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  • Is Microsoft Preparing the Going Out of Business Sign?

    September 25th, 2008

    All right, I know some of you have complained that I tend to write lurid headlines. Maybe there’s even a suggestion that the contents of the articles themselves don’t exactly match that promise.

    I will quibble with you readers over that, particularly this time. After all, I’m sure most people would laugh loudly at even the suggestion that Microsoft is about to go out of business. They are, after all, the world’s largest software company, and their Windows operating system lives on over 90% of the personal computer desktops around the planet.

    Sure Apple has made huge strides, with Macs now garnering over 10% market share when it comes to retail note-book sales, although global figures are still in the lower single digits. So where do I come up with that silly stuff about Microsoft?

    First of all, I’m not suggesting that the executives at Microsoft are pulling the sort of shenanigans that did Enron in. That would seem to be a stretch. I also think that the SEC is, in light of the nation’s ongoing financial turmoil, more apt to observe signs that a company might be keeping extra sets of books or seriously fudging their profit and loss statements.

    But let’s look where Microsoft is right now. Windows Vista has proven to be far less of a force in the enterprise than they hoped. Shipping several years late, without a few key features, it comes across as a bloated version of Windows XP with an updated, resource-heavy user interface. Sure, Microsoft has likely resolved some of the serious conflicts with third-party drivers and applications, but it’s not as if businesses are taking a second look in large numbers. In fact, many are buying new PCs and rolling back the operating system to XP.

    Imagine, if you will, how people would treat Apple if significant numbers of Mac users bought new Macs and tried to induce them to run under Tiger. Sure there are people who still regard Leopard as buggy, but as the updates come forth, those numbers are diminishing. Besides, it’s probably not possible, since the operating system is closely entwined to the hardware, and it would take a lot of hacking to make older systems compatible, with no guarantee of success.

    The promise of Vista’s successor, Windows 7, appears to be a mixed bag. Just the other day, Microsoft was suggesting that the bundled apps, covering email, instant messaging and so forth, might be pulled from the product. Instead, your new Windows desktop would include an icon to go to the Windows Live site to download what you want. Or maybe the PC makers would just add their own alternatives, such as Mozilla’s Thunderbird.

    That, however, doesn’t appear to represent any huge amount of innovation, or any innovation for that matter. It’s just a case of musical chairs, though I can see that it might lessen antitrust concerns if the end user isn’t presented with a load of Microsoft junk on their hard drives.

    Beyond Windows, there is the potential of a successor to Office 2007, and that, and the other software products Microsoft produces, are largely more of the same with extra features to entice you to buy the overpriced upgrades.

    Outside of its core competency, Microsoft’s prospects are fuzzier. A third generation Zune lineup is out, but nobody seems to care. The successor to the Xbox 360 is supposedly under development, with Microsoft working on its own chip designs. However, just what expertise has Microsoft even demonstrated in such an endeavor anyway?

    But the real straw that breaks the camel’s back is the recent news that Microsoft wants to buy back $40 billion dollars worth of its stock. Their efforts to acquire all or part of Yahoo are forgotten, and evidently Microsoft doesn’t want to pour more of their large horde of spare cash into research and development, to demonstrate a real penchant for innovation, rather than a simple claim.

    Now I don’t know about you, but my suspicion here is that such a maneuver would do little more than increase the financial holdings of the executives and reduce the influence of individual shareholders. It would not end up allowing Microsoft to create and manufacturer superior products, or attempt further expansions beyond the software business.

    It’s just a financial maneuver and nothing more. With Microsoft’s stock price fairly stagnant in recent years, why are they doing this now? Could it be that they expect some serious change to their financial prospects in the future, and they want to give their executives a chance to build golden parachutes for themselves in the event of a wholesale firing of large numbers of employees?

    Considering what Apple can do with a fraction of the staff, you wonder what sort of efficiencies could be achieved over a Microsoft with competent management.

    Indeed, just what are Microsoft’s real prospects for five years from now? Forget about ten years. Just the near future, where you expect at least one or two major operating system upgrades, and enhancements to their productivity applications.

