Last year when I predicted that Microsoft had five years until they’d have to apply for Chapter 11 Bankruptcy Protection, there was a lot of laughter. I was told that I was crazy – a point that I won’t argue. Being crazy means that you see things in a different light.
And then we have Information Week running an article titled Microsoft Looking Like An End-Stage Company. In it Information Week calls out many of the same points I’ve been making. They also suggest that Steve Ballmer, the President and CEO needs to go. Soon.
Microsoft looks like a classic case of The Innovator’s Dilemma. When was the last time that Microsoft introduced a successful new project? I can tell you exactly. It was August 24th, 2001. The launch of Windows XP, which merged the 9x and NT versions of Windows, is the last successful new product, and it wasn’t even new. It was a merger of two pre-existing products.
The last ‘NEW’ product that was a success for Microsoft was Microsoft Exchange, the original version being released in 1996. How many companies could exist for over 14 years without releasing a successful new product? None, unless they were living off an illegal monopoly.
Oh, I agree. Microsoft has introduced a lot of other products. The problem is that none of them have been all that successful. The original X-Box wasn’t bad, but it wasn’t a hot seller. The X-Box 360 was a hot seller, but it also suffered severe warranty issues, forcing Microsoft to take a One Billion Dollar write down. Office for Windows is a good seller, but it’s hardly a new product, it was initially released in 1990. The Zune hasn’t sold well. The KIN phone died within weeks. Windows CE has been used on a lot of devices, but it was never as popular as the Palm OS on personal digital assistants. Windows Mobile is sitting at 5% market share. Internet Explorer is loosing share. And so on…
My original prediction was based on Microsoft taking no action to avoid bankruptcy. Obviously Microsoft would take action, but I didn’t have any idea as to what sort of action they would attempt to take. Oh, we know that Microsoft has been selling off and closing divisions, my thanks to Dr. Roy for hosting a listing.
The problem is that selling and closing divisions doesn’t address the main problem, a lack of productive innovation. If you can’t or won’t bring new products to market, you might as well just close the company.
And Microsoft has shown a complete inability to do this. One product that Microsoft has been pushing for a long time is the Tablet PC concept. The company invested a lot time, effort, and money on Tablet PCs, however the product line never sold well. There are a huge number of Tablet PC evaluations available on the net. One of the common complaints about the Tablet PC concept was price, and price was the driver behind Michael Arrington’s Crunchpad project. Michael wanted an inexpensive tablet. The project failed (and there is currently some fascinating litigation going on). But Apple’s project didn’t.
That Apple, a newcomer to the tablet market, could do what Microsoft was unable to, is a huge indictment of Microsoft. Yes, the IPad is in effect an oversized IPhone. But it works, works well, and from it’s release it was priced at a level that people were willing to pay. I’ve seen estimates that more than 15% of IPad buyers, used it to replace a Windows Notebook. Since Apple products tend first to be sold to Apple fans, and only later gain traction among general users, if the IPad continues to sell at the current rate, it will soon start eating deeply into the Windows laptop market. Melinda Gates may have an Apple Ban at her house, but millions of others don’t. George Bush likes his IPad.
So where is Microsoft going? Based on published articles, they’ve decided to take a page from the Tony Soprano system of making money. If you can’t win with a superior product, threaten your customers. Exactly how this would make their customers want to keep dealing with them I’ll leave you to decide. You can probably already guess my opinion.
The big question is, can they save the company? For that matter have they even started to try?
Their latest SEC filing should contain some information, with luck I’ll have time to read it later today.
Sunday October 31, 2010