
The Ballmer Days Are Over - showngo
http://brooksreview.net/2011/05/ballmer/
======
asr
I'm sorry, he lost me at comparing Microsoft stock to Apple and Google over
the past 10 years. In retrospect, those are two of the most successful
publicly traded tech companies of the period--not a fair comparison.

Not to mention those were small companies in 2000. For Microsoft stock to have
increased 1200% (as Google's did) it would have probably had to grow into some
very significant portion of the world economy.

Obviously Microsoft hasn't outperformed over the past 10 years, and it looks
like the rest of the article gets into actual substantive critique, but it's
hard for me to trust substance from someone who starts out with such an unfair
introduction.

~~~
Spyro7
Note: I do not hold shares in any of the below companies.

Apple and Google were in their heydays during this time period. If anyone is
interested in seeing a _really_ interesting comparison then go to
finance.google.com and do the following:

1\. Look up MSFT

2\. Click "All" for your zoom option, this should give you from 1986 to
present

3\. Add GOOG and AAPL using the compare box

Now look at the chart. MSFT is up 25,019.04% since it was publicly listed.
AAPL is up 11102.07% since it was publicly listed. GOOG is up 394% since it
was publicly listed.

If we want to truly assess Ballmer's performance as a CEO using stock
performance as a metric then I strongly suggest we look at the past ten and
five years of performance of Microsoft and compare it to similar tech
companies.

Offhand, I think that IBM and Oracle make suitable comparison points. Looking
at the past ten years of performance, we can see that MSFT is down about 27%,
while IBM is up 49% and ORCL is up 109%. Now we can more clearly see that
Ballmer has more than likely missed some opportunities along the way. When you
narrow to the last five years, the picture doesn't change.

I agree with the author of the blog piece - Ballmer has proven to be a
mediocre CEO of Microsoft. However, we need to make sensible comparisons to
get the point across.

Frankly, I don't understand how MSFT could sit on 40 billion dollars in cash
and short term investments without increasing its dividend to something more
in line with what one should expect from a mature cash-rich business.

Increasing shareholder value should be the goal of all publicly listed
companies. Purchasing Skype for $8.5 Billion dollars flies straight into the
face of this - it is a crazy move. Any shareholders that are not screaming
about this should wake and smell the sinking share price.

Edited: Formatting in the step-by-step portion of this post was messed up
initially...

~~~
amorphid
MSFT was the overpriced darling of the Dotcom era. Ballmer inherited an insane
valuation. Meanwhile, in the last ten years, net income has gone from under 8
billion to over 18 billion. This is not a failure and will eventually be
reflected in the stick price.

Source -- <http://www.microsoft.com/presspass/inside_ms.mspx>

~~~
Spyro7
An insane valuation? At the start of January 2000, Microsoft's most recent
earnings per share was $0.90. It's share price was about $58 dollars. This
would have given it a P/E ratio of about 64x. This was relatively tame by dot
com standards.

MSFT's current P/E ratio is about 10x. Just looking at that number right
there, most people would conclude that MSFT was a great value play. In my
personal opinion it is indeed a great value play - but not so long as Ballmer
is still calling the shots.

If market prices were solely set based on income then you would be right; the
price would eventually rise regardless of whether Ballmer remained at the helm
or not. However, market prices are more complex than this. They also
incorporate expectations for the future. It is here where MSFT's current
problem is.

If you look at the components of MSFT's cash flow their major income sources
are the Windows Operating System and the MS Office Suite. It is unbelievable
that either revenue source will suddenly evaporate.

The problem is that both of MSFT's core business functions are under pressure.
This pressure is coming from the decreasing dominance of the PC as the digital
platform of choice and the increasing prevalence of Internet-based solutions
to problems that were previously solved by offline software packages.

While MSFT is currently conducting expansions into a large array of
industries, it is unlikely to dominate these industries to the same degree
that it currently dominates the desktop sphere. In all of the industries where
MSFT is trying to expand its footprint it faces vigorous competition from
fairly formidable competitors. Even in its core industries, challenges are
appearing on the horizon. Here's just a really quick summary:

1\. Video Gaming - Nintendo, Sony, Apple? (Perhaps for "casual" gamers only,
but I am not well versed enough to know how serious of a contender Apple is as
of yet)

2\. Tablets/Mobile - Google, Apple, HP

3\. Search/Advertising - Google (Look, this is a big enough fish, I don't even
need to name anything else)

4\. Operating Systems - Google (ChromOS in the distant? future, Android
everywhere, tablets eating market share), Apple (tablet popularity may erode
Windows market share)

5\. Server & Server Tools - ORCL, Linux, IBM, etc, etc, etc

6\. Microsoft Office - Nothing serious yet, but GOOG is salivating at a chance
to chip away at this

Market prices incorporate expectations for future growth as well as
performance relative to peers. In the near term Microsoft is making buckets
and buckets of solid cash. In the medium term, there are threats on the
horizon that are looming large. In the long term, there is a great deal of
uncertainty and this uncertainty is not made any better by strange moves like
acquiring Skype for $8.5 billion.

I have heard some people say that acquiring Skype was a defensive move. Look,
defensive moves like that are the last ditch strategy of someone that knows
they are losing. There were a billion strategies that could have been taken
that would have yielded a better strategic position.

What Microsoft needs is a visionary leader that can turn its buckets of cash
into something that can carve out a substantial, permanent, and secure
foothold on one of the fronts that they are fighting. That sounds cliche, but
it is what they really need right now.

Microsoft is a fantastic company with an amazing amount of talent in it. I
actually believe that it has some incredible earnings potential, but unlocking
this potential will take bold, aggressive moves - not expensive defensive
posturing.

It is not my intention to bash Microsoft. I have a lot of respect for the
company. However, something obviously needs to change in response to the new
challenges that they are facing. The status quo is no longer good enough.

Sources:

Edgar online for the year 2000 10-Q filing, yahoo finance for price in 2000,
[http://www.betanews.com/joewilcox/article/Microsoft-Q3-2011-...](http://www.betanews.com/joewilcox/article/Microsoft-Q3-2011-by-
the-numbers-Record-1643B-Windows-revenue-declines/1304021955) for revenue
break down.

I apologize in advance for any formatting strangeness in this post. In my
defense - I am new here, and it is 1:31 am.

