Can Microsoft Management Survive a Windows 8 Failure?


NEW YORK (TheStreet) -- When it comes to investing in technology companies, there are two important rules investors must follow to be successful.

Rule #1 is that there is no value without growth.

Rule #2 is to never forget rule #1.

While there are companies including Apple and Amazon that make it easy to remember these tenets, what I have begun to realize is companies tend to lose their "tech status" pretty quickly once Wall Street becomes accustomed to lowering performance expectations for the stock in question.

It has happened to once-high fliers such as Cisco , Hewlett-Packard and most recently Dell . By and large, I've become somewhat convinced that this is where software giant Microsoft finds itself today.

I say "somewhat" because unlike some of the names that have failed to produce growth in sufficient quantities, Microsoft is on the verge of being able to do something about this in a relatively short period of time.

One cannot mention Microsoft today without wondering why it can't be like Apple. For that matter, this comparison has been the source of what has become a less than favorable appeal towards the company by the investment community.

However, I think the best way to assess Microsoft and its value is on its own performance rather than on what the competition is doing. However, the unfortunate thing is that the competition is often doing too well to the extent that it offers the perception Microsoft has somehow lost both its ability to compete and innovate.

Be that as it may, for Microsoft to succeed in today's environment, it needs to understand not only where it is but also where it wants to go. For that matter, so does its critics, many of whom are too quick to proclaim the company's demise.

Its upcoming release of Windows 8 has the ability to silence these opponents. But the question remains, can it execute? I think this is a make or break opportunity for the company and likely its real last shot at becoming a player again within consumer market. In fact, its life depends on it.

I say this with the understanding that it does have a dominant lead in PCs. However, last I checked this was a dying industry -- the low margins being reported by its partners in Hewlett-Packard and Dell support that reality. For this reason, Windows 8 has to succeed if Microsoft wishes to capture a significant portion of what are now replacing PCs -- tablets and smartphones.

But I don't think Apple intends to make this easy. While Microsoft remains underappreciated for its continued success in the enterprise as well as government sales, Apple continues to take a pretty big chunk from its PC sales to the extent that one out of every three computers sold in the U.S. are Macs.

If that is not reason enough for concern, there is also the fact of the growing popularity of the iPad and tablets in general. Whether it's from Samsung and based on the Android platform from Google , these have started to cause shoppers to postpone replacing their PCs. For that matter, Apple continues to be the overall winner as sales of the iPad have grown from under 14 million just two years ago to over 40 million at the end of last year. If it does not almost double this year it will be a surprise.

So this leads to more questions regarding Microsoft's partnership with Nokia , or more specifically what kind of competitive leverage has it provided in the area of mobile? In fact, will it prove to have been a waste of time if Windows 8 fails?

As hard of a blow that might prove to be for the company, is it prepared to go to plan B and use its cash to make an acquisition, such as for struggling mobile device player Research in Motion , a company that it can now buy for pennies on the dollar. Bottom line

As I've said previously, I don't envision a scenario where Windows 8 can fail and Microsoft survives. If this was 1998, perhaps it might get away with it. But in an Apple/Google-dominated new technology environment there are now too many options available for the company to get by this unscathed.

I wonder, however, if Microsoft is prepared for what might not be a favorable reaction to the release. What if the Ultrabooks by HP, upon which it is heavily reliant, are not well received?

It may or may not have a plan B but despite the criticism Microsoft has received over the past decade, I hope it does.