Slashdot Mirror
Microsoft's Midlife Crisis
pillageplunder writes "This article from Businessweek covers the recent memo sent to all Microsoft employees by Steve Ballmer. Interesting tidbits through-out: how Microsoft will try to cut a Billion dollars in expenses, and its cost per employee is about $300K"
$300k per employee? I wonder how much of that is in weed.... could explain alot of things...
SysWear - Geek T-shirts (UK/Europe)
Includes stock?
Perhaps Gates knew exactly when the right time to leave was :)
i think steve ballmer reached his mid-life crisis long ago.
Marge, get me your address book, 4 beers, and my conversation hat.
...or you may just be holding microstock and the one left holding the bag...
My stock and desktop GUI is now in Apple. And who doesn't love a cute penguin?
Microsoft's major problem is that it's been a long time since they've released a totally new line of products that has been sucessful. Aside from Open Source, Microsoft also has to compete with its own prior versions... Why does somebody who has Windows 2000 need Windows XP? Why does somebody who has Office 2000 need Office XP?...
Dear Microsoft,
Welcome to the real world, where your stock does not grow 10,000% in a matter of a few years, and companies have to *gasp* cut costs, or perhaps even *bigger gasp* innovate, to keep their companies from falling flat on their face.
With much love(sorta),
The World
They can keep all thoses perks and crap.
Microsoft's problem is not competition. In most markets, they own a huge share. So Mac's ~5% and Linux's small share are not the problem.
The problem is that innovation (?) is getting more and more expensive. And in order to keep revenues up, they need to spend huge amounts of money on advertising, etc.
The low-hanging fruit has been picked, and now they need to go after new markets, new products, and the more difficult dollars.
No reason to lie.
immediately discontinue the "one dollar for each reported bug" program.
"Is this just useless, or is it expensive as well?"
Maybe if Ballmer wouldn't charge his dry cleaning to his expense account, they wouldn't be in such dire straights...
DEVELOPERS, DEVELOPERS, DEVELOPERS!!!!
This space for rent
Any business can benefit from optimizing its processes. Microsoft has been very good at making profits... it will be interesting to see if it will succeed at creating business processes that capture the imagination of its employees and make them feel like part of a well oiled machine.
Amazing magic tricks
If you've costed in the salary of a professional, fringe benefits, vacation, employer's contribution to social security, etc. and then add in a multiplier to account for the infrastructural overhead services (people in accounting, facilities maintenance, management, etc.) in a large corporation or university, this figure is not at all unusual.
That said, however, Microsoft enjoys a surfeit of talent that, like ATT Bell Labs in its day (when it, too, had a monopoly) could afford to do lots of interesting work.
Unfortunately, the need for innovative work to reinforce and expand the existing business model and never ever undermine it is constraining and prevents the company from releasing the full talent of its employees.
So what you see instead are people leaving Microsoft to start entirely new ventures.
"Provided by the management for your protection."
Now..now..play nice.
Everyone look at poor M$ in the corner, dying a slow death for the lack of another Billion in the bank.. Lets not let that happen..shall we..being the good neighbours we are..
So here is what I recommend.. The slashdot community will, painful as it is, will map out the various product lines of Microsoft with their perceived value, which needs to be truncated or snuffed out completely. Once we are all in agreement as to the total worth is a Billion, Cmdrtaco, the chosen representative, will submit said list to the powers that be (read: Balmy Balmer) for review and acceptance.
So get your thinking caps out, check your emotions , pay no heed to the thousands of M$ programmers who will obviously hate you for nixing their much loved products, let reason run rampant..and lets choose what Microsoft needs to put another Billion in the bank!
Rapid Nirvana
Those whom the Gods would destroy they first give a vision statement to.
If brevity is the soul of wit, then how does one explain Twitter?
In other news, Microsoft is nearing the release of their two newest products: Microsoft Combover and Microsoft Penis Car
It would be cool if it didn't suck.
I wonder if this is an example of Microsoft trying to be the "end all, be all" of everything, and it's finally catching up with them.
So far, they have 4 sources of real revenue:
Windows OS/Server
Office
Development Tool Sales
Some hardware (mice, keyboards, etc)
Everything else that MS is involved in has been money losing ventures. Cell phones, PDA, cable TV, "Ultimate TV" - heck, the "raging successful Xbox" has lost over $2 billion for the company (and if that's success, I'd hate to see what failure is).
