Microsoft takes it in the shorts.

First quarter 2006 earnings for MSFT surprised analysts, resulting in a bunch of downgrades and an almost 11% one day loss of value for the company.

The old joke goes "We lose money on every item we sell, but we make it up in volume." Microsoft has been following this strategery with the Xbox for years. It's a case of pure oneupsmanship with Sony: "Gotta have the better hardware and better games!" The result is both companies are pumping out huge quantities of consoles and losing money like crazy. The big winners are the software companies - as long as there is intense rivalry between Microsoft and Sony, they get to pick and choose where to go and get to pay lower licensing fees.

Furthermore, MSFT missed shipping their new Operating System in time for Christmas. Let me be brutally honest here: Operating systems are becoming irrelevant. Within a matter of the next three to five years, most applications you use everyday will be through the interface of your browser. It won't matter if you're using Linux, Windows, or OS X. It'll all be the same. Think I'm wrong? Take a look at salesforce.com, Googles new efforts such as their purchase of writely, and quickbooks, which has an online version of their incredibly popular accounting software.

Microsoft is missing yet another trend. Why isn't there a web version of Office?