AFTER years at the cutting edge of technology, Microsoft seems in danger of falling off the pace.
According to Nomura analyst Richard Windsor, in the short-term Microsoft is going to have difficulty sustaining its current share price.
"Microsoft needs to find revenue growth in order to justify its current share price, which represents a price-to-earnings ratio of 25 times," he says. "Growth in the personal computer market is last decade's story, and market penetration has slowed."
The relentless attack on Microsoft's flagship software products by lower cost rivals is the most worrying factor. The company's software is increasingly seen as expensive in the PC market, where hardware and software prices are falling.
Open-source software using non-proprietary operating systems, such as Linux, is also cutting into Microsoft's virtual monopoly of desktop software as governments and corporations become attracted to the cost-savings they offer.
Governments, including Germany and China, have already begun a move towards open source, with Sweden, Denmark, France and the UK also testing the water. Sweden has recently identified savings of more than $1bn a year, while Denmark has identified cost reductions of between $480m and $730m a year.
News source: The Scotsman