I think it can now be safely said, in hindsight, that Microsoft's entry into the browser business and its subsequent linking of the browser into the Windows operating system looks to be the worst decision—and perhaps the biggest, most costly gaffe—the company ever made. I call it the Great Microsoft Blunder.

It looks like a whopper that keeps whacking the company. The most recent bash came from the Eolas v. Microsoft patent suit over aspects of the ActiveX usage in Internet Explorer. Microsoft lost and was slapped with a $521 million settlement.

If the problem is not weird legal cases against the company, then it's the incredible losses in productivity at the company from the never-ending battle against spyware, viruses, and other security problems. All the work that has to go into keeping the browser afloat is time that could have been better spent on making Vista work as first advertised.

All of Microsoft's Internet-era public-relations and legal problems (in some way or another) stem from Internet Explorer. If you were to put together a comprehensive profit-and-loss statement for IE, there would be a zero in the profits column and billions in the losses column—billions.

The joke of it is that Microsoft is still working on this dead albatross and is apparently ready to roll out a new version, since most of the smart money has been fleeing to Firefox or Opera. This means new rounds of patches and lost money. Continue reading...

This fiasco and the great Microsoft Blunder began when Marc Andreessen, then of Netscape, made some silly, off-handed remark about how the browser would become the next platform for applications and suggested, in so many words, that Microsoft would be destroyed. Instead of the boys at Microsoft laughing out loud and then ignoring this remark, they started scrambling around like ants on a hot stove.

The next thing you know, Microsoft went Internet slaphappy. Besides cobbling together a browser from any code it could license, it rolled out all sorts of Internet magazines and various Internet-centric ideas to the point where it was obvious to anyone watching that the company itself was believing all the hype coming from outside.

The main piece of propaganda among the Internet-centric ideas was that the personal computer is dead. "There'll be no computers in a few short years, as everything will be embedded and become appliances," said all the experts.

This appliance malarkey comes and goes, but always goes. We still have computers, we still need operating systems, and we still need Microsoft Office. Yes, there are alternatives to everything, but the gold standards for all these basics make most of the money, no matter what anyone idealizes to the contrary.

But Microsoft buys the fear. It must have some of the lowest corporate self-esteem for any dominant company in the history of modern business. The company is like the panicky old woman wondering how she lost a penny in her purse while giving exact change in the express line at the grocery store. Hey lady, you are holding things up!

So what can Microsoft do about its dilemma? First, it needs to face the fact that this entire preoccupation with the browser business is bad for the company and bad for the user. Microsoft should pull the browser out of the OS and discontinue all IE development immediately. It should then bless the Mozilla.org folks with a cash endowment and take an investment stake in Opera, to influence the future direction of browser technology from the outside in. Then, Microsoft can worry about security issues that are OS-only in nature, rather than problems compounded by Internet Explorer.

Of this I can assure you. People will not stop buying Microsoft Windows if there is no built-in browser. Opera and/or Firefox can be bundled with the OS as a courtesy, and all the defaults can lead to Microsoft.com if need be.

Of course we already know that this will never happen, since Microsoft is a creature of habit. So it will forever be plagued by its greatest blunder ever. Have fun, boys.