Why Isn't Microsoft's Strategy Working Anymore? 90 comments
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We've owned shares of Microsoft (MSFT) for almost seven years -- with nothing to show for it. I've been wrong on the stock, and something is wrong at the company. What is it?
Microsoft has been a non-innovator from the start, so to say that its lack of innovation is crippling it is to ignore the strengths that made it a great business for the first two decades of its existence. The company's model has always been to copy the best-of-breed and then defeat the creator of that technology through marketing. It invented none of the applications in its Office suite, nor the main concepts of its Windows franchise. The former came from various innovative firms like Lotus and WordPerfect, while the latter came from Unix and the way Apple (AAPL) elegantly used it in its operating systems. The Xbox copied leading game companies; the Zune copied the iPod; Internet Explorer copied Netscape; and so on. This is not a new observation. It's a well-known part of Microsoft's strategy.
Why isn't it working anymore? Computing is shifting from the local hard drive to the internet, true, but Microsoft is also a big player online. Its IE and Outlook Express software packages remain popular for browsing the web and managing email. Its Office suite is integrated with online applications and offers a limited amount of online file storage and manipulation. The company is not oblivious to the migration to the web.
It appears to me, however, that the wide variety of options presented by the internet makes it a much harder beast to control through monopolistic practices. Switching from one website to another is effortless. Most publishing now happens online, so proprietary formatting is gone. As a writer, I used to have to worry constantly about whether the format of my documents would carry over to the recipient. Not anymore. Almost everything is plain text anyway, or rich text, and both of those work anywhere. Blink! Just like that, compatibility with Word disappeared as a reason to keep paying money to Microsoft.
It's in the same trap regarding almost everything online. Outmarketing Lotus 123 with Excel worked to snuff out 123 because as more people started using Excel, more people needed to remain compatible with its files. People began saying "send me your Excel file" instead of "send me your spreadsheet" or even "your 123 file." With online search, for instance, it can't work that way. Google's dominance doesn't mean I can't prefer Ask.com just because I like it. I don't have to worry about my way of searching being compatible with your way of searching. The compatibility issue no longer drives users into the arms of Microsoft.
It's the same with the OS. I mentioned in the past that the freedom to switch to any computer that could get online would give Apple a leg up and cause Microsoft trouble. I also said that my firm would migrate to Apple over the next few cycles. That began two weeks ago when I replaced my own PC notebook with a MacBook Pro, and was able to start working differently within a week. Apple's ads don't lie. Its technology is gorgeous, powerful, and easy. For me, there was a little adjustment period as I unlearned old habits and learned new ones, but it's been more fun than stressful. I love not caring whether Microsoft can do a better job with Windows 7 than it did with Vista, because it no longer matters to me. I've moved on.
Will the rest of the world move on, too? The longstanding argument in Microsoft's favor is that while one guy with one notebook might be able to convert to another way of working, entire corporations with proprietary apps built on PC platforms won't. Therefore, Microsoft will always thrive as a giant among giants, supplying the framework within which serious business gets done.
Is that true, though? Databases run on other platforms. Browsers increasingly handle more of our workload. Text has ceased being proprietary. Email works the same way anywhere. People seem more concerned with whether the home office works with their mobile appliance of choice than the other way around. The parts of business that people use and personalize have moved past Microsoft, it seems, and that leaves the company vulnerable to losing the other parts behind the scenes.
Every analyst report I read on Microsoft stresses that incremental revenue from Windows and Office upgrades will keep the company afloat, but it seems I've read that same report for seven years with no change in the stock price. I don't think Windows and Office forever are enough to keep Microsoft a compelling business.
To be sure, it's good at milking them. To assure a better adoption of Windows 7 than Vista, for instance, Microsoft stopped enterprise support of Windows XP. Many businesses stuck with XP because there was no compelling reason to upgrade to Vista and plenty of reasons to avoid upgrading. The ability to keep working fine without the upgrade shows how mature computing has become, and how increasingly stretched the constant upgrade path to profitability has become. These days, beyond just not wanting another upgrade, users fear them. That's a pretty sketchy situation.
It's made more so when you realize that Windows, Office, and Server/Tools comprise 80% of Microsoft's revenue. That much of the cash depends on upgrades that need to be forced on people through planned obsolescence and support rationing. In the past, such measures worked because people knew less about computing than they do now, and had fewer options. These days, with most personal users doing almost everything online and most business users having everything they need already in place or migrating online, it's not guaranteed. There are many non-Microsoft options, some cheap or free, and the Microsoft brand is taking on the tarnish of old school. Who wants a Microsoft-powered mobile phone? Who searches online with Microsoft sites? What power user opts for Internet Explorer over Firefox, Opera, or Safari? Why send a Word document via email when you can just share effortlessly with an online productivity suite like Acrobat or Google Docs or ShareOffice or Zoho?
Unlike Apple, Microsoft has created few ongoing service revenue streams from individual users. Apple's iTunes store, Mobile Me online storage and data sync service, and photo album printing service are all good examples of how Apple keeps getting money from its users after the initial sale. It does so in a way that doesn't make the user feel bad. Nobody wants to pay for software they don't need, but they don't mind paying for songs they want, renting movies they want to see, managing their data conveniently, and printing the pictures they want to share. These are all great ideas that give people what they want at prices they don't mind -- the essence of business, really. One problem with monopolies is that they lose that drive to make customers happy, and when the monopoly power falls away, the unhappy customers are quick to make a switch. The former monopoly is slow to adapt, in most cases, and we're witnessing that with MSFT 2.0.
Exhibit one is the new Microsoft Bing. Have you seen it yet? It's the company's latest attempt to gain market share in internet search, where it just can't get any traction. Its inability to make headway in online search shows that it's stuck with the desktop, the very real estate that's declining in relative value because people spend less time there than before. Nobody is going to stop Googling stuff in favor of Binging it.
It's so lopsided online that Yahoo (YHOO) isn't interested in doing any kind of deal with Microsoft. Remember a little over a year ago when Microsoft tried to buy Yahoo, and Yahoo snubbed it? That's still going on. Yahoo feels more confident in its battle against Google (GOOG) without Microsoft on its side. Yahoo CEO Carol Bartz said last week at Bank of America's 2009 Merrill Lynch tech conference, "I personally think we would be better off if we never heard the word Microsoft." That's a pretty clear repudiation.
Bing is a convenient case-in-point for what ails Microsoft. It calls itself a "decision engine," which is already lame. When I search online, I'm no more making decisions than when I drive my car and "decide" at an intersection whether to turn or keep going straight. Sure, life is a series of decisions, but what I'm doing online with search is searching. I may be finding information to help me make a decision, but the main thing I'm doing is searching. So, already, the attempt to differentiate falls flat.
Beyond that, Bing is no better at helping me make decisions than the search results at Google and Yahoo. Besides, its real game becomes clear with its focus on buying things and enticing me with its garish cashback feature. That part is inelegant and transparently against my interests. Cashback pops up from the most expensive options, and tempts me to get a 5% rebate by paying 25% more on the price. This is straight from the playbook of discredit cards and the worst retail practices. Once I wised up to cash-back being a con from Redmond, the entire set of search results from Bing became suspect. If it's skewing the shopping results toward expensive items so it has a profit margin that enables it to give me 5% back and still retain a slice for itself, why wouldn't it skew search results in some way?
