SteveJ-restore-test

The mainstream media has released an major investigative report on Microsoft. The link is "a teaser", not the full article. Microsoft’s Downfall: Inside the Executive E-mails and Cannibalistic Culture That Felled a Tech Giant by Vanity Fair 12:00 AM, JULY 3 2012 Analyzing one of American corporate history’s greatest mysteries—the lost decade of Microsoft—two-time George Polk Award winner (and V.F.’s newest contributing editor) Kurt Eichenwald traces the “astonishingly foolish management decisions” at the company that “could serve as a business-school case study on the pitfalls of success.”  [italics added]  Relying on dozens of interviews and internal corporate records—including e-mails between executives at the company’s highest ranks—Eichenwald offers an unprecedented view of life inside Microsoft during the reign of its current chief executive, Steve Ballmer, in the August issue.   Today, a single Apple product—the iPhone—generates more revenue than all of Microso...

Horace Dediu of asymco has written two recent posts on Microsoft: " The evolution of the computing value chain ", and  " Who will be Microsoft's Tim Cook? " I find Dediu's work outstanding: he provides hard data for the points he argues... " The evolution of the computing value chain " - the graph, although log not linear sales, seems to show three things: Past product rarely 'plateau', they move from growth to decay in a single, sharp step. PC's as a proxy for MS-Windows + MS-Office has had decades of ramp-up and seems to have plateaued. Already, the longevity and plateauing mark PC's as 'different'. Other products, smartphones and tablets, are in strong growth phases and surging past PC sales. What the graphs can't show is "what will be?": predict the future. My view is that Desktops aren't going away, especially the Corporate Desktop, but they will morph and take on characteristics of competing, new dev...

In 2006 I looked at the Microsoft Annual Report and thought "I've seen this before, their market is being taken by newer 'substitutes'. They'll hit a 'financial pothole' within 5 years, give or take." Well, that hasn't happened, so my prediction was wrong . [Update 17-Feb 2012: Forbes has a piece on Microsoft's aliments, "The Wal-Mart disease". Very few companies [7%] recover after a "growth stall" and 70% lose more than half their (share) value. It isn't "game over" for Microsoft, but they are in deep trouble without any sign of effective corrective action by Management or the Board. Kodak management destroyed $31B in value in just 15 years, will Microsoft beat that?] What's happened is that despite massive attempts to the contrary, the Microsoft share price has languished for a decade or more. Sales and Revenues continue to grow, but not strongly and due to the 2007/8 Global Financial Crisis, they even w...

Another interesting piece from Business Insider: " Apple's iPhone Business Alone Is Now Bigger Than All Of Microsoft ". Steve Ballmer can't be a happy man... His competitor that almost died, but they helped save, looks like it's "done an end-run" around their business and is trouncing him convincingly. Microsoft has in the past used a "last to Market, then beat the leaders" approach [think of the abandonment Microsoft Network and the Internet turn-around, where Internet Explorer was purchased and bundled "for free"]. That's worked for the PC market, but I can't see it working in the smartphone/consumer product market. MSFT invented and owned the smart-phone market for nearly a decade with Windows-CE. HP produced their Win-CE device which morphed over time into a phone. First to beat Win-CE was Blackberry. Within 5 years iPhone has not only reduced Win-CE/descendants to irrelevance (modulo the Win-8/Nokia deal), a complete out...

A couple of articles discussing Microsoft's future, directly and indirectly. Others are starting to forecast the potential for a collapse and "Microsoft 2012 == IBM 1990". Steve Jobs Was Right: Google IS Turning Into Microsoft (reminding us that Microsoft has tried to get into TV, cable, music and a bunch of other things) (Larry Pages asked Steve Jobs for advice.) Jobs told him to focus on fewer things and do them really well. Jobs later recounted the conversation to his biographer Walter Isaacson. "Figure out what Google wants to be when it grows up. It's now all over the map. What are the five products you want to focus on? Get rid of the rest because they're dragging you down. They're turning you into Microsoft" Search is like Windows: an 800-pound gorilla Display advertising is like Office: piggybacking on success Android is like Xbox: a surprise success in a brand new business area (but not a big money maker) Google+ is like Bing: a reaction to...

