This Is How Microsoft Beats Apple

Posted on February 17, 2009. Filed under: Apple, Microsoft | Tags: , , , , |

As an investor, I hate consensus, so it makes me nervous that so few of you think that Microsoft’s (Nasdaq: MSFT) plan to open retail stores is a good idea.

“Rarely have we seen a concept so universally derided as Microsoft retail stores,” wrote the editors of blog MacDailyNews in response to my article las week. “Even Vista and Zune were better received. The fact that Microsoft is seriously considering retail stores is proof positive that the company’s ‘management’ has an unmeasurably over-inflated opinion of the company.”

Foolish colleague Anders Bylund is the lone dissenter, it seems. “Had these stores been running a couple of years ago, Windows Vista might presumably have been sent back to the lab again for a few more rounds of bug-fixing and refinement,” he wrote.

Mind the gap, Mr. Softy

I’m not buying it, nor are many of my fellow Fools. “Apple (Nasdaq: AAPL) is definitely a consumer electronics product, Microsoft is not. It is a means to an end, not a sensory experience,” wrote reader Timberly Marek.

Agreed. Vista’s perception problems persisted among corporate IT managers who lobbied for continued support of Windows XP. Some consumers weren’t thrilled with the OS, either, but their outcry wasn’t nearly as audible.

Still, others really like it. (Gasp!) “Vista is not being embraced as an upgrade for individuals and companies because of the expense factor. Too bad, because Vista offers a great computing experience,” wrote commenter prose976 in response to news that Intel (Nasdaq: INTC) had declined to upgrade its XP machines to Vista. Would retail stores have changed its mind? I doubt it.

That said, there is a retail gap for Mr. Softy to fill. Tech-savvy consumers who want an integrated entertainment experience — like an iTV capable of playing Web, TV, or video game programming on demand — don’t have a home at the mall. Microsoft can change that.

A better media center

Skeptics will argue that Microsoft has already tried and failed to bridge the gap between the PC and the TV with its Media Center PCs. True. A retail presence probably wouldn’t have changed that, either. Why would a similar effort work now?

Competition is more hesitant today, and its technology more capable. Take Apple. Last month, Chief Operating Officer Tim Cook told investors that the iEmpire still considers its Apple TV player “a hobby.” Best Buy (NYSE: BBY), meanwhile, is fundamentally a big box retailer. GameStop (NYSE: GME) still offers plenty for gamers, but its business is under assault from e-tailers. In short: None of these retailers are outfitted for Web-centric entertainment.

Now imagine a Microsoft store that features:
Hands-on displays of the Xbox, networked for multiplayer action.
Wi-Fi-ready Zunes tricked out with related audio gear.
And best of all: Big-screen, high-definition TVs showing all sorts of Web content: streamed movies, a live World of Warcraft adventure, YouTube videos.

There’d be room for Windows PCs, too, but only the really advanced stuff — the stuff that makes your entertainment experience even more entertaining. Let Dell (Nasdaq: DELL) and Hewlett-Packard (NYSE: HPQ) sell everything else.

Microsoft could also have experts a la Geek Squad and Apple’s so-called Geniuses, but they’d be trained for the bridging problem — installing and servicing home theater systems built around the Xbox or enhanced via the Zune or Windows Mobile smartphones.

Let someone else polish Windows …

Consumers have more access to digital infrastructure than ever before. And that’s only going to get better with an Obama administration that has promised national access to broadband Internet. Someone will profit from that by bringing more of the Web into our living rooms.

So far, Apple isn’t trying. Microsoft can with the right retail strategy, one that thinks bigger than Windows. What do you say, Mr. Softy? Will you mind the gap?

Source: fool.com

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