2007/04/10

Microsoft troubles - II

Follow up to a previous post on MSFT hitting a 'financial pot hole' by 2010. The numbers look very, very bad to me. The seeming lack of management response and apparent leadership would deeply disturb me as a shareholder...
The Paul Graham piece Microsoft is Dead and the follow-up were a prompt for this post.

What amazed me was: there are 4,500 MSFT employees (of 71,000) out there blogging. And it's a live campaign led by the MSFT management... Wired have a piece on this effort Channel 9, and the text of an internal memo critical of the PR/Developer Relations effort (6,000 words!) accidentally leaked.

This "radical transparency" is an amazing artifact. It should go down as one of the most innovative and successful acts of Microsoft. Many other companies could do well emulating this effort. And do better by listening to their staff...

Blog the First

From Mini Microsoft Blog, "Should you stay or go". This from a self-described "senior" MSFT employee who is highly committed to the company.

In the context of the blog entry, lots of their senior/long-term people are leaving. That's gotta hurt.

I can tell you this: I, like a lot of senior Microsofties, can't imagine staying for another year of flat stock growth. I'll have to be developing the bestest, funnest software in the world to live through another year of watching a stock price that meanders around like a fat, gassy contented cow from Carnation. I see this next year as the loyalty tipping point for Microsofties who have held on this long, hoping beyond hope for the shares to finally perform. If that doesn't happen, the office spacing problem around large of chunks of Microsoft will start to ease up without new buildings opening. And be wary of those who do stay, because you'll have to ask why.

From MSFT Extreme makeover blog around end March-2007.

Stats

• Shareholder value destroyed since 1999 = $320B • Shareholder value lost at Tyco, Lucent, Worldcom, and Enron combined =$192B
• Years underperforming all major indices = 4 of the last 5
• Cumulative underperformance over that period = 40%
• Performance since 1998 = Flat
• Peers outperforming it this DECADE include: AAPL, AMZN, CSCO, EBAY, HPQ, IBM, ORCL, SAP

Blog the Last

Not everyone in MSFT thinks it's sinking... [But Robert Scoble, a strong pro-MSFT voice, did leave mid-2006.]

Don Dodge in Since when does growing $4 Billion a year = Dead? bags the Paul Graham piece Microsoft is Dead. Good to see a dissenting voice. For the record, Microsoft is growing revenues at over$4 Billion a year and is on track for $50 Billion this year. Since when does growing$4 Billion a year equal DEAD? If that is dead I know a lot of companies that would like to be so dead.

Don Dodge has a later update saying that "\$4Bn growth is more than the full income of the likes of Yahoo! and Adobe". Yes, he's absolutely right. IBM, right up until it's two years of massive losses, created record profits every year. That's the whole point: businesses that "milk the cash cow" and don't understand that pushing prices up to force profits will antagonise customers, probably permanently, will suffer exactly this sort of market collapse.

Answer: It's about the second differential of financial performance. The acceleration or rate-of-growth in rate-of-growth. When the acceleration goes negative, not just zero, then there is only one outcome - a crash... By the time the rate-of-growth (velocity?) goes negative, it is too late to do many things. Only radical options are left - because of acceleration and 'momentum' any turn-around effects will take some time to show up. Which takes nerves of steel for owners/shareholders and managers alike.

When the negative acceleration is due to a shift in the underlying technology, like in 1984 when G3 fax "took-off" and telex started to decline - crashing heavily by 1988, the marketing term is 'product substitution' - then you've probably lost the game if you don't have many strings to your bow... If you don't have a diversified product portfolio.

MSFT know some of this stuff, which is why for more than a decade they've been actively trying to come up with new product lines - with new revenue streams. But their money still mostly comes from what they've always done: "Office", "Windows" and ???

Microsoft is too deeply embedded in Corporate and Domestic computing to just go away. And there are far too many I.T. people who know only Microsoft (and I suspect, many don't realise the thinness of their experience) who have a vested interest in their vendor of choice, the one to whom they've nailed their career to, not failing.

So the future holds rough times but not extinction for our favourite "Evil Empire".
And who will take the mantle that got passed from IBM to Microsoft...