Microsoft Troubles: XV. My prediction not fulfilled

In 2006 I looked at the Microsoft Annual Report and thought "I've seen this before, their market is being taken by newer 'substitutes'. They'll hit a 'financial pothole' within 5 years, give or take."

Well, that hasn't happened, so my prediction was wrong.

[Update 17-Feb 2012: Forbes has a piece on Microsoft's aliments, "The Wal-Mart disease". Very few companies [7%] recover after a "growth stall" and 70% lose more than half their (share) value. It isn't "game over" for Microsoft, but they are in deep trouble without any sign of effective corrective action by Management or the Board. Kodak management destroyed $31B in value in just 15 years, will Microsoft beat that?]

What's happened is that despite massive attempts to the contrary, the Microsoft share price has languished for a decade or more. Sales and Revenues continue to grow, but not strongly and due to the 2007/8 Global Financial Crisis, they even went backwards one year.

The new smartphone and "tablet"/iPad markets seem to be the first computing devices to seriously erode the PC market. Even though this was foreshadowed in the Japanese market around 2005, people seem surprised.

This demonstrates that there is a lot of life left in the Computing market, that Innovative Products and Services are far from exhaustive. And that Microsoft is no longer at the forefront of the field.

The technical Coup de grรขce may be Apple inventing another Big New Thing, after the iPad.

I won't be rushing out to buy MSFT shares any time soon. They have to come up with something out-of-the-box for them to again become or be near #1 in Software. With Ballmer at the helm proclaiming "everything is a PC", I can't see that happening. But he's the one with $10B, not me.

Microsoft face two distinct challenges:
  • Like IBM prior to 1993, they will keep manipulating pricing on their "cash cows" to increase yearly revenues. As IBM showed us, this strategy leads to customer revolt and revenue collapse.
  • They might attempt to repeat their "buy marketshare" strategy (think Xbox and IE) and over-spend. The first sign will be MSFT needing to borrow.
Exciting times, I wonder where it will lead..

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