~~~
wonnage
64x being tame by dot com standards still doesn't make it cheap!

As for the earnings argument, look at it this way - Apple and Microsoft both
made about 18B after taxes in 2010. Difference is, Microsoft's been printing
money for almost a decade. Google doesn't even come close.

It's a fantastically profitable company. You can speculate about the future
however you want, the fact remains that this company that until a year or two
ago made more than Apple and Google combined is priced far below that
combination.

~~~
Spyro7
It is a fantastically profitable company. A fantastically profitable company
with the P/E ratio and historical growth rates of a public utility.

Why invest in Microsoft when you could invest in Exxon Mobile, Johnson &
Johnson, The Coca-Cola Company, Novartis - all companies with better long term
growth rates and beefy dividends.

Look, I am not trying to be discouraging, but I find it grating how little
progress Microsoft has been able to make despite its huge market advantages.

Maybe the question is one of perspective. I tend to constantly think in terms
of long-term investments. If you are investing because you intend to cash in
on an upcoming bounce in the price (rather than holding on for the long term)
then that is actually a sound strategy - I wish you luck in timing the bounce.

It's the long-term perspective that I am mostly referring to. That is the
reason for the speculating about the future.

Disclaimer: I own none of the shares mentioned above - as a matter of fact I
currently own no shares of anything.

~~~
wonnage
Microsoft's had better earnings growth than any of the companies you listed.
In the past 5 years Novartis grows its revenue from 30B to 45, MSFT does it
from 51 to 62. Keep in mind that it gets harder the bigger you are - if you're
already sucking 51B from your customers, how the hell do you find another 11?

The flaw with speculating about the future is that anything that's certain
will be priced into the stock immediately. Any other "educated guesses" you
make might as well go to a blackjack table.

A lot of people think they're being prudent just because they're investing
with a "long-term perspective". That doesn't get you anything in and of itself
- I can buy a car and hold onto it forever but it'll never appreciate (well,
until it becomes an antique). It's true that you shouldn't daytrade, that you
should be willing to stomach holding something even if it loses value. But
that just makes it more important that you understand _why_ you've chosen to
hold onto this stock for so long. And I don't think speculation about the
future is a good basis for that decision. If you can point to something in the
present (e.g, 18B in net income) there's a lot more assurance that you're
actually getting something for your money.

~~~
eftpotrm
If Novartis has put on 50% or 15B, how is Microsoft doing better by putting on
22% or 11B?

Now, I'm not fully convinced that companies on that scale are really
delivering the best market value to either shareholders or wider society
compared to their functions being split across a network of smaller
organisations that can stand or fall on their own merits, but still... other
large companies exist and have done better.

------
axiom
Microsoft issues dividends. Google and Apple don't.

~~~
macrael
Can you expand on that comment? I have no idea what this is supposed to mean.
Should this change how we interpret the stock price growth comparison between
Microsoft, Apple, and Google?

