Microsoft's Next Big Thing: 4 Game Changing Ideas

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We're barreling toward Microsoft's (MSFT) next quarterly report on Thursday, and it's hard to get too excited.

The great Microsoft growth stock that rewarded investors handsomely during the 1980s and the 1990s, has been a bit of a snoozer on this side of the millennium. Look up "lost decade" in the dictionary, and you'll sneak a glimpse of Mr. Softy's mug shot.

There won't be any confetti launchers come Thursday. (Analysts see revenue climbing a mere 6.5%, with earnings growing just shy of 10%.) Microsoft remains a growing company. It's still the world's largest software company. It just happens to be as sexy as Abe Vigoda.

That can all change, of course. Microsoft can still innovate its way out of this slump.

Four Things Microsoft Can Say to Turn It All Around

I questioned its potential return to greatness this summer, but there are a few things that Steve Ballmer's tech giant can do to get me -- and other jaded Microsoft watchers -- excited again.

Let's go over a few things that I would love to hear Microsoft say on Thursday.

1. "Windows 8 tablets are going to be great!"

We're living in an iPad world. Apple (AAPL) owns this space. Google's (GOOG) Android is a distant second, even though its Android smartphones are outselling Apple's iconic iPhone.

The only time that BlackBerry or webOS tablets have turned heads is when they're fetching ridiculous clearance bin prices.

Why should we take a Microsoft tablet seriously? Well, let's analyze the shortcomings of the non-iPad gadgets. They're good for surfing the Web, streaming video, and messing with apps -- just like an iPad -- but they lack rudimentary computing applications. You don't see too many people pecking out word processing documents, building spreadsheets, or even managing email accounts -- you know, the stuff that folks on laptops and PCs rely on Microsoft Office for in the real world.

That will change when Microsoft 8 rolls out next year. The touch-friendly operating system has been rebuilt from the ground up. Microsoft has a real shot at making this the first tablet that isn't simply a leisure gadget.

This matters because...

2. "We're going to give iOS and Android a run for their money in smartphones."

When Microsoft agreed to compensate Nokia (NOK) billions -- yes, billions -- to champion its mobile operating system, we knew that the Kin killer was serious about smartphones.

You're not seeing it yet, but Finland's Nokia -- a global juggernaut in handsets -- is going to make Microsoft a more relevant player in mobile operating systems. Given the recent outages at Research In Motion (RIMM), Microsoft's timing couldn't be better to make a dent in frustrated IT departments eying more reliable BlackBerry replacements.

If Microsoft matters in mobile, it will matter in tablets.

Consumers don't see Microsoft as a "cool" company, but that may change because...

3. "The Xbox is going to be the cornerstone of home entertainment systems."

Set aside that preconceived notion that the Xbox 360 is for pimply faced teens playing Halo with Cheetos-dusted fingers. Gamers are a broader audience than that, and a Web-tethered Xbox 360 is no longer just a gaming appliance.

The Xbox 360 serves up video, music, and websites. The Xbox was the first console to allow Netflix (NFLX) streaming, and that's just the beginning.

Earlier this month, Microsoft announced that nearly 40 TV and entertainment giants would be coming to its Xbox Live platform, raising the bar again by making the top gaming console an indispensable set-top box for streaming video from some of the biggest cable and premium television providers.

Microsoft wants to be a TV star because ...

4. "Bing is going to be profitable!"

One of the bigger shocks in Microsoft's recent quarters is that the tech bellwether is losing a lot of money in its online operations. It's dragging down the historically chunky margins in its software strongholds, despite Bing's success against market-leading Google.

Microsoft will eventually make its online initiatives profitable, or consider spinning them off to improve its income statements.

The clock is ticking, and investors aren't going to be too patient if all they get is meandering Windows and Office sales over the next few years. Microsoft needs to prove that productive tablets, corporation-validated smartphones, wired Xboxes, and money-making dot-coms are its future.

Microsoft's next big thing is that everything is about to change.

Longtime Motley Fool contributor Rick Munarriz does not owns shares in any of the stocks in this article, except for Netflix. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Netflix, Google, Apple, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple and Microsoft.


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