Summary : "last to market" worked as a strategy in the past for Microsoft. But "everything is a PC" is probably false and theyll be sidelined in the new Mobile Devices world. A response from a friend, this page by John Gruber on Daring Firebal l, is worth reading. Gruber points out that Apple and Microsoft have radically different marketing strategies. Apple shows The Real Deal when it's ready, Microsoft pre-announces a long way out. Neither is "better" in itself, they're just different. I'm wondering if Microsoft's "Windows 8" is too little, too late. Yep, they've finally got an Apps Store, Cloud Storage and are trying to engage App Developers. With Smartphones, people buy Apps, not O/S features. This works against Microsoft. Win-7 didn't take off, why should this latest attempt? Remember that launch parade by MS with a coffin, 'cause they were going to bury the iPhone... How did that go for them? If I was a rusted-on...

Update 1: Mary Jo Foley of ZDnet tips a launch of Windows 8 next week at AllThingsSD. From a Forbes blog: Microsoft’s Windows OS For Tablets Coming Next Week? May. 27 2011 - 12:11 pm, Agustino Fontevecchia A tablet-optimized, Windows OS could be ready to see the light of day as early as next week, according to recent market chatter and media reports. (designed for System on a Chip) ... at the Ira Sohn Conference, Einhorn, president of Greenlight Capital, said that it is “hard to envision success in mobile” for Microsoft, despite its recent partnership with Nokia. Why was Microsoft so slow to enter the tablet market? It has to do with Microsoft’s dominance of the PC operating system market. As the world leader in PC/Client platform space, with Windows as one of the most expensive components in a PC (along with the CPU), the company receives “anywhere between $40 and $100 for a Windows OS license with 85% contribution margin when someone buys a new PC,” explained Aggarwal. Lighter and c...

Update 1. Influential hedge-fund manager, David Einhorn president of Greenlight Capital, calls for Ballmer to stand aside. Update 2. The MSFT board stands behind Ballmer, rejects David Einhorn's call to stand aside. Einhorn has 9M MSFT shares (0.011%). He's bought because he thinks they're undervalued. This could just be a media beat-up by him to make some money - the share price has increased. Whatever the cause, this is a significant milestone. The MSFT board has had to consciously and publicly defend their continued choice of Ballmer as CEO. Original: From Reuters, Bill Rigby,  SEATTLE, Mon May 23, 2011 IBM passes Microsoft's market cap after 15 years Since the Internet technology bubble burst in 2000, the tables have been reversed and Microsoft's stock has been stagnant as investors doubt its ability to move beyond its Windows operating system and Office suite of software An investor putting $100,000 into both stocks 10 years ago would now have about $143,000...

Adam Harthung at Forbes wrote Why Not All Earnings Are Equal; Microsoft Has the Wal-Mart Disease, byline is May3, 2011.  Read the article, says more than I can, with more (economic) facts and more eloquently. It's only ever been about the company's economic performance. Poor products and ignoring your customers only ever have one outcome. Sad for the employees and shareholders, though. Please note , I am specifically saying that Microsoft products are NOT doomed, just the company. Winders on the Corporate Desktop isn't going away anytime soon (2-3 decades to run at least). Too much invested, too many careers tied to it and the Lemmings Rush hasn't turned elsewhere yet... The next two Big Questions for Microsoft, the company: How soon before the Board notices and removes Ballmer? Who will be the eventual purchaser of the profitable lines-of-business - Windows and Corporate solutions?

Microsoft doesn't understand Software , or at least how to build it at-scale and the people who create it. All software and systems have a design life. As the world and platforms change, what was once a good design degrades. The classic example of "bit-rot" was "Y2K". The code and applications didn't change, but time showed up fundamental design limitations or flaws. Some organisations resolved the issue by setting the date back 28 years and "screen-scraping". It's a temporary solution that amplifies the point. On top of that, complexity is your enemy:  a lot of "undergrowth" develops over time and has to be cleared or it chokes the forest. Which means that at some point we all have to start again... [Hint: Apple did that with OS/X] A neat demonstration/proof comes from the world of Windows protocols:  SAMBA, a portable reimplementation of the Windows SMB protocol for "File and Print". The SAMBA team is up to its fourth comp...

