Microsoft's brand power has been in sharp decline over the past four years, an indication the company is losing credibility and mindshare with U.S. business users, according to a recent study by market research firm CoreBrand.

According to the CoreBrand Power 100 2007 study , which polled about 12,000 U.S. business decision-makers, Microsoft dropped from number 12 in the ranking of the most powerful U.S. company brands in 2004 to number 59 last year. In 1996, the company ranked number 1 in brand power among 1,200 top companies in about 50 industries, said James Gregory, CEO of CoreBrand.

CoreBrand measures brand power using four criteria. It first rates the familiarity of a company's brand. Once a company has a certain level of familiarity, they are ranked according to three "attributes of favorability": overall reputation, perception of management, and investment potential, Gregory said. While Microsoft's brand is still eminently recognizable, the company is declining in all three favorable attributes, he said.

Gregory said that a decline in and of itself is not indicative that a company is losing its mindshare or reputation among customers. However, what's significant in Microsoft's case is that the decline has been consistent over a number of years and has plunged dramatically in a brief time.

"When you see something decline with increasing velocity, it's a concern," he said.

Among its peers in the category of Computers, Peripherals, and Computer Software, Microsoft is second to IBM in brand power, with Toshiba a close third, Gregory said. If Microsoft's downward trend continues, Toshiba could pass it in brand power next year, he said.

Gregory could only speculate as to why Microsoft's reputation has been declining because his firm does not ask people that specific question. He said the "underwhelming" response to Windows Vista might be one reason, and Apple's clever "I'm a Mac, I'm a PC" advertising campaign -- which paints Windows in an unfavorable light -- may be another.

IBM suffered a "much faster and more severe" decline in brand power in the early 1990s, Gregory said, and it took them 10 years to rebuild the brand's reputation. To stage a similar turnaround, Microsoft must have a clearer vision of the direction in which the company is headed and put forth leaders that people can trust to articulate that vision, he said.

Microsoft, which has been diversifying its business beyond packaged software in the past several years, has struggled to articulate how the many facets of its business -- software, entertainment, and online among them -- show a cohesive business plan. The company has been trying to clarify at least one of those strategies -- its online advertising business -- with new services and a bid to purchase Yahoo. However, Gregory suggested it may take more than that to raise the perception of its brand.