The big killer, though, is that even if Bing gets something really right and really cool, Google and Yahoo would just implement it at their own much more heavily trafficked sites and Bing would fall from whatever little perch it had managed to attain.
Microsoft is trying hard, with a $100 million ad campaign, to get you to switch from Google to Bing, but it won't succeed. It's trying to convince you that you need better search results when:
A) You don't think so, and,
B) It doesn't deliver them.
Other than that, it's off to a great start.
I give it points for presentation, though. The site is nice looking. As for functionality, comparing the news section to Google's news section is all you need to do to understand why Bing is a bust. Bing's news page looks like somebody's blog with pictures, not at all an up-to-the-minute feed from the best sources online. Google News, by contrast, has an official feel, comprehensive coverage, and many options for customization to follow the news you want the way you want.
While Microsoft embarks on another lost year against Google and Yahoo, it's losing the cloud computing war. That's where it should be focusing its efforts. It will continue snubbing open standards, clinging as it does to its monopolistic practices that served it so well during the desktop phase of computing, so users will not embrace Microsoft's own cloud computing initiatives. Why? Because they'll require access from Windows and installation of Microsoft's server software in companies, and will somehow always work best with Internet Explorer. By the time it gets its cloud services model doing anything interesting, it will be in the same situation it faces in online search today: up against entrenched competitors and offering no compelling reason to switch.
Permit me to step outside my bounds a little and tell you an idea I have for Microsoft. The company owns a well established operating system, industry standard office software, and the most widely used internet browser. Combine those with its deep pool of development talent, and I think it has all the ingredients needed to make the most powerful virtual desktop on the market.
Call it World Windows, for now. It would be built into every new copy of Windows and offer the option of complete replication online of a user's computer desktop by incorporating two existing technologies: remote PC access and online backup. Investing in a server farm to handle everybody's hard drive impression would be smart, as it would provide everybody with data back-up and convenience when they travel. With World Windows, from any internet-connected computer in the world, I would be able to pull up my precise desktop with all of my software usable via a browser-based emulator that could be maximized to fill the screen. Any net-connected computer could become my computer exactly as I see and use it at home or work.
Once that was in place, it would provide Microsoft with plenty of new opportunities to place smart ads and add-on services, such as more deluxe back-up for a price. Bing or another Microsoft search service could be built in to gently show people a different way to search, with maybe some kind of customization like saved searches to make it stickier so they don't run right back to Google.
It's possible that if such a platform took off, Microsoft could charge online ad placers like Google and Yahoo a percentage of click revenue that happened via the virtual desktop that spreads like wildfire.
This approach would accomplish several goals:
A) Keep Microsoft at the center of the computing experience
B) Get everybody cloud computing with familiar MS software
C) Provide ad revenue to MS without needing search
D) Entrench Microsoft in a new way -- online
So far, we've seen nothing so visionary from Redmond. Instead of pulling together something big and bold like World Windows, it continues trying its method of copying and outmarketing. It has not yet adapted its business to a changed business climate.
In the meantime, the company is managing its cash cows well for the short term. Senior Vice President Chris Liddell said in the March conference call: "Over the next 18 months, we will be delivering updates to our core franchises, namely Windows 7, Windows Server and Office 2010, as well as bringing new services like Windows Azure to market." That's all the optimism, the core franchises. They're fine today, but what kind of future do they have?
Judging by the stock's performance this decade, investors don't think much of one. As MSFT's revenue per share has increased every year since 1993, the stock has been a loser this whole decade. Its value has become better because the same share price buys more revenue and earnings, but the lack of share price appreciation is troubling.
We'll hold for now to see if the company can't get back over $30 just on economic recovery prospects alone, and the fact that almost nothing positive is priced into it at $22. For the long term, though, Microsoft has lost its presumptive status as a buy-and-forget holding.
Disclosure: Author owns MSFT shares.
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This article has 90 comments:
1. Windows has never worked well. Vista is a disaster.
2. My Windows-absed Palm Treo was by far the worst cell phone I ever had having to reboot it every other day.
3. My XBOX360 experienced there ring of death.
4. Microsoaft IE is by far the most buggy browser if you are coding web pages.
With the exception of Microsoft Office, my experience with Redmond has all been bad. I have moved on as well.
-AM
www.microsoft.com/azur...
It's not that Microsoft's strategy is not working anymore.
I am going to explain what is wrong with Microsoft stock, right here, right now.
It is called the Law of Large numbers as it applies to these mega cap stocks. Now I am not saying that MSFT stock will never go up again. On the contrary, it could easily go up 100% over the next 20 years and have a market cap of about 400 billion. Sure, why not.
However, for those who invest and have a 20-35 year time horizon, a 100% return is not going to cut it over that time period. They want more.
MSFT company value was once a mere 10 billion in market cap and maybe had 200 million shares outstanding. That is when is was truly a good long term investment. Why?
Exponential market cap expansion. (coupled with a much smaller float)
The simple fact of the matter is size matters. These companies just do not have the demand, nor ability to exponentially expand their market caps anymore.
It MSFT over 20 years to grow to 200 Billion in market cap. The stock over that time returned thousands of percent.
Now at 197 billion in current market cap, the stock, if its market cap grew another 197 billion, would only be a return of 100%.
That's it.
That is the problem the MSFT stock. Stocks can get to a point where their size completely hinders their ability to generate returns to shareholders that they demand. I am not saying it is a bad company. Not at all. But people have to realize that a companies stock is one item, and the company itself is another item.
GOOG has managed to grow to a 140 billion dollar market cap company. Do you know why? Mainly because they only have 300 million shares outstanding VS the 8 BILLION shares outstanding that MSFT. GOOG, can surpass MSFT simply because the thin float compared to MSFT allows it. The shares outstanding is another reason why these stocks are hold back. 8 billion shares. That is outrageous. I know they would never do it, but MSFT should be doing a 1:8 reverse split to absorb that float. They will never do that of course, and the majority of people think reverse splits are bad (because they have been brainwashed by Wall Street into believing so) but that would then create "demand" for the stock.
The general public and even most institutions see MSFT as a mature company. The company may even just become a dividend play if the yield were to ever reach 4%.
Individuals and institutions know that in order to grow ones portfolio you need to own the companies that are 1 billion to 10 billion in market cap size, that have the ability to grow those market caps 1000% to 100 billion in market cap size. MSFT is well past that phase. Even a 500% return in MSFT would make the company worth a trillion dollars, and frankly, that is never going to happen thus the potential is not there for exponential market cap expansion. All the mega caps suffer from this problem.
Jason, that is not to say they are not good places to park money for those who want blue chip stocks. Of course the problem with that is the general public is told over and over again that blue chip stocks are the best to hold during down markets when in fact they are the worst stocks to own during down markets. The public is lied to because the mega cap / blue chips names are the ones that get sold the hardest when institutions raise cash during bad markets because of their massive liquidity and availability.
I think MSFT really just suffers from its huge float, inability to exponentially expand its market cap, and the fact that it is yesterday's news. The company is a good company and is never going away, and perhaps at some point it will yield over 4% thus offering a total return of 8% per year to those who want a steady blue chip name.
