June 15, 2006 5:50 PM PDT

Microsoft's mixed scorecard

Microsoft turns 31 this year, and it's showing signs of age.

The Redmond, Wash.-based company remains the largest software company in the world and one of the two or three most influential in the technology market. Still, with success has come size, and the giant has not moved as rapidly into search or music as smaller competitors.

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"Microsoft is doing of good job of executing on an incredibly wide variety of opportunities, but it is not like it once was when the whole world was a green field opportunity," said Nathan Myhrvold, CEO of Intellectual Ventures and former chief scientist at Microsoft. "There is a huge tendency to think Google can do no wrong and Microsoft is a dowdy has-been, but neither is correct."

Here's a laundry list of Microsoft's strengths and weaknesses:

 
Search and online services: Microsoft is the clear bronze medal winner here. Google has established itself as the search leader while Yahoo has aggressively tried to build a loyal following through acquiring sites like Flickr. Microsoft has improved its own search results, but changes imposed on MSN and Hotmail have yet to reel in the younger competitors.

"They're up against some formidable competition and changes in the marketplace as a result of software as a service, open source and Web 2.0," said David Smith, an analyst at Gartner. "Microsoft products and strategies today--as manifested by their existing products--are not well aligned with those movements. They're moving in that direction but they are nowhere near it yet."

 
PC operating systems: Microsoft still controls more than 90 percent of the market for operating systems for PCs. Apple Computer has seen its worldwide market share creep up slightly to 2.3 percent, but Apple's share is in reality only about one-third of what it was in 1997. Linux has also not made much of a dent in desktops yet.

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Nonetheless, problems loom. Vista, the next big version of Windows, has been delayed several years and won't hit until the first part of 2007. Microsoft has not come out with an operating system that has prompted industry-wide upgrades since Windows 95 was released 11 years ago. Since then, businesses and individuals have upgraded computers when their hardware got old or to insulate themselves from problems like the Y2K bug, according to most analysts.

Don't expect a major rush to upgrade this year either, analysts said. A major upgrade cycle transpired in 2004 and 2005, according to Gartner and IDC. Thus, a big hardware replacement wave isn't due until 2007 or later.

Microsoft asserts that the features of Vista will spur upgrades. Gartner, however, is already throwing cold water on that and telling customers to upgrade gradually.

CONTINUED: Microsoft rules software roost…
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