Venture capitalists see strong Amazon but continued weakness at Microsoft2012

Four experienced venture capitalists offering their predictions for 2012, unanimously agreed that Amazons Kindle Fire would be a big success while Microsoft would continue to struggle. They were speaking at Washington Technology Industry Association’s annual Prediction(s) event. Several said Amazon’s value would continue to rise, potentially taking it past Microsoft in valuation within five years. One challenge, however, the panelists pointed out, was Amazon’s low margins on most of its products. A key factor could be Amazon’s cloud services, which could eventually account for as much as half of the company’s profits.

The outlook for Microsoft was far grimmer. Rob Glaser, chairman of Real Networks, pointed out that 2011 was the first year that Microsoft operating systems were not on the majority of the worlds computing devices. He said Microsofts challenge was to take its considerable strength in getting developers to build applications for PCs and transition them to other windows devices like tablets and smart phones.

Dan Rosen, chair of the Alliance of Angels, argued that Google’s acquisition of Motorola makes phone companies nervous and may have created an opportunity for Microsoft to win more manufacturers over to its operating system. Rosen also thought that the well-received beta version of Windows 8 suggests the possibility that Microsoft could come out with competitive tablets in 2012.

Bruce Chizen of Voyager Capital, like the other panelists, was skeptical of Microsoft’s ability to gain much marketshare in smartphones in 2012. But he argued that Nokia’s decision to use the Microsoft platform could keep Microsoft in the race. Several panelists felt that Microsoft could win as much as a 20 percent share of the European market thanks to Nokia’s dominant market position there. But few believed that this market power would quickly translate into marketshare for the Windows phone in the U.S. and Asia.

Chizen argued that Microsoft’s primary strength was in enterprise software, and the company should focus on that strength. One panelist suggested Microsoft use some of its $50 billion cash hoard to acquire Germanys SAP so it would be better positioned to counter IBM and Oracle.

Frank Artale of Ignition partners said a critical measure of Microsoft’s ability to thrive in the future would be how successfully it gets its developer community to begin developing applications for its Azure cloud platform.