By Philip Elmer-DeWitt
July 25, 2009

John Dvorak is a crafty tech writer who has made a career of stirring up the Apple (AAPL) fan base and basking in the ensuing controversy. Two of his most famous examples: his 1984 critique of the “newfangled” mouse (“There is no evidence that people want to use these things”) and his 2007 call for Apple to pull the plug on the iPhone “before it’s too late.”

On Friday he stepped up on his surly Second Opinion soapbox to go after Steve Ballmer’s Microsoft (MSFT), and for once I thought he made a lot of sense.

The theme of “Is the party over for Microsoft?,” as it often is with Dvorak (no relation to the Czech composer or the Seattle keyboard designer), is that companies should stick to their core competencies. Thus his warning to Apple to stay out of the mobile handset business — “a buzz saw waiting to chop up newbies.”

“There is no likelihood that Apple can be successful in a business this competitive,” he wrote shortly before the iPhone hit the market. “Even in the business where it is a clear pioneer, the personal computer, it had to compete with Microsoft and can only sustain a 5% market share.”

But as Techcrunch‘s MG Siegler points out, Apple’s 91% revenue share from computers that cost over $1,000 suggests that Cupertino is actually sticking very close to its knitting — which is to dominate the market for high-margin computing devices. Or, as COO Tim Cook would put it, not to build the most computers but to build the best.

The news hook for Dvorak’s opinon piece this week was Microsoft’s most recent earnings report, which showed revenues down 17% year-over-year in the same quarter that Apple’s climbed nearly 12%.

“Everyone knew the day would come when the fortunes of Microsoft Corp. would reverse,” Dvorak writes. “The company might now be in actual decline.”

The reason, he says, is that Microsoft too often forgets that it is a software company built on the success of operating systems and applications suites. He makes the case that Redmond has been too easily distracted over the years by the success of others in essentially unrelated fields.

Then, in the meat of his argument, he ticks off 10 of these “bright and shiny objects.” I quote:

  • Years ago in the pre-Internet era, AOL was the talk of the town, so Microsoft had to copy it with MSN. No money was made; no strategic advantage was gained.
  • Netscape was the rage for a while, so Microsoft threw together a browser and got in that business. The browser was given away for free. No money was made; the strategy got the company in trouble with government trustbusters.
  • During the early days of the Internet, new online publications appeared. Microsoft decided to become a publisher too, rolling out a slew of online properties including a computer magazine and a women’s magazine. They were all folded.
  • Computer books became popular; Microsoft began Microsoft Press. After an early splash and success, the company soon lost interest and the division now languishes.
  • Teddy Ruxpin became a hot toy. Microsoft rolled out a couple of robotic plush toys, including the creepy Barney the Dinosaur who sang “I love you and you love me.” The company soon lost interest and dropped the whole thing.
  • AOL-TV appeared, along with other device-centric TV-delivery mechanisms in the 1990s. Microsoft created a Microsoft-TV division as well as a device. It soon lost interest.
  • Adobe Photoshop became a huge success, so Microsoft hired Alvy Ray Smith to develop photo-editing software. Smith quit when the company lost interest in the idea.
  • Yahoo and Google showed that a search engine could be a money maker, so Microsoft copied that idea; it now has Bing.
  • Cloud applications are currently trendy, along with notions about software as a service. Microsoft decides to go into that business.
  • The Apple rolled out a MP3 player, the iPod. Microsoft came up with its own MP3 player, the Zune. The company also says it wants to stream music.

“This is a company that began making development tools for programmers,” he concludes. “Does anyone see a pattern here?”

You May Like