MS has $56 billion in the bank (some cash, some investments), and so far, revenues are still outstripping costs. But I think Ballmer can look ahead and read the writing on the wall. Other than the MS tax on computers (yes, it exists, deal with it), people aren't rushing out to upgrade with every new OS release. Lots of folks are still on Windows 98/2000 Server and Office 95.
So what will be cut away? WIll they just reduce the number of employees? Shift more developers to India? Or cut on some projects and say "OK, so we're not going to take over the cable market."
The Xbox2, for example, is being retooled not to be "successful" (as in "Beat Sony!"), but "profitable", which should be their focus: making a game system that is cheaper to produce, harder to hack, and even if they aren't #1 in the game industry they can make money at it (wait - that sounds like another console company out there). Why be #1 in the home media player market when sometimes being #2 makes money too?
Odds are, MS is, as the article mentions, just going through a "mid-life crisis". They'll either recoup, tighten down, and keep chugging along - or just proceed with "business as usual" for all their talk, then wonder 5 years from now why all of the business are running Slinux (simple Linux - easy enough for Grandma to figure out how to change the screen resolution) or Apple OS X instead of Windows.
52 Weeks, 52 Religions with John Hummel
On growth and costs: "We have as much opportunity to grow as any other company in the world. That's a big statement, but the opportunities we've scoped out are very big. Make no mistake -- we must grow our revenues to grow profits. We cannot just cut costs. At the same time, we must ensure a competitive cost structure, or competitors will offer prices, services or innovations that we cannot afford to match. Other companies have been severe in tightening costs the last few years -- layoffs, major benefit reductions, etc. We have not done those things and want to be prudent now so we avoid severe measures later."
On the need to innovate: "The key to our growth is innovation. Microsoft was built on innovation, has thrived on innovation, and its future depends on innovation. We are filing for over 2,000 patents a year for new technologies, and we see that number increasing. We lead in innovation in most areas where we compete, and where we do lag - like search and online music distribution - rest assured that the race to innovate has just begun and we will pull ahead."
On Microsoft's share price: "Obviously, we all want to increase the value of our stock, and we have the best opportunity to do that since the end of FY98. Our stock was around $25 then, as it is now, and we have more than doubled our operating profits since. Shareholders then were betting we would work hard for all these years to make the company worth that mid-98 stock price. We have done so."
On aiming products at various markets: "Our products must also be better segmented for different users with different needs. And we must evolve marketing to focus more squarely on the value proposition throughout the product lifecycle, not just at launch. So many customers have yet to deploy our most recent advances, so we must not only help them understand why to deploy, but also demonstrate the benefits of deploying before we reach the Longhorn generation."
On perceptions of Microsoft: "We must also work to change a number of customer perceptions, including the views that older versions of Office and Windows are good enough and that Microsoft is not sufficiently focused on security. We must emphasize key positive perceptions of the strong manageability, and developer and information-worker preference, for our platform."
On avoiding the trappings of size: "Nothing solves 'big company' ills quite like a strong focus on accountability for results with customers and shareholders. Innovating, growing share and profits, and serving customers all ensure that we have no time for wasted motion. To do this, we need to prioritize the things that matter the most with our customers and for the company, and then be accountable for executing on those choices."
You are correct. Even if your company makes money, Wall Street look at the rate of revenue and income increase. Wall Street also sees the $50 or $60 Billion in cash that Microsoft has and asks "Hey, where are our dividends on the stock?" A $0.16 per share dividend isn't much when you have $60 Billion in the bank.
By switching to Linux and OpenOffice/KOffice on their desktops. Not their development or testing machines, but just their accountants, security team, and call centers.
Dang! Wait a sec...Windows and Office are free to them, so it only saves on the cost of anti-virus + downtime/patch maintenance, so that's probably only $50 per user or so.
You suck at trolling and even starting a troll... You have to do it right.
I use Microsoft everyday and love it. I want Bill Gates to have my baby and Linux sucks.
Seems to me that Sun led the way back in the early 1990s when they developed Java. Take 1 really talented software engineer, and give him something to work on. Allow him to pick 5 to 10 other talented people, and sequester them from the rest of the company for 1 year.
