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Microsoft Is Out of Touch

Tuesday - 7/16/2013, 2:00pm  ET

Microsoft CEO Steve Ballmer just announced the company's restructuring plan late last week, and if you had enough caffeine in your system to stay awake while reading it. you noticed that a handful of new engineering departments were set up, but not much else.

What's more interesting is what Microsoft's COO Kevin Turner said last week at the Worldwide Partner Conference: "We have high respect but no fear of competitors. ... We are doubling down and making sure we are fighting and evangelizing our story."

A healthy dose of confidence is always welcomed -- and necessary -- in the tech world. But Microsoft should definitely be scared of the competition. Actually, every tech company should be a little scared of the competition. I don't care if you're Google, you should be looking over your shoulder at the guys behind you and checking to see if their product or service is better than yours.

It's no secret Microsoft was late to the both the smartphone and tablet markets and sales of its Surface tablet and Nokia phones running its Windows Phone 8 OS are not doing great. Microsoft was No. 5 in the worldwide tablet vendor space in the first quarter of 2013, making up just 1.8% of tablet shipments market share. Nokia is No. 2 in mobile phone shipments, but even doesn't make the top five smartphone list right now. That's obviously bad news for Microsoft's mobile products and one more reason the company should be scared of its competitors.

Which leads us to the next statement from Turner: "If you bet on Microsoft, you are not going to ask anymore, 'Hey, where is the innovation?' The challenge going forward is how do we keep up with it."

Again, confidence is good. Overconfidence is not. Sure, Turner was talking with a group of Microsoft partners (as the conference name suggests), but the idea that Microsoft is some sort of fast-paced innovator is hard to fathom. The problem is that some people -- namely investors -- are betting on Microsoft. Some are happy with the results they're getting because the company's stock is up 29% since the beginning of the year, but consumers -- the people who actually buy products -- are scratching their heads at Microsoft hinting that it's a top innovator. A skeptic needs to look no further than Surface tablets that people aren't buying, a desktop OS that people aren't happy with, and a mobile OS that's taking about 3% of the U.S. market share.

Too soon
Microsoft needs to build investor confidence and draw in consumers with its latest products -- not with overconfidence. I still believe that Microsoft can pull this off, but it's going to take a long time to gain mobile customers and convince users that its software and devices are worth trying. To the company's credit, Microsoft's products and services do show the company is trying hard, but if the company believes its innovations are top notch right now, it has a real problem. Compare Microsoft's innovations to Google's Glass, Android, Chrome, Search, Ad services, maps, and autonomous cars, and it's easy to see what a true innovator looks like.

I'm being a bit tough on Microsoft, but it's because I think the company can truly be a major mobile player going forward -- if it can get its products and services right. The challenge for Microsoft is that there's a long list of other tech companies already dominating the market. To help investors figure out "Who Will Win the War Between the 5 Biggest Tech Stocks?" The Motley Fool has put together a free report on specifics. Find out who the competition is -- as well as their strengths and weaknesses -- by clicking here now.

This article was originally published as Microsoft Is Out of Touchon Fool.com

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