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Microsoft: The Faint Smell of Rot
happycorp writes "A business reporter for ABC/Fortune
is asking whether Microsoft is poised to collapse, based on years of industry observation
(with successful calls in the past, he notes) rather than
purely technical considerations.
A short read, with this favorite quote:
"if you sniff the air, you can just make out the first hints of rot.""
This kind of "insight" can be applied to almost every company, and it's about as good as Colin Fry's cold reading ("wait, I think I smell something back there...").
It will however be interesting to see if Microsoft may one day break up voluntarily into different operating units, and thrive in different areas independantly.
Rock that crushes, Paper & Scissors that don't matter.
Yeah, and in late 2004 the Register posted that Microsoft was about to file for bankruptcy.
(FYI, no B.S.: That article is printed, laminated, and behind a case in one of Microsoft's lobbies.)
The coolest voice ever.
Wang will be around forever. Enron does so much enery business, they will never fall. Worldcom has the numbers to survive. Compaq will never collapse under its own weight. Sega makes great games and a great 32 bit console, they will be around forever....
Need more examples? Point is: ANYTHING can die.
Five years ago it was a source of pride to go to work for the Evil Empire -- now, who cares? It's just Motorola with wetter winters.
Umm... no. Definitely not.
As I went from the latter to the former, I can tell you there's a lot of difference. Motorola is bogged down, lacking excitement in teams that should be excited. The place was being "SEI/CMM Level 5"'ed and "Six Sigma"'ed to death. The personality of the employees and teams was as interesting as the endless rows of slate gray cubicles. And it was horrid to take an internal class on Perl, and see experienced software developers that couldn't finish a simple basic program in 20 minutes that I had finished before the instructor was done explaining.
At Microsoft, I'm excited about my job and the product I'm working on in ways I never was before. I'm more impressed by both the knowledge and passion of the people here than I ever was at Motorola. It's nothing like anything I saw in my 6 1/2 years at Motorola.
I don't mean to sound like a MS cheerleader here, I just want to make it clear that this is definitely not a valid comparison to anyone who has spent any significant time inside the two companies.
Oh, and the winter here is a hell of a lot better, even if it wetter. And the summers... wow.
"You know your god is man-made when he hates all the same people you do."
Certainly this was written to get a bit of attention, but in a way he's just foreshadowing what happens to most businesses, especially those that grow as large as Microsoft has. A brief look through history will confirm this.
AT&T is a good example. Although they were "broken" by an anti-trust suit, they actually volunteered to spin off the Baby Bells as a concession. In their minds, networking and computers were the future. In a way, AT&T had it all going for them. They ditched the tedious Baby Bell system to jump headfirst into a sector that absolutely exploded. Tons of people thought AT&T was the unstoppable 800 lb. gorilla that once it entered the computing/networking segment, it would just dominate it. History, however, has proved us wrong and now AT&T is about to be consumed by one of its children in an odd sort of Darwinist/Oedipal freak of the market economy.
Now, I'm not saying MS will tank tomorrow or even five years from now. What I am saying is that there's always something that destabilizes the status quo. It could be something that they don't see coming; it could even be something they see coming but can't properly react to. In any case, the inevitable will happen and MS will fall. Some day.
Per Square Mile, a blog about density
... here..
... He explained that Microsoft carried on its books no value at all for its software. Assets like Microsoft Windows or Microsoft Office, which might be given some book value and depreciated over time were carried on the books as valueless. This contrasted at the time with IBM, which valued its software assets at billions of dollars.
Basically discussing accounting shenanigans before the bubble burst, and I remember reading it at the time (though this comes from this weeks' article links)..
"The late Frank Gaudette was Microsoft's first-ever Chief Financial Officer. He was also Microsoft's first head of Human Resources, first head of Facilities, first at running just about every department that had to do with operations but not product development, sales, or marketing....
My question was based on the idea that nothing goes up forever and there must come a time when even Microsoft is no longer a good buy. How can we tell when that time has come?
"Watch for any changes in our accounting," said Gaudette. "If I need to I can start, depreciating the software and maintain earnings growth for years on flat revenue. Watch for the accounting changes, wait for the next uptick in the stock price, and then sell.""
Read the whole thing, very interesting stuff...
You've forgotten the reason why Microsoft existed in the first place: To *make* a lot of people a heckuva lot of money.
If Microsoft sees no future in its business, it will liquidate its assets and pay off its investors. Sure, it has billions, but if it can't find a way to turn those billions into trillions, then it will be sold and the capital invested somewhere else. This is the core of capitalism.