Best of luck.
No position whatsoever in MSFT.
This idea is one that I have been spouting to all my clients and friends. The only succesful MSFT cloud-computing application is Exchange in a hosted environement. The Online/Offiline functionality of Outlook/Exchange could be enhanced to provide multi-device and virtual desktop (like you suggest) functionality. Hosted Exchange is a great, undermarketed product.
The virtual PC in the cloud, combined with other OS agnostic apps IS the future and the ultimate desktop killer as people learn that ownership of data does not mean they have to hold it on their own, personal, magnetic disks.
I could not agree with your points more. However, I am still an XP/MSFT software user...AAPL is still too arrogant and making some of the same mistakes they did in the 80s. Mistakes that have caused them to always play catchup from a less than 5% marketshare.
Great Article!
An Information age GM? They're so busy and committed to managing, marketing and milking I don't think they can make a radical move which could put them on a path to new and real avenues of actual growth (not to mention real innovation). If they were to try something like a Saturn it would get stuck in the same morass of institutional inertia. Steve Ballmer seems just to be the "muscle" that backed up Gates.
In any case they have a pretty big cow full of milk. I'm still using XP and not in the Apple camp because I get more choices in vendors - hardware, software and I don't have to pay the Apple premium. Computing wise my next big decision is smartphone, leaning towards Palm as I'm a legacy user.
So because of this trust-deficit, I think the following point is a bit moot, but technically I don't think Microsoft has it in its corporate DNA to actually build such a product that wouldn't be a complete dog's breakfast to use. And this despite having an enormous number of talented developers and engineers. Indeed the only way for them to unlock this value imo, is to put the cash cows into a private equity financed shell to be run as a mature declining annuity, and then either shut down or spin-out the rest of the company (like the break-up of baby bells...baby softies?) - a gaming company, a search company, a cloud company, etc. (these are top of the head suggestions to illustrate the point rather than necessarily the best / most viable split...)
Windows 7 on the other hand has gone public beta, its very good, easy to use, stable for a beta, they have over 1M fee testers out there (including myself), it keeps the Microsoft feel but has a slight air of Mac OS X to it. Pricing remains to be seen.
It looks a lot better and expect an SP jump near to release.
Thanks Ray and team - see you in the cloud shortly!
Really large companies are unlikely to grow rapidly. Size and incumbency are frequently incompatible with innovation and competition.
>and then defeat the creator of that technology through marketing.
Simply me-too copying & marketing has never worked in history. I know that's what they say on Slashdot, but you can use that line for AAPL even more (the iPod was not the first mp3 player, the iPhone not the first touschreen phone, OS X not the first Unix and many of their signature software like iTunes was bought externally), but AAPL's success is clearly not only driven by amazing marketing.
MSFT's M.O. is a bit more clever than that, and clearly different from AAPL. They'll go into a market and be second best. They get laughed at by tech writers & early adopters, and take only marginal market share. They don't care. MSFT will keep steadily improving the product, and when the number one trips, they step in for the kill. All the MSFT successes have played out this way (Word/WordPerfect 6, Excel/Lotus123, Internet Explorer/Netscape 4, Windows/OS2, Xbox/PS3, Windows Mobile/Palm, even their mice 'n keyboards biz). It's not working yet for Zune and Bing, but be sure they'll be there when AAPL or GOOG take their eyes off the ball.
> The most important strategy for Microsoft to adopt would be to get
> rid of Steve Ballmer.
The business model of MSFT used to be Adapt, Adopt, and Improve, but they've turned their back on what made them successful. Word is no better today than it was in 1997. Vista & Windows 7 are *worse* in many ways than XP. Their business plan now seems to be to trick people into adopting standards that they can't get out of. No thanks.
MSFT has always been been smoke and mirrors; all talk and marketing-- NEVER delivering a solid product. I think the death of 1000 cuts is taking it's toll. The profits in the OS division, for example, has to start declining. You can get a NetBook with FREE Ubuntu, so MSFT is forced to cut its margin on Windows for Netbook. Netbooks hurt Apple, too, but less so, because the iPhone is good enough to perform many laptop functions AND fit in your pocket. Also, you say MSFT copied UNIX concepts. Therein lies their biggest problem: even Win 7 is not based on a UNIX kernel. It will never have the security, performance, or facile multitasking REAL UNIX OS's, like LINUX and OS X, have. This becomes important in our always-on, multimedia -oriented world. They wasted years on Vista, and never even came close to the bar Apple set in 2000, when Apple successfully launched a UNIX OS usable enough even for consumers. Game over.
Microsoft needs a visionary. Gates wasn't it. Not sure if Ray Ozzie will be either.
> He is a great personality and pretty reasonable.
No, he is neither, and even if he were, those are not the most important qualities in leading a company like MSFT.
Microsoft's began to decline after XP release in 2002 and share price reflect the gradual demise. It branched out to too many unrelated misadventures in hardwares like Xbox (still bleeding money despite attempts to "hide" the losses via accounting tricks since launch in 2001) and Zune is absolute disaster.
Microsoft also hired like crazy or Ballmer who often acts like madman on steroid in Microsoft events. Everyone at Microsoft gets their own office even low ranking FTE or "orange badge" contractors.
Microsoft will join the other great tech companies like the mainframe vendors (IBM, Control Data, Burroughs, etc) and miniframe vendors (DEC which got acquired by Compaq, HP, etc).
Example: IE vs Netscape. About a decade or so ago, when I was doing a rock music web site for an ex girlfriend, I noticed that it was so much easier to code fancy effects on IE than Netscape. So I became a fan of IE. It had nothing to do with Bill Gates' behaviors or strategies. It was simply s mstter of IE being more workable. Period. Later, when my web design days had passed, I switched to Firefox because I like tabbed browsing. I had no political bone to pick with Microsoft. When IE 7 came out with tabs, I checked it out. But I hate it because it feels too heavy and takes much longer to load. Again, nothing fancy, I'm just picking the product I like better.
As to Excel vs 123 and now Open Office, I favor Excel becase it kicks you-know-what in terms of its ability to macro. 123 never made it our of the stone age. Open Office is pretty good, but still not quite there. So again, I'm just going with what works better for me.
I have an iPod and not a Zune. Do I even have to explain!
On my last laptop purchase, I had it set up with XP, not vista, because I wanted it to move at reasonable speed.
As to wintel vs mac, I still remember during the heyday of the battle being at Kinkos with a Mac and trying to figure out how to take a floppy disk out of the drive. After nearly half an hour, and when I was starting to slid a pen into the drive to pry it out, some Mac fan had mercy and came over to show me I had to drag the disk drive icon to the trash. Oh yeah, THAT was intuitive! (I assumed doing so would erase the contents.) And of course there was Conflict Catcher software to correct crashes that strategists tell us never occur with Macs; those obsolete one-button mouses; the absence of a delete or backspace hey (I can't recall which) on the Mac keyboard ... hey, Microsoft and pc didn't win only because of predatory practices. There are many who find Apple computers to be long on boasting (and long on pricing) but short on delivery.
