Will Microsoft Save Itself in 2013?

Microsoftfinds itself in a precarious situation as we roll into 2013.

The Windows 8 launch that was supposed to save Redmond's bacon appears to be a dud. Pushing into the mobile market with the Microsoft-branded Surface tablet upset a horde of traditional partners and doesn't seem to pay off, either.

So where does Mr. Softy go from here? I'm afraid it won't be anywhere nice.

Task No. 1 on CEO Steve Ballmer's agenda must be to get the failing Windows 8 launch back on track. The company can't afford another unmitigated disaster so soon after the tragedy we know as Windows Vista. The Vista debacle opened the door for Apple to gain market share in the PC space.

With PC-style systems fading in importance these days, Microsoft is risking the server market and the already minuscule mobile foothold it established. Ballmer is still defending the design choices that went into Windows 8, but it's a quixotic quest.

The company can't afford to ram unpopular choices like the tablet-centric Metro desktop down the throats of consumers and corporations. Ballmer might have had that luxury 10 years ago, when Microsoft lacked serious competition in every computing space that mattered. But things have changed. Apple and Google are crushing traditional PC sales under the wheels of invading tablets and smartphones. Low-cost Linux systems are stealing Microsoft's data-center lunch, led by inveterate penguinistaRed Hat . Redmond's core markets are melting away under this double-sided assault.

A quick service pack could restore some sanity to the new system -- make the Metro experience optional rather than mandatory, and Redmond still stands a chance. The question is, will Ballmer swallow his pride and get it done? The answer will determine Microsoft's future in a big way.

Taking the bitter pill would mean backing off the Surface idea while smoothing over the worst parts of Windows 8. Admit that being different just for the sake of being different is a losing strategy. Go back to software engineering 101.

But I don't see Ballmer making that tough decision. It's just not how he rolls. Then it'll be up to the board of directors to hold him responsible when this dogmatic strategy fails.

Microsoft is sure to underperform its peers in the Dow Jones Industrial Average when this happens. I'm so sure of it that I've started a bearish CAPScall on Microsoft. Next to actually selling the stock short, that's the strongest negative statement I can make about any investment.

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The article Will Microsoft Save Itself in 2013? originally appeared on Fool.com.

Fool contributor Anders Bylund owns shares of Google, but he holds no other position in any company mentioned. Check out Anders' bio and holdings or follow him on Twitter and Google+.The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google and Apple, creating a synthetic covered call position in Microsoft, and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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