The company is so cash rich that they can afford to invest vast sums of money to develop a product which can only make money in the long term. Video games and mobile phone software are examples of loss leaders that lose money -not for too long, they hope. MSN though is the best example, which lost money since its inception, until this year, its first in profit.
There are significant differences between Microsoft's massive success in dominating the huge PC software market and any other large scale business. MSN for instance is not the only Web service provider and they show no signs of being able to create the dominance needed to impose a monopoly akin to the PC software. In these new markets Microsoft must be innovative and competitive. This is a massive change to their culture and it is to their credit that they show signs that they can work with two drastically different business models.
While the "old" Microsoft struggles to shore up obsolete, but still massively profitable, IE, Word, etc., there are some well funded new developments. The new version of Windows (Longhorn) and particularly Office 11, have some progressive new features, albeit hindered by compatibility problems. But in terms of a more progressive move two new incentives stand out, Magellan and Underdog. Magellan is at the bottom end of the scale; it is business software for the individual and the small business, a direct competitor to Intuit Quickbooks. The amusingly nicknamed "Underdog" is at the other end of the scale; it is a search engine, hosted by MSN, to compete with Google.
Microsoft has already made an inroad into the business application software market by buying Navision and Great Plains. Magellan is targeted below these products, aimed at the single or very small network of PCs. There has already been some wrangling between Microsoft and Intuit, and it will be surprising if there are not some anti-monopoly lawsuits flying around before too long. They will certainly take some market share, but I can't see them dominating unless they are prepared to virtually give Magellan away, packaged with Longhorn, say. This is a possibility, using Magellan as a stepping stone to Great Plains, etc.
Underdog is a very different ball game. Microsoft were caught out by Google, and Yahoo and Ask Jeeves too. Google are reportedly earning around $3 billion annual revenue from advertising associated with search results. In contrast MSN has been licensing technology from Yahoo, paying around $200 million and earning around $360 million, peanuts compared to Google. No wonder they have invested $100 million in developing their own search engine.
With Underdog linked tightly into MSN services such as Encarta and MSN Music, they compete directly with Yahoo. Google and Ask Jeeves are therefore expanding their services, adding e-mail, music, video, etc.
On one hand it is encouraging to see Microsoft being innovative. Underdog has some new features not found in Google, although the beta version now in use isn't as good as Google overall - yet.
It is encouraging to see so much technology being developed to make the Web more useable. But all this effort is misdirected. It is all trying to make the best of a bad job, HTML. What is needed is a whole new generation of XML based Web services, only then will searching be properly directed.< BR>
Martin Healey, pioneer development Intel-based computers en c/s-architecture. Director of a number of IT specialist companies and an Emeritus Professor of the University of Wales.