Companies are the sum of its investors, and nothing more. They can come and go pretty much as they wish. What do you think "corporation" means? It means something made out of many parts, those parts being actual people and their fortunes.
Companies don't collapse. They are abandoned. That is what is happening to Microsoft *right now*, and he sees it.
The radical sect of Islam would either see you dead or "reverted" to Islam.
Ronald Reagan was right, and elite wisdom was wrong. The Soviet Union was already decaying from within, and all it took was a few firm pushes (IRNMs in Europe, aid to the Mujahadeen, SDI) to help push it over the edge.
So it is with Microsoft. Besides Windows and Office, what products do they have that are profitable? Story after story comes out about how Microsoft is going to take over this or that sector of the industry (MSN, WinCE, WMP), but they never seem to turn a profit. Like the Soviet Union, they've overexpanded, they have a restive population tired of chaffing under their iron bootheel, and a few pushes (Linux, iTunes, etc.) may be enough to push them over the edge.
To put it another way: It's no accident that both the Soviet Union and Microsoft are called "the Evil Empire."p.
Lawrence Person (lawrencepersonh@gmailh.com (remove all "h"s to mail)
http://www.lawrenceperson.com/
I think that this guy is right, up to a point.
We see lots of things that tend to loosen up MS's chokehold on the industry.
Large government clients are pushing for open office document formats. People are using more and more software that runs on multpiple platforms (ie., Firefox). New platforms, like phones, set top boxes, media centers, PDAs, and the like aren't panning out.
And many customers really want out. People complain about MS a lot now.
To me, the most significant thing is that they don't seem to be making the right moves. They're not doing anything interesting, and they're not responding to their technical challenges in a vigorous and competent way.
Gates is clearly a genius with business, but I don't think he's up to running the tech side of the company. Since he became the "chief software architect" they've been floundering.
But on the other hand, think about how much money they have. That means that there's no chance of them collapsing or going away. The cash gives them enormous staying power.
I don't think that collapse is a likely scenario. It's more likely that they'll be more like an IT industry Sears.
Sears was mismanaged for decades. Long after the retail industry had passed them by, they were still doing things in the same old dumb ways they had always done it. But they were still there, because they had gotten to be so big and strong in the days when they were on top. They owned a ton of land underneath their stores, and it was worth a lot of money. They had staying power.
I feel really good about the future. I don't think anyone's going to have their boot on our necks the way MS has in the past. Apple is making some beautiful machines, and Linux is a couple of years away, at tops, from being really competitive on the desktop. Windows will probably get cleaned up, and it will probably end up being cheaper.
Or maybe not even that something is wrong- just that something that used to be right isn't there anymore. I think I see what he means. The image used alongside the article is the Microsoft that dominated, that we feared and loathed: the Borg. I can't exactly put my finger on it now, but that's not how I see Microsoft right now. Sure, they're still enormously big, powerful, and evil, but somehow don't seem terrifyingly unstoppable, destined to destroy or eat up everything in their path. There was a time that the mere mention of Microsoft getting into a market was enough to send people scattering. Do they still have that effect? I think the guy is onto something.
After all, he's essentially correct in that the world's imagination is on Linux and Firefox rather than Windows and Explorer... at least in what I've seen in my limited scope.
But if I were to interpret what I smell, I'd say it was something along the lines of huge change rather than oncoming death. Microsoft [should] know they aren't moving the way they once did. Their code is too big to maintain backward and forward compatibility and things are breaking around the edges. I can't tell you how many places I've read that Microsoft needs to make a new product from scratch and throw out compatibility if it wants to recapture the hearts and minds of users and administrators. I think we're all very ready for something new which is why we're looking to Linux... well some of us are looking to Apple as well as the author points out.
Microsoft is a lot of things in my book but stupid isn't one of them. Their hearts are in the wrong place though. They need to shift focus away from themselves and back onto the consumer.
I come from a age where you had a choice of MS-DOS or ... Unix. AT&T SysV is where I learned myself -- the goal, of course, was always to get root. I got root.
:). There's a LOT of logic behind how Unix systems work -- and considering the concept/usage is much older than Microsoft I see it as being rather well thought out and mature. It becomes so obvious when dealing with trying to fix something on XP.
:)
If you look at all the major players in the market place today you'll note that they're _all_ getting behind one of the Un*x's or the other (I consider Linux, BSD, and OS X all to be "Unix" regardless of what SCO [or you] may think
Microsoft may be a 800 pound gorilla, but IBM is still a 8,000 pound monster that is going Linux [and still pissed off]. After recently comparing OS/2 to XP side by side I understand.
