How times have changed.
At the time, Microsoft's market cap was more than $500 billion. Today, it's hovering at $220 billion, slightly below
$223.79 billion market cap.
Microsoft CEO Steve Ballmer
Microsoft's decline isn't limited to market cap. For the first time in its history, Microsoft was forced to layoff employees -- nearly 5,000 during the recession. And as the company's stock price declined by about 20 percent between 2000 and 2010, Apple's shares enjoyed 1,000 percent growth over the same period.
Blame Microsoft's decline on the company's inability to see the future. Over the past decade, Apple shifted its focus to mobile hardware and generated record profits.
knew that the Web was the future and invested in search, online advertising, and cloud computing. All the while, Microsoft continued to focus its efforts on its Windows and Office. And it was surpassed.
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But Microsoft CEO Steve Ballmer doesn't seem too concerned. "It's a long game, we have good competitors...we too are a very good competitor," Ballmer said on a recent trip to Asia, according to
. "We are executing very well and that is going to lead to great products and great success."
But whether or not Microsoft can revive its aging strategy is up for debate. At the AllThingsD D8 Conference, Ballmer seemed unimpressed by two very important trends in the technology industry: the growth of tablet computers and the transition of software and company operations to the Internet.
Questioning the iPad
Ballmer's first target was Apple's iPad. The device, which has sold over 2 million units since it launched on April 3, is carving out a new sector of the industry and causing a decline in netbook sales -- a key battleground for Microsoft.
Ballmer said that Microsoft will try to compete against the iPad, but for most consumers, sticking with a "general-purpose device" like a desktop or notebook will be the way to go. "You're going to have a range of devices over time that are light and don't have a keyboard and will run Windows," Ballmer said. "The bulk of the market is going to stay with general-purpose devices."
But after showing off a range of tablets that would run Windows at CES earlier this year, Windows-based tablets that can compete on the same level as the iPad -- like
cancelled Slate -- are nowhere to be found. And now that J Allard, the Microsoft exec who created the company's ill-fated Courier tablet, has left the company, it seems that Microsoft's desire to play a major role in the burgeoning market is somewhat lacking.
Ducking the Cloud
Research firm IDC estimates that global revenue from cloud computing services will grow from $17.4 billion in 2009 to $44.2 billion in 2013.
, H-P, and
are throwing boatloads of cash into the cloud, and Google offers Google Docs, an online office-productivity suite designed to compete with Microsoft Office. Google is also planning to launch its Web-based operating system, Chrome OS, later this year. It will initially work on netbooks, but over time, the company hopes to bring it to more-capable computers and compete directly with Microsoft's Windows platform.
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Despite the launch of Microsoft's nascent Azure cloud platform (which is mostly aimed at developers), Ballmer doesn't seem sold on the absolute viability of the cloud just yet. He said at the D8 conference that the desktop will reign supreme for the foreseeable future. He contends that based on what customers want today, they will "require some device with a reasonable amount of storage and graphics ability." And while he acknowledged that cloud computing is coming, he's not yet sure if it will be as groundbreaking as Google and many others say.
"There is nothing bad for us in the trend
to the cloud," Ballmer said at D8. "But it's a transition, and as such, it's a period of tumult. So we need to be smarter and more vigilant."
Microsoft has put itself in an unenviable position. The company has gone from outright dominance over the technology industry to dominance in only the operating-system and office-productivity markets. Luckily, its missteps can be overcome, thanks to the profitability it derives from Windows and Office. But as the market continues to shift away from the software giant's core strengths, it will need to adapt.
After all, if it fails, no one will be there to catch it.
--Written by Don Reisinger in New York.
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Don Reisinger has been writing columns and blogs about the technology and video game industries for years. His work appears in some of the tech industry's biggest publications, as well as in the
Los Angeles Times
, where he blogs about social networking. Follow Reisinger on Twitter @donreisinger.