Last week Microsoft posted its first loss ever for the latest quarter - and it may be the best thing ever to happen to the company!
Microsoft had to post a loss from a charge taken in connection with its internet business. This business includes the acquisition of the online advertising service aQuantive in 2007 and the relaunch of the Bing search engine and other initiatives to bring the company into the high growth part of the internet, and begin to compete with Google.
At the same time the core Microsoft businesses seems to be doing fairly well. The total revenue rose 4% and the Enterprise SW group was up nearly 13% with a big bump in operating income. And there is a new Office suite out, including a subscription based Cloud version as well as a new version of Windows on its way which will undoubtedly drive numerous Smartphone and Tablet products from vendors across the world, as well as an upgrade cycle on PCs.
But the stock price is not really taking off - why not? What is the problem?
Simply put: If the company do not succeed in breaking out of the sideway track it has been on for a number of years now, it will become the largest “cash cow business” ever seen, and the reservoir of “milk” may potentially be disappearing very quickly.
If on the other hand they were able to leverage their enormous base of technology, talented people, customers and millions of users, they could be the growth story to dwarf even Apple!
So how hard can it be? Surely, it is just a matter of asking the engineers to build some better products? Well guess what, that’s what they have been doing. However - “good products” don’t cut it. It has to be mind blowingly great products which the world will instantly recognize they cannot live without.... And that is something quite different, as many great technology companies have realized before them.
The lackluster performance recently is not about lack of talent and vision with the Microsoft team - it is about lack of hunger! Complacency is the number 1 enemy of technology companies and it seems like the people at Microsoft have a lot of this.
And this is where the first quarterly loss in 26 years come in. If the Microsoft management team cannot use this to explain the urgency of change and execution to the people there and create real hunger again, Microsoft needs a new management team!
If however they can do this - all the elements are there for a fantastic success for Microsoft.....
How? you may ask. I’ll tell you: Apple, Google and Amazon are all busy integrating Smartphones, Tablets and Cloud solutions into compelling solutions for the consumers trying to capture and lock them in for the future. Why the consumer market? Simple - because that’s the marketplace they mostly are in. Undoubtedly the strategy is to push towards to Business marketplace when dominance has been achieved and people are demanding their “personal solution” at their jobs.
However, Microsoft could be the company to integrate Smartphones, Tablets and Cloud solutions and PCs, into an uniquely and very compelling offering for the Business community and later move towards the Consumer markets. This is a true differentiation, only Microsoft have. If they use this advantage intelligently - they will win a large chunk of the market!!
To put it differently: It is theirs to lose
You could say RIM had a similar opportunity to focus on the business market rather than consumer, perhaps on a smaller scale. Yet they too were squashed by Apple. That said, I agree with your premise that MS has all the variables at their disposal. Is complacency the problem - sure. But it's more than that. MS needs to redefine markets and business models, not just increment technology one release at a time. I guess they are too accustomed to being a fast follower. Is new leadership the answer? Or, should they break the company up? Maybe both.
ReplyDeleteAgree that RIM had a shot of something - bot surely they never had the installed base of Windows, Office and Outlook users to leverage. What they lack is sexy devises and a sales and marketing strategy targeting their enterprise customers to capture the opportunity.... I can get high just thinking of this opportunity :-)
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