Ballmer Is Bad News for Microsoft 12 comments
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The Wall Street Journal ran a nice article on Microsoft's (MSFT) Bill Gates and Steve Ballmer Thursday. It was offered as a backdrop to the further departure of Mr. Gates on June 27 from his already reduced role at the company. The article, like many others on Microsoft, never asks the hard question that's central to seeing the software giant's future: Is Steve Ballmer another Bill Gates?
Look at the record.
Under the stewardship of Bill Gates, MSFT split eight times and rose 53,000% from early 1986 to early 2000. Under the stewardship of Steve Ballmer, MSFT split once and lost half its value since early 2000. Look at the sorry chart.
It has grown earnings under Steve Ballmer, but they haven't boosted the stock price because forward-looking investors refuse to pay a high multiple (price/earnings ratio) for a stock with a steadily dimming future. Value investors say Microsoft is a great bargain these days, better than when Mr. Ballmer took over, but they may be missing that it's cheap for a reason.
That reason is that Steve Ballmer has done nothing since he took over. What's new at Microsoft? There are marginal differences, but for most casual users Microsoft puts out the same software with different version numbers today that it put out eight years ago. Mr. Ballmer completely missed:
- The importance of internet search.
- That the center of computing was moving from the desktop to the internet, and that the migration would make all computer users platform agnostic. Increasingly, all that matters is that a computer can get online. That being the case, why would anybody choose clunky Windows over elegant Macintosh?
- That people stopped needing any new features in their OS and productivity software about ten years ago, and had grown wise to the meaningless upgrade cycle.
- That the only new capability in productivity would be putting it online, and that Microsoft needed to face that reality sooner than later or somebody else would get the edge. Microsoft took its eye off that ball, and Google (GOOG) picked it up and ran with it all the way to a goal called gDocs.
- That online video was going to be a big deal. Again, Google beat Microsoft to YouTube and now controls almost 40% of the online video market. The number two site commands just 4%, Microsoft about 3%.
And so on. It's hard to see what Mr. Ballmer has been doing these past eight years. The Xbox has been successful, but that's hardly Microsoft's core income center. The company has lost its iron grip on computing since Mr. Ballmer slipped his hand into the control glove.
This is not the first time we've seen this. Think back: Steve Jobs was replaced by John Sculley at Apple (AAPL), then had to return to save the sinking company. It took less than three years to see that Dell's (DELL) Kevin Rollins was a disaster, and to get Michael Dell back in charge to resurrect his namesake firm. The man who put Starbucks (SBUX) on the map, Howard Schultz, had to return in January after an eight-year absence to get the coffee shop hot again. Charles Schwab sent David Pottruck packing in 2004 and re-took the helm at his namesake firm:
"I'm sorry," Pottruck remembers Schwab saying, "but the board has met and decided that they have lost confidence in the direction of the company and in your leadership. We've decided to make a change and have me come back to the office." Effective immediately, Pottruck was to step down, and Schwab would become CEO again. -- full Fast Company article
And so on.
We'll probably never witness such a dramatic return for Bill Gates. He hasn't seen fit to right the ship in the past eight years, why start now? He's off to greener pastures.
Microsoft shareholders are sure going to miss him.
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This article has 12 comments:
But remember that the jump from Dos to the Win95 took more than 10 years...
Xbox has had recent quarters in the black, but it's getting squeezed between Wii on the low end and PS3 on the high end. Long term prognosis: not good.
www.gamasutra.com/php-...
Short ... to the point ... and, dead on. People do not realize how critically important the right CEO (and personality) is to the branding of an international growth company these days.
In Steve's defense, Bill is a tough act to follow. But following such an act with arrogance and a deep inward desire to return to "the glory days" of the past is a doomsday strategy if there has ever been one.
Apple is thriving these days because they portray an innovative leading edge consumer-oriented brand and historical image. There will always be growth in that market. Microsoft's more technical and stoggy brand might be fine for IT professionals and large corporations, but to make any real progress in the consumer and international channels and cultures, something far more radical has to happen.
I have been in the technology branding and image creation businesses for almost 30 years now. Even today, the old Apple ads branding them against "big brother" IBM, and today's branding "Mac" agains the entire "PC" world are award winners if I have ever seen any. They are funny, memorable, and effective.
We'll see how Microsoft's new consumer branding agency decides to take on this battle. Unfortunately for Steve, more than just a "hip" new advertising agency may be needed.
The Microsoft board show know this. But, here again, they are the ones who seem to support the status quo of the present regime.
Maybe Yahoo needed to be the surviving entity!
Should be "interesting"!
George
griddick@imageline2.co...
If Microsoft were to abandon the hardware and concentrate on selling gaming software, they would likely be profitable in that line of business at a level comparable to their PC software business segments.
But it's good to look at recent Microsoft annual reports, to gauge where the money comes from -- take the most recent quarter:
(amounts in billions -- of course)
sector . . . . . . . . revenue . . profit
Client (Windows) . $4.025 . . $3.097
Server & Tools . . $3.255 . . $1.092
Bus. Div. (Office) . $4.745 . . $3.138
Entertainment &
Devices (Xbox) . . $1.576 . . $0.089
Online Services . . $0.843 . ($0.228)
The games division turned a 5.6% operating profit last quarter -- compared to operating profits of 76.9% in their Windows client software business, 33.5% in their Server software business, and 66.1% in their Office software business.
And it is worthy of note that (I think) this is the FIRST year that Microsoft has been able to turn a profit in their entertainment business segment. They are trying desperately to buy their way in using profits from Windows and Office, and are failing. Neither Nintendo nor Sony is going to go away, and eventually someone is going to decide that the games division must either make respectable profits or else.
Granted, Microsoft has a lot of money to burn, but burn it they are, and that pile of cash is getting smaller over time.
Microsoft united the desktop OSs and to a large part SMB servers. The pulled developers kicking and screaming into new generation/Object programming, and Vista has more under the hood than browser-people can comprehend. Too bad it is so under appreciated by those-that-don't-get-i...
If we had a dozed different desktops and office apps, we would also have the devisive chaos of the 60s, 70s 80s, in computing. It wasn't pretty, not was it productive (as in $$$).
What other companies are thought to have "missed" the internet, just because they do not own it 100% Or slipped up by not being goog or Apple.
Only MS is required to be all things and win everywhere. If MSFT had won in every space they would have be broken up and faced 100 times as many court cases. Competition is the best thing for MSFT. I am sure Monkey boy would rather see silly stories like this than sit in front of yet another court room.
Goog had no idea they were on to such a money earner, no one did. Those who wish to pretend they knew it was coming, need to go back revise black swan 101.