can Microsoft compete?

At first blush, that would seem to be a ridiculous question, given they've got something like 90% market share (a bit more perhaps) among personal computers. But that's sort of the point; they've practically owned the market since the Mac slid out of sight in the early 1990s. They really haven't had to compete.

In fact, you could say they've never had to compete, not since they landed the contract to provide the operating system for the IBM PC, PC-DOS and then went on to develop their own MS-DOS, which, along with the PC-compatible BIOS, enabled the clones to rise up and overwhelm IBM's own personal computing effort. It was a market position borne up by irresistable logic, and they've been on a rocket ride ever since, but that rocket is finally running out of fuel.

True, it didn't come entirely for nothing. A degree of competence, delivering working code, was necessary, but this was easier back in the days of MS-DOS than it has become in the days of Vista, with its Byzantine complexity. True, some of their customers wanted to take advantage of larger memory capacities than MS-DOS could initially accomodate, and there were other such issues early on, but the main thing Microsoft had to be careful to do was to not break the main applications many people were using as they updated MS-DOS and then Windows. Compatibility was the byword which defined the market, initially compatbility with the IBM PC and PC-DOS, then compatibility with MS-DOS and with programs such as Word Perfect and Lotus 1-2-3. (Actually, once they had competing products, breaking these programs mattered considerably less.)

But, to judge by what the rumor mill has to say about Vista, compatibility is no longer the central concern at Microsoft; apparently it has been replaced by brand recognition. It's called Windows, therefore it's just the next version of what you've been using for years; nevermind that you can't install it on your old machine and that it won't run your old software. It's Vista, but it's Windows Vista, get it?

Okay, let's assume they get past this, that they don't lose many customers to the need to upgrade hardware and/or software and their cash cow continues to show up for milking. There's still the issue of the six billion dollars they spent refreshing it and the open question of whether they'll make $6 Billion more off of Vista than they would have made continuing to sell XP.

Now, to that calculation add their intention to ship yet another major update of 'Windows' - one likely to be even less compatible with previous versions - by late 2009, just over two and a half years from now, so the above question becomes whether they'll make $6 Billion more off of Vista than they would have made selling XP between now and January, 2010, at which time we'll have to add the cost of developing Vienna to the bill.

Meanwhile, Linux continues to press forward and Mac OS X is progressing by leaps and bounds.

Place your bets.