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Microsoft's mobile push may be too late

(MoneyWatch) Microsoft (MSFT) keeps trying make itself relevant in the mobile world, first with Windows Phone and now with its Windows 8 platform for tablets. The software maker also has released its own Surface tablets: the Surface RT, running a version of Windows for lower-power chips in many tablets, came out in the fall, and now Surface Pro, with full Windows 8 for heavier computing needs.

Microsoft obviously has a lot riding on this push. According to CFO Peter Klein, there is no "plan B" if things go wrong. All it can do is adjust its mobile strategy until the company has "the right set of experiences at the right price points for all customers."

But it will take more than the occasional course correction for Microsoft to catch up to Apple (AAPL) and Google (GOOG). The question is whether Microsoft's strategic path can ultimately restore the company's mobile fortunes to where they once stood, when the company was a major force in cell phones and the main choice for portable computers.

When people talk about bet-the-company strategies, they typically indulge in hyperbole. Not in this case. Microsoft doesn't face near-term disintegration, but its fortunes in the medium run are at stake. For all its attempts at diversification, Microsoft has remained almost entirely dependent on selling variations of Windows, Office and business productivity software. The problem is that even a successful venture like the Xbox family of game consoles is tiny compared to Microsoft's strongsuits. Even as the company moves to provide "cloud" storage services, what it actually offers is largely hosted versions of its more popular applications.

Too big not to fail?

Microsoft allowed itself to fall too far behind in a classic example of what Harvard Business School professor Clayton Christensen famously dubbed the "innovator's dilemma." The company focused on the product categories that were responsible for the revenue Wall Street expected and were caught by the disruptive innovations of the modern smartphone and tablet. That was enough for the dynamics of how people use computers to change.

Many businesses and people still need PCs even as the use of tablets and smartphones explodes, but for how long? If computing increasingly moves to the cloud, then soon people will be able to plug a large display into a small mobile device and leverage massive cloud server farms to provide the computing muscle some tasks need. The performance and visual space advantages of desktops will evaporate.

Taking a major stake in mobile early on would have allowed Microsoft to remain relevant by continuing to control a significant portion of client devices. But it let opportunities slip away. Now its new product entries are moving at an excruciatingly slow pace.

Walking while the market runs

Windows Phone units reached 3 percent of smartphone sales last quarter, according to Gartner. That is a significant jump from the 1.8 percent of the previous year, but still nowhere the almost 70 percent market share of Google's Android platform and about 21 percent for Apple's iOS. Yes, Android grew from nothing into the dominant force, but that was at a time when the touch-centric smartphone was new. Market dynamics are now completely different.

As far as tablets go, Microsoft's Surface hasn't moved the needle much. Sales estimates run from 720,000 to 900,000 units last quarter. Microsoft quickly sold out the 128GB version of the Surface Pro, but there may not have been much available inventory.

The company is not picking up mobile market share as quickly as it needs to keep users close. Instead, Microsoft has chosen its usual approach of chasing a market and counting on having enough time to refine its approach and ultimately succeed. Even in the past, that could be a hit-or-miss tactic. Today, there is no time, and Microsoft executives frittered away what little they might have had.

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