At Microsoft's level, they can probably afford to do this with 20 or 30 such groups in parallel working on the same or similar ideas.
After a year, dump the projects that are not going well, and refocus those groups on other ideas. Innovation is rarely done by large commitees.
Kinetic stupidity has a new brand leader: Allen Zadr.
Companies don't mature until they go through a couple generations of management and product lines. This is one of the criteria used in Built to Last, one of the few biz books I can say were a *good* use of my time (the other IIRC was the ability to deal with failure and bounce back).
Basically, MS has been under the same management (Gates, and even Ballmer has been around since the beginning, pretty much) since its inception. Product lines -- well, in a way it has been through three: command line (DOS-era), early GUI (Win 3.x and Win9x) and modern OSes and platforms (NT, networking products), but it has shown considerable difficulty getting out of the "sell boxes of software" model.
Given all of these, I'd call MS a very immature company even now. Midlife crises will come the day Linux is just as good on the desktop as OSX is, and MS is forced to look in the mirror and ask, "what now?"
Go somewhere random
Microsoft made almost $10 billion in profits last year. If they can cut $1 billion in expenses, they will be making 10% more profits assuming they don't hurt their revenues in the process. Since investors tend to look at price/earnings ratios when deciding what a stock is worth, we might expect a 10% increase in profits to translate into a 10% increase in stock price. If you own large quantities of Microsoft stock options (as I'm sure everyone in Microsoft senior management does), you'll make a lot of money if the stock price goes up 10%.
Remember the days when Republicans were the party of fiscal responsibility?
Most of MS costs are labor - people. How you reduce labor costs is to pay less and pay fewer people.
Expect cuts. All this talk about how MS is no longer going to pay for shiatsu massages for your 'animal companion' is just their way of saying "Hey dickheads the 90's are really fucking over". Next stop - "Microsoft is just like everyone else, move to India or get fired!"
Thats 17 Billion dollars right there!
Just cut it down to 282k per employee. There are 57,000 of them so that would apporoximate a 1 billion dollar cut right there.
- what is the definition of simultanagnosia?! I've been meaning to look it up!
Well, the last time I checked, that was roughly how much they'd lost over the previous four quarters on the XBox venture... and roughly how much they'd lost onthe XBox venture over the four quarters before that...
In a company where pretty much everything except Windows and Office is the company just tossing money at an unprofitable venture for the privilige of having a product in that area, finding a billion dollars to cut shouldn't be that hard...
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
It's increasingly tough to get funding for anything truly innovative because the investment community understands that Microsoft will "innovate" the idea into their operating system franchise if it has the potential to be successful.
a key focus now for Ballmer is "process excellence," which seems unlikely to inspire Microsoftees to stay up all night creating the Next Big Thing.
The Next Big Thing *is* process excellence and the goodies that come about through that, like secure software with minimal bugs. Ballmer atleast has that right. Now if he can have his developers find their idea of a Next Big Thing, while keeping true to the real Next Big Thing (process excellence) then you might see MS leave the doldrums of midlife crisis.
Ok, ok, enough joking around. I hate to say it, but Microsoft needs to learn how to make a buck off of Linux. They could create their own distro and do their own API and app porting to it. For the same reason people love that OS X is built on *nix, people wouldn't mind a Windows built on it. The best of both worlds. Sign me up for that.
Thanks, you can have the podium back now.
-Patrick
"They never stop thinking about new ways to harm our country and our people, and neither do we."
> Linux and open source will never beat Microsoft. Microsoft will crumble from within, and beat itself.
Just like the USSR collapsed from within.
But it wouldn't have happened without the economic pressure of competing against the US (military spending).
Likewise, it won't happen to Microsoft without the pressure of competition from Linux (and Open Source, and Apple, etc).
- For the complete works of Shakespeare: cat
In the past 6 years I've worked on 2 projects that were halted, because the product we were creating was added in to Windows. It's hard to sell a product that duplicates what comes in the OS itself.
In both cases, our primary competitors sold out to Microsoft. Afterward we all sat around like igits, thinking "why didn't we sell out sooner?"
No reason to lie.
Microsoft is dying.
Quick! Someone send Steve Ballmer a TCO study that shows how much money they will save if Microsoft migrates to Linux!!!
