Microsoft’s first CEO correctly and eloquently informed the world that software patents are not necessary for innovation, and that they indeed stifle innovation.

Microsoft’s current CEO has done a complete about-face on this issue, realizing that Microsoft is doomed to extinction unless it can use the force of the software patent system to cripple or kill the competition that they can no longer compete with head-to-head.

There is another problem with Microsoft — their attitude. Ballmer should spend billions on search, but when he speaks — he should focus on the features and let Wall Street journos dig out what money they are putting where.

But if you switch your mind away from USA market, the scene is different in places like India. Microsoft has only one enemy to be dealt with — piracy in OS and apps market. Both Office 07 and Windows 7 (till now) are fine products in isolation and if they get the pricing right — they are safe here.

For the formats on the mobile devices, mobility goes hand in hand with openness — so there is little chance of formats giving a significant advantage. I have read at many places about how Microsoft is great at coming back on competitors after lagging behind. Though the earlier dominance by a single player phenomenon might have already ended on the mobile front with WebOS, Android, Symbian and IPhone set to split up the market.

“Part of Microsoft’s problem is historical. Executives spend too much time focused on competitors.” And on themselves. Way too much effort expended on internal processes (meetings, review, ladder climbing) that has no tangible customer benefit.

Also, I’m not sure “Recent cutbacks and internal refocusing point to Microsoft making its core business market the top investment priority” is necessarily a bad thing. If it means retreating to a more secure revenue base and retooling the company around more profitable, sustainable, understood businesses, that may be a good thing for the company.

It’s not going to happen, but it would be the right strategy IMHO.

Microsoft needs to relearn how to focus on customer needs, customer satisfaction, and efficient, focused, profitable execution toward those goals. It needs to shed a lot of the technology-for-its-own-sake attitude and not-invented-here bias. Less fiefdom building, more customer rapport building.

Business customers are the company’s core audience, and rebuilding the company’s “core competencies” with that known, trusted audience would be a good start toward re-engaging with consumers with a better set of social (and technical) skills down the road.

I’m not holding my breath, however. The list of tech companies that successfully retooled for a changing business landscape is frightfully short (and starts with Apple).

If those fat profits collapse then they will be left as a big company with big overheads. Just look at the netbook market, it is making the business of selling operating systems much less profitable. They do not even have the Office upsell because these machines will never run Office properly.

XBox may be popular but it takes constant investment to be a player in the game console market and I am not sure Microsoft have the stamina. Even if you wipe out the 8 billion to make the console, the XBox division only makes hundreds of millions per year. This sounds good but Microsoft is a company designed to run on tens of billions of profit.

Without monopoly-sized profits, I think Microsoft will quickly collapse into a much smaller company. Maybe the business of making operating systems and office applications is not going to be profitable at all when there is open and free software competing against it?

Microsoft Soapbox was their YouTube, they still spent billions on it but it wasn’t even as popular as YouTube so will never have the ability to add adverts to the videos. Google love data, they feed it into their search machines so they can learn. My guess is that they are using this massive amount of data to train their AI to search videos, they have already done it for text (including translation) and images. If you look at it like that, then YouTube is a very cheap and good investment. Think of it as R&D for now.

Mobile is a red herring. The point is that you can use the web on ANY device, it does not matter if it is classed as a phone or a netbook. The iPhone could never have been popular without the open web based on standards. Imagine the iPhone running IE 5.5 for Mobile ARM Edition. The web would not have been an enjoyable experience. Microsoft would have intentionally crippled it so that their IE 6.0 for PocketPC would make the web look better. Remember that the first iPhone did not have applications, it’s biggest selling point was that it had ‘the real web’.

I think that open source software has played the biggest part, without open source, there would be no OSX or iPhone. Without KDE, there would be no Safari or Chrome.