    Other than overpriced coffee tables riddled with touch sensors, just what is Microsoft going to do with themselves? Or are they planning to just take the money and run?



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    9 Responses to “Is Microsoft Preparing the Going Out of Business Sign?”

    1. John Fallon says:

      Microsoft’s core competencies – the server products – are so extremely competent and profitable. Exchange server rules the business market. SQL Server is wonderfully good, and extremely profitable. Windows Server 2003 and 2008 scale to almost any level and are extremely secure, but still pretty easy to use and administer. Microsoft takes support and security far more seriously than Apple does; and they did spend over $8 billion on R&D last fiscal year.

      Apple’s had a lot of very public failures in the last few months, and some of them are clearly due to Apple’s lack of staff and lack of attention to testing.

    2. Chuck says:

      Gene,
      Excellent questions. I am not a financial guru, but one has to wonder why MSFT is buying back ANOTHER $40B in stock. It appears they have nothing left, no ideas for new technologies that will expand the business, no “killer apps” in the works. MSFT has been left behind, I feel. Apple took the digital media market; Google took search. What’s left? I am sure time will tell, but MSFT doesn’t seem to know right now. It seems plausible that they might start laying off workers. Their cash horde is probably below Apple’s now. After this next round of stock purchases it may be gone.

      Nobody is arguing they aren’t making lot’s of money with Windows and Office, but the Next Big Thing seems to allude them.

    3. Apple’s failures were mostly the result of releasing too many products at one time. They’ve moved beyond that now, pretty much. MobileMe seems mostly functional, for example, the iPhone activation setup is being made more efficient, and iPhone 3G performance has improved noticeably for most users.

      Next.

      Peace,
      Gene

    4. Chuck says:

      @John,
      You are correct. MSFT in the OS, Office and server space is huge, and profitable. But those are products that exist now and for the most part will not grow the business. MSFT’s server software has to continually fight free solutions like Linux/Apache/MySQL, while bloated, buggy Office is getting battered by free office suites and Apple is taking the most profitable computer hardware sales, dragging down the profits of MSFT’s hardware vendors, and expanding Apple’s market share, at least here in the U.S. MSFT has strongholds but they are slowly being eroded.

      What Gene and I are asking is: what’s the next big thing for MSFT? The answer appears to be, they don’t know either.

    5. Sean says:

      Microsoft is just taking tried and true financial advice from Michael Dell. They are selling the company (to themselves) and giving the money back to the (former) shareholders.

    6. DBL says:

      After waiting five paragraphs for any hint whatosever of the substance of your argument, it seemed way too run-of-the-mill to justify that expenditure.

    7. After waiting five paragraphs for any hint whatosever of the substance of your argument, it seemed way too run-of-the-mill to justify that expenditure.

      So I gather, shorn of the implied insult, that you have no information with which to counter my ideas. 🙂

      Peace,
      Gene

    8. Jim says:

      Most folks are still brainwashed. There is a war on, for your mind! just encase you didn’t know…

      Here is the deal, open source will eventually win out this struggle. No questions.

      I can tell you this, I manage a HUGE back-end. ALL of it open source. The front-end user will see a desktop change within the next 5 years. I’m talking 1000’s of computers everywhere! Why pay for something that comes for free? See what people don’t understand is EVERYTHING that you can do within winblows(any version) you can do ten times better with open source. including propitiatory code.
      lamen

      Ok for the laymen, simply put… 2 power lines come into your house.(need not worry about power sources origination, ok) BOTH of these power lines provide the same volts,amps,watts,joules, blah blah ect, ect…. (2) OF THE EXACT SAME POWER LINES… ***Get that part folks*** See now, the only difference between the 2 is….
      One you pay for, and the other one is simply free. Alll you have to do for the FREE one is pay someone to set the free line up for you if you’re incompetent yourself. Or afraid of change…

      So I really don’t care what most folks say, because I know what is happening behind the scene… and that is COMPLETE and total change…. Microsoft will be taught in History class. If you ask me, sooner the better.

      ta ta until later.

    9. Bill says:

      I’m reading this on a iPhone lol but I don’t think Microsoft is even thinking about goin out of buisness

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