

The Tech Press Turns on Microsoft's Ballmer - edw519
http://www.newsweek.com/blogs/techtonic-shifts/2010/06/08/drumbeats-the-tech-press-turns-on-microsoft-s-ballmer.html

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petercooper
I'd rather eat hot coals than use Windows but at the same time, I am awed by
their business sense, and it seems rich to suggest that Ballmer is driving
Microsoft into the ground when the profits show the opposite picture.

The share price might not have rocketed, but MSFT's net income is up from
$5.355bn in 2002, hit $17.68bn in 2008, and even in 2009 was still $14.569bn.
For 2000, pre-crash, it was ~$9bn when he took the reins. A 62% increase in
net profits from a peak to today's trough is nothing to poo-poo.

Call Ballmer whatever you like, but the company, under his direction, is
producing giant piles of cash even in these rough times.

~~~
btilly
In the last decade Microsoft has grown profit margins without creating new
product lines. That is great for current profitability, but not for future
revenues.

At this point it is only a question of time until free alternatives to core
Microsoft products become good enough that people are willing to stop paying
the Microsoft tax. The growing popularity of mobile and semi-mobile devices
without Microsoft software suggests that this day is coming sooner rather than
later. And Microsoft's attempts to increase its profit margins aren't helping
any.

In short the relative stock prices of Apple and Microsoft is a vote of belief
that Apple understands and is inventing the future, while Microsoft has no
realistic plan for how to adapt.

~~~
awa
Xbox is a prime example of a new product line which has become profitable for
the company even though critics were out for the division's head when it was
loosing money.

~~~
btilly
You're right that the Xbox is now profitable. (When I first googled this I
came up with some links that suggested recent non-profitability, but I had
misread the dates on them.) But at this point it still doesn't look to me like
the kind of product line that can grow into something to sustain the Microsoft
we are used to.

As for the critics, they missed what was obvious to me at the time. The main
purpose of the Xbox was not initially to make money. Few remember now, but a
decade ago Microsoft and Sony were butting heads in many different areas.
(Particularly ones involving DRM, storage formats, and other things of
interest for media providers.) In typical Microsoft fashion, they went after
Sony's air supply. Competition from the Xbox forced Sony to slash prices on
the playstation, which cut Sony's profits in half. This distracted Sony, which
made them a less dangerous competitor in areas where Microsoft was going head
to head with them.

(Of course in the end Apple did an end run about both by demonstrating with
iTunes that you can deliver content without DRM and make everyone happy.
Microsoft never sold the world on DRM everywhere, all the time. And Sony
learned the hard way that people really don't like having a rootkit slipped on
your computer without your permission...)

~~~
awa
Take .Net for another instance, totally new thing, very few bet on it but is a
good success for Microsoft.

Also consider S&T (server & Tools) in the last decade, MS has been able to
grow huge profits from that division, Very few people in 2000 would use
Windows as a server platform.

The xbox story strikes me as relatively similar to Bing (OSD) story... They
are pouring a lot of resources there. Hopefully, the end result will be
similar or better.

~~~
btilly
My memory of the popularity of Microsoft as a server platform is rather
different than yours. For instance look at
[http://news.netcraft.com/archives/category/web-server-
survey...](http://news.netcraft.com/archives/category/web-server-survey/) and
you'll find that Microsoft IIS has maintained a 25%-35% market share since
1998.

Now I grant you that Microsoft put a lot of energy into .Net, and it has
achieved some success. But I look at that as more of a sustaining effort.
Microsoft has always had programming tools aimed at certain sections of the
business market. They have changed the tools, so what used to be done with VB
and Access is now done with C# and SQL Server. But fundamentally it doesn't
seem to me to be a radically new market, nor do I see much evidence that their
market share has changed significantly.

As for Xbox and Bing, I absolutely agree with you that they are very similar
stories. Just as Microsoft used the Xbox to try to neuter Sony, they are using
Bing to try and undercut Google. It will be interesting to see how that goes.
I think that Google's recent stock price is evidence that the market thinks
there is a real threat.

However the bigger threat to Microsoft is coming from Apple. And Microsoft is
nowhere to be seen in that space. Furthermore despite the threat to Google
from Microsoft, there is more of a brain drain from Microsoft to Google than
vice versa. And I see more entrepreneurs worrying about competing against
Google's offerings than Microsoft.

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btilly
See <http://news.ycombinator.com/item?id=889473> for previous discussion of
Ballmer's deficiencies.

I've personally long maintained that a major source of Microsoft's problems
are a classic case of being on the wrong side of disruptive innovation. See
_The Innovator's Dilemma_ and the (IMO better) follow-up _The Innovator's
Solution_ for more.

Another has been the legal problems that have caused them to shy away from
their past ultra-aggressive tactics.

If I'm right that outside problems are a major cause of their downfall, then
part of Bill Gates' genius was recognizing the writing on the wall and leaving
at the right time to maintain the myth.

~~~
potatolicious
In all likelihood it's a little bit of both external and internal factors.

I disagree with the article that seems to want Ballmer's head on a platter for
bungling Vista - that was a bad move for sure, but tossing out everyone
responsible for that mess seems like tossing out all opportunities to learn
from it.

Hubris has a lot to do with it, I think. There have been a remarkably large
number of instances where Ballmer has said something that betrays the fact
that he has no respect for his competition. Everyone's a lame duck competitor
compared to the wonderful products of Microsoft... until they completely
trounce MS in the marketplace. Then you might hear a half-hearted mea culpa
from Ballmer, but after that it's swept under the rug.

Maybe it's the job of a corporate CEO to talk big about his own products - but
I've seen few other CEOs so openly negative and dismissive of competitors'
products, and IMHO this has probably a significant hand in MS's failures at
tackling new product lines. His reaction to more-successful competitors seems
to be unproductive: note his claims that Google and iPods are not allowed in
his house. How can you compete when you are _willfully_ ignorant of your
competitors' products?! When someone is leading a market I'm trying to compete
for, you bet your ass I'll have my hands all over their product.

------
armandososa
Sorry for my stupid question, but I can't understand the quoted phrase "out-
to-lunchness". What's that? I don't know, but it sounds pretty derogative.

~~~
chc
"Out to lunch" is an idiom that basically means "not mentally there." It can
refer either to being out of touch with what's happening or just seeming
completely insane.

~~~
armandososa
thanks! I understand now.