Going forward, I think the prescription for Microsoft is really quite simple. Don't su**! If they put out good stuff, they'll do fine. Too few observers give them credit for this as they rose to prominence; yes they imitated and yes they marketed, but often in the glory years, they were a bit better, way more so than critics admit. If they put out junk, they'll flounder. It's really quite simple and more important now, with the industry mature, than it was in the days when they could make so many first-time sales.
They're good: you make a lot of money.
They're bad: they leave with you with a perverse incentive set.
Nothing else that Microsoft can do will make them as much money as their desktop monopoly. Its not that they don't have interesting technology or other good products -- XBox is good work -- its that compared to their core monopoly, this will never make them much money.
Ray Ozzie and the "promise" of cloud computing illustrate this problem nicely. Ozzie is one of the smartest guys around, and he's been a pioneer in "cloud computing" and network applications, starting with Lotus Notes, and continuing at the very cool Groove Networks.
So Ozzie's the guy with the chops to deliver superior application functionality in a browser, that's clear.
Except that anything can run a browser-- and MS makes their money on Windows and Office.
So Microsoft's success leaves it with the decision: Do we stick with what's making money, or promote lower margin technologies for the future? Either decision is painful.
On Jun 08 09:08 AM Sanibel wrote:
> The most important strategy for Microsoft to adopt would be to get
> rid of Steve Ballmer. He is unequivocally among the worst CEOs in
> American history.
On Jun 08 10:03 AM doubleshortetf wrote:
> I used to work at Microsoft.
>
> Microsoft's began to decline after XP release in 2002 and share price
> reflect the gradual demise. It branched out to too many unrelated
> misadventures in hardwares like Xbox (still bleeding money despite
> attempts to "hide" the losses via accounting tricks since launch
> in 2001) and Zune is absolute disaster.
>
> Microsoft also hired like crazy or Ballmer who often acts like madman
> on steroid in Microsoft events. Everyone at Microsoft gets their
> own office even low ranking FTE or "orange badge" contractors. <br/>
>
> Microsoft will join the other great tech companies like the mainframe
> vendors (IBM, Control Data, Burroughs, etc) and miniframe vendors
> (DEC which got acquired by Compaq, HP, etc).
On Jun 08 09:49 AM WhoWantsARiskFreeWorld wrote:
> People underestimate the important ways in which MS's products were
> actually better than the competition, and how that competition kept
> falling on its face. That includes the Apple of the time. As an example,
> MS Word was a decent word processor that offered wysiwyg. While Wordperfect
> stubbornly clung to DOS text mode and F-keys, MSFT kept improving
> Word until Wordperfect had no way back. Similar tales can be told
> of Lotus, Apple, Ashton-Tate, etc etc.
>
> The business model of MSFT used to be Adapt, Adopt, and Improve,
> but they've turned their back on what made them successful. Word
> is no better today than it was in 1997. Vista & Windows 7 are
> *worse* in many ways than XP. Their business plan now seems to be
> to trick people into adopting standards that they can't get out of.
> No thanks.
MS's licensing schemes are a disaster with "bundling" insisted upon so "mail and Office are free" once a company pays for server and desktop OS's (Windows). Once the "bundle" is purchased why would a company purchase a competitive product for one piece? Even if it was far superior it would be an additional cost.
The cost of just Server and Desktop OS's is prohibitive by themselves so the clear design of their licensing is to make a company have the full MS Suite.
MS needs to change its thinking and licensing before it can be truly competitive.
MS is the GM of the next millennium.
After the market is validated, MSFT cobbles together technology from their skunkworks. The first version of all of their software is horrible. Historically, MSFT has used customer feedback to improve the product to the point that the third version is usually widely accepted.
I will say that Vista and Live Services is "World Windows" 1.0 with Windows 7, Bing, etc. representing 2.0. The next version of these apps which I foresee consolidation (barring silly anti-trust allegations) of these apps to create seamless interface for "World Windows" 3.0. By this time all of the infrastructure and technology (i.e. security, collaboration, etc.) will be mature enough for widespread adoption of your version of World Windows.
MSFT products are not the most dynamic or the easiest to learn, but now ALL of MSFT office products are the DEFAULT STANDARD for both Enterprise and SMB market.
On the other hand, GoogleApps/Docs are interesting and cute, but certainly not ready for Enterprise PrimeTime. We resell Postini and GoogleApps. Postini rocks because people are screaming for email security to protect their Exchange servers.
GoogleApps suck because nobody is asking for an online word processing/spreadsheet application.
Vista is a disaster! In what respect? Please don't say it crashes every 5 minutes, because tests show it is more stable than Apple OS. It is virus prone - Apple OS can be hacked in 30 minutes (sometimes seconds) or less and it less protected from the viruses than Vista is. It has horrible UI - it's a matter of opinion, I cannot see anything in Apple besides the home screen. Not to mention that professional software simply works on Windows and not on Apple.
Productivity suites. Did you notice that Office beats everything on any platform? It is rather foolish to think that Google will be able to capture any significant share of the market - free StarOffice failed, despite having by far more sophisticated featureset than Google offers. And the privacy issues that plagued Google - not a single CIO in his right mind will ever permit using Google for corporate documentation.
Gaming: MS isn't doing so badly with xBox, beating PS3 so far.
Subscription services: iTunes is not the only thing that requires subscription, as you might know. Please check xBox subscription numbers. Or even better, please check the revenues generated from corporations subscribed to the MS tech support. Sorry, but iTunes is peanuts comparing to these numbers.
MS is mighty string on the corporate arena. Check the server offerings. MS is growing and not without the reason. MS products in the server universe beat competition hands down.
Where MS is lacking is consumer area beyond the OS and productivity suites: Zune, WinMo, Internet search. It is a tip of the iceberg (in many respects, revenue-wise, technology-wise and efforts that MS invests), but as a tip it is the only thing that shows above the water. And unfortunately, most of the analysts never bother to look underwater, building their "analysis" on the 5-8% of company's offerings that they know of.
Their $40 Billion share buyback program announced in 2008 is a confirmation indicator of where they are in their cycle. This doesn't mean that Microsoft is no longer a good company; they have very little debt and relatively stable cash flows. The problem with Microsoft is that their current business model doesn't lend itself to stock price appreciation while their dividend payout ratios are unimpressive. Hence the 2008 buyback announcement, which may or may not go through.
Intended to act as a bullish indicator, the insider buying trends don't support its interpretation in that regard. Company-announced buybacks should only be interpreted as a bullish indicator if they are accompanied by proportionate increases in published insider buying levels, which would indicate buzz. Absent this confirmation, after seven years of stable profits but little capital appreciation, the buyback is simply an attempt to use company muscle to boost flagging market interest. The ongoing war with open source software doesn't help, since Microsoft is fighting a guerilla-style, viral business model that is predicated on a bottoms-up, almost 'grassroots' creative approach to innovation that is less heavily dependent on rigid intellectual property concerns.
The challenge with open source software is that it tends to be generally perceived as requiring above average computer skills (since it tends to be the preferred medium for techies) whereas Microsoft obsessively concentrates on perpetually making their software more intuitive and user friendly. The introduction of Linux-based graphic-user interfaces that allow a neo-luddite WWII veteran to download music would pose a serious challenge to Microsoft supremacy.
When they make a mistake, they fix it!
When they don't quite reach there goal, they try again!