Of course there's a reason (in our organizations) that as of 2000 it was decided to REMOVE Windows from the mix and migrate all users to either Linux or OS X. I myself [IT admin] use OS X at home for a reason. Others will follow.
It's simple really -- in personal consulting I charge $35/hr for IT work if it's Linux/BSD/OS.X/QNX/Netware based. The rate changes to $70/hr for de-virus'ing your system [again]. Clients quickly learn what the Mac-mini is all about...
Yeah, Microsoft is dying -- and unfortunately (for the US) it'll be a slow death. IMHO the US had better wake up or we'll technologically have out shorts eaten by the rest of the world as they continue their migration away from Windows.
Things move much more quickly these days, it seems to me. With technology changing so rapidly, unless you're actively growing and adapting, you're dying. It took a month for Firefox to hit 10 million downloads. Or look how fast products like the iPod or Google took off. Microsoft may not be fighting for its life right now, but a bit player can become a serious challenge very, very quickly. Likewise a new technology can completely change the game. Microsoft has done very well in adapting to new technologies in the past- they successfully met the internet head on after getting hit upside the head by not anticipating that one- the question is whether Bill Gates is still sharp enough and hungry enough to adapt that way again when a new challenge emerges.
Kind of a grandiose assessment of SGI's demise.
The were doomed about the time Jim Clark realized the PC's and Windows had come far enough along that they were going to rule the world, and thanks to their economy of scale, low margins and fast product cycles proprietary workstations were doomed.
Clark then preceded to start telling everyone at SGI the bad news, it hacked off Ed McCracken among others, they forced him out and they lost their visionary. He went on to make a fortune on Netscape on the PC, SGI meanwhile had no vision and started spiraling in.
A major disruptive shift was occuring in the market, the visionary saw it, everyone else at SGI refused to see it. At the nexus was the first Windows NT release, the Pentium Pro, single chip graphics engines like Glint and Voodoo(today Nvidia and ATI), oh and Microsoft bought Softimage and made them port to the PC at which point everyone realized expensive 3D workstations were dead, everyone except the people at SGI.
If I recall correctly Pentium Pro was the first chip with some of the fruits of Intel's outright theft of Digital's Alpha architecture at which point IA32 started to not suck for the first time. If you recall Intel partnered with DEC with the idea of adopting at least part of Alpha. After they looked at all of the Alpha's inner secrets, they backed out, used all of DEC's IP anyway and it caught Intel up with RISC. DEC won a court case over it a long time later but by then the damage was done and Intel was rewarded handsomely for thievery.
At the same time SGI was rushing in to the supercomputing market which isn't a market that has ever or will ever sustain a fast growing company. Its a quirky market, where you survive on good will, whims and largesse of the U.S. government, which is pretty much the only thing keeping SGI alive today. 9/11 probably saved SGI from bankruptcy because they can live on the big surge in Defense and Intelligence spending, building high end systems that almost no one but the government will buy.
@de_machina
Microsoft's total cash on hand is 34.5 billion. Their operating costs average around 6-8 billion a quarter. By my math, that means they could operate for anywhere to 1-1.5 years without taking in any revenue, unless they *seriously* scaled back their business ventures.
That is quite far from "decades"
To me the real question is why, even after so many years of being in a wide variety of markets, Microsoft's only reliably profitable divisions are still Office and Windows. The Mac division is really an extension of the Office division.
Your comments about the XBox, directory services, games, PDA, and so on are valid, but from a business point of view that really only matters if they are profitable. The Home & Entertainment division is now profitable but is expected to go red next quarter, and the Tools division is profitable. The real money earners for MS are still Office and Windows.
Add to this the fact that Microsoft maintained profitability by cutting their R&D *in half* and I can't help but wonder if Microsoft is mortaging its future in order to please the stock market today.
They do have a boatload of cash in reserve, and they won't be going away any time soon, but the famously long Microsoft quality cycle (v1 sucks, v2 sucks less, v3 is ok, v4 is good) just isn't going to cut it any more. Smaller, more nimble competitors abound, and they're getting smarter. They're attacking Microsoft at the edges and playing against Microsoft's weaknesses (user experience, security, price, reliability).
Microsoft may be going after the long-term bucks with the XBox, but they can't leverage their OS dominance in that battle, and Sony definitely isn't going to take it lying down. What happens when MS can no longer rob from the Windows and Office divisions in order to keep the Home division going?
Read the EFF's Fair Use FAQ
But it's not Microsoft. It smells more like the rotting of a tired journalist raising controversy to drive readership. How pathetic. *LOOK AT ME!*
the real test is if they are going to be forced to fight the browser wars again.
if firefox forces microsoft to move the IE team out of the dungeon, and into the spotlight again, its over.
in a war, if you fight multiple battles over the same territory, you will lose.
