Plus and Minus of Microsoft.

Goldman Sachs noted that Microsoft missed the tablet curve, faces the down slope of a Windows 7 upgrade pop and faces multiple challenges. According to Goldman Sachs 2011 is going to be a rough year for Microsoft.

That note was so convincing that Sam Diaz put on his GApple (Google + Apple) goggles and likened Microsoft to the Titanic. If Microsoft is sinking it’s only because the hull can’t carry all the cash the software giant rakes in.

In a case of nice timing, the New York Times reports that Microsoft will demo new slate PCs and Windows 8 functionality at CES 2010 next month. Microsoft has been talking about tablet PCs at CES for more than a decade yet Apple ran off with the market courtesy of the iPad. Now Android tablets are in on the act. Will Microsoft finally deliver a credible tablet?

The software giant’s well-documented issues with the tablet and smartphone markets are causing a lot of angst. Goldman Sachs isn’t the only research firm sounding alarm bells. Some analysts such as Stifel Nicolaus’ Doug Reid say that the mobile wars have been decided in favor of Android and Apple’s iOS. In May, Barclays Capital analyst Israel Hernandez said Microsoft’s mobile miscues remain a big worry for the company.

All of that’s true, but Microsoft has plenty of cash for reinvention. In fact, the company has lost billions of dollars on Internet ventures, but is showing some promise with Bing. Other moneypits that worked out for Microsoft include the Xbox. Bottom line: Microsoft’s dollars buy it some wiggle room.

That said there are real worries for the company. Here’s the Microsoft ledger as I see it.

Negatives:

Tablets. The topic du jour for Microsoft is whether it can create an iPad rival. What’s maddening about Microsoft’s strategy can be summed up with one product: Microsoft 7. Microsoft insists on Windows 7 slates when it has a better alternative in house with Windows Phone 7. Here’s the deal: Windows 7 is just too large to be a tablet OS. Windows Phone 7 looks as if it were built for tablets. So what if Microsoft doesn’t conquer the smartphone market with Windows Phone 7? It has plenty of time to make Windows Phone 7 a real tablet player. The unfortunate thing is everyone on the planet sees that Windows Phone 7 could be powerful with a tablet. Microsoft has its blinders on.

http://www.zdnet.com/blog/btl/microsoft-a-big-ship-at-crossroads-what-else-is-new/42698?tag=nl.e539