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Can Microsoft Win Back Lost Client Share in 2011?

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Microsoft’s new year promises to kick off with a bang, with new products coming on line and fairly new ones ramping up.

However, it seems primed to be a defining year for Microsoft (NASDAQ: MSFT), as the company struggles to maintain control of the market for computing clients — whether phone, hand-held, the desktop, or the browser.

For example, at the annual Consumer Electronics Show (CES)in Las Vegas on Jan 5, Microsoft’s CEO Steve Ballmer is reportedly poised to show the world a “slew” of new slate computers running Windows 7 during his keynote.

He is also rumored to be planning to show a version of Windows for ARM-based devices, as well as for devices built on Intel’s new “Oak Trail,” low-power CPUs.

Ballmer said last summer that tablet devices running Windows 7 are “job one” for the company — coming on the heels of the explosive success of the Apple (NASDAQ: AAPL) iPad.

How quickly device manufacturers can turn demos into products, though, has been dicey to date and, as in other areas, Microsoft needs to come from running well behind to somewhere near the market leaders.

Microsoft has actually been in collaboration for a decade or more with PC makers and they have sold tablet computers for years without any significant impact by the form factor. Can Microsoft, now that Apple has validated the format, catch up to the leaders of the pack?

The Client’s the Thing

The same question could be asked about Microsoft’s foray into the smartphone business in early November. With the end of holiday sales looming, an early indicator of Windows Phone 7’s initial success — or lack of it — will be how many phones were actually “sold through” to consumers during the holidays.

In late December, Microsoft said it had already sold 1.5 million Windows Phone 7 handsets. However, it did say that those handsets were what is called “sold in” numbers, meaning that they were sold from the manufacturer to the distributor but not yet “sold through.”

Besides showing off Windows Phone 7 and new tablets, Ballmer may announce some new metrics for the handsets during his CES keynote. Although he may or may not announce it at CES, Microsoft is also rumored to be in talks with Finnish mobile phone giant Nokiato produce Windows Phone 7 handsets.

If not, Ballmer has another opportunity in February at the Mobile World Congress in Barcelona, Spain. That was where he announced Windows Phone 7last year.

All of these moves have one thing in common. Mobile devices are increasingly becoming many users’ client of choice for Internet access, and that takes client market share away from PCs and laptops, which ultimately puts Microsoft’s Windows and Office franchises at risk.

Becoming a player in slates and Windows Phones is crucial if Microsoft is going to continue to dominate the client marketplace. A deal with Nokia could conceivably increase Microsoft’s presence in those markets.

Microsoft is also working to expand its client presence in other areas as well. Specifically, it has had significant success so far with its cloud-based Business Productivity Online Suite (BPOS). By last spring, the company claimed to have already netted some 40 million paying customers for its various online services.

BPOS provides cloud computing customers with enterprise applications that are hosted in Microsoft data centers or by third parties — Exchange, Sharepoint, Lync unified communications, and Office 2010 Professional marketed on a subscription basis.

The company recently announced a new subscription suite that it calls Office 365, which will include the latest versions of Microsoft’s servers.

Office 365 is currently in beta test with general availability slated for sometime in 2011.

Don’t Forget Windows 8

Microsoft has many other irons in the fire in the new year, though, including others directed towards regaining market share on the client.

For example, the company began beta testing Internet Explorer 9 (IE9)— the first major overhaul of Microsoft’s aging browser in several years — with an event in San Francisco in mid-September. The new browser is built on HTML5 and sports new security features and a simplified UI. It will also support the controversial H.264 video codec.

IE9 is also due out in 2011.

Then there’s Windows 8. Windows 7 had only been on store shelves for a month in 2009, when the first leaks of what is likely to be in the next major release of Windows began to surface. That discussion also devolves to retaining — if not regaining — client share.

Features rumored to be coming in Windows 8 include a 3D user interface, codenamed Wind and designed initially to run on higher-end 64-bit systems, and which will adapt to the user’s actions over time, according to leaked information published on an Italian tech enthusiasts sitein mid-December.

While it’s purported to become available by 2012 at the earliest, it’s a safe bet that Windows pre-beta or beta versions will surface sometime during 2011.

For now, though, Microsoft has the growing adoption of Windows 7 in corporate accounts to thank for its continuing Windows franchise — migrations are well underway at most companies, according to recent studies. By the time, Windows 7 had been out for a year, Microsoft reported it had already sold 240 million licenses.

Meanwhile, the most recent release of Microsoft’s productivity, Office 2010, shipped in May, and is now seeing corporate adoption picking up.

Additionally, it will be a continuing year of battles for search engine dominance between Microsoft and Yahoo (NASDAQ: YHOO) on one side versus Google (NASDAQ: GOOG) on the other.

Whatever happens, it appears that 2011 may turn out to be decisive as to how many of the clients of the future will carry the Microsoft logo.

Stuart J. Johnston is a contributing writer at, the news service of, the network for technology professionals. Follow him on Twitter @stuartj1000.

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