Forbes published a tirade on Microsoft on January 2 titled, Microsoft is Fast Turning Into a Sideshow. Roger Kay makes some compelling points that Microsoft is not as influential as it once was, and that it has missed or blown several opportunities, and that Ballmer isn't the best CEO. He's right. But so what?
Kay writes: "Microsoft has reached an Orwellian impasse, in which it cannot tell the truth--even to itself. It is blinded by its own hallucinations about how the market is operating."
Sounds quite dramatic, but really, what big company isn't delusional? Have you ever read a press release?
While Microsoft is losing ground with the consumer, it's not as bad as Cisco. While it lost its position in mobile, it's not as bad as RIM (or Nokia). While it has lost its share in servers, it is not as bad as SCO or Novell. Microsoft is still a healthy cash-positive business with enterprise dominance. Its last Q1 revenue was $16 billion that delivered a net income of $4.47 billion. In other words, rumors of Microsoft's death are greatly exaggerated.
I find it strange to defend Microsoft. I agree with most of Kay's thoughts in Forbes. Certainly Microsoft could have been more, and certainly Google, Amazon, and Apple's successes have largely occurred during Ballmer's watch. But here is what Kay missed:
* Jobs: Jobs was extraordinary and left few survivors to talk about it. His vision, attention to detail, and ability made him very successful. Blackberry, Disney, the entire music industry, and anyone else he targeted didn't have a chance. Microsoft got bruised, but actually survived. Since Jobs passed away, Apple's stock has come down, it's apologized for bad products, and its customer satisfaction recently hit a four year low. Jobs is dead, and while the world will miss him, Microsoft won't.
* Lync: Lync is proprietary, super complex, and far from cheap, but its tight integration with other Microsoft products makes it compelling to many. Microsoft is using Lync as a means to lock organizations into Office, Exchange, and SharePoint. A very sticky glue that leaked through the unguarded Presence door. Lync is growing--administrators and users like it. Telecom decision-makers are increasingly data-oriented people. The CIO knows Microsoft better than the brands that came from the PBX world.
* Cloud: It is abundantly clear that cloud services are the future. Microsoft was late and effectively followed Amazon's lead with Azure. But Azure is ramping quickly, as is Office 365, and Skype. Microsoft is struggling with Bing, but the enterprise doesn't care.
* Play Makers: Kay speaks of Amazon, Google, and Apple as key play makers. But what industry? None of them have compelling enterprise plays. Sure, they are all penetrating the enterprise, but enterprises are big. Salesforce, Oracle, IBM, HP--all penetrate the enterprise too. Amazon is first and foremost a retailer. Its cloud business is amazing and disruptive, and even complements many enterprise IT plans--but rarely unseats Microsoft. Google Apps are great, but about the same price as Office 365 with less functionality, and weak voice solutions. Apple's personal products remain a threat--so what?
Should Ballmer go? Probably. But Bill Gates seems to like him. Bill made the transition from TechGod to PhilanthroGod, and evidently he finds the paltry $4.47 billion in quarterly net income acceptable. Changing the CEO of Microsoft would distract him from saving the world. If you don't like Microsoft's performance--don't buy the stock.
Microsoft doesn't have to be innovative if it has the cash. Yesterday Avis bought Zipcar--it didn't spend almost $500 million for 10,000 (used) cars. It spent the cash for some needed innovation. Zipcar changed the (old established) game. The innovation engine of big companies involves lots of smaller companies.
Don't compare Microsoft's innovation engine to Apple--Jobs was an outlier. It will be another 100 years until the next Jobs comes along. When comparing Microsoft's innovation engine to those of Oracle, IBM, HP, Dell, Nokia, RIM, Adobe, etc., then Microsoft isn't so bad. Cash trumps innovation--and that's why Microsoft owns Skype.
The enterprise seems quite content with Microsoft. Exchange is doing fine--better than Domino. Cisco tried to take on email and retreated soon after. Yes, there are more alternatives to Office than ever before, but Office still rules. I use Google Apps heavily, but won't consider it for complex documents. Windows desktops are still dominant. Cisco started beating the "Post PC" drum pretty hard last Spring while announcing Jabber for Windows. Windows-8 isn't particularly exciting, but it isn't a step backwards, like Vista from XP. If the missing "Start" button continues to be an issue, Microsoft will add it with SP1.
Kay claims Microsoft is so weak it can't keep its talent. But shouldn't there be turnover if opportunities are missed? Cisco has named three leaders of its collaboration unit in less than a year. Apple recently bid farewell to iOS manger Scott Forstall and Maps manager Richard Williamson. Avaya has had significant turnover in the executive suite. So what? An unfortunate reality of turbulent times are turbulent careers.
Microsoft is an easy target. We would like to expect more from this once disruptive and more powerful company. But It's actually kind of nice that Microsoft's failures are leaving room for competitors to flourish. Monopolies are boring.
Dave Michels is a Contributing Editor and Analyst at TalkingPointz.
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