Microsoft Is Feeling the Weight of the World

surface“The launch of Windows 8 is the beginning of a new era for Microsoft (NASDAQ:MSFT),” commented CEO Steve Ballmer in the company’s first-quarter results. “Investments we’ve made over a number of years are now coming together to create a future of exceptional devices and services.”

The new era turned out not to be very exciting. After an early-November drive to nearly $30, shares spent the rest of the year bouncing between $26 and $27. Demonstrating a little optimism ahead of its second-quarter earnings, shares were up about 1 percent on Thursday afternoon, but the stock is still down nearly 6 percent year over year.

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At the end of November, Stephen Baker, vice president of industry analysis at NPD, said that “after just four weeks on the market, it’s still early to place blame on Windows 8 for the ongoing weakness in the PC market.” For better or worse, this connection, that the fate of the entire PC market will be a function of the success of Windows 8, was established months before the product launched.

“We still have the whole holiday selling season ahead of us, but clearly Windows 8 did not prove to be the impetus for a sales turnaround some had hoped for.” It was up to Microsoft to give Apple (NASDAQ:AAPL) the finger, revitalize the declining PC market, and show the world that it could keep up. Success was the new era Ballmer was hoping for, but it’s not here yet…

SurfaceIt’s not fair to call Windows 8 or the Surface failures, but the incoming earnings report could decide things one way or the other. Sometimes it’s easy to see the Surface as a late, awkward attempt to hedge PC sales, but sometimes it’s easy to see the tablet as a perfectly viable contender in the market. This quarter will help reveal how well the device did against the iPad and the family of Google (NASDAQ:GOOG) devices.

Windows Phone is alive and well at well at the heart of Nokia’s (NYSE:NOK) fight to position itself in the smartphone market. The combination is in the underdog ring with Research in Motion (NASDAQ:RIMM), but that fact doesn’t discount them. The smartphone market is bigger than two companies, and a third- or fourth-largest platform would be in a healthy position.

“It has been far slower than Microsoft would have liked, but Windows Phone is now starting to gain respectable shares in a number of key European countries,” commented Dominic Sunnebo, consumer insight director at Kantar WorldPanel, in a report. “However, its performance in the Chinese and US markets remains underwhelming. As the two largest smartphone markets in the world, these remain key challenges for Microsoft to overcome during 2013.”

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