Steve Sinofsky is out. There’s going to be a ton of analysis about what this means, but you can ignore it all, because it means NOTHING.
Why does it mean nothing?
Because Microsoft doesn’t sell most copies of Windows. Microsoft depends upon its contracts with the computer OEMs for sales.
To a certain extent you can ignore Windows when trying to evaluate Microsoft. Because of the way it is sold, it doesn’t have the same financial impact that Office has on how Microsoft performs. Effectively Microsoft has Windows sales locked in.
Microsoft doesn’t have Office sales locked in though.
I’ve been arguing that Microsoft has huge weaknesses:
- A large percentage of its cash reserves are outside the United States.
- Office provides an over large portion of Microsoft’s profits.
- Free and low cost alternatives on the market are impacting Microsoft’s profits from Office.
- Office is only available on Windows and Mac OS X.
- A drop in Windows market share directly impacts Office Sales.
- Most mobile devices do not run Windows.
How could replacing Sinofsky address these issues? Simple, it couldn’t.
What has to be changed is the corporation’s long term strategic planning. There’s no evidence at present that Microsoft intends to make changes to the corporation’s long term strategic plans. And there wouldn’t be. Admitting that you are changing your long term strategic planning, is admitting that there is a problem.
Admission of Problems
While Microsoft hasn’t admitted openly to having problems, the company’s legal actions are an admission of sorts. Legal actions are expensive. One company doesn’t sue another company for fun.
Legal actions have to make financial sense. Microsoft isn’t going to sue a competitor who isn’t hurting them, unless the lawsuit would have an impact on other players.
The same applies to negotiations about use of patents. A backyard inventor isn’t going to be approached by Microsoft. A company like Amazon on the other hand would be targeted, and Amazon did sign a technology licensing agreement with Microsoft.
An increase in licensing and legal action can be an admission of corporate problems. As an example, IBM only started chasing licensing agreements when the company was suffering from decreased sales.
While Microsoft wasn’t seeing decreased sales, it was suffering from an inability to break into new markets. You’ll note the similarities with Apple’s recent lawsuits against its competitors, and the wide uptake of Android OS devices, reducing Apple’s market share for mobile devices.
Sinofsky leaving won’t impact this
To change Microsoft would require Steve Ballmer’s replacement, along with most of the members of the Board of Directors. And that isn’t going to happen. Bill Gates still has effective control of the company through his stock holdings, and it is apparent he doesn’t understand the problems.
What will be really interesting is seeing where Sinofsky lands. He appears to be a pretty capable guy, and a position with a startup could really let him showcase his abilities.
Tuesday November 13, 2012