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Microsoft backed further into a corner by partners

(MoneyWatch) Microsoft (MSFT) continues to face pressure in the market. Its grand move toward a "device and services" strategy took a beating with poor reception for its Surface tablets.

As it has moved away from long-time hardware partners like Hewlett-Packard (HPQ), those companies have responded in kind. The latest move: a $279 HP notebook -- powered by Google's (GOOG) Chrome operating system. The more partners promote competing products, the increasing difficulty Microsoft will have in reestablishing its market dominance, if that is even possible at this point.

One problem after another

The recent past has seen a string of Microsoft setbacks, mistakes, and disasters, whether alleged truth-bending in marketing Bing, its search engine; the attempt to placate disenchanted investors; or the sudden retirement announcement of CEO Steve Ballmer, even as he continued to make major shifts in the company's strategy, like buying Nokia's device business.

Ballmer's announcement of the shift to a devices and services strategy was a major one. It was a (very) late tacit acknowledgment of the reality that mobile devices could become the new normal for client computing. Apple, Google, Samsung, and others were racing ahead of Microsoft, and long delays in addressing the problems have meant that the owner of the Windows and Office brands had to catch up from a trailing position.

The inherent problem is that as mobile devices become ever more powerful, convenient, and well-designed for consumers and business users, fewer people need the capabilities of full desktops, laptops, or notebooks to do the bulk of what they must accomplish. That is what opened the doors for Apple and Google to race ahead, putting Microsoft in the uncomfortable position of low single-digit share in this critical market.

Old dog, old tricks

Microsoft has used its usual strategy of introducing a product and then refining it over time, hoping that change can happen quickly enough to retain loyal customers and regain disaffected ones. But no matter how quickly Microsoft tries to move, it doesn't seem fast enough. It has lost enough momentum and popular favor that many people have started to assume that nothing it does would be right. Look at the latest ZDNet shootout between the iPad 5 and Surface 2 in which David Gewirtz was surprised to find a Surface 2 Pro taking top marks for his admittedly personal criteria. Unfortunately for Microsoft, perception, whether correct or not, is typically the trumping factor for buyers.

Now the pressure continues on the traditional notebook front. AP found the HP Chromebook 11 a respectable machine, even considering the need for a largely available Internet connection. Would someone use it for graphic design? No. For extensive spreadsheets? No. But there is plenty it can do and at $279 is an attractive buy.

Other vendors look to Chrome and Android as ways to reduce their manufacturing costs (no licensing expenses) while keeping buyers interested. It's another front on the client computing war. Maybe Microsoft can turn the tide in one of these directions, although it seems increasingly unlikely given how its efforts have gone so far. But to turn back all the challenges simultaneously? Less likely day by day.

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