However, these two companies are by no means doing equally well. Let me explain how Google
Microsoft grew revenue year-over-year by 7% and adjusted EPS by 6%. This compares to Google, which grew revenue (exclusive of Motorola) by 21% and adjusted EPS by 20%. In other words, Google is growing three times as fast as Microsoft.
Microsoft is in the midst of the biggest worldwide computing boom in history, with billions of people around the world starting to afford computers -- whether residing in their hands, laps or on their desks -- for the first time. So why is Microsoft growing so slowly, hardly keeping up with more commoditized old-world businesses?
Google, that's why.
Ask yourself this question: How many people do you know who have switched from a Google product to a Microsoft product in the last year? Two years? Ever? Exactly, me neither.
Let's mention four major product areas where Google is beating Microsoft:
1. Productivity Software
Microsoft Office is Microsoft's biggest profit center because -- you guessed it -- it typically costs a lot of money to use it. Some versions of the Office suite has cost as much as $450, although many people, including students, of course pay less. Google sells laptops for $450, and the software is provided for free for individuals and small businesses.
Everyone knows Gmail beats Hotmail. That's why almost all of your friends -- at least those under the age of 50 -- have switched.
Depending on whose market estimates you use, Android has around 50% market share, whereas Microsoft struggles to achieve 5%. This is the biggest market in the world, and Google is beating Microsoft 10 to 1.
4. Social media
In one year, Google has reached 250 million users, or one third of Facebook's (FB). Yes, user engagement isn't quite there yet, but who thought one year ago that Google would even be close to 100 million by now? What does Microsoft have? A stake in Facebook. Better than nothing, but a relative embarrassment compared to Google.
Back to the switching argument again: Ask yourself how many people or businesses you have seen that switched from Microsoft to Google in the last year. Then ask the opposite: How many have switched from Microsoft to Google?
If your observation is similar to mine, you will conclude that this is a one-way street: Google is winning everything, and losing nothing -- at least to Microsoft. This is why Microsoft is growing revenue and earnings at one third Google's pace.
And it's not just companies switching from Microsoft to Google. What about new startups? I have been meeting with startups almost every other day for over a decade, and in the last few years I have not seen a single one building its IT on Microsoft. It's 100% Google -- apps and Gmail.
Of course, Apple
Google is opening up additional fronts against Microsoft. The 700,000-plus core Compute Engine is one such front. Sooner or later, Google is also likely to get into the gaming console market, one would think.
Most visibly, and relatively near term, however, should be Google's increasing emphasis on the PC business. So far, Google has marketed Chrome OS PCs mostly to some schools, where it has had some success in places such as the South Carolina and Florida school systems.
Google's timid approach to marketing a well-received product will soon change. In only a few short months from now, we should expect more PC markers -- the likes of Dell (DELL), HP (HPQ), Lenovo (LNVGY), Acer, Asus, Sony (SNE) and equivalent -- to introduce and market Google laptops and desktops.
When Google goes after the PC market with more effort, more people are likely going to see the threat to Microsoft. Judging from how good Google's current PCs (made by Samsung) are, this will likely cause material harm to Microsoft.
Of course Google's product portfolio continues to lack in some important areas. I already mentioned the gaming console. Something to compete with Microsoft Outlook is another. Google Calendar is almost there, but not quite. Google's most glaring weakness in the entire company's portfolio is the address book, which is far behind Outlook in important functionality.
Conversely, Microsoft has remaining advantages with the Xbox 360 and Outlook. One embarrassing shortfall for Microsoft is that its new Windows 8 RT operating system will not get Outlook. This is the equivalent of BlackBerry launching a new product without email and a physical keyboard. People will soon wake up to this embarrassment.
What about the smartphone? I actually think Windows Phone is an excellent product, with the OS performance easily holding its own against the iPhone and Android. The problem is that being equally good -- or even slightly ahead -- is not likely good enough.
Microsoft is late to market, and many of its cloud service tie-ins are arriving late to market, or aren't there at all. That said, Microsoft should be a player here -- far, far behind Google and Apple.
This brings us to Windows 8 for the PC. Do your friends salivate at the idea of upgrading to Windows 8? No and neither do mine. Some are curious to try it, as they have some hope that it might turn out to be something interesting. Sadly for Microsoft, the people who have tried a Beta version have almost uniformly sworn to never get it, running into the arms of Apple and Google instead.
I like some of Microsoft's products. Windows 7 was a success. Windows Phone is a solid product. Skype is dominant. The Xbox 360 is best in class. Outlook has no decent competitor from Google or Apple. However, these positives are not stemming the overall tide.
The tide carries a market share shift in only one direction: Out from Microsoft, and into Google and Apple. Apple has been the stock market's darling for a few years now, and for good reason. Google, however, is coming on strong, taking market share from Microsoft Office and other cloud services.
When Windows 8 largely fails in the coming months, as I expect it will -- lack of interest in an upgrade cycle -- and Google makes its push for the Chrome OS PCs (Chromebooks and Chromeboxes), people will see much more clearer how Google's growth rate will continue to be vastly superior to Microsoft's. For Google, Apple is the toughest competitor -- not Microsoft.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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