Microsoft's (MSFT) Real Problem: The Second Coming of Apple (AAPL)

As Microsoft (MSFT) continues to waste time and resources figuring out how to win a sideline game it has already lost–Internet media–its shareholders have bigger things to worry about. Namely, the future of the Windows and Office cash cows.

It has been so long since Microsoft had anything real to worry about in these businesses that it’s easy to take their perpetual domination for granted. Don’t.

We’ve written frequently about the cloud computing threat: Google (GOOG), Yahoo (YHOO), Amazon (AMZN), and other web-based services companies offering functionality and apps for free that Microsoft currently charges a boatload for. Microsoft is aware of this threat and is moving to try to combat it. But if it smoothly navigates a technology paradigm shift of this magnitude, it will be one of the first dominant technology vendors in history to do so. (Think IBM’s transition from mainframes, DEC, etc.)

The second major threat, however, comes from a company that Microsoft once left on the edge of death: Apple (In fact, Microsoft actually helped save Apple once, by becoming a shareholder, so it could demonstrate to regulators that it did, in fact, have a competitor. At the time, it didn’t).

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