Just thinking about it, I only see two ways in which that would change the
stocks valuation. On the one hand, it must reduce the capital that Microsoft
has on hand, which might reduce the price of the stock. On the other hand, I
would imagine that the fact that owning Microsoft gives you real value in the
form of an (quarterly?) payout might increase the stock's price. One can still
buy and sell the stock just like a stock that doesn't pay a dividend, betting
on the future success of the company, plus you get money on a regular basis.
Is there some other way it relates? I really don't know much about this.

~~~
pkteison
You can make money by buying a stock, having the business get more valuable so
the stock goes up, and selling the stock at a higher value. Or you can make
money by buying a stock, having the business make money and pay it out to you
in dividends.

At the end of the day, what matters here is how much money you make and how
long it took you to get it, which is a function of sell price - buy price +
dividends received - transaction costs and taxes paid. This chart ignores the
dividends received part, and thus misrepresents the value of the stock. I
don't know how big the dividend is so I don't know by how much. I doubt it
would really make -50whatever% a whole lot better, but it would certainly be
something better.

Traditionally dividends are generally paid out by businesses that can't
reasonably expect to use their cash to grow - reinvesting all your cash to
grow may not make sense if your growth is limited by geography or by
completely owning an entire market. The textbook example is a utility company.

~~~
wonnage
Even a company that's growing _ought_ to pay dividends in most cases. After
all, if your shareholders have faith in continued good business they have the
option of reinvesting their dividends. Companies that don't pay out are
essentially telling you that your money's better off in the company, which
strikes me as a rather arrogant way to treat your owners.

~~~
akronim
Dividends are basically saying "we're returning earnings because you can
probably invest them better than we can". It's up to the investor balance
their portfolio and decide how much money they have invested in the company,
dividends are supposed to be that mechanism.

~~~
wonnage
Sure, and as a shareholder I can say that I always know better. In reality I
probably don't, but it's a matter of principle. We own this company, and
they're telling us that they'd rather use all the profits they generated (out
of the money _we_ provided) for themselves.

It's not that I think every company should always pay out a dividend. It
doesn't make sense if you're growing fast, or losing money. Berkshire doesn't
have to because we generally agree that Buffett's a better investor than the
rest of us. For the vast majority of companies not in these categories though,
it seems like the shareholders would be better off if they just got the cash.

~~~
adw
No, not for themselves; for their shareholders – ie for you. They're saying
that there's an illiquid opportunity they can access which you can't.

You might disagree with them; if you do, sell the stock.

------
zmmmmm
I think Microsoft should break itself up and leave Ballmer in charge of the
business focussed parts and put a new CEO in charge of WP7, xbox and the other
consumer parts. Everyone heaps platitudes on Jobs but the reality is he has no
understanding of or interest in business needs. On the other hand, you can
make an argument that Ballmer has performed quite well on this front.

The simple fact is that it may be impossible to reconcile the different
business styles needed to succeed in both the consumer space and the business
space. Let them separate and have genuinely different corporate personas and
both might succeed more.

~~~
lotusleaf1987
>Everyone heaps platitudes on Jobs but the reality is he has no understanding
of or interest in business needs. On the other hand, you can make an argument
that Ballmer has performed quite well on this front.

Yeah Apple definitely doesn't need all that cash they're raking in.

Move along please, point to something substantive and back it up with evidence
before you arrogantly dismiss Steve Jobs. He has valid criticisms such as how
will he be replaced? But what you said, absolutely is not backed up by all the
available evidence. You then go on to praise Ballmer? Bizarre.

~~~
varikin
I think the OP is right, but you are misunderstanding. Jobs understands his
business, but what products does Apple put out there for businesses? Microsoft
has Exchange, Active Directory, .NET/C#/MVC, MSSql, plus many more products
aimed at the enterprise. Apple makes consumer products and does it will. The
iPhone/pad/pod, AppleTV, laptops, and desktops. They tried the server market
with XServer, but that was discontinued this year.

I want to mention again .NET and C#. C# has become a cornerstone of the
enterprise world, much like Java. You could say that Apple has XCode and
Obj-c, but that doesn't really compete against .NET, except for desktop apps.
But the focus of XCode lately has been iOS and .NET has been web apps. Of
course this is a broad generalization.

Back to business needs. Microsoft is great at products for the businesses, and
great at selling them to the businesses. They are also great at other things
too, like XBox. I have had a feeling for a couple years now that there are
departments with great product managers that put the product above the
politics of a large corporation and upper management that shield the workers
from the politics. Those departments end up with great products, like the
XBox, Office (though I have heard Office just has the clout of being a big
money maker to get whatever they want), Visual Studio/.NET/etc, Windows, and
possibly IE (or at least the the current IE team). But reading about what
happened with purchasing Danger to take on the iPhone stinks of to many people
trying to tell Danger team what to do.

About the only place where Microsoft and Apple true stand toe to toe is the
OS. Windows 7 looks great (I have only used it sparingly being a Mac/Linux
guy) and OSX is great. I guess you could say the browser is another place.
Both IE9 and Safari are good, but really, I think Firefox and Chrome have them
beat.

How Microsoft can use this to their advantage is for someone else to figure
out. Maybe splitting up would be good, or maybe they just need to say to hell
with completing against Apple when in comes to consumer gadgets.

