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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.
They've got enough cash in the bank to run the business for decades if they never made another cent ... They may not be the 800lb gorilla, but I don't know how you could possible predict a collapse.
2advanced.net - Business Quality Hosting
Apple and Sun will be gone by the end of the year. IBM will collapse under its own weight, Nintendo will be out of business any day now, BSD is dead....
Same crap, different company.
"I use a Mac because I'm just better than you are."
Esp. when its flagship products are monopolies.
The Raven
...about the Roman Empire in the time of Julius Caesar. But it took several hundert years until it collapsed.
I won't believe it until Netcraft confirms it.
"The faint smell