Dvorak: There's Still Potential for Microsoft

When a company like Apple is hitting on all cylinders, investment money can be shifted from a company like Microsoft over to Apple. And why not? Growth seems like a given for Apple, and growth is what drives a stock price up and up.

But I have to agree with John Dvorak in his article "Rethinking Microsoft," there is also potential for Microsoft to grow its revenues. Its biggest potential comes from its Xbox division. As an owner of an 50-inch HDTV and a Nintendo Wii, I can tell you that the future of gaming isn't the Nintendo Wii, at least not in its current iteration. Let me be clear, the Wii is the present. The Wii will be the best-selling console this Christmas , but it will not be next Christmas. In the long run, the more HD content that is produced for the Xbox 360, the more its sales will increase . The amount of HDTVs in homes around the world is about to explode. People like me will be experiencing HD for the first time and will want to have a game console that justifies having a large HDTV. The desire for HD content is very strong.

There is still a small competitive risk from the Playstation 3. However, the only thing keeping the PS3's hope alive is the inclusion of a Blu-ray player. It is this same Blu-ray player that has been the PS3's albatross, making the console too expensive for most of the gaming market. There is no reason why, sometime next year, Microsoft couldn't package their HD-DVD peripheral with the 360 and still beat the PS3's price. And by next Christmas, the Xbox will have a larger number of compelling games than the PS3. It's the Xbox and Wii's early sales lead that has a lot third-party gamer designers focusing on those two consoles and not the PS3 for the future.

The biggest threat to Microsoft's revenue stability is Apple stealing away the average computer user at home. Microsoft will continue to dominate in the business world, as it is an industry that Microsoft does anything to cater to, especially sacrifice ease of use for its OS. In the digital age, what the business world wants is directly in opposition to what the consumer wants. Apple understands this is changing their computers to cater to the consumer, not business.

In the end, revenue from the 360 will make up for any decline in the OS market that Microsoft might experience.