Could Microsoft quietly be winning the tech wars?

Cisco CEO John Chambers Gives Keynote Address At Cisco Live

"It's going to be brutal": Cisco CEO John Chambers describes the high-tech business environment to come at a company conference this week. (Justin Sullivan / Getty Images / May 19, 2014)

Is Microsoft actually beating its high-tech competitors? That could be the hidden message in the presentation by Cisco Systems Chairman and CEO John Chambers at a company conference this week. 

Chambers, striding into the audience of current and potential Cisco corporate clients in full evangelical mode, warned that competition in IT (information technology) is going to be bloody. "You're going to see a brutal -- brutal -- consolidation in the IT industry, where out of the top five players only two or three will be meaningful in as quick as five years."

His theme, naturally, was that Cisco would be one of those survivors, well placed to help its customers thrive.

Thus far, pretty standard fare: creative destruction has been a hallmark of the business world for roughly as long as there has been a business world. The slide Chambers displayed of companies that have arrived, flourished and then perished without a trace over the last quarter-century wouldn't surprise anyone who knows that only one corporation in the Dow Industrials Index today was part of the original Dow in 1896. (Trivia buffs: it's General Electric). 

What was more interesting, however, was Chambers' hint about who the bloodbath survivors might be. This came in a chart showing quarterly revenue growth (year-to-year) since the start of fiscal 2011 for Cisco and four rivals in the business services space: Oracle, IBM, Hewlett-Packard and Microsoft.

Of the five, the company with the consistently strongest growth has been Microsoft -- 14 quarters of growth in excess of 3%, and only one of 2% or less. Cisco comes in second by this metric, with 12 quarters at 3%+ and three at 2% or less.

Chambers obviously expects Cisco to be one of the survivors -- "Nobody eats our lunch," he said, sounding as though he's delivering that message as an exhortation to his own employees as well as a pledge to the customer base.

Of the others, he dismissed HP and IBM -- "watch how disastrous the last 2.5 years have been where an HP and an IBM haven't had revenue growth for two to three years," he said. Chambers also is known to view two business software and networking companies not shown on the chart as formidable rivals, Germany's SAP and China's Huawei

But what about Microsoft? The company's public image has swung from that of the Evil Empire to a bumbling clown. Its unveiling just Tuesday of its new tablet/laptop, the Surface Pro 3, was received with a large helping of skepticism: Is it "less fun than an iPad but less productive than a laptop?" asked Slate.com technology writer Will Oremus. "Or, to put it more charitably, more productive than an iPad but more portable than a laptop?"

On the surface, so to speak, Microsoft looks to be in bad shape. Its share of the total computing market has shrunk from 90% a decade ago to 24% today, squeezed by Google's Android and by Apple. But it's still a major player in business services, and the appointment in February of a new CEO, Satya Nadella, may have revived hope among investors -- Chambers himself praised Nadella as "a seasoned, world-class technology leader."

Microsoft has been quietly climbing the stock charts, gaining about 45% since the beginning of 2013 (though it was dead money before then, going all the way back to 2001). Cisco has gained only 20% since New Year's 2013, but the company and its chairman seem to be perennial favorites of the investment community.

For IBM, the dead-money period is now: It has had its ups and downs, but overall it's down about 5% from the beginning of 2013. On the other hand, HP, which has a Rodney Dangerfield gets-no-respect buzz about it, actually has more than doubled in value in the last year and four months. Maybe stock prices aren't everything.

What will be the key to success? Chambers says it's winning the battle for the "Internet of everything," by which he means mobile networking and cloud computing. As for who will be the ultimate winner, the implication of his talk is clear: today, no one knows.

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