Most of the companies they competed with took MSFT for granted and comparing MSFT to GM doesn't make any sense at all.
The only company I know of that stayed ahead of MSFT is Quicken because they never let there quard down.
Go ahead and right off the Zune, Bing, or even Windows Mobile, it doesn't really matter. If MSFT is still working on it and hasn't put out the white flag, they will eventually sink iPod and Google if they want and trust me, it looks like they want to.
Please listen carefully once more. The bottom line is: - MSFT cannot and will not be able to continue existing as a Crummy Landlord, period.
The World Desktop you describe is a viable extension of the thin-client concept that is gaining credibility in the corporate environment. It would be very cost effective to be able to get rid of the low-end IT support staff by providing a uniform presentation of applications and data and a single point to install upgrades and patches.
I really cannot see a real push in corporate America to relinquish data security to outside control. However the development of the software to support the World Desktop would certainly be cost effective if it were adapted to an in-house server farm.
Somehow the environment you describe would also suffer from network performance if every time I or my employees open a spreadsheet to enter production data they had to wait for a Viagra commercial to load prior to getting anything done?
"The Online/Offiline functionality of Outlook/Exchange could be enhanced to provide multi-device and virtual desktop (like you suggest) functionality. Hosted Exchange is a great, undermarketed product."
.. or is it ? Our business (only 70 users) has been running its own exchange server for 10 years. It is expensive to manage / replicate / backup etc for such a small number of users.
Google apps is $50 per user per year for an imap hosted service that really looks no different to our users on Outlook.
It is very hard to look past Google Apps - it's a fraction of the upgrade costs (hardware and software) that we will have if we stick with Exchange.
MS's vulnerability on email servers has flow on effects:
- If we move to Google apps, do we really need a Windows domain. Our database server (currently SqlServer) is accessed only by browser by our users. Our file server could just as easily be linux, with zero licencing cost. And ...do we even need a Windows desktop etc etc .....
although on the bright side i am glad that capital is being put to companies that CAN innovate.
Two things come to mind as the root cause of this decline, the cost of the development of software is still high, the big ROI is getting is getting harder to find.
Microsoft had a great run, but they are now coasting on the past with no hope of becoming a significant player in the future of technology. Ray Ozzie is smart but he has not shown any innovation since Lotus Notes, all of his recent companies have been losers and MS is no different.
As usual MS ignores it's user base's wishes (always has) and just does damn well what it wants. If they just made it EASY to upgrade users would do it. My own PC has over a hundred gigs of software on it .. am I going to spend a week "upgrading" my OS for MS' benefit? I think not. What benefit do I get out of doing so? The answer is NONE.
This really is one massively retarded and predatory company, and unworthy of anyone's trust and support. How many people do you know that RAVE about any MS software that ARE NOT MS techheads that make their pittance from hooking their wagon to the MS star?
Do you want to own stock in a company like this? I don't, and I've been a MS user since 1985.
To understand why Microsoft is embracing the cloud, and the importance of this transition, you have to understand Microsoft's core business strategy: Microsoft is a platform company - this means they're core business is to make platforms for other people to build applications on. This is why there is a Windows client, mobile, and server version. And why SharePoint and Office are a foundation for custom productivity and collaboration applications.
Now, the cloud is becoming a platform for applications, and Microsoft will be there, too. Early indications are that Windows Azure will offer the best of Amazon-style cloud (infrastructure-as-a-s... and a Google-style cloud (Platform-as-a-Service), and do it in way that is both enterprise friendly and approachable for startups. They already offer business-grade collaboration, email, IM, and web conferencing in the cloud. Office apps in the cloud are coming. In fact, Microsoft has already said that over time they will offer *all* their business software as both licensed software and as subscription from the cloud. The idea is to give people choice in how they consume functionality, but also to help people create experience and capabilities that combine the best of what the cloud and the best of what deployed software can offer.
Despite the firm commitment and progress on the cloud front, htis is not an "either/or" story... In fact, the death of the client is much exaggerated. For example, iPhone apps are great precisefly because they are client apps that take full advantage of the underlying platform in ways that browsers apps cannot. Palm Pre and the WebOS is is the same... despite the name, the apps for the Pre run on the OS, not in a browser. Walt Mossberg has even started calling this Web 3.0 - rich client experiences that incorporate online information in a very user-friendly way. This has been a key part of Microsoft's vision for over a decade, and Apple (and more recently Palm) has done a great job executing their very complementary version of this vision with iTunes and iPhone. Adobe with Air and Flash is on the same path.
Although they seem web-centric from a distance, even Google is on this path... it's less obvious to a casual observer because they are adding rich client application capabilities into their browser (compiler, offline storage, etc.), but their goal is to re-create a full application platform within the frame of browser so that browser apps can offer similar experiences to what rich client apps can offer. Though abstracted via the browser in Google's version of this strategy, they apps hope can be created will nonetheless draw on traditional operating system resources like the ability to store things on the file system. Google's Android OS is another example where they are seeking to be an application platform/OS company.
So all the major players have a similar strategy when it comes to leveraging rich client with internet services... the big difference is the place they are starting from.
Microsoft is in a very good position here. They have both an enteprise and a consumer heritage, as well as a gigantic developer and partner ecosystem. Moreover, they are enabling that ecosystem with a common developer model for creating rich, internet-connected experiences across platforms - including Windows, Linux, Mac, Windows Mobile, Nokia, etc. This, in turn, means skill re-use for developers and partners and faster time-to-market for partners and devs to deliver new software-based innovation.
Windows Server 2008 has been a big hit, and with Windows 7 and Windows Azure just around the corner, and a new Office and new Windows Mobile on the horizon, Microsoft is advancing their platforms at every "platform tier" - client, mobile, server, productivity, and cloud. IMO, this is a a great time to bet on Microsoft for that reason alone.
When you add in what Microsoft is doing with Project Natal for XBOX 360, as well as Bing (passing Yahoo in search share last week), the story looks even better.
(Disclosure: I do work for Microsoft, but my opinions are my own and I am not speaking as a representative of the company).
On Jun 08 10:20 AM Crocodilian wrote:
> Microsoft illustrates that monopoly profits can be good and bad.
>
>
> They're good: you make a lot of money.
>
> They're bad: they leave with you with a perverse incentive set.<br/>Nothing
> else that Microsoft can do will make them as much money as their
> desktop monopoly. Its not that they don't have interesting technology
> or other good products -- XBox is good work -- its that compared
> to their core monopoly, this will never make them much money.
>
> Ray Ozzie and the "promise" of cloud computing illustrate this problem
> nicely. Ozzie is one of the smartest guys around, and he's been a
> pioneer in "cloud computing" and network applications, starting with
> Lotus Notes, and continuing at the very cool Groove Networks.
>
> So Ozzie's the guy with the chops to deliver superior application
> functionality in a browser, that's clear.
>
> Except that anything can run a browser-- and MS makes their money
> on Windows and Office.
>
> So Microsoft's success leaves it with the decision: Do we stick with
> what's making money, or promote lower margin technologies for the
> future? Either decision is painful.
GoogleApps users have ZERO ability to sue Google for ANY data loss due to Google server actions.
A GoogleApps sales person told me that Google has never lost any data for any customer and there is nothing to worry about because Google will never lose data.
