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April 28, 2006
Microsoft: tough times for leeches
The big question that arises from the fact that Microsoft missed analysts' expectations with its third quarter earnings report is just where did $US2.4 billion in extra expenses go? The cost of doing business at Redmond was up a staggering 49 per cent. The consensus in the investment community seems to be that Microsoft is preparing a major new initiative, although nobody can quite work out what.
There's disquiet in the camp, with suggestions that Microsoft has devalued the term "innovation", and that new software features simply don't qualify.
And MiniMicrosoft finds a certain irony in the fact that Steve Ballmer is boasting about setting some sort of benchmark in firing "underperforming" staff, given that the company doesn't seem to have lifted a finger to sack executives who've presided over a series of debacles ... most particularly, perhaps, Ballmer himself. Who knows. Maybe that $2.4 billion has been set aside as a termination payment. It would probably take that much to pay him off.
Some observers are suggesting that it's the beginning of the end for Microsoft, which, given the guarantee of substantial income from the new Office suite and Vista is absurd. For it to lose that revenue, there would have to be massive uptake of Linux and open source products. There are very good reasons why Linux etc should take off, given the substantial new investments - in both hardware and the OS - that Vista will demand. But somehow, we can't see that happening.
There seems little doubt , however, that when it comes to new product lines and business opportunities, Microsoft is floundering. It's always been a dud when it comes to genuine innovation, but in the past it's been able to buy the brilliance of other companies. The business model it pursues was pioneered, in fact, by the leech, and other parasites. Nowadays, companies like Google and Yahoo! - hell, even Rupert Murdoch - seem to be sucking up the new blood.
Worse, Microsoft seems incapable of delivering those essential, money-making major revisions in a reasonable time frame. In our view, Ballmer, and a lot of the top-level management should go. We don't expect that to happen.
Posted by cw at April 28, 2006 03:00 PM