October 14, 2011 at 14:30 PM EDT
Thumbs Up for Dell, Down for Microsoft
As Dell continues to strengthen its position, longtime collaborator Microsoft continues to bolster its reputation for stodginess.

Michael Dell opened the inaugural Dell World 2011 information-technology conference in Austin on October 12. One of the topics of conversation at the convention is Dell’s (NASDAQ:DELL) declaration that it is focusing its tablet business on Microsoft’s (NASDAQ:MSFT) Windows 8 rather than Google’s (NASDAQ:GOOG) Android platform. Despite the close working relationship between Microsoft and Dell, though, things aren’t perfect. Apparently, Dell has cancelled plans for any new Windows Phone devices until 2012, and possibly beyond. What this means for the stocks is anyone’s guess, but it does make a good segue into the topic for this article, which is that investors should sell Microsoft and buy Dell. Here’s why.

Missed Opportunities

Microsoft is notoriously slow to make decisions and possibly even slower to admit mistakes and change course. Take the Windows Phone, for example. Most people could have predicted as late as five years ago that smart phones would rule the world, yet the new operating system Microsoft unveiled to replace its antiquated Windows Mobile platform didn’t appear in the U.S. until November 2010, a year later than originally intended. Late to the ball, its market share continues to wither away.

Apple (NASDAQ:AAPL), Research In Motion (NASDAQ:RIMM) and Android have all taken the chairs at the table, and Michael Dell likely sees the writing on the wall before Microsoft does. Estimates suggest that Microsoft sold as few as 1.4 million units last quarter — fewer than the number of preorders for the iPhone 4S over one weekend. Given Microsoft’s resistance to change, it is going to move ahead by merging the PC and mobile interfaces and hope for the best. We all know how this story will end. Badly.

Another example is Microsoft’s Kinect, the $150 motion-tracking device for its Xbox console. Microsoft spent hundreds of millions developing it and now it’s selling like hotcakes. The original plan was to sell the Kinect cheap as a way to generate further game sales. Unfortunately, what company didn’t anticipate was the hackers who repurposed the Kinect for all kinds of uses, including attaching it to a Roomba, iRobot’s vacuum cleaner, so the robot can be directed around a room with hand gestures. The list of alternative uses for Kinect is a long one. Microsoft, in its infinite wisdom, refuses to welcome the creative exploitation of its product, staying silent on the matter. Instead of welcoming the open-source community as Apple did with the App Store, Microsoft chooses to sulk when it really needs embrace creativity. Is it any wonder younger people don’t take Microsoft seriously?


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