But Google will never give customers an SLA telling them they cannot sue Google for data loss.
Google is not customer-centric!
Never has been. Never will be.
On Jun 08 01:16 PM LA Tech wrote:
> GoogleApps users have ZERO ability to sue Google for ANY data loss
> due to Google server actions.
1. Microsoft is hated in the IT world. They are bullies, they continuously produce and charge for software that should be beta. They cause headaches for millions of networks and for that they are hated.
2. They charge too much for their products, especially at the same exact time that small businesses (MS best customers) are shutting their doors with record speed. Business can't afford to upgrade and will just get by with their past products.
3. They do not support their products as much as they prepare you for the next fee for the pleasure of using them.
4. MS has off shored, or imported, the bulk of their labor. As your employees thrive and then shop in your customers' businesses, the cycle of money flows. Once the job goes to the third world where there are not millions of small start ups going into business, you screw your own customer base.
And finally, the general hatred of the rich Bill Gates and the underlying resentment that he stole an idea and became a multi-billionaire from his theft.
If MS, as many such companies, would figure out that you can sell many more items if you price them competitively and support your products, instead of pouring all your money into the next great thing and allowing your prices and service to tick off your customers.
As the US economy continues it descent, MS's customers will be closing in droves. And any new customers will just buy the software secondhand.
Apple is geared for the consumer and is very difficult to manage in large Enterprises while Google's offering is still only viable for the small enterprises.
Microsoft is moving fast into the cloud (both products and a cloud OS) and Windows 7 is superb.
Net-net: Revenue and growth are what matters and I believe that Microsoft is adapting to the changing world and that it would be foolish to think that MSFT is down for the count.
PS - Your commentary on Bing is way off as far as I'm concerned, I like the service and I have changed my homepage to bing.com.
* JWhitling
* 12 Comments
*
* Follow
Are you saying we CAN sue MS when Excel calcs wrong (it does sometimes) or when Access corrupts a series of tables (happens a lot) or other things like that? My understanding is that we are on our own when this stuff occurs.
On Jun 08 01:16 PM LA Tech wrote:
> GoogleApps users have ZERO ability to sue Google for ANY data loss
> due to Google server actions.
______________________...
Data loss is different than the example you just gave. Imagine one year's worth of email missing?
Nice try, though!
Have you heard of Live Mesh or seen all of Microsoft's virtualization technologies?
Live Mesh synchronizes files to servers and to peers. Live Mesh allows for Remote Desktop to any enabled device from any web browser. Cell phones will also be included. There's also an application framework for it.
Right now, MSFT's application virtualization technologies are for the enterprise but that can change.
2. Windows Azure
Windows is setting itself up to be the hosting service of choice for websites and web services. Google has AppEngine but Google's focus is advertising not developer support.
3. Recurring revenue
I could have missed it, but you didn't seem to mention MSFT's enterprise licensing which is explicitly designed for recurring revenue. They really are only missing recurring revenue from consumers, but they're getting there. MSFT doesn't release Xbox LIVE Gold numbers, even internally, but sources put annual revenues at around $500M (kotaku.com/341399/xbox...). That figure will rise as more consoles are sold and more Gold-only features are added (NetFlix streaming for example). There's also the Zune Pass system; the fact that MSFT doesn't mention those numbers implies it's not doing well.
But I suppose you succeeded at what really matters - getting people reading what you right and talking about it. Page views is your livelihood after all.
In a word, it's "usability."
I use Ubuntu and/or the mac because...
It doesn't pummel me with dialogs.
It doesn't make me reboot. I used to waste time rebooting from Windows crashes. Now I waste the same amount of time rebooting from Windows updates.
It doesn't pound my hard drive, slowing things further.
It doesn't stop and pause for 20 seconds when I do something so complex as click on a folder and try to move or delete it.
It doesn't refresh my desktop screen randomly.
It doesn't steal my focus when I'm trying to do something else.
It actually closes applications (or at least gets them out of my face) that I tell it to close so I can go do something else.
It doesn't freeze and make unresponsive a window because it's still running some damned process I could care less about.
It doesn't make me *wait.* That's the biggest downside of using Windows. It wastes my time, as if what *I* was doing didn't matter. It's unresponsive and rude. If Windows was a restaurant, I'd leave the building without paying and stiff the waiter.
Basically, the designers of the Mac os and Ubuntu wrote it as if what *I* was doing mattered. Not the machine.
If they ever fix the usability issues, and move the OS to the web so I can save my current configuration, they might win, but I think that a company made of thousands of arrogant geniuses is just too stupid to see the really obvious wart-covered bulbous nose in front of their face. They will eventually fail, spectacularly.
The real point is that to my knowledge, nobody has ever successfully sued for data lose like you exampled .. including MS.
On Jun 08 02:39 PM LA Tech wrote:
>
>
> * JWhitling
> * 12 Comments
> *
> * Follow
>
> Are you saying we CAN sue MS when Excel calcs wrong (it does sometimes)
> or when Access corrupts a series of tables (happens a lot) or other
> things like that? My understanding is that we are on our own when
> this stuff occurs.
I am just tired of Microsoft, period.
Tired of doing surgery on the registry because Windows thinks it knows what's best for users.
Tired of the constant updates because someone used old, broken code, or didn't pay attention and coded wrong. Tired of updates for updates because the first update was coded wrong.
Tired of fending off all the bad guys 24/7 who try to install their crap, steal our data, and render our computers useless.
Tired of paying way too much for something that needs to be constantly activated and validated.
Tired of the increasingly bloated size of the OS, the applications, the updates as HDD size grows. Just because I have all that space doesn't mean I want YOU to use it!
Tired of MS attempting to branch out into all things computing to be #1 at everything, when they should be focusing on making ONLY Windows and Office function correctly with the proper code.
I decided that I could not and would not stomach another upgrade or update from Windows that doesn't want to function.
I switched to Linux. It has its own troubles, to be sure, but nothing close to excruciating hassle that is MS.
THAT's why their strategy doesn't work anymore.
MICROSOFT ONLY OUT PERFORMED WHILE IT WAS GROSSLY VIOLATING THE LAW.
AFTER THE SECOND ANTITRUST TRIAL THEY STOPPED VIOLATING THE LAW AND WE CAN SEE THE RESULT:
THEY ARE A POOR PERFORMER.
Did you send a copy to Bill?
- Yes Ballmer should go, for the simple reason that the BOD should fire any CEO who has generated the returns he has in the last 10 years.
- Yes they are too large to grow substantially due to the law of large numbers
- They are not executing well because they are fighting on too many fronts: consumer, enterprise, web, gaming, etc.
- In the enterprise, however, they are a force to reckon with. They invested 10 years and billions to become enterprise-ready/worthy. The problem is they got distracted by search.
- No, they are not too expensive compared to their enterprise rivals. Oracle DB costs 3X for the same features as SQL Server. IBM Websphere costs 10X what Visual Studio and Windows Server costs. Those are the real costs to large enterprises, not GOOG. I work for a large bank and we just spent $42 million with MS; GOOG earned $640k from us this year
- yes, the big stock buybacks are an admission they do not have any real ideas on how to grow from here.
