updated 05:10 pm EDT, Tue April 10, 2007
Microsoft may be at a turning point in its future, according to actions taken by key figures today and over the weekend. Goldman Sachs financial analyst Sarah Friar today removed Microsoft from its conviction list, noting that while the stock was still worth buying it no longer had the same allure as before. A fundamental shift in the market towards the web and the resulting independence from Microsoft's software were cited as the primary reasons, as users no longer needed Windows or desktop utilities for an increasing number of tasks.
"Vista may be the last big operating system developed by the company," Friar said. Microsoft still plans a revision to Vista codenamed "Vienna" for 2009.
This freedom may have helped play into the analyst's observations about rival operating systems from Apple and various Linux distributors, which Friar said were likely to draw business and home users away from Windows over the next ten years.
Google, however, is the primary threat, Friar said. Their "dominance in search, deep pockets, and “cool” factor make it a serious competitor to Microsoft," she wrote, "as it strives to obsolete the desktop operating system." The California-based search engine developer has developed or refined a series of web tools that potentially replace Microsoft's well-established desktop software, such as Gmail (which supplants both Hotmail and Outlook) and Writely (a web-based text editor).
Although strictly professional, the advice reflects an opinion which gathered momentum in the blogging community this weekend. Influential author and venture capitalist Paul Graham has controversially declared Microsoft "dead," pointing to Google as far more "dangerous" thanks to its relentless web expansion. Microsoft no longer posed an immediate threat to Silicon Valley firms by threatening to buy them out or release a direct competitor.
"We [don't] worry about Microsoft as competition for the startups we funded. In fact, we've never even invited them to the demo days we organize for startups to present to investors," Graham said. "We invite Yahoo and Google and some other Internet companies, but we've never bothered to invite Microsoft."
Microsoft has also lost mindshare among the most computer-literate developers, many of whom explicitly prefer Apple systems. Windows has traded positions with Macs as the safe choice for beginners. "I'm now surprised when I come across a computer running Windows. Nearly all the people we fund at [our company] Y Combinator use Apple laptops," Graham added.