A flurry of nattering erupted over the weekend regarding Paul Graham's declaration that "Microsoft Is Dead".

[Sidenote: Paul claims that he authored the piece to "say it first". While you might be widely linked for your Yahoo glory days, Paul, you're far from the first person to say it]

While Paul was obviously exaggerating to make a point (I presume he knows how to read a financial statement, and is well aware that Microsoft's revenue are still following a ballistic arc, and that >90% of PCs out there still run some variant of Microsoft's operating systems), it shouldn't come as a shock that I'm in agreement with his core point -- that Microsoft's ability to herd the industry has seen an unbelievable decline over the past several years, and that tech leaders aren't all that interested in whatever Microsoft is claiming that they'll think about maybe developing some time in a few years -- and indeed I'd said something very similar just last week, albeit without the confrontational, exaggerated title.

In today's Financial Post I see that Goldman Sachs has just removed Microsoft from their highly-rated "Americas Conviction List", specifically noting that investors are nervous about the future of retail software. Sure, Microsoft is still considered a "Buy", but this is another indication that people are seeing a future where Microsoft isn't all-singing and all-dancing.

While looking for an online link to provide for the news item (I'm still a happy reader of dead-tree newspapers), I came across this article on ZDNet, in which the author says-

"but can you really say a company with $28.8 billion in cash is on the downswing?"

YES! Of course you can!

That $28.8 billion is owned by shareholders, and if they see it squandered in failed attempt after failed attempt at buying diversity, they'll demand it back through another special dividend. Microsoft's bounty of cash, and their massive revenue, has never guaranteed them anything, and their history is rife with initiatives doomed to failures (much like the ridiculous "turn on an internet dime" myth, many have a selective memory when it comes to Microsoft, forgetting how many of their ventures have been dismal failures. Expect the whole ridiculous "Live" branding to be yet another failed direction).

Microsoft certainly isn't dead, however it will likely go through some massive, externally forced changes in coming years as the two foundations of Microsoft profitability -- Windows and Office -- start to crumble.