- Vista included a game-changing initiative called WinOS, which would make all data that passed through the OS available at all times, not locked in a DB somewhere. Incredible vision that would have given all competitors fits. But it failed, and they pulled it out of Vista. The result was a two-year delay and some artifacts that make Vista problematic and trouble-prone. These are corrected in Win7. But they did take a big competitive risk that would have paid out in a huge way.
Other reasons:
* Broken promises: release schedules, stable software, new features, compatibility.
* Planned obsolescence (Windows ME/Vista): corporate customers hate this.
* Nazi strict licensing: licensing servers required for corporate workstations, need to phone home regularly or they will deactivate, product activation on consumer systems, etc, slowly getting everyone used to a rental model.
* M$ is a Hollywood whore: DRM, OS programmed to behave like trojan if you're a suspected pirate; also forces their hardware partners to write trojans for this purpose.
* They eat their own: M$ opening retail stores to compete with their partners, large and small (Dell, HP, Costco, Best Buy, and small mom & pop computer shops); same for apps, eg., great plains/accounting.
* Over-marketing of the M$ brand (and for what good reason, really?): back in the heyday, application consistency was seen as a strength; today people don't seem to care and if your app looks and feels like Windows then it's considered run of the mill/generic. It's like buying a Walmart refrigerator, then buying Walmart brand bacon & eggs, and Walmart icecubes to go with it. Then later, a Walmart microwave and Walmart vacuum cleaner and Walmart shampoo. One word: gay.
* M$ is the Radioshack of computing and Ballmer is an insult to every car salesman on the planet.
Most businesses can save tremendously by switching their server environment to Linux: Suse, Redhat, Debian, etc. And as more and more apps are made to run in the browser, the desktop is not too far off.
If you don't believe me, see this:
www.youtube.com/watch?...
If you knew Steve Ballmer personally, would you:
a) Turn him over to the authorities?
b) Leave him stranded in the Grand Canyon?
c) Have him sterilized?
d) All of the above?
And The Bing is terrific, and beating Yahoo too!
kat
I like bing. After a few tries, i am ready to give bing a few tries. I'm actually willing to change my behaviour to use bing over google if bing continues to improve (it's "news" link is very beta though..it links to msn.com).
On the other hand, to compete in new technology you need visionaries with a lot of technical expertise to compete in new fields which have the freedom and flexibility to pursue whatever develops along the way. Microsoft uses its financial freedom and monopolistic attributes to make up for the lack of some of these management traits. They make up for a lot but provide very hit or miss results which often have no material impact to their overall business (good because they fail more often than not).
As competition becomes more agressive, Microsoft is finding itself playing catch up more than being at the forefront of anything. Thus, if you are looking for a growth company, Microsoft is not the right choice for your portfolio. People who tend to lump all tech companies as growth stocks will often wind up holding this company without realizing it no longer fits the typical tech stock profile anymore. Think of it more like a modern day utility.
At the end of the day, the author's comments are systemic of what is truly wrong with our markets. In the current environment, stocks are priced for 2020 earnings; you cannot bet against the market because there are investors like the author who will keep buying, even though the market is priced for 2020. On the other hand, you certainly do not want to be a lemming and buy into some mystical earnings number 20 years out.
Truly sad that our markets are so overvalued; the expectations of the author point out better than I ever could why the market is truly a dangerous place to bet ---- at current prices, the market is priced for perfection; yet, every idiot lemming and their brother thinks it is undervalued.
On Jun 08 07:12 AM atlasman wrote:
> Here is my Microsoft experience:
>
> 1. Windows has never worked well. Vista is a disaster.
> 2. My Windows-absed Palm Treo was by far the worst cell phone I ever
> had having to reboot it every other day.
> 3. My XBOX360 experienced there ring of death.
> 4. Microsoaft IE is by far the most buggy browser if you are coding
> web pages.
>
> With the exception of Microsoft Office, my experience with Redmond
> has all been bad. I have moved on as well.
>
> -AM
I have a Zune 80 and will upgrade when the Zune HD comes out. I LOVE my Zune.
My XBox 360 is AWESOME... I play games, watch movies, and did you know that you can hook up your Zune and turn it into a Juke Box? You can also get Netflix on it....Can you do that with the Wii?
I was one of the first consumers to upgrade to VISTA, I have had NO problems whatsoever with Vista.
and some people say MSFT has no innovation?
What about the Surface, you know that computer/table that MSFT has been selling for $13000 and companies ARE buying.
Bing is a Great website, one guy said it was not up to date as google news, well. you are comparing 2 different things. the homepage of Bing and the News page of Google. Well, google is not up to date as Twitter. Bing is layed out better than google and yahoo IN MY OPINION.
What about SilverLight, it is a Great product.
Sync for vehicles.....thier photo stitching software...
Someone also said that MSFT has not found a way to keep customers spending money like Apple's itunes. Have you even bought MSFT/Zune/Xbox points to buy songs, pictures, podcast, games etc....
What about the Zune Pass, $15 per month. or Xbox Live Membership that is $50 per year.... Does apple have something that MILLIONS of people are happy to pay $50 per year for?
I too am a little unhappy with the stock price, but I am only 24 and I believe that MSFT will be one of my best holdings when it is time for me to cash in. I have been buying on these pullbacks, a my dividends are reinvested so I am getting even more Shares! Thanks MSFT for a Dividend.
Check out my article on how to fix MSFT for $5 Billion!
I own Microsoft.
MSFT you are more than welcome to contact me about job openings. My Current employer will understand if I leave.
1) Bureaucracy kills creativity-----
The technology industry = hypercompetitive innovation = creativity. A corporation the size of Microsoft simply has too many hierarchical layers, too many standard operating procedures and policies, too many forms to fill out, and too much management and bureaucracy to be a hotbed of creative construction and creative destruction. Every time a tech company gets this big, along comes a much smaller, more creative, faster, and more dynamic startup competitor who cleans their clock with a whole new paradigm of what technology can do. MSFT in 2009 is what IBM was in 1989 and what Yahoo! was in 1999 in that they are ignoring the emergence of a new competitive framework. While MSFT managers hold endless meetings to craft their new system for processing expense requests, somebody else is working on artificial intelligence, a more effective interface, or a superior file format.
If you wonder why Google offers on-site massage services, free meals, and 20% creative time to its employees, etc. this is why. Yet, I doubt that even these measures will be enough to maintain competitive advantage (see reason 2).
2) Tech encourages entrepreneurship----
Why did the founders of Google drop out of Stanford to start their own business rather than just graduating and getting a job at Yahoo? Because if you are a brilliant visionary, no company can offer you the rewards that starting your own company can offer. Had Yahoo! even realized what these kids were capable of, they might have been able to offer them a measly $2 million a year or so - and even that would cause a management uproar. In technology, there are few barriers to entry. You don't have to come up with millions of dollars in financing to build factories, etc. If you build a better mousetrap, or search engine, the world really does beat a path to your door. Why then should you sell your better mousetrap to another firm for a tiny fraction of what you could have made with your own business?