... hi bingo
Microsoft didn't learn the lesson of the late 80's/90's when IBM tried to push us to more proprietary/expensive systems. IBM stock tanked from a high of $84 to $48. My Boss at the time said 'screw em', so did many others, we shifted to Microsoft.
Fifteen years later, Microsoft makes the same mistake. More expensive, not compatible etc.
I've already done twelve new Linux installs this year, happy people too.
Enjoy,
It's just the normal noises in here.
Ah but their burn rate is over 6 billion a year. And the actual amount is 35 billion this means less than 5 years to be reduced to ashes. You have to remember their stock value will crash way before that, employees start leaving for high ground. Then marketing hurts from cut backs, development hurts they go into bug fix mode only and then the inevitable death occurs.
Got Code?
Dont forget, windows and dos succeeded because it was free for home users. Not legally, of course, but windows and dos were pirated like crazy. Guess what it got them? Marketshare. They sold it in the workplace, but won it in the homes of the hobbiests.
They killed/buyed off the competition. Guess what, along comes a competitor that can't be bought or killed off. And it's take the effective part of MS's early strategy one step further. MS doesn't know how to fight it.
The market created a competitor, or put another way, a competitor evolved much like a bacteria in the presence of antibiotics. MS's traditional pills dont work anymore, they've killed off what they could, allowing what remains to have room to thrive. In a way, MS created modern OSS.
Microsoft makes money on Windows, Office, and Exchange. Most of the other stuff they do is a money loser: MSN, X-Box, Hot Mail, Windows CE, hardware. The other stuff may be strategic and it may help to prop up Windows, but still its mostly a money sink.
If Microsoft were to lose Windows and Office monopoly because of competition, Microsoft would not be a profitable company - not by any stretch. What could cause them to lose Windows and Office. Open source.
All that really has to happen is for Linux to get more usable. And a lot of that has to do with drivers. Once that happens, the big PC vendors will migrate the Linux faster than you can say "Linux Torvalds". The layoffs from Microsoft will be similar in relative magnitude to the layoffs at IBM in the late 80s. I say relative because MS has far fewer employees than IBM did.
Let me say that I would not want to own a house in or around Redmond when this happens. I also would not want to have a lot of MS stock when it happens either.
Within 5 years Linux will become the dominant desktop OS. MacOS X will have a marketshare perhaps double what it is today. Windows will have a smaller marketshare, but will still be around as Microsoft focuses on it as a "core business" for those who can't or won't migrate to Linux.
Avoid Missing Ball for High Score
But none of this happened. Netscape was wiped out, IE dominance is settled even despite IE again looking pathetic in comparison to Mozilla's newest breed. Office still rules and there is nothing to beat it. Open Office? Well, for simple documents and spreadsheets maybe yes. And yes, it has improved a lot over last few years. But still for serious word processing, I'm sorry, but no.
Also Linux is still a great server OS but still can't be considered seriously for the desktop for non-geeks. I've installed Ubuntu three days ago. I was really amazed how little has changed since three years ago when I, sadly, abandoned Linux as my desktop. Again, a few things that can't be done in any other way but by editing config files with, say, vi. I enjoy vi and I still remember what to edit, but does a simple user? And no access to most of applications without reading manuals and adding additional repositories of .deb packages (mostly for ideological reasons). It is not "install and work", it's still "install and then tweak the things around to get anywhere". This is the part of the mix that makes OS X a success - some OS X users I know were not even aware there was a command line on their system until I showed them. Now, that's how a modern GUI OS should be designed. If there is a Linux distro to match this please let me know, but I think I'll end up buying a PB when I'll save enough money to do it.
And in the meantime Microsoft has improved a lot. XP is stable, easy to use and I'm yet to have a virus infection or anything after three years of having it on my PC (which is connected to the net 24/7 on a public address, BTW). Also Office has improved a lot in terms of stability and reliability. I remember using Office 97 which without SR-1 crashed a lot and we had lots of problems with it. Office 2003 I use now is rock stable. This is not exciting, this is nothing new but maybe in these days of computing becoming commonplace (and programming & sysadmining becoming a blue-collar commodity job) what is needed is not excitement but solid, predictable functioning? Can you think of a killer feature now missing from, say, Word that would excite the masses?
So, maybe Microsoft is just maturing with the market. They were a geeky sweatshop when computing was the new, exciting field. They are a solid, respectable, middle-aged corporation now. So, I don't think we will see them sinking anytime soon.