Can Microsoft Succeed Outside of Windows? (MSFT)

Microsoft Corporation (NASDAQ: MSFT) is among the biggest companies in the world and continues to exert dominance in computer software of all kinds. The company's flagship products, Microsoft Windows and Office, are among the most prolific products of all time. Astonishingly, an estimated 12,000 millionaires were created out of Microsoft's success.

With revenues exceeding $60 billion and operating income over $20 billion in 2010, Microsoft clearly hasn't shown its age in earnings results. Still, more than 60% of revenues are tied to Windows and Office products. The company has made visible progress in other business divisions, but a question remains: can Microsoft succeed outside of PC software?

To be sure, the company earns a considerable amount in server software, business consulting, and entertainment and devices. But outside of XBOX, Microsoft has yet to establish itself in another prominent market position.

Take Microsoft's effort at mobile operating software as an example. Despite multiple efforts over a decade and significant investment, Windows Mobile is far from a "player" in the U.S. market. Apple's (NASDAQ: AAPL) iPhone, Google's (NASDAQ: GOOG) Android OS, and Research in Motion's (NASDAQ: RIMM) BlackBerry continue to dominate the mobile operating space. Why has the company languished in such a fertile market?

Arguably, the company is too big to adjust to continuously changing consumer demands. Microsoft releases a new Windows version every few years, but mobile phone technology changes at such a rapid pace that previously successful strategies are irrelevant. Google has paid close attention to consumer trends, and benefited beyond expectations as a result.

In a Canalys research report, it notes that "Android devices collectively represented a 34% share of the US market in the quarter, and with growth of 851% Android became the largest smart phone platform in the country."

Investor skepticism is clear in Microsoft stock. The company has been unable to maintain a share price above $30, and has recently slid below $25. While no one expects a $50+ stock circa the dot-com era, markets appear hesitant to bid Microsoft above its current plateau. Shareholders have expressed frustration with management at its inability to grow outside businesses, and the proof positive lies in a lower market capitalization than Apple.

Microsoft is far from rolling over, though. The company has sold more than 175 million licenses for Windows 7 so far, just released an updated XBOX, and Windows Phone 7 is set to be released this fall. Whether these initiatives result in organic growth (and a stronger stock price) remains to be seen.

Microsoft shares are down 1.9% this afternoon, to $24.36.

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