It is easier to build strong children than to repair broken men. -Frederick Douglass
Because wasting money is never a good idea, no matter how rich you are.
Advice: on VPS providers
Unless over the last 13 years you have used your immense cash stockpiles to hire people for the sole purpose of research.
My beliefs do not require that you agree with them.
Well, that explains where the name "Longhorn" came from...
Employees can clearly expect no protection from M$'s 56 billion dollars. From the NYT article:
Using some of Microsoft's $56 billion in cash to maintain worker benefits, Mr. Ballmer explained, is not an option. "The cash is the shareholders' money," he wrote, "so we need to either invest in new opportunities or return it to them."
Whack! Who would think that the company that has screwed it's investors, partners and customers would turn around and screw their employees?
Last year's hiring binge is over and the Microsoft game is very close to over. Speculation is that up to $40 billion will be used in a stock buyback to keep the options from tanking. That will leave them with about two or three quarters of operating expenses in the bank. Good riddance, IT will be a much better place without them.
Friends don't help friends install M$ junk.
Microsoft's strength has always been embrace and extend. Its weakness comes in the decisions on whether to "exploit" or "extinguish." It has killed a legion of technologies/business/competitors whose contributions to the world of computing have come to nothing or have been FUBARed--just because Microsoft feared the competition.
It has bowdlerized standards when it could for its own gain (e.g. Kerberos, SMB, etc.). Microsoft sees computing as a zero-sum game where it MUST win and everyone else must lose. Rather than compete by making itself look good (innovation, quality, service), it has been always willing to win by making others--including itself--look bad.
Then comes Open Source--a game where they either play fair or they don't play at all. Now, Microsoft is stuck with having to REALLY innovate. Linux and Mac OS X are running rings around Redmond and Ballmer's only answer is to exhort the troops. That won't work.
Microsoft needs to adopt open source, retool its operating system and--for once--put all that money toward excellence rather than bullying the market, ripping off innovators and/or buying ascendancy via restrictive contracts with manufacturers. If Apple announces Mac OS X for x86 or some other innovation comes along, the good ship Microsoft is going to have a BIG hole below its water line and not enough buckets to bail with.
The history of personal computing is comprised of sea changes. Ballmer's memo acknowledges that. He remembers the position he was in ten years ago.
The cost per employee at msft is high, partly due to some of the best working conditions in the industry - love 'em or hate em', msft is consistently voted as the best place to work, at least here in the UK, but i'm pretty sure the states is more or less the same. Ballmer (if he would have had hair) is a typical PHB , in that he thinks that cutting costs in some of these "extra's" will make the company "perform better", but usually, the opposite is true. Ballmer and his yes-men probably have not heard about some of the modern management techniques that disprove this single-minded vision of manageing a company. The free Coke's are probably next to go. Along with a fair chunk of employee productivity, no doubt.
People who think they know everything are a great annoyance to those of us who do.
This is the point where Microsoft investors figure out just how diluted Microsoft stock has really become. If I read the numbers right, they have 11 Billion shares outstanding. Which means that, after 30 years of doing business, they have only made about $6 per share (which costs $27.89).
This is the problem with companies not giving dividends - it really distorts the amount of money they are making, and distorts the purpose of the company. Microsoft wants to hoard the money so it looks better on paper, rather than give the owners of the company their profits, which will reveal that wild investing in disparate projects which make no money but undermine competitors does not do much to shareholder value.
This is part of the problem with option-granting programs - it dilutes the stock significantly. When companies give dividends this is more obvious (hey! my dividend went down this year!). When they don't, the stock price is a lot less attached to reality.
It's kind of interesting how much of Microsoft's quarterly revenue comes from investments rather than direct earnings.
I'm not saying they aren't a strong company - they are. However, their stock price is WAY over what it should be, and their performance-per-overpriced share isn't what it should be, either. Their large bank account has helped justify their stock price while spending rediculous amounts of money keeping the competition away.
Engineering and the Ultimate
Or at least they did.
That's one of the reason that MicroSoft doesn't pay any corporate tax.
Alternative Fuel
Laugh at my ignorance while I learn Rails - a Real ne
...The big thing is going to be Longhorn--that's why it's taking so long. WinFS, Avalon, whole new interface called Aero Glass, an entire .NET-based OS that replaces Win32, and so on...
