Microsoft's (MSFT) Ballmer: IT Spending May Never Come Back

In a statement that must send chills up the spines of other tech CEOs, Microsoft’s (NASDAQ:MSFT) Steve Ballmer said that the vicious recession may have reset IT spending to a level which will never recovery to where it was in the period just before the downturn.

“While we will see growth, we will not see recovery,” Ballmer said.

Ballmer is speaking directly to Microsoft’s own future, although he did not frame his comments that way. There has been growing concern that the world’s largest software company will never be as dominant as it once was in the operating system, server software, and business products portions of the industry. Much of that is due to increasing competition from other large companies like Oracle (NASDAQ:ORCL). The balance is due to relatively new rivals like open source Linux and Google’s (NASDAQ:GOOG) server-based desktop applications.

That leave Microsoft with only one potential growth business and the emphasis has to be on “potential”. Redmond is hoping that its search engine alliance with Yahoo! (NASDAQ:YHOO) will get it 30% of the US market for search. That is an ambitious goal and for Microsoft to be really successful, it would have to get that figure close to 40%. It would be hard to find an analyst who would even give that 100 to 1 odds of working.

Slowly but surely, Microsoft is beginning to admit that its own success brought it a market full of competition and, combined with the economy, it is bound to be less successful.

Douglas A. McIntyre