~~~
bad_user

         what products does Apple put out there for businesses
    

That's the beauty of it - they don't have to target businesses, because
businesses buy their shit anyway.

    
    
         doesn't really compete against .NET
    

Apple doesn't have to compete against .NET - Microsoft shot itself in the foot
years ago by not building a Unix and by not taking advantage of the open-
source ecosystem.

You may say what you want about .NET, but go to any software or web-related
conference, and you'll see more than half the room filled with Apple
computers.

Apple doesn't compete with .NET because it doesn't have to.

~~~
varikin
I don't care for MS, but I do grudgingly respect .NET from everything I have
seen. And while it is hip to use Apple and run RoR, Django, Erlang, or any
other next big language and stack, .NET is huge in the corporate world where
the stack is decided based upon politics and who plays golf with who instead
of by the developers.

And yes, Apple doesn't compete with .NET, that was sort of my point. They
different products to address different needs—iOS/desktop apps vs web based
CRUD apps for insurance companies (example corporate industry).

~~~
bad_user
These alternative platforms for software development are actually eroding
Microsoft's market share.

It isn't just the hipsters that are deploying to Linux, it's the big guys too,
like the London Stock Exchange.

~~~
Raphael_Amiard
> These alternative platforms for software development are actually eroding
> Microsoft's market share.

where is the data about that ?

------
ChuckMcM
So this is just shareholder activism at its finest. A lot of M$ share holders
are upset at the Skype deal and with the returns on the stock since Ballmer
took over. Nothing new here, just that Microsoft lead by Ballmer has
underperformed the market.

I keep waiting for these folks to say who they think _should_ be running
Microsoft but that doesn't come up a lot.

~~~
brg
Inside Microsoft, many hope it will be Steven Sinofsky.

~~~
swilliams
Sinofsky is really good at running Windows & Office, but is he the right guy
to successfully expand beyond that? MS is getting its butt kicked in mobile,
social, and consumer electronics, all of which Sinofsky doesn't have direct
experience.

~~~
redthrowaway
Gates didn't have direct experience in any of the areas Microsoft ended up
dominating. In the end, the CEO's role is more visionary than mentor. His job
is to guide, not to teach. A good CEO can make smart choices about
technologies with which he's unfamiliar, if he has a vision in mind. Compare
Sculley and Jobs in their approach to Apple: neither was technologically
gifted, but Sculley relied on the engineers to dictate direction, whereas Jobs
(mk II) dictated direction to the engineers. The point is that a CEO need not
be Gates: he need not have an intimate knowledge of the technology, so long as
he has a clear and accurate vision of its future.

~~~
varikin
Also, it doesn't have to be the CEO with the vision. The CEO can, in the
scenario, find and back up someone else with the vision.

------
melling
The world will be a little better off with a decline of Microsoft. 90% desktop
market share is too much. More diversity will be healthier. Chromebooks should
take some market share. Microsoft can own 50-70% market share and still be
very profitable. They might even be more innovative in other areas.

~~~
brg
Chromebooks as they are now are not attractive. Apple's mobile platform,
MacBook, IPad, IPhone, is significantly eating into MS share.

~~~
aik
Who exactly are you speaking for when you say they are not attractive? A large
part of Microsoft's share is in school/org licenses. Another large one is for
the unskilled users of computers. I would very much consider Google as a real
competitor for them.

~~~
brg
<http://www.pcmag.com/article2/0,2817,2385301,00.asp>

I look at it this way. Chrome notebooks are priced beyond that of PC laptops,
they offer no benefit over a PC laptop running Chrome, so why buy one? Further
ChromeOs will have limited local storage, and absolutely no native apps. This
means no Skype, no local movie player, etc. A buyer would actually be getting
less for their money by buying a ChromeOS machine instead of a $350 laptop at
BestBuy with Chrome installed.

The form factor for consumption of media, video and news, does not require a
keyboard. In fact it does not seem to require much of the laptop form factor
at all. The tablet may already be the best solution, time will tell. But
ChromeOS is avoiding stepping on Android's toes, and is not expanding in that
direction. And that is limiting.

Leasing will only be available for schools, businesses, and governments--
entities already in long term contracts with Apple or PC manufacturers. There
won't be much penetration in the short term. And when it comes to price
comparisons, ChromeOS will not have the support base and personelle which is
already built up around PCs.

