With the Windows Surface RT selling out of its available stock -- and winning an endorsement from Oprah Winfrey, no less -- it may seem like Microsoft (MSFT +0.38%) is riding on a high.
Despite the short-term good news, the long-term fate of the company is not so rosy, at least according to futurist Peter Cochrane, ex-chief technology officer of British Telecom (BT +0.08%). Microsoft will "die and disappear" within the next few years, Cochrane told Computing.(Microsoft owns and publishes Top Stocks, an MSN Money site.)
"There is no convergence in IT -- what we see is divergence ... apps are appearing individually to achieve separate functions," he said. As such, the "one OS" (operating system) business model, like Microsoft's, cannot survive. By all accounts, Microsoft "owns" the operating system business, with about 85% market share. (The remaining market share is divided between Mac and Linux.)
Far from being an alarmist, Cochrane's bona fides are sterling; after an illustrious career at BT, he was appointed as the UK's first "Professor for the Public Understanding of Science & Technology" in 1998. Cochrane is currently CEO and Chairman of Cochrane Associates and he is an active investor in high-tech start-ups.
The "one OS" model clearly seems to be where Microsoft is putting most of its chips, given the recent debut of Windows 8. In Windows 8, Microsoft has a single OS that looks like it will be able to span multiple hardwares (PC, tablet, phone, TV) and can be accessed in a variety of ways including touch, type, clicks, and gestures (Kinect).
Windows 8 is not only used in the Surface RT tablet; the Nokia (NOK +0.84%) smartphone using the application was just launched last week. However, Nokia currently has a very small share of the smartphone market, according to data from the International Data Corporation.
Nokia's Symbian operating system holds a 2.3% share in the market, down from 14.6% a year ago, said IDC regarding third-quarter data in a release dated November 1. Windows has a 2% share, up from 1.2% over the same period. Apple's (AAPL +0.03%) iOS holds a 14.9% share and Google's (GOOG +0.70%) Android holds a 75% share. Research In Motion's (RIMM +3.61%) BlackBerry platform shrank to 4.3% for the third quarter, down from a 9.5% share for the third quarter last year, according to IDC.
IDC said shipments of Android-based smartphones grew 91.5% in the third quarter to a record 136 million units. Google's free mobile OS nearly doubled the third-quarter growth rate for the rest of the industry.
Replacing the operating system-based model, said Cochrane, will be a new app-based model that allows users to interface with any screen in the world through tiny access devices, or even cybernetic implants. Cochrane also predicts divergence in the cloud, with clouds "going live and being populated only for as long as they are required." Current reliance on device-hosted applications is holding back the move to more agile computing, he said.
Microsoft clearly has a legacy operations business to support, now and in the near-term future, since most cloud servers run on Windows. Even so, the migration to cloud computing, an estimated $14 billion industry in its own right according to IDC, could be a turning point for the industry. Sanford Bernstein analyst Toni Sacconaghi said in a research note that the cloud could represent "the tip of the iceberg ... an important deflationary force for traditional packaged applications services."
With about $50 billion in cash or equivalents, Microsoft has the means to reinvent itself and develop applications beyond the stable opensource platform model it has built.
Even if Cochrane's predictions are correct, in the end, Microsoft has the means to transform itself in a similar manner to what Fuji (FUJIY +2.87%) is trying to do as it migrates away from the dying photography industry. Alternatively, it could truly "die and disappear" like Kodak.
