How could a CEO inherit a company with as big of moat as Microsoft and not have piles of cashflow - no matter what he did? They spend $9 billion on R&D and what have they shipped? Windows 7, finally? Let me hit the start button - Windows DVD Maker, Windows Media Center, Windows Media Player, MS Paint --- I have an OS (that I just want out of the way) and a bunch of crap that comes with it.
Office, their cash cow and current defacto for businesses, is $400 for the Pro version! - this pricing model will be obsolete in a decade.
Xbox has been a huge loss leader, now starting to turn a profit. But this barely makes a dent and likely never will.
Zune? Kin one and two? Day late and a buck short. These flops would be very embarrassing for me, but Ballmer has no shame.
I'm no Ballmer fan but there is one very interesting correlation not highlighted here: Apple started surging and Microsoft stopped from around the time when Microsoft came under anti-trust pressure. Microsoft has been enormously handicapped for the last decade by their monopoly status. They have been completely unable to leverage synergies between their multiple platforms because of it.
Now, I happen to agree that Ballmer is a disaster. I hate the fact he is 100% about screwing money out of businesses and zero about love for technology. There is nothing in him that is beautiful, nothing that inspires a vision of the future. Jobs, as much as I detest him, has at least a love and vision for technology. Gates had these latter as well, but unfortunately, not the force of personality nor the aesthetic sense to drive his vision to the core of the company the way Jobs has.
Your first paragraph makes an underemphasized point. I remember at the time of the antitrust litigation against MS reading interviews with former IBMers about IBM's comparable experience years earlier. They all said that what MS had to fear was not losing the case but rather a slow strangulation due to the climate change (so to speak) that protracted antitrust action would evoke within MS internally. It seems that this is exactly what happened. Hindsight is 20/20 of course, but given that this was widely predicted at the time, I wonder if it was a failure on Gates' part not to settle quickly. MS were at the height of their power then. But as the I Ching says, it's precisely at the height of one's power that one should worry about the coming decline.
How could a CEO inherit a company with as big of moat as Microsoft and not have piles of cashflow - no matter what he did?
That their profits are up 60% over the last decade, even despite the crash, is not entirely dependent on what he "inherited." Windows 7, Windows 2003/2008 Server, the recent versions of Office, and more.
Ballmer is not a "tech" guy, he's a numbers and business guy, always has and always will be. Keeping the profits trending upwards is his job and he seems to have pulled it off despite a lack of true technological innovation.
Up 60% in a decade? Thats maintaining, not growing for a tech company. Especially for MS, which could completely be attributed to more people being able to afford computers. The market clearly reflects that in their falling P/E over the decade.
> Keeping the profits trending upwards is his job and he seems to have pulled it off despite a lack of true technological innovation.
That statement is truly worrying. There is no such thing as a healthy tech business if all you're doing is 'keeping profits trending upwards despite a lack of true technological innovation.' It's too risky, and it's dangerous precisely because it's so comfortable.
If experience is anything to go by, Microsoft may well turn out to be the next IBM: large, profitable, and irrelevant.
DirectX -- nVidia and ATI implement Direct3D in hardware, not the other way around
.NET -- C# and F# are leading language development in many ways (not all)
XNA -- games for Zune, PC's, Windows Mobile, XBox from one suite of development tools and a consistent toolkit across all three
WPF/Silverlight -- it's what Flash 10 and HTML 5 are pretending to be
MS pioneered tablet computing
MS has technological innovation coming out of its ears. What's amazing about it is how poorly MS takes advantage of it
MS is in fact turning into the IBM of the software world -- large, profitable, and not sexy, but critical.
For that matter, IBM is far from irrelevant -- the technology that IBM develops and isn't bright enough to utilize for itself enables the rest of the semiconductor industry to compete with Intel -- including AMD.
Just like IBM, Microsoft is developing all sorts of stuff, some of it cool and some of it mundane, but both lack the vision to actually DO anything with it. That's what Apple is good at -- Apple doesn't develop much technology, but is good at coming up with cool things to do with it.