What It Would Take To Fix Microsoft For Me

Maybe it is just me, but I have to say that Microsoft (MSFT) is the most irrelevant mega cap company out there. At least General Electric (GE) moved markets and has some economic relevance. MSFT on the other hand, as we learned this week, is just a big old cash cow that is losing market share.

The company has managed to fiddle about in its old windows mentality while the likes of Apple (AAPL) and Google (GOOG) are doing to MSFT what MSFT did to the likes of IBM (IBM), Unisys (UIS) and their contemporaries two decades ago.

MSFT has totally botched the Yahoo (YHOO) takeover. Why 30-plus analysts waste our time and their employers’ money on covering MSFT is beyond me.

My recommendation to the MSFT board is to boost the company’s dividend to an annual rate of 3 to 4% and consider splitting the company to three parts – software, internet and entertainment. Once that occurs and only then will the company attract my interest.

Disclosure: At the time of this entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL and GOOG --- although positions can change at any time.

Comments

[AJ, Washing...:]

Amen.

2008 Apr 25 02:00 PM

[FreeRange:]

Amen - unfortunately the government had the opportunity to force the breakup of this anticompetitive 900 lb. gorilla, one that holds back innovation, but blew it. In reality, MSFT would have flourished and become more profitable by being broken up, just as happened with Standard Oil. Once the government broke them up way back when, the individual parts became much more profitable.

2008 Apr 25 02:04 PM

[aardivark:]

The software division should be further split into two independent companies: operating systems and applications.

2008 Apr 25 02:08 PM

[wallawallab...:]

Shamelessly peddled an inoperative OS that wouldn't install and run on machines owned by their own executives.

Apple's OS installs on machines years old!

Apple: most honest value for your buck.

2008 Apr 25 02:14 PM

[brewer:]

To top it all off, they basically inherited (through IBM's myopia) and stole (from Apple, chiefly) all their marketshare and technologies. The stock should be $15 by now.

How many failures can they have and the stock still hovers around $30? Now we find that their main business is also faltering?

Businesses are starting to move to Apple. No kidding. They are slow to change, but the writing is on the wall. Compare how long it takes to do basic tasks, such as installing office, coping files, opening a page on the internet, etc... OS X is anywhere from 50% to 1,100% faster. See the article at popular mechanics about this. There are more pro-apple articles every day it seems, even in stalwart 'wintel' magazines.

It's been news for awhile that Apple is gaining marketshare. Now the news is that Microsoft is actually losing marketshare. Maybe there is justice in the world after all?

2008 Apr 25 02:21 PM

[beech_35:]

Correction: Apple's newest OS (Leopard) installs and runs fine on machines as much as seven years old. All you need is a G4, 867 MHz, was available on the Power Mac G4 introduced mid - 2001.

Tiger runs fine on machines even older than that.

Windows generally requires new hardware with every OS upgrade.

2008 Apr 25 03:09 PM

[David Lentz:]

Make that 4 parts -- the software business should be split into an Applications company and a Systems company, as there is simply too much of an incestuous relationship between Windows and Office that hobbles the designs and progress of each, making each of them more bloated and complex than either has any need to be.

In the end, it is not necessary for the government or Microsoft management to bust up this company, the inexorable forces of the marketplace and competition (even the watered-down form that Microsoft and the DoJ have allowed to remain) will do the job.

One can make a (very) credible case that the open source movement owes pretty much its entire existence to Microsoft, as the crushing of competitors from an economic perspective has left the field cleared such that only "profitless" competition could flourish.

Hence we see products that are based on a combination of open source and proprietary designs (e.g., Apple, IBM) eating away at Microsoft, corroding the stodgy intransigence with innovation and creativity, while Microsoft has been unable to establish a profitable beachhead in any other area, frittering away billions (with plenty to go) in the process and going nowhere.

All that Microsoft stockholders have to look forward to is the hope of large intermittent cash dividends to pacify them. Hardly a growth stock scenario.

2008 Apr 25 03:17 PM

[Zobby:]

The iPhone SDK will be another big nail in the coffin of Windows. When 3rd party applications come to Apple "iDevices" the tight integration between these 'new platform' mobile computing devices and 'classic' computers (notebooks, desktops) will be an Apple advantage neither Msft. (or any other company) could match. They can't match it because they don't have OsX. Leopard on Mac is just the beginning, the iPhone SDK (or Cocoa Touch) is whole new and potentially much bigger ball game.

2008 Apr 25 03:23 PM

[TanToday:]

--->"Correction: Apple's newest OS (Leopard) installs and runs fine on machines as much as seven years old. All you need is a G4, 867 MHz, was available on the Power Mac G4 introduced mid - 2001."

