Little did Microsoft (MSFT) know that a company called Acer could ignite the spark that eventually burns its revenue down.
Acer is connected with Microsoft's real villain: Google (GOOG). Google's Android operating system -- which is free -- will be loaded onto some Acer notebook computers that will be sold later this year, Bloomberg News reports.
Google's free software applications are already stealing sales from Microsoft Office, and Android will further hurt Windows' sales. The potential of larger sales losses in the future raises the question of whether Microsoft can stop the bleeding before it becomes the next General Motors.
It's not as if Microsoft hasn't seen this coming. The issue for the software giant is, like GM, they seem to be reluctant to deal with the inevitable reality: a competitor, in this case Google, has products that should eventually break the heart of Microsoft's sales. Can they innovate before it's too late?
How long before Microsoft's dominance crumbles is, at this point, a guess. Microsoft is a mature company making gobs of money from its operating system and office software, while Google makes its money from online advertising and gives away its operating system and office software to help drive ad sales.
Bloomberg News said as Android enters a "market dominated by Microsoft," it will only be "deepening the rivalry" between Google and Microsoft. Acer is a formidable player with wide distribution as the second largest maker of laptops in the world. They'll help Google break Microsoft's hold on the market.
Asustek Comptuer, which pioneered the sub-$500 laptops called netbooks, has also developed a product running on Google's software, Bloomberg's story said. So the threat to Microsoft's money-making empire is building.
Microsoft is dependent and understandably reluctant to give up the goose that has been laying golden eggs for the last couple of decades. When Microsoft Chairman Bill Gates turned the company over to CEO Steve Ballmer, some news reports suggested that Gates saw this emergence of so-called cloud computing as leading to the inevitable demise of the main revenue generators for the company he co-founded with Paul Allen.
In classic, late-to-the-game, me-too fashion, Ballmer said last week, "We are working for an extension for Windows and Office to the clouds." He spoke at the D: All Things Digital conference last week in California.
What can it charge for such products when Google is happy to give them away?
Redmond, Washington-based Microsoft has smartly diversified its revenue in recent years by created a gaming division, led by the Xbox 360, a search unit, which will unleash its newest search engine, Bing, tomorrow and a mobile software unit. None of these assets can replace the billions being brought in by Windows and Office.
Microsoft does have the cash to buy, invest -- or, better yet, create -- the next big thing that would replace the revenue that will be whittled down over the next decade.
The question is, as users become less dependent on Microsoft's products, will the company have the ability to keep itself from becoming the next GM. As it looks now, Microsoft may become another bailout candidate for the U.S. government sometime in the future.
Anthony Massucci is a senior writer for DailyFinance. You may follow him on Twitter at hianthony.
Investing in Startups
The lucrative and risky world of startups.View Course »