Microsoft, With Retail Push, Emulates Rival Apple
February 12 2009 - 8:02PM
Dow Jones News
Microsoft Corp's (MSFT) decision to launch a retail push for the
first time suggests the company is hoping the success of smaller
rival, Apple Inc. (APPL), in reaching consumers, may rub off on the
larger company.
An announcement from Microsoft Thursday confirming long-rumored
plans to launch retail stores comes as the Redmond, Wash.-based
software giant faces multiple challenges in the way it reaches
consumers.
While Microsoft owns the world's largest and most profitable
software franchises in Windows and Office and has a successful
consumer electronics product in the Xbox console, it has stumbled
in recent years with consumer-facing products like the Zune music
player, which have failed to make traction against Apple's
iPod.
Meanwhile Apple's operating system has recently made gains in
the core desktop computer market, which Microsoft dominates. In
2008, Apple's share of the U.S. personal computer market rose to
7.7%, according to IDC, from 6.4% in 2007.
Microsoft is also increasingly seeking to persuade customers of
the interconnectedness of its products spanning home PCs, the
Internet and mobile phones, as well as the core desktop Windows and
Office tools.
"They are taking a leaf out of the Apple playbook," said
Katherine Egbert, a software analyst with Jefferies & Co.
Egbert noted that Apple's very successful turnaround of its own
business, spearheaded when Chief Executive Steve Jobs returned for
a second tenure at the helm of the company, had roughly coincided
with its decision to open its own chain of retail stores, in the
late 1990s.
On Thursday Microsoft said it had hired David Porter, most
recently head of worldwide product distribution at DreamWorks
Animation SKG (DWA), and a veteran of Wal-Mart Stores Inc. (WMT),
the world's largest retailer.
"We're working hard to transform the PC and Microsoft buying
experience at retail by improving the articulation and
demonstration of the Microsoft innovation and value proposition so
that it's clear, simple and straightforward for consumers
everywhere," Microsoft's Chief Operating Officer, Kevin Turner,
said in a press statement.
Microsoft didn't immediately disclose the value of the
investment it was making in the stores, the number of stores it
would open or the store rollout.
"Retail will help Microsoft in telling a broader story it wants
to get across about products from Windows Live to Windows Mobile,"
Matt Rosoff, an analyst with Directions on Microsoft, said.
Microsoft said in 2008 it planned to launch a retail push
involving chains, including Best Buy Co. (BBY) and Circuit City
Stores. Circuit City in January said it would go into liquidation
after failing to reach an agreement with creditors or find a
buyer.
Rosoff said the beleaguered current state of the electronics
retailing industry likely prompted Microsoft into the decision to
launch its own chain.
Microsoft shares closed Thursday up 0.26% at $19.26.
-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455;
jessica.hodgson@dowjones.com