From one perspective, 2009 was a difficult year for Microsoft. It lost overall market share in the browser wars, MS-Office was being challenged by Google Docs, and Windows Vista was still being attacked by users and especially Apple. Overall, it missed its profitability targets and it was forced to do some cost-cutting (read: layoffs). Many have been saying that Microsoft has started its decline.

However, another way to look at 2009 is to look at the company’s actions in response to the changing marketplace. The most successful companies are not always the ones who lead the innovative charge, but the ones who keep building on their own and others’ innovations, responding one step at a time to consumers’ desires. Microsoft, in fact, is famous for this – most of their major products became industry leaders only after four or five generations of updates.

So how has Microsoft responded to the competition and marketplace in 2009? The list is pretty impressive. On the legal front, Microsoft successfully got the European Union to stop bullying it (for now) – it just dropped its antitrust lawsuit against Microsoft. On the product front, Microsoft introduced new versions of Silverlight, a new HD Zune player, a new version of Internet Explorer, a completely revamped search engine (Bing) with a continuing stream of new features, a Bing App for the iPhone, and its Surface computing hardware. On the partnership front, Micrsoft signed significant deals with MySpace and Yahoo, and it launched a significant WebSpark program for small developers. On the advertising/promotional front, it launched massive campaigns supporting both Bing and Windows 7, it consistently posted some of the most watched videos on the internet, and it opened the new Microsoft Stores. And, on the R&D front, there are advances for the XBox (Project Natal), a new version of Office (Office 2010) with web-based availability, a possible new tablet computer (their Courier Tablet), and new work on IE 9.

Microsoft is certainly not standing still. And if 2009 is any indication, 2010 will be another interesting year. Anyone who discounts their competitive potential is making a mistake. In fact, most companies who are struggling in this recession should exude the same energy as Microsoft in updating their products and services to fit the changing marketplace. This is not a time for complacency.

Domus is a full service marketing consulting agency based in Philadelphia. Please visit our main web site for more.