I hear it's going ot come bundled with Duke Nukem Forever too.
...Rob
The American Dream isn't an SUV and a house in the suburbs; it's Don't Tread On Me.
Dear Steve,
If you had really paid attention in your Harvard business classes, you would have learned the story of Standard Oil. A big monopolistic oil company that was finally forced to break up into pieces. Mr. Rockerfeller was sad until he suddenly discovered his stock portfolio went through the roof. Apparently, when Standard Oil became a bunch of smaller companies, they grew the market and their collective market capitlization was far, far greater than they were in one company.
You've had the opportunity several times now, and the last time had the feds suggested it too. But maybe it's not too late. It's time to knife the baby and split Microsoft into two or more companies. Split applications from OS. Create an Internet technology group separate from the others that encompases IE as a pluggible component for Windows or any OTHER Operating System, and provides search, MSN, Instant Messaging, VOIP, etc.. Move the Entertainment group into its own company and let it succede or fail on its own, and more importantly, let them have the freedom to chose the technologies involved. XBox has fans now, and it has a bright future. But only if the XBox division is no longer distracted by trying to save the OS group.
Come on, Steve. You know the time is right, and this is so the right thing to do.
The bitter lessons of a veteran coder: http://bitterprogrammer.blogspot.com
DISCLAIMER: I work at Microsoft as a developer. Nothing I say here is official company stance. This is just my personal opinion based on my time both before and after joining Microsoft.
Microsoft's main problem is a refusal to take quick action by trusting in common sense and instinct.
For example, it took upper management over a decade to finally see that users didn't trust Microsoft products. The rest of the world knew it all along, but management had to wait for mountains of hard data to come pouring in before taking any action. The Trustworthy Computing effort is genuine, sincere, and effective, but it's also about fifteen years overdue.
Do you think Bill Gates wrote BASIC for the Altair, or pulled off his buy-an-OS-and-name-it-MS-DOS move, based on mountains of official market research and hard data telling him that it's what people wanted? I'm betting he didn't. I'm betting he did it because he was smart and trusted his own instincts -- just like a professional chess player who doesn't realistically have the time to scientifically evaluate every possible move at every turn.
Microsoft isn't a bad company. People here really do care about satisfying customers and making the best stuff in the world. I really hate the false accusations so many people make about this company. But I also have to say that this company has grown timid and too slow to act, and that is our real challenge.
Moderator hint: a comment is neither "Flamebait" nor "Troll" if it is true.
This is pure gold, so if this shows up on store shelves you heard it here first.
Re make Microsoft Bob! Excpet don't give it the same name or tag on an "XP", that would be a give-away.
How about "Microsoft Ballm"
Your interface is a broken-down old house where Ballm (the monkey) helps you find your documents and applications.
You need Ballm's help anyway, because the house was built with non-standard building materials. So there are locks that take keys that only Ballm has that you can't get anywhere else. Also if you want to try and fix the house up, its got screws and other fasteners that take tools with odd-shaped bits that you can't buy anywhere. But luckily Ballm is there to "help" you upgrade you to fasteners that take new tools. Which Ballm will rent(license) to you, he is really strict about not trying to duplicate the tools though.
Will your belongings be safe in your home? You bet! Ballm left all sorts of holes in the walls so you can see anyone who wants to come in. So you don't have to be ever vigilant over your belongings, Ballm offers to help keep the holes safe too. He doesn't really watch every hole though, just waits until someone tries to come/peep in one of them then decides how long he'll wait until he patches up that hole.
The funny fickle Ballm!
hmmm, maybe I will go patent this concept. Surely there is nothing in existance such as this!
You're missing the point. They've NEVER issued a dividend, and after 30 years they have only made, TOTAL, $6 per share.
Let's assume, just for a moment, that Microsoft has the potential in the future to make as much as it has in the past (I doubt this highly, but let's go with it). Let's also say that they spent their first 15 years in "growth mode", so they really made their $6 per share in the last 15 years. That means it will take at least 60 years for it to earn it's share price.
If you think that Microsoft is going to take off again and all-of-a-sudden go back into boom mode, by all means, it would be a great stock. But the fact that after 30 years it has only netted $6 per share for a $27/share stock, I think you're putting your money in the wrong place. Microsoft is way over-diluted, which is one of the ways they made such a large cash position.
