Microsofts 10 Unlucky Breaks

by Joe Wilcox, Editor, Microsoft Watch

It’s Friday the 13th, the unluckiest day of the year. How has Microsoft’s luck been over the past 34 years? The company’s rise through the 1980s and 1990s was really a series of lucky breaks combined with business savvy and execution on the vision of one PC on every desk. But Microsoft’s luck started running out in the mid-1990s. We’ve selected 10 unlucky breaks based on the scope of their impact on the company, counting up to No. 1.

The Sept. 11, 2001, terrorist attacks against the United States hurt Microsoft in an unexpected way. Microsoft had already planned a late October launch of Windows XP in New York; the timing and venue led to a subdued launch event.

Microsoft’s share price peaked at around $58 in December 1999. A year later, its share price had fallen to around $21, and it has generally traded below $30; below $20 today. The low share price creates negative perceptions that Microsoft is no longer a growth company, particularly when competitors such as Apple and Google are doing so much better.

Was it stupidity or an unlucky break? Six months before Google bought YouTube for $1.6 billion, Microsoft passed on a $500 million acquisition. YouTube is a hot property. The site had 41 percent video viewing share and 100 million unique viewers in December, according to ComScore. If catalogued as a search engine, YouTube would rank No. 2, ahead of Yahoo.

Torvalds’ development of the Linux kernel in 1991 would later revive the free software movement Microsoft co-founder Bill Gates sought to squash in the late 1970s and 1980s. Open-source software consistently cause sales problems for Microsoft and energizes a fervent anti-Microsoft community. Open-source gains in Europe contribute to anti-Microsoft sentiments and ongoing antitrust troubles.

In 2001, Apple released Mac OS X, opened its first retail stores and launched the iPod. Combined, these three events would later revive the Apple brand, increase Mac market share and, through music, make the company a household name. Folklore has it that bad luck comes in threes.

If there is a blueprint for disaster, it’s Windows Vista. The product was jinxed from the very start. Microsoft promised features that were later dumped. Vista proved to be incompatible with enterprise software and demanded newer hardware to run. Reviewers panned the OS and businesses shunned it. No Microsoft competitor could have launched an anti-marketing campaign as effective as Windows Vista.

Google’s success doesn’t lie in its oft-hyped search algorithm, but in its search advertising business pioneered by Overture. Finally, somebody figured out how to generate real revenue from the Web. Google’s platform has characteristics similar to Windows. There are APIs, developers and third parties profiting from the platform. It’s bad luck that Google is so much more than a search engine.

Microsoft observed a major dip in software sales, starting in September and becoming a collapse in December. Windows profits were down 13 percent in the fourth quarter; software sales could slow disastrously throughout 2009. Already, Microsoft has announced its first layoffs ever. While the global economic crisis hurts everybody, Microsoft is in a unique position of misery. Its products are used everywhere.

The May 1998 antitrust trial left deep scars on Microsoft. The case, which lingered until Nov. 2002, led to more than 100 other lawsuits. The U.S. case also affected Europe, which has fined Microsoft for antitrust violations three times since 2004. Bad luck: U.S. oversight was extended two years from Nov. 2007. Microsoft carries the stigma of a convicted monopolist, damaging its brand and empowering enemies.

It was bad luck that Microsoft executives were looking the wrong way when Tim Berners-Lee created the first Web server in 1990, University of Illinois students developed the Mosaic browser a few years later and in 1994 Netscape released the first commercial Web browser. Berners-Lee used open standards outside of Microsoft control. The Web shifted relevance in the areas of information, software development and computing away from Windows computers to Web browsers and servers.