NEW YORK ( TheStreet) -- The latest "fashion topic" in technology investing is Microsoft's (MSFT - Get Report) return from the stock market backwaters. It's all about how Microsoft's new and improved products will stem the market share declines of the last couple of years.
The nature of these "new and improved" products is, however, extremely poorly understood. The hourly explanations on CNBC seem to be centered on the Windows start button returning after a brief hiatus.
The key to understanding a potential Microsoft turnaround has nothing to do with fixing a small bump in the road in the form of a misguided approach to eliminating the start button. If that were the source of Microsoft's decline, then Microsoft must have been doing extremely well until just before the launch of Windows 8 on Oct. 26, 2012.
But, of course, Microsoft was in decline long before the start button disappeared last Oct. 26.Likewise, a Microsoft renaissance will be based on something entirely different, and that is a total transformation away from localized software to cloud computing. Basically, Microsoft's future resides in copying Google's (GOOG - Get Report) Chrome OS and Salesforce.com (CRM - Get Report). Let me explain. Traditional PCs -- both Windows and the Mac, as well as enterprise software from companies such as Oracle (ORCL) -- are based on the idea that you buy and install programs on your PC and server sitting in a closet. These programs need to be maintained and upgraded by your in-house staff, or yourself if you're in charge of the household or small business.
Maintaining and upgrading software not only costs a lot of money to buy, but it also takes a lot of time -- which is also a huge cost. This is good for IT consultants, Microsoft and Oracle, but not for anyone else. This is where companies such as Google and Salesforce.com entered the picture. These companies harnessed the open Web in order to deliver software as a service (SaaS). You don't need any special software to access Google and Salesforce.com -- just open a browser window. Guess what? This is the direction in which Microsoft is going as well. Let me offer a few examples of what is being implemented right now: 1. Outlook vs. Outlook.com: If you were working in white-collar office America in the last 20 years, you probably spent most of your computer time in Microsoft Outlook. This remains the most powerful software of its kind, but it may also be overkill for many users. It is also hugely cumbersome.