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The second coming of Microsoft

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Right now Microsoft has all the pieces in place for a full revival, a chance to once again become the dominant software company in the world in reputation as well as cash flow. After years of getting everything wrong, the company at last appears to be doing everything right.

Gone is the smugness, the over-confidence, the arrogance, the Sony-like diversions into obscure product lines, and their annoying habit of releasing products long after their competitors that cost more and do less.

From the very beginning Microsoft has always tread in the footsteps of others, but still managed to win the race. Windows, and the concept of a graphical user interface, was an Apple concept. Office was a homage to Word Perfect and Lotus software. Internet Explorer was not the first browser, but followed Netscape Navigator and others. Live.com (now Bing.com) was not the first Internet search engine by a long mile.

But being second or third to market never stopped Microsoft from turning out a better product at a better price, while using their leverage with computer companies and third party companies to make their products the industry standard. According to the latest statistics compiled by Market Share, roughly 88 per cent of computers around the world are still using some form of Windows operating system. That's despite all the security issues, the poor reception to Vista, Apple's victory in portable devices and doubling of computer sales, the rise of Linux brands like Ubuntu and Fedora, the rise of open source software like Open Office and free Web 2.0 applications, growing competition from smart phones and ultra-miniature PCs running Linux kernels, and the company's own inability to put out a decent response to Apples "I'm a Mac" ad campaign.

Microsoft is so entrenched that it would probably take a decade or more for them to lose their number one position, but a decline is a decline. There's no question that the company has been on a path to becoming a niche player in the market, catering mainly to business users.

There are a lot of different ways the company is turning things around:

Windows 7 - After Vista bombed, at least in terms of public perception, Microsoft was under a lot of pressure to develop a fast, sturdy and sensible operating system that could compete visually and functionally with Apple's OSX. So far Windows 7 has been well received, both through the Beta and the recent "Release Candidate" version that will be most similar to the finished product. Windows 7 is expected to ship in the fourth quarter of 2009.

Xbox 360 - After placing a distant third in the last console generation, Microsoft was first to market with a next generation console by a full year. While the Wii is winning this round with its low price and unique controller, Xbox 360 is way ahead of Sony's PS3 and gaining every day. While Microsoft had issues with systems overheating and failing, the selection of games, the online and multiplayer experience, the controller and the reasonable price point was a winner. Meanwhile they've sold more games than any console, and their Xbox Live service is a hit with 20 million paid members.

Bing.com - While most people would say Microsoft's main competition is Apple, industry analysts actually believe Google poses more of a threat. Google dominates the search engine market, and its free Gmail and Google Docs services have displaced demand for Hotmail and Office. For a while Microsoft was interested in purchasing Yahoo! to shore up its search engine revenues. Microsoft released Bing.com on June 3 to remedy that, which is essentially a separate (yet integrated in Windows) browser they hope will compete with Google. So far the reviews give Google the edge, but acknowledge that Bing.com does a few things better, like shopping and ranking search results by reviews.

Zune - For years Zune's answer to the iPod has been a weak "me too" but their new advertising campaign for the Zune music subscription service (e.g. 30,000 songs on an iPod costs $30,000 on the iTunes store vs. a monthly $15 fee) makes a compelling argument for the Zune - but only as a music player.

Unfortunately the iPod ceased being just a music player two generations ago, leaving Zune even further behind. However, the new Zune HD - very similar to the iPod Touch - takes a leap in the right direction. The new Zune will be showcased at E3 next week, and appears to feature a large touch screen, HD radio, support for HD movies and other features, although there's no word about on-board accelerometers, games, "apps," or any of the other features that made Apple the industry leader. I'm personally hoping that Microsoft will announce its own App store, that it comes with a removable battery, that it allows features like GPS mapping and gaming, that it has a built-in microphone, that is has a sturdy web browser and e-mail client, and that it supports all kinds of third party software. To top Apple, this thing needs to be unlimited in potential, and just a little bit cheaper. So far I'm not encouraged by the references to the Xbox Live Marketplace, which to me is more about Microsoft setting limitations than it is about the possibilities if they decide to make it exclusive. Here's hoping I'm wrong.