Richard Waters published a piece, " Ballmer's opportunity to prove his worth ", on 12-Jan-2011 in the Financial Times. It's been picked up and reprinted - I become aware of this through an investment newsletter.  Microsoft's performance is now a concern/topic for mainstream investors. That can't be good. Waters starts: Some members of Microsoft’s board of directors feel the need to keep their chief executive under closer scrutiny. That does not mean that Steve Ballmer’s job is on the line – at least, not yet. But it does show that some on the board are getting restless about the company’s performance under his 11-year watch. And there may be few catalysts that will make things look any better in the short term to make his position any more comfortable. Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rig...

Three pieces in the trade press showing how things are unfolding. Om Malik points out that Intel and Microsoft fortunes are closely intertwined. Jean-Louis Gassée suggests that "Personal Computing" (on those pesky Personal Computers) is downsizing and changing. Joe Wilcox analyses Microsoft latest results and contrasts a little with Whatever the state of play is, Steve Ballmer has been at the helm of Microsoft for a decade. These are his results. He's taken an effective monopoly with a guaranteed cash-flow and a mountain of cash and turned it into "not the coolest place to work". Will Microsoft go out with a Whimper, not a Bang? A fierce Open Source advocate friend now "Just doesn't care" about Microsoft. Is apathy the marker for a company's decline? "Why Intel Will Be a Mobile Loser" by Om Malik Atom would be competitive until 2011. Too bad Intel sold its StrongARM technology to Marvell. "Very Personal Computing" - Edited...

MMC, "Mostly Macintosh Compatible", the equivalent for OS/X of WINE for Windows, doesn't yet exist, that I'm aware of. This comes from a personal need: on my Intel linux systems, I'd like to be able to load and run the Mac software out there, especially for things like printer drivers. Why would MMC be a Microsoft killer? And why only for non-Enterprise markets? What's needed to build MMC for Linux? What might Apple have to say? The average "Joe User" who's price sensitive, will want to buy a commodity Intel PC, more commonly a laptop or netbook these days.  If they weren't price sensitive, they would buy an Apple product and this discussion is moot. Enterprises have a very different cost-structure and set of concerns. Anyone who's locked into Microsoft will first consider moving to Apple products, not Linux. Only organisations who need a "poverty pack" solution will consider Linux+MMC. By their nature, they are difficult custo...

Paul Budde recently questioned, "Will Microsoft be able to make the jump?" [04-Apr-2010] For other comments see my pieces " Death by Success " and " Death by Success II ". He quotes the marketing "S-curve" and Summer Players by Carol Velthuis describing company performance and market maturity in seasons of the year. This is a response to Budde's query: "I have always found it difficult to understand why Microsoft has left it so late to fully embrace the new environment -i n relation to both the Internet in general and mobile broadband." It's because they are trapped by their success. They are not alone nor the first, as definitively documented in Why Smart Executives Fail , by Sydney Finkelstei, a Professor of Management at Dartmouth's Tuck School of Business. Specifically: Lack of vision and competence in Management,  Rigid and bureaucratic heirarchy, Dysfunctional culture, and Incompetence in their technical speciality...

"Microsoft Office is obsolete, or soon will be" By Joe Wilcox. I hadn't picked this trend, it's quite important. It squeezes their 2nd "birthright" (the other is the PC Operating System, I'd focussed on.) Microsoft achieves around 90% "Gross Margin" on two product lines (O/S and Office), and these lines carry the rest of the business. There is also the "Enterprise" division: they leverage these two product lines and add server software like O/S, Exchange and SQL Server. Perhaps Office 2007 was the zenith, even for Enterprises? Microsoft has never embraced the idea that products can be complete . To go forward, you can't add more frills. You have to completely reinvent/redefine the product or the field - like the iPhone. I can't do better than Wilcox's article - I suggest you read the link. For a quicker read, I've picked out what I see as the most salient points. There are two very good paras at the start and a cute l...