3) It's like selling canned air... stale air----
Alternatives to ALL Microsoft software is now available for free: Linux or Android for your OS, Open Office, Google Docs, Linux for your server, Linux apps like GIMP for graphics, Firefox for your browser, and the list goes on and on. This wouldn't be a problem if MSFT quality was so much higher than their free competitors that it justified a price. However, Windows chronic and inherent lack of security or stability means that is not the case. Similarly, MSFT's attempts to produce hardware like Apple have ended with low quality products like the Zune and Xbox. Everything they touch becomes low quality. Open source hobbyists working for free are somehow writing better and more secure code than the paid employees at MSFT. For an explanation of why, see (1) and (2).
Innovation and timing is the key to success in IT; MSFT has neither. I agree full-heartedly that seeing this market cap double is unlikely; I would even argue to short it. Great article!
Jake
bullishbankers.com
A more valid comparison might be to an old-school land line telephone company like Qwest (Q) or Windstream, which will eventually be wound down as demand declines. Demand declines because of the emergence of new technologies that make the wire lines almost obsolete.
On Jun 08 12:40 PM dybydx wrote:
> i agree with the non-innovator opinion from the author. although
> as someone else pointed out, MSFT is being bought as a utility company,
> not a growth stock. its low P/E of 12.5 is inline with many utility
> companies. (where as intc at 20, csco 16.5 and goog 32)
>
> although on the bright side i am glad that capital is being put to
> companies that CAN innovate.
Microsoft grew because it got lucky and also missteps of its competitors – IBM, Apple etc.
Microsoft has never symbolized innovation just imitation – windows from Apple, Excel from lotus 123, Word from Word Perfect, IE from Netscape, …. That business model is finally broken with rapid innovation in the market – Microsoft simply is not nimble enough to imitate quickly.
Vista has a major disaster – it not only hurt Microsoft but the entire PC space. No one wants to buy a PC/Laptop as Vista would be imposed on them. Imposing Vista was a terrible policy – individuals and corporations hate Microsoft for it. The full ramifications of Vistaster will ripple through on Windows 7. I tried to upgrade to Vista several times after each new patch and service back – did not work, had to roll back. Recently they are trying to hawk IE 8 – another disaster had to rollback immediately. Even the rollback did not work correctly, had to re-rollback and uninstall. Do you think I will upgrade to Windows 7 - NEVER.
Bing –why will anyone even try it? I tried – even to search some help on Microsoft products – Google gave me better results.
Microsoft is going the way IBM did – had a monopoly in a shrinking market with extremely unhappy customers. Ultimately IBM collapsed and had to reincarnate as a much smaller and different kind of a company.
Microsoft can be treated as a utility stock for its tiny dividend– not as tech or growth.
Microsoft grew because it got lucky and also missteps of its competitors – IBM, Apple etc.
Microsoft has never symbolized innovation just imitation – windows from Apple, Excel from lotus 123, Word from Word Perfect, IE from Netscape, …. That business model is finally broken with rapid innovation in the market – Microsoft simply is not nimble enough to imitate quickly.
Vista has a major disaster – it not only hurt Microsoft but the entire PC space. No one wants to buy a PC/Laptop as Vista would be imposed on them. Imposing Vista was a terrible policy – individuals and corporations hate Microsoft for it. The full ramifications of Vistaster will ripple through on Windows 7. I tried to upgrade to Vista several times after each new patch and service back – did not work, had to roll back. Recently they are trying to hawk IE 8 – another disaster had to rollback immediately. Even the rollback did not work correctly, had to re-rollback and uninstall. Do you think I will upgrade to Windows 7 - NEVER.
Bing –why will anyone even try it? I tried – even to search some help on Microsoft products – Google gave me better results.
Microsoft is going the way IBM did – had a monopoly in a shrinking market with extremely unhappy customers. Ultimately IBM collapsed and had to reincarnate as a much smaller and different kind of a company.
Microsoft can be treated as a utility stock for its tiny dividend– not as tech or growth.
a) if competition was allowed, it's possible that renewable energies could pose an innovation hazard for staid utilities
b) so does MSFT in its core OS and Office lines
c) MSFT IMHO is a high-profit monopoly. No one to date has made a dent in its core businesses, so it's allowed to egregiously fail in other lines without really denting the bottom line.
It's an interesting comparison, although I will not touch MSFT with a ten-foot pole.
On Jun 09 12:33 PM Chris B wrote:
> The comparison of MSFT to a utility is flawed because (a) utilities
> such as gas, water, and electricity are generally thought of as things
> that could not be innovated into obsolescence within a few years,
> (b) because utilities tend to have predictable and stable cash flows,
> and (c) because utilities are heavily regulated which makes them
> low-profit monopolies but also protects them from competition. The
> software industry resembles none of these attributes.
>
> A more valid comparison might be to an old-school land line telephone
> company like Qwest (seekingalpha.com/symbol/q) or Windstream,
> which will eventually be wound down as demand declines. Demand declines
> because of the emergence of new technologies that make the wire lines
> almost obsolete.
BTW, this is a great article, although I find the conclusion could use a little bit more fine tuning. The 'decade' is a bit harsh given that it includes the dot-com boom/bust, which would put even INTC and CSCO in a bad spot along with nearly all of tech outside of AAPL and RIMM. I'm much more optimistic about especially INTC, even though its price performance has mimicked MSFT to a fault.
Good riddance.
I'm surprised that you have held on to your Microsoft shares for this long.
People do not forget and they do not forgive. Motorola is a shining example, Motorola charged excessive when it was the only show in town in 1980s and then came the competition and people bought products from other companies just because they did not want to give their money to Motorola. The same will happen to Microsoft. Who needs Microsoft. My windows XP works just fine, thank you very much and I do not see a need to upgrade. Heck, even Windows 2000 would have been fine.
Computer World, June-5: Bing overtakes Yahoo in global search wars. In matter of days, Microsoft's search passes Yahoo for No. 2 spot behind Google
www.computerworld.com/...
I agree, an internal Exchange Server can be unwiedly, insecure, and expensive to manage. Hosted Exchange elimnates the internal headaches, and, with the right provider, provides ALL the functions of exchange (including those not done or not done well by Google) with best practices, reliablity, and low, predictable monthly cost. User accounts go for about $13 a month.
Jun 08 12:12 PM MikeOz wrote:
> On Jun 08 07:59 AM david levy wrote:
> "The Online/Offiline functionality of Outlook/Exchange could be enhanced
> to provide multi-device and virtual desktop (like you suggest) functionality.
> Hosted Exchange is a great, undermarketed product."
>
> .. or is it ? Our business (only 70 users) has been running its own
> exchange server for 10 years. It is expensive to manage / replicate
> / backup etc for such a small number of users.
> Google apps is $50 per user per year for an imap hosted service that
> really looks no different to our users on Outlook.
>
> It is very hard to look past Google Apps - it's a fraction of the
> upgrade costs (hardware and software) that we will have if we stick
> with Exchange.
> MS's vulnerability on email servers has flow on effects:
> - If we move to Google apps, do we really need a Windows domain.
> Our database server (currently SqlServer) is accessed only by browser
> by our users. Our file server could just as easily be linux, with
> zero licencing cost. And ...do we even need a Windows desktop etc
> etc .....
I have 75% of my portfolio in Microsoft. Your foolishness is my fortune.
I will step on your faces in my journey to riches ... you poor stupid plebians.
Normally i am not so arrogant but in the face of ridiculous bullshit I have no choice.