Lastly Chrome notebooks necessitate a wireless data plan, but as of now no
carrier gives unlimited access for a low, flat fee. That means no unlimited
Netflix or Hulu. And judging from my experience with a mobile data card, the
connection is not stable enough for video streaming anyway, nor voice calls,
nor multiplayer gaming.

------
siglesias
>> In fact, the acquisition by most accounts sounded more like a move by
Ballmer to buy something that others may have wanted to own — just for the
sake of others not owning it.

This struck me because I'm presently reading Stephen Levy's _In the Plex_ , in
which he reports at great lengths about why Google decided not to purchase
Skype when eBay had it up for sale: mainly owing to Skype's peer-to-peer
technology not being compatible with Google's existing centralized
infrastructure. What reason would Microsoft have to think that this reasoning
had changed?

~~~
larrik
If you look at Microsoft's words and actions in regards to their competitors,
they are clearly completely clueless.

In fact, "Microsoft people" are often completely blind to everything not made
by Microsoft. Reading HN you may never know, but if you've met actual .NET
stack developers, or MSCE's or anyone else similar, and you'll find people who
_make websites_ and don't know what _apache_ is. Or they'll dismiss open
source technologies with ridiculous reasoning.

That's what I see when MS speaks.

(To be fair, IBM can be the same way, if you are in certain industries, and I
would imagine Cisco has the same effect in networking, but that's outside my
knowledge)

~~~
kitsune_
Thank you. I'm a .NET developer by trade. (ASP.NET MVC).

Yes, I know Haskell. Yes I know python. Yes, I've used django. Yes I've
programmed in PROLOG and EIFFEL. Yes I can use a shell and succesfully
configured a linux server countless of times. Fuck me, totally unrelated, but
I even know MATLAB. Yes, I had my hands on SOLARIS servers. Yes, I programmed
a SPH solver with CUDA. Yes I know javascript, not just jQuery. ETC.

So here I am, an actual ".NET stack developer". Ask me anything.

~~~
artsrc
I am doing some work with C# right now, and I would agree with "are often ..."
in my workplace.

------
brown9-2
_Windows Mobile 6.5 was a powerhouse of a product. Pre-2007 most U.S. buyers
of smart phones chose between BlackBerry and Windows Mobile 6.5. Both were
small screened devices with a hardware keyboard — with exception to the few
HTC devices with stylus based touch screens. Palm was struggling at the time
and Windows Mobile was the dominate player in consumer minds, BlackBerry was
the beast in boardrooms._

This seems off to me. Am I the only one who doesn't remember "Windows Mobile
was the dominate player in consumer minds" in 2006?

~~~
ry0ohki
You had to be one of the rare consumers who were purchasing a "smart phone". I
remember writing software for the platform because it seemed like it was
really going to take off, especially when things like the Dell Axim were
starting to sell.

Side note: Anyone want a Dell Axim?

~~~
cosgroveb
I remember how badly I wanted a Motorola Q or a Samsung Blackjack when they
came out but I had just started a contract... Luckily for me my contract was
up just in time to get an iPhone.

------
dr_
Whereas I agree that Microsoft's performance and innovation over the past
decade has been abysmal, I'm not sure it's just Ballmer to blame.

It all started with the Google brain drain - and that happened while Bill
Gates was very much involved at Microsoft. Once the brain drain begins, you
lose talent at a rapid clip and no matter how great an idea you may have, it's
very hard to execute.

So then if you can't build it, you buy it. The product and the talent. Hence
the Skype purchase. Here MSFT is buying a business and the people who run it,
granted at a hefty price, but Skype is well established around the world and I
see it as a better integration with Microsoft than eBay, which never made any
sense to me. No it didn't cost Apple 1 billion dollars to build Facetime - but
it also didn't cause Skype 1 billion dollars to build Skype. I can't say what
it's worth now but I do know that I use it a lot since it's been available on
the iPhone - great when traveling abroad.

Bing is slowly making strides as a search engine, Windows 7 is selling rather
well and Kinect is a huge it. And they have partnerships with Yahoo! and
Facebook.

Ballmer may need to go, but I really don't think Microsoft is entering the
early stages of it's finale.

~~~
AJ007
Buying Skype might have been the first smart thing Microsoft has done in a
while. Skype is a relevant brand to consumers globally, Microsoft just is not
anymore. The real question is will Microsoft destroy Skype.

Bing search is another good move Microsoft has made. Adcenter, on the other
hand is an embarrassing disaster on its own two feet and an ugly nightmare in
comparison to Adwords. Adcenter is like a buggy crashing version of Adwords in
2005. Given that Microsoft provides the only real alternative search engine to
Google that is pretty damn pathetic.