A friend sent me this link to a New York Times Op-Ed 'contribution'. Huge news... February 4, 2010 Op-Ed Contributor Microsoft’s Creative Destruction By DICK BRASS Dick Brass was a vice president at Microsoft from 1997 to 2004. This guy was a VP in the glory years - either side of Y2K, and before the 2004/5 Longhorn 'reset'. The failure to build the successor to XP was a breaking-point: the forced upgrade cycle was gone. He's likely to have a bunch of stock, or options, and a vested interest in the company's success/survival. His comments are likely to be both informed and as positive as they can be... My summary: Microsoft, he says baldly, "is struggling", "And yet it is failing, even as it reports record earnings." "Microsoft has become a clumsy, uncompetitive innovator." Despite many efforts, fine engineers, huge R&D and many "visionaries", it hasn't created anything substantial to replace it's two franchise...

"On the latter, Microsoft is hoping Windows 7 will pull it out of a financial hole" by Charles Arthur, Sydney Morning Herald, Nov 5, 2009 . First time I've seen in popular press the actual words "financial hole" w.r.t. Microsoft. Previous piece - "Microsoft Troubles V"

This cartoon lampoons Windows 7.0 Beta. Eerie. It underlines for me that Microsoft is crap at writing Operating Systems code. O/S's need to be correct, secure, robust (resilient to errors internal & hardware) first and foremost. Only after that look to features and 'performance'. How come the Great Unwashed, the home & business users and the media seem blinded in the same way the fanboi's are? Wikipedia's "Time Line of Operating Systems" underscores this point - compare Microsoft's offerings since 1999: Win-2000, Win-XP, Longhorn: abandoned, Vista and 'soon', Win-7. Compare to Annual or Biennial shipping of new releases OS/X, AIX, Solaris, HP/UX, Ubuntu, Red-Hat & Fedora, SuSE, ... Microsoft is the exception, not the rule. Everyone else in their class does better. Apologists for MSFT may add Win-98 SE, Win-ME, Win-server 2003/8, Media Centre, Home Server, Small Business Server and even Win-CE - plus the many 'Service Packs...

Being too successful leads to failure unless you are aware of the problem and carefully monitor and protect against it. Every large company faces this problem - in I.T. for example, Google and Microsoft. The rule applies at all levels - individuals, projects/teams, companies and countries. Even potentially our species and the whole living planet. I was reminded again of this yesterday by Victor Cook in "The New Battle for Your Desktop" where he analyses the financials of Google and Microsoft (GOOG & MSFT). He describes a problem with Microsoft: The company actually captured 77.5% of combined revenues in the quarter ended June 30, 2007. Sometimes it's great to be the market leader. But in this case it's not. Microsoft shelled out $539 million for that 77th share point. And it was worth only $172 million after total costs. Not a good thing. To maximize earnings (by optimizing total costs) the company should have captured only 60.3% of the market. That's the ...

More on the theme of "Microsoft will experience a Financial Pothole" from a Financial perspective. For less rigorous commentaries, there's Motley Fools piece "The Two Words Bill Gates Doesn't Want You to Hear" (A: Cloud Computing) [Article requires signing-up, but can be found from Your Favourite Search Engine] A commentary on that piece from Carbonite , a 'Cloud' vendor. Victor Cook at Customers and Capital has a series of pieces on Microsoft and its fundamentals. His series on 'Brands' compares GOOG & MSFT at times. The first post in the 'Blue Ocean Strategy' series , the second , third and fourth posts. His analyses of a number of issues are informed and enlightening - MSFT vs GOOG, the YHOO & Double-Click acquisitions... Cook points at a March-19 2009 piece at 'The Wild Investor' called "The State of Microsoft" that starts: Well we are not in the 1990’s anymore, and unless you plan to hold the st...