Microsoft: Have missed the boat on catching up to Apple & Google.

In early 2007 I started opining that Microsoft would "hit a financial pothole" around 2010. Thirty posts followed before I gave it up: the mainstream & financial press were looking seriously at the topic. [A Forbes columnist "called the game" in January.]

What prompted my view in late 2006, pre-iPhone, I'd noticed that Microsoft hadn't been able to maintain it's growth above 10%. They (legally) manipulated their figures to remove extreme volatility. Since the early 1970's, I've seen a bunch of Tech companies falter, stumble and fail. Always starting with one "off" result. When the iPhone appeared, I knew the mechanism of their "pothole".

I missed the GFC in 2008 and its effect (revenue down) and in 2012 went on record saying "I missed the date". I'm a technical person, not a financial analyst.

Note I didn't predict their failure or collapse, only a "pothole". How the Microsoft management respond now is what will determine the future of the company. Will they do "more of the same" or look to real change and innovative responses? That's up to the Board.

My view is that Windows has a "lock" on the Enterprise Desktop, nothing touches it for 1,000-100,000 desktops. We can expect to see "Windows" still being sold & supported for at least 25 years. The fate of the company is not nearly as clear cut.

Paul Wallbank wrote an insightful piece today on the latest step in the Microsoft saga, ending with:

The numbers aren’t lying for Microsoft. That’s why Steve Ballmer has to move fast and think creatively about the company’s future.

The time to address the iPhone/mobile device revolution was in 2007, just like Google did. Microsoft has attempted multiple "iPhone killer" releases of its products since 2008. With all its resources & expertise, how did Microsoft let Google deliver an iOS competitor, Android, that's gone onto become the most popular mobile O/S? This despite Microsoft owning the Desktop and inventing the smartphone and owning that market for around a decade.

How was that allowed to happen? Why wasn't the senior management cleared out in 2009?

Microsoft's market dominance was accidental and solitary: they never managed, despite many attempts, to replicate the success, profitability and near-monopoly of their Desktop Operating System and Office/"Productivity" tools. They bought the XBox market and supported big losses for many, many years. They don't dominate the games console market, they barely hold their own... Declaring "everything is a PC" doesn't fix the problem of the mis-match between Reality and their faulty perception.

Their path back to near the top of the pack isn't doing "more of the same". They can follow Kodak and Xerox down the hill from market leader to irrelevance or worse with conservative "sound business strategies".  These approaches have failed, the current senior management has failed, the current culture is dysfunctional and killing them not-so-slowly and the CEO and Board are letting it unfold.

The only question for me is:

What would Bill do?

Bill Gates, whatever his faults, would've acted decisively long, long ago. We know he could turn the behemoth on a dime when needed: the Internet Memo where they abandoned MSN and embraced the 'Net, everywhere.

This isn't a technical failure by a good business-person, this is a business-failure by an incompetent and egotistical CEO.

Bill's not coming back, he's made that plain. By his actions, you'd think he foresaw this day more than a decade ago when he started converting his shares into cash... And Ballmer didn't.

My thesis now is that Microsoft will squander its capital, both cash and "goodwill", on "more of the same" moves.

If they follow pre-1990 IBM and walk further into denial by trying to maintain profits on falling market-share by inflating loyal customer charges, they will suffer the same fate as IBM: a sudden and near complete collapse of their business.

Will Bill be waiting there to pick up Office and Windows for a song?