Engineering and the Ultimate
Microsoft could save a lot in licensing fees if they just switched to Linux and OpenOffice.
Microsoft's problem is not competition. In most markets, they own a huge share.
Their problem is competition, in a way. Has been for years. Competition of older versions of their own product, that is. Windows XP isn't selling as well as they want to, because of the Windows 2000 that people already have and that does what they want.
I believe posters are recognized by their sig. So I made one.
The FA cites "$300,000 in annual expenses per employee".
This sounds like they add up all their expenses for the year and divide it by the number of employees. Thus, things like legal bills, lobbying activities, R&D, and the like get heaped in with salary, 401k, costs for office furniture, and so on.
I don't think this is the same metric as the the direct (salary) and indirect (office space, 401k) costs per employee.
Someday a Slashdot ID of 177180 will mean something.
after 30 years of doing business, they have only made about $6 per share (which costs $27.89).
Actually, you don't read it right. Microsoft's stock has split 9 times, and 1 share in 1987 would give you 288 today. The value of one share on Sept 18, 1987 was $114.50, and the value of one share on Feb 14, 2003 was $24.96. Given that you would have 288 shares, your beginning value of $114.50 would have ended up at $7,188.48.
A quick trip to CNNMoney's Financial Calculator will tell you that's an annualized rate of return of 44%. The historical average of the DOW Jones is about 10%, the S&P 500 12%, and the NASDAQ about 14%. I'd say MSFT would have been a worthwhile investment until February of 2003.
MSFT's P/E is 40.76, while the S&P 500 is 19.4, definitely a much higher price to earnings. However, Microsoft was traditionally a growth stock, not a dividend payer.
Conclusion - MSFT may not be a great stock to own now, but it was a great stock to own for 16 years or more.
Saying Android is a family of phones is akin to saying Linux is a family of PCs.
That's only true in a free market. Ask Steve Ballmer how motivating bullshit like this is. That pales in comparison to memos about "accountability", which are big dumb company speak for, "we're going to fire people, work harder." When you are using government IP laws to squash your competition and purchases to prop up your bottom line, you might get big headed. The market, however, is much freer than M$ suspects.
Friends don't help friends install M$ junk.
MS needs to make up for a $1B loss they will take over the next year. I forget the exact reason for it, but it's nothing special, they made some acquisitions and some such that gave them higher profits previously and those are now going away, it's natural and to be expected.
The problem is stock holders will see $1B less and think the company is going under and freak and sell, despite any amount of education MS tries. Companies that have had similar things happen and tried the education route found it didn't work out.
So MS is choosing to reduce the $1B as it showson paper, part of this is to not spend as much money, hence some of the cut backs.
And while there might be cut backs the benefits offered by Microsoft are pretty damn amazing. It's like saying a rich kid is going into poverty because there dad took back on of there 4 mansions from the kid. The employees are still pretty nice off.
"Not knowing when the dawn will come, I open every door." - Emily Dickinson
"Actually, you don't read it right. Microsoft's stock has split 9 times, and 1 share in 1987 would give you 288 today. The value of one share on Sept 18, 1987 was $114.50, and the value of one share on Feb 14, 2003 was $24.96. Given that you would have 288 shares, your beginning value of $114.50 would have ended up at $7,188.48."
I agree with you that Microsoft used to be a great stock to own. I would also agree that, if Microsoft could persue the same growth that it has over the past 30 years, it would also be a great stock.
My contention is simply that Microsoft will not see the growth it had in the past, and therefore its _current_ stock price is unjustifiable.
"Conclusion - MSFT may not be a great stock to own now, but it was a great stock to own for 16 years or more."
I agree with that wholeheartedly.
Engineering and the Ultimate
I do not agree. Microsoft has tried to destroy every competitor, many successfully. In my opinion, Microsoft's business model is miserably inadequate with respect to its customers (real) needs, such as not being subject to every worm that comes along. Their approach to "partners" is miserably dishonest. Their manipulation of the market is legendary. I believe they are among the most harshly competitive, no-holds-barred, bare-knuckle, knockdown-dragout, meanest competitor the computer business has seen.
But they take their "fiduciary responsiblity" to stockholders very very seriously, and until recently (last year, this year) were among the most consistent growth stocks in business history.