In my collection of Apple hardware, I actually HAVE just that model, yeah, bought it in late Oct of 2001, added a little memory long ago, when Leopard came out, the newest OX I bought the "Family Pack" that allows for FIVE INSTALLS if you are somehow classified as a "family" and it went right onto the OLD machine, and worked, PERIOD.

I had an Apple II, long ago, but when Lotus 123 was the rage, I had to have a Compaq { first on in the state to own one } to LUG AROUND, my proud "portable that *only* weighed 30lbs!"

So, keeping a spare Apple around, more for the "keep a tap on the other guys" forever, I used BOTH, daily side by side. Finally when the VISTAdisaster was released, and the HUGE mess it made of my setups, I bit the bullet and went total Apple, my new MacBook Air, weights 1/10th what the Compaq did, my 24" iMac is a delight for these 58 year old eyes, the Time Capsule backs them all up over a Wireless N/5Ghz hourly, without my doing anything, the four iPods the family has all work, the AppleTV is ok, and getting better, and best of all....

I loaded up on 2000 shares of AAPL, ranging from 73 to 162 a share.

The way I see things, Apple is now unstoppable, a behemouth on a tear, and they have a HUGE market out there, virturally untapped, PISSED OFF MICROSOFT users! With only 6% share { depends on who and where you look } they *ONLY* have 94% potential upside, maybe less as some bleeding edge enthusiasts go UNIX or UNIX varients.

Apple has PAID FOR all my apple hardware in the last two years, AND is about 1/2 way to paying for my son to go to Carnegie Mellon, and learn how to make more money than I ever did. THANK YOU, Steve Jobs, thank you.

2008 Apr 25 04:44 PM

[MacManMaz:]

To get back to the topic: What would it take to fix MSFT for me?

I just don't see it happening, but getting rid of Steve Ballmer would be a start.

What an embarrassment!

2008 Apr 25 04:48 PM

[KenC:]

Actually, OS X is a certified UNIX

2008 Apr 25 09:06 PM

[dithers:]

Break it up, force it to become competitive in ALL areas -right now Word and Windows supports such innovative wonder products as the Zune, a recycled old Mp3 player from Toshiba which is a copy of an old iPod.

How can Ballmer remain in his job when Msoft loses billions through all their 'ventures' and somehow thats OK?

2008 Apr 26 12:54 AM

[deaverb:]

Perfect commentary. Microsoft is no longer relevant except for being a menace to computing. Doesn't really matter "what" they do now.
Simply is just promoting OpenOffice.Org, the antidote for Office. Our military buyer suggested I try it after having trouble on our new Vista (only for testing purposes; our work horse continues to be 98 and XP).

Slick. So Microsoft has a near free competitor in OpenOffice.org or free on their site (a bit geeky and scare-y; but the developers just have very high standards--unlike Microsoft). Apple is the competitor for OS. Google for online; lots for Xbox.

Microsoft is no longer best at anything. So no break up required. The market is taking care of that.

Scott, the author, is right--and sounds like the experienced warhorse. Why are we bothering? Why think about Microsoft?

Much appreciated. Give it a rest (including me!). Well done.

2008 Apr 26 08:52 AM

[Zach Bass:]

No, no, no!! It would be far better that they continue to lose market share, and continue to atrophy into eventual obscurity. At some point, their ineptitude will implode the company and corporate america will perform a massive rotation to a better company. A company more interested in the needs of the user, than the corporate buyer. I believe that company is Apple.

-zach bass
http?//zach bass.com

2008 Apr 26 09:28 AM

[jaume ribe,...:]

apparently, looking at the article and most comments, it seems pundits dream of another world where balance sheet structures don't exist, tracks of superb results either, etc... As to the stock value, being a company "value" low volatility is good position (i.e GE). Agree on scarce pay out....ONLY

2008 Apr 26 02:27 PM

[Sanibel:]

Any thinking investor should realize that Microsoft has not generated any major new technology product in many years. It merely copies others or buys its way into technology where it is already late to the party. Microsoft should be broken up. The result would be innnovation and more innovation. The first step would be to get rid of Ballmer. I simply cannot figure out why this has not yet happened.

2008 Apr 26 11:05 PM

[WAKEUP:]

I agree with sanibel: "The first step would be to get rid of Ballmer. I simply cannot figure out why this has not yet happened." Even harder to figure out is why Ballmer was ever put in the position he now holds, in the first place.

2008 Apr 27 01:52 AM