I think you hit the nail on the head with the brain drain. The fact is even
with a brain drain companies have assets. Apple was effectively a dead company
in the late 90s. Microsoft needs this same type of brutally intense focused
leadership right now -- not attention deficit disorder look at me showmanship.

~~~
roc
Trick is, I don't think Microsoft bought Skype for the consumer service. I
think it's solely to make Exchange/Lync a better enterprise offering.

MS has apparently realized that there's still a huge opportunity following the
analog PBX shakeout of the last decade. They've been pushing Lync pretty
heavily lately and I think the Skype purchase was made so they can directly
address the things people ask for when they're evaluating Lync.

------
mpat
The same board that approved this deal would be responsible for appointing a
new CEO.

~~~
brown9-2
Exactly - a lot of this rant about how the board should sack Ballmer presumes
that the board knows better.

------
switch
I think it's a disservice to Ballmer to not consider that every business goes
up and down.

This chart (courtesy turar) is the real story ->
[http://ycharts.com/companies/MSFT/net_income#compCos=AAPL,GO...](http://ycharts.com/companies/MSFT/net_income#compCos=AAPL,GOOG&zoom=10)

It just bothers all the Silicon Valley tech press that Microsoft continues to
thrash its competitors.

Google makes money via search. Apple started off with fucking mp3 players and
now makes 'post-PC' devices.

It just bothers SiValley that no one can touch the Windows domination.

Microsoft made $5 billion+ in profit last quarter. The CEO who's been in
charge for the last 10 years should be given a prize for surviving and growing
the company's profits.

A new emerging company will always have more room to grow. If you consider
each company at its core competency they are all dominating.

Google has 64% or so search share. Bing+yahoo get 30% or so. Microsoft has
90%+ desktop OS share. After 16 or 20 continuous quarters of growth Mac is
still less than 10%. Apple is dominating smartphones (though Android might
slow it down, notably without making any profit itself - unless you want to
count it as a defence for mobile search). It's also dominating Tablets and
trying to change things - because it doesn't want to fight Microsoft head-on
in PCs - Just too difficult given Microsoft's advantages.

So each company is dominating its niche and trying to find ways to make its
niche dominate the entire tech landscape.

Microsoft still being so dominant and the success of Windows 7 point to
Sinofsky and Ballmer being God level. Growing profits from a couple of billion
a quarter to $5 billion to $6 billion a quarter is extremely impressive.

Apple's growth is more impressive - However, that doesn't mean Microsoft's
profits are unimpressive and it'd be foolish to take your personal dislike of
Microsoft as a reason to discount some really solid work by CEO Ballmer.

Finally, Ballmer's first duty is to Microsoft and himself and Gate and
Microsoft people. Who fucking cares what the vultures of Wall Street and
shareholders who don't do squat think.

------
jaz
Sure, Microsoft could have built a skype clone in-house for far less than
$8bn. But would people actually sign up and use it - to the tune of 124
million people per month? My guess is no, at least not for several quarters.

~~~
cabalamat
> Microsoft could have built a skype clone in-house for far less than $8bn.
> But would people actually sign up and use it

Yes. MS has a massive installed base. If they can't leverage that to get
people to use it, they are clearly incompetent.

~~~
teyc
Pre-antitrust days, that would be exactly what MS would have done. But it has
been battered and bruised by the investigations and must have sworn to
themselves "never again" will they ever devote managerial time to do what
could have been solved by an outright purchase.

~~~
ry0ohki
I think this is a key point. Ballmer has been hogtied with the fallout of the
anti-trust stuff. Microsoft can't use it's "installed base" advantage in the
same way it once could. We'll see how great Google does once it inevitably
faces the same issue.

~~~
teyc
Actually, I think it is that whether bad memories can get institutionalised.
If Balmer leaves, that body of bad memories will be gone, and people more
willing to take risks again. We need to remember the software landscape has
changed considerably. What might not be permissible of Microsoft in the 90s
may now be fair game.

~~~
kklimonda
Hmm.. haven't Microsoft been forced to introduce the browser ballot not so
long ago?

~~~
teyc
Yes, and I believe that includes email client etc. There is no reason why they
can't do that with VOIP.

------
jmvoodoo
Microsoft is entering what Jim Collins would call the 4th stage of decline:
Grasping for salvation. Unless something changes dramatically very soon, I
wouldn't be placing my bets on Redmond.

~~~
thematt
That's an overstatement to say the least. Microsoft still mints money at an
incredible rate. They may be doing terrible in the mobile and web space, but
Windows and Office will continue to live for a _long_ time, particularly in
corporate environments.

~~~
commandar
But unless Microsoft finds a new vision and direction, they're in _serious_
trouble when those cash cows start to go dry.

What makes Microsoft's floundering under Ballmer particularly galling is the
fact that Microsoft has been acutely aware of this for a very long time; the
Sun and Netscape antitrust suits were born of Microsoft's fear of a platform-
neutral world.

It's not here today, and we're only starting to see the first seeds of it with
the rise of rich web applications and platforms like ChromeOS, but it's on its
way. Microsoft still has a timeline in the scale of years to work with, but
they need to start focusing aggressively on the future sooner rather than
later, and, frankly, I don't see Ballmer as being the person capable of
guiding the company through a transition they're going to have to make if
they're going to survive in the long-term.

------
greyman
>> Beyond that is the fact that Microsoft has 89,000 employees — are you
telling me that the company that put a computer in every home couldn’t create
a Skype clone? <<

Yes, that's right. They couldn't create a Skype clone, no chance. Of course,
they could create a similar product in terms of functionality, but how many
would switch to it from Skype?

~~~
nl
Actually it's a lot worse than that. MS already has a very successful Skype
competitor, that does better than Skype in most metrics

 _Windows Live Messenger boasts in excess of 330 million monthly active users
with 40 million concurrent, compared to Skype's 170 million and 20 million-30
million concurrent_

[http://arstechnica.com/microsoft/news/2011/05/microsoft-
conf...](http://arstechnica.com/microsoft/news/2011/05/microsoft-
confirms-85-bn-skype-purchase-clarifies-nothing.ars)

Only 8 million Skype customers pay, so the income they'll get from it is
pretty much nothing (compared to other sources of income MS has)

Read that whole article - it shows how dumb this purchase really is.

------
iamelgringo
People often forget the Microsoft right before Balmer was slapped with one of
the largest anti trust lawsuits in decades. People wonder why MSFT hasn't been
competing aggressively for the following decade... It's because they've been
afraid of anti trust litigation yet again.

I've had a couple of conversations with people in semi-upper levels of MSFT
management. Long term Microsoft employees are still scarred from that
litigation. So much that it still comes up in conversation 12 years after the
fact.

------
headbiznatch
I would guess they are mainly purchasing entrenched users of an already-
implemented service. This same outcry (largely inspired by the sheer magnitude
of the numbers involved) accompanied the MySpace acquisition and then YouTube.
One failed miserably, the other is still playing out and might actually have
made sense. The prognosticating is, at the very least, as desperate a flailing
as the purchase itself. It's a serious business gamble. If you think you know
with certainty at this point in time whether or not it will pay off, I submit
that you are really into yourself or just really nervous. Skype has millions
of users who couldn't care less who owns Skype. We just cannot say at this
point that this is a disastrous business decision.

P.S. I have been following Skype for a long time and worked for a company that
sought to partner with them in their early days (fudge - just dated myself).
Beyond the old school "acquire eyeballs" angle, in my humble opinion, their
technology is very legit. The
algorithms/techniques/architecture/infrastructure they use for audio
compression and transmission (and now video) are very finely tuned and if you
think it is easy to recreate that just because you have thousands of
developers at your disposal, you should reconsider your position.

------
JacobIrwin
Microsoft's strategy is much more in the 'stability' mode now (similar to
Boeing). Most often, exponential growth (as seen in GOOG's chart) occurs in
the first ten years of existence. From what I see, once a company is
established and the rate of change for acquiring additional market share
slows, their stock price tends not to climb up the charts with the same (dare
I say 'speculative') uni-directional velocity.

Also, MS has had a nice streak of anti-competition battles during Ballmer's
tenure. Just one data point that may be relevant to the lack of growth in MSFT
share price.

Last thing, a chart showing the 100-day Simple Moving Average (post tech
burst) may more accurately depict/model the normal MSFT price range under
Ballmer's leadership.

Interesting blog/review for sure, thanks

------
javert
This article is too business-centric. MS is sinking slowly because the world
is moving to better things than Windows. It's sort of like selling bicycles,
when motorbikes are becoming increasingly available.

------
fleitz
"just for the sake of others not owning it."

Perhaps this is why it's worth $8.5 billion to MSFT and not to others. It's
pretty silly to say someone got a bad deal a week after they bought it. If
Ballmer has some awesome plan for it that will require a year or two to
implement it would behoove him to disclose this so that others could move
competitively to destroy the value from such a purpose.

~~~
jakarta
Why's it silly? He's buying a commodity business (thats what VOIP is) for 32x
earnings.

There's a reason M&A is often referred to as a winner's curse -- because
winning the bidding typically means overpaying. The synergies execs often talk
about almost -always- fail to be realized.

Shareholders of Microsoft would have been much better off if the company just
bought back $8.5bn in stock. A dividend would have been out of the question
due to tax repatriation issues.

~~~
ericd
Having Windows users be able to call each other and every other Skype user
right out of the box could be pretty interesting.

~~~
sunir
Skype already has enough market share that bundling with Windows is not likely
to generate enough growth to justify the purchase alone.

~~~
qq66
Windows has ~4 times as many users as Skype.

------
thewisedude
I get the impression that Ballmer does not have great vision. I dont have
evidence to support it. That said, I dont buy many of the arguments made in
this article. He is comparing Skype to Facetime. I dont think buying an app
for 8 billion dollars make sense. I am sure there is more to skype deal than
just the GUI app. The deal may have brought rights for usage of certain IP
networks or something along those lines.

I am not sure how MSFT is planning to leverage this deal with plans of pushing
into the mobile market. I am sure there is something in the works there.

Stock Price comparison: There were many Billion dollar companies that are
doing fine without a staggering growth seen in Apple or Google, that does not
mean that CEO's are doing a bad job.

------
S_A_P
So this seems to be largely a rehash of existing arguments against Steve
Ballmer with the added bonus of the skype purchase being thrown in. I cant say
that I disagree with the article, but I would agree with others' comments that
direct comparisons of MS to Apple and Google are not completely valid. I
personally think that there is space for all 3 companies to thrive(which to
some degree _is_ the case) since they all have a different niche. It does seem
that MS is not the less agile and forward thinking company of the 3. I could
liken it somewhat to Detroit vs japan/Korea

------
Niedar
If you take into account stock split and dividends for Microsoft, the total
return from 2000 until today is about 13% which is not great but much
different than the misrepresentation of a 60% loss. The returns would be much
higher if you had not bought in 2000 before the crash which Ballmer could have
had no control over. For example if you had bought shares at the end of 2002
than your total return over that time would have been about 130%.

I'm not saying that Microsoft hasn't missed opportunities or that Ballmer
shouldn't be replaced but its not quite as bad as pictured in that graph.

~~~
JacobIrwin
13% per annum is better than most top-rated mutual funds earn

------
spinchange
One thing I never see considered in comparisons to younger or more nimble and
retooled competitors is that by 2000, Microsoft was already a convicted
monopolist!

For the first few years of the decade, the company was still dealing with
governments on two continents on what and how they could compete in the
software business.

As others have mentioned, in this time frame they have also paid _billions_ in
dividends.

It may well be time for Ballmer to go, but the comparisons in stock price to
Apple and Google over these short time frames don't reflect all the context
and dynamics of the share prices.

------
dstein
The bothersome thing about the Skype acquisition is that it's really not going
to save them at all. It was a statement purchase. They bought it to show off.

They could have bought up a lot of innovative, smaller companies for $8.5B...
some that might rebuild their character.

------
bgarbiak
No mention of Nokia deal?

------
dimitar
The article doesn't mention Xbox or its more enterprise solutions at all
instead focusing more on Apple.

------
volandovengo
If Windows 8 is a success, I would be quite surprised if Steven Sinofsky
didn't become the CEO.

------
tomlin
Anyone else have Florence and the Machine in their heads after reading this
headline?

------
michaelpinto
I think buying Skype was a good move — although letting Ray Ozzie go was a bad
move.

------
Groxx
Particularly heinous for the Skype purchase: it's amazingly buggy. It's gotten
shinier over the years, but they still payed 8.5 billion for a POS.

~~~
ikono
That's definitely overstating it. They are better than everyone else in the
consumer space. Not enough to be worth 8.5 billion for but the core underlying
technology is good(They suck at client development though). People
underestimate how hard VOIP is because it sounds so simple.

~~~
togasystems
The echo cancellation algorithms, the speed of their sip like algorithm as
well as the infrastructure to run their entire network is an engineering
marvel. While, Skype's UI could use an update as well as some usability
testing, their backend infrastructure is most definitely not a POS.

------
johnl
Hardly, here's why: If you can link the phone with desktop applications you
have a hit that neither Apple or Google can duplicate. Think of you desktop as
a server for your phone. Who better to coordinate the operating systems of the
two than Microsoft. If that's what he is thinking, I can't wait to watch the
dog fight between the three of them.

~~~
stock_toaster
You mean like Apple's facetime or Google's gtalk (not sure about the
standalone client, but you can call phone numbers from gmail)?

------
turar
CEO doesn't control the price of his company's stock. It's silly to use stock
price, which is set by the market as a performance indicator. It's makes more
sense to compare metrics like net income, free cash flow, etc.

And Microsoft isn't doing that badly on those:
[http://ycharts.com/companies/MSFT/net_income#compCos=AAPL,GO...](http://ycharts.com/companies/MSFT/net_income#compCos=AAPL,GOOG&zoom=10)