I remember when we thought IBM were "evil"... They never came close! Microsoft executives are the gold standard of "growth at *all* costs" mentality.
Please tell me you are kidding - I'm no MSFT fan, but let's take a look up and down the balance sheet shall we?
According to MSFT's last balance sheet filing (3/31/04), they had current assets of 65 Billion. Now these are things that reasonably can be turned to cash if the need arose in fairly short order. So based on just that number, yes, they have about $6/share. However, the company also has about 25 Billion more in Long term assets (the building(s) they own, any longer term investments, etc).
Now balanced against that is about 19 Billion in liabilities, showing that the net assets of the company is about 70 Billion (also known as shareholder equity).
However, even using that value is a really bad idea for valuation. Unlike manufacturing companies, MSFT can't actually put its biggest asset on the balance sheet - it's intellectual property! GAAP say that only IP that is BOUGHT can be put on the balance sheet, and that which is internally developed cannot - take a look, and MSFT only has 600 MM in intangible assets. This means that the IP value of Windows, Office, etc, etc, etc, is nowhere on the sheet. Now, however much we may agree that they don't make the greatest software, you'd be hard pressed to find someone who thinks that having all that IP isn't worth some major bucks. Add all that back in, and the cost of MSFT stock doesn't look that bad at all. After all, do you think everyone who owns the stock is stupid?
Disclaimer- I do not own any MSFT stock, nor do I plan to buy any in the near future - index funds rock!
> Oh. I understand now. Microsoft, as a company, is a failure.
Exactly. Luck gave them a monopoly on DOS, they were clever and ruthless enough to keep that going through the transition to NT. Office was their other big idea that lead to monopoly #2. But examine their products that they didn't get a monopoly on, none are profitable. Their early success in gaining a monopoly on DOS has twisted their corporate culture such that they don't know how to compete. That is why I call them a failure, because failure is their future unless they can reinvent themselves.
Lets look at that future a bit shall we? Let us start with their present situation.
Assets:
One metric assload of cash.
Monopoly rents on Windows & Office
Liabilities:
Zero friends & allies in their industry, only enemies and slaves.
Zero prospects for growth at greater than growth in PC sales in a world where PC sales are flat.
Zero prospects for innovation, having NEVER innovated in the past and a corporate culture built around NOT innovating so as to prevent accidental damage to their monopolies by changing the rules of the game.
Several money losing divisions that can't be eliminated without scaring Wall Street.
Now we look to the future. If there is one certainty, it is that OpenOffice.org is going to destroy the revenue stream from MS Office. Whether Microsoft cuts the price on Office or bundles it into Windows to maintain their monopoly, the revenue stream from Office is going to decline faster than most analysts yet realize. Windows on desktops is probably a safe stream for 3-5 years, then it could be at risk as well. With both monopolies at risk where is the upside when assessing future earnings? Today's stock price is Wall Streets best estimate of what earnings will be in the future. For the past couple of years that estimate from the hardest assed green eyeshades money people (Wall Street investors) has been one consistent verdict: FLAT.
Publicly traded corporations are all about the share price, nothing else matters except dividends and with so many shares in circulation they simply don't have enough revenue now to pay meaningful dividends and revenue isn't going to growing much anymore, and will probably be declining 5 years out. So their future is one of pain. They are way past the size where actual failure is a possibility, yet success and growth is also out of reach so their future is a long drawn out pain until something changes the equation. See IBM in the 80s and 90s.
Democrat delenda est
The problem with this company is that you have to make a lot of random people feel good about themselves before you get a go ahead on anything. You want a permission to fart in your office? Ask a dozen other teams what their policy is, schedule two dozen meetings, negotiate, negotiate, negotiate and only then will you get a go-ahead.
You know why this is? This is because of lousy management. A lot of people have become managers at MS simply because they wanted to become managers, not because they have necessary skills or are particularly fit for the job. A repercussion from this is that there's certain lack of leadership and vision from the very bottom to the very top.
This is unfortunate, because as a company Microsoft can kick everybody else's ass. We have SIXTY BILLION bucks and the best talent in the world, yet we still sit on our butts and wait until somebody else invents something to buy the company outright.
