Things are not going well for Microsoft, the world’s largest software company, in either the courtroom or the marketplace. Microsoft was found guilty by a US court of being a “predatory” monopoly last April, and a judge ordered it to be split in two; the case goes to the appeal court at the end of February. Meanwhile, Microsoft is struggling to cope with the shifting landscape of the computer industry, where the rise of the internet, and its philosophy of “open” software standards agreed by consensus, has undermined its business strategy. Under the leadership of its co-founder, Bill Gates, Microsoft has weathered adversity before. But the confluence of these subtly interconnected threats presents an unprecedented challenge to its dominance of the industry. How did it get into this mess? And can it get out of it?
Windows on the world
The roots of Microsoft’s woes lie in its efforts to defend the dominant position of its Windows operating system. Windows, which is installed on 90 per cent of all personal computers (PCs), is the centre of Microsoft’s strategy, and the source of its power. It is a crucial layer of software that provides the “platform” on which all other programs sit, and through which they talk to the PC’s hardware: keyboard, mouse, screen, network and so on. Software companies must make their programs compatible with Windows if they want to be able to sell them, and PC manufacturers must build Windows into their machines if they want anyone to buy them. Microsoft sits in the middle, controlling the standard and making a fortune in the process: around 100m new PCs are sold every year with Windows installed, and Microsoft charges an average of $50 per copy. Little wonder that Microsoft is the biggest software company on earth, or that Bill Gates (who owns a large chunk of it) is the world’s richest man.
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