We don't really work 60 hours per week anymore. Some chose to do so, and they do quite well for it. But many work 40 hours and do perfectly fine as well. I personally have done quite well in my first few years here, and I only work 40 hours a week. Like any software job, I have worked a couple of 50 or 60 hour weeks at deadlines, but by no means is this common.
Until last year, they never paid a dividend. The only people who ever made money off M$'s greed were stock market speculators. Now that the "growth" is over, they pay a pathetic little dinkle to all those who had faith. At the same time, they rewarded their executives handsomely, though their treatment of "perma-temps" is infamous. You call that responsible? That's rape all around.
When the stock crashes down to it's worth, about $6 for their assets, "investors" will be left with nothing. Don't you worry, the lawyers will get the cash. I predict that long term investors, such as pension funds and "partner companies", would have been better off with government bonds.
Friends don't help friends install M$ junk.
Here I am feeding a troll...
My local 7-11 is ways better, so your "grander scale" description is also BS.
I've never seen a 7-11 that had more than 2/3 of what I saw in the fridges in the Redmond campus. Your mileage may vary.
The food was okay, but to say that it "blew away any cafeteria" is simply ridiculous -- that is, unless you live on snails out in the woods or something.
You'll notice I didn't say it blows away every restaurant, because it doesn't. Every college/corporate cafeteria or similar eatery I've seen? Absolutely.
I mean, come off it. Get out of your bedroom more often and see the real world out there. Or maybe save up some money and take a trip to the city some day...
I've lived and worked in three major cities. I've certainly visited others. I'm not a world traveller, but certainly beyond your asinine accusations.
And it looks like you missed it: the point of all their free drinks and the food court theme is to keep you THERE and WORKING, as much as possible. No need to go out for lunch (even if a brief change of scenery would be refreshing), nor even a stroll to the corner 7-11 for a soda or Starbucks for a coffee.
No, I quite got that. Point is, it's something Microsoft does right that the vast majority of companies that employ programmers do wrong. Yes, it absolutely is in a company's best economic interest if I just grab a handy soda and go back to work without losing my train of thought, rather than walk or drive to get one. They make up the $0.50 for the soda in my greater than $0.50 value of productivity. I wouldn't be disallowed the choice to go out for a drink or for lunch if I wanted -- but I have that choice, I don't have to if I don't want to.
All things being equal, why would you not rather work for a company that makes smart, rather than dumb, choices in managing you and your work environment?
My open letter to Steve Ballmer:
Dear Mr. Ballmer,
As a scientist and developer developer developer developer, I believe I can answer some of your concerns:
I can sincerely assure you that I, for one, have never considered older (or newer, for that matter) versions of Microsoft Office and Windows good enough. Not even once. You can stop worrying about that.
Now, no matter how much you believe your developers developers developers developers to innovate innovate innovate innovate, saying the above as a company which, in fact, has never contributed a single notable innovation to any computer-related field... Well... What can I say? You are not only doomed. You are already dead.
Sincerely,
Pan Tarhei Hosé, PhD.
Sincerely,
Pan Tarhei Hosé, PhD.
"Homo sum et cogito ergo odi profanum vulgus et libido."
This is a completely misleading statement. The fact that Microsoft expenses options is a *Good Thing* and is something that all corporations should be doing in the wake of recent accounting scandals.
And by saying "MS doesn't pay any corporate tax" you are insinuating that it somehow is hiding revenue, which is ludicrous. Recently, MS stock options have been "underwater" so they have not been popular to exercise. But any money that *is* spent on exercised option discounts is written off as additional employee salary expenses, which it is (the number of options purchased times the difference between the option strike price and the cost basis is added to the employee's W-2 taxable income total). MS should certainly not have to pay taxes on employee salaries: the employees already pay taxes on their salaries! Making the company pay taxes on the same money would amount to double-taxation. This is how all companies handle their options plans, assuming they are expensed on their books. If not, then investors beware...
Now, whether this deduction alone can wipe out the total taxable corporate net income of Microsoft is a different story entirely. There would have to be a LOT of options exercised to amount to that kind of money, and in recent years it just hasn't happened. Back in the late 90's, it's possible. MS net profit was much smaller back then. Today, with MS stock price stagnant for 5 years and profits stronger than ever, there is no way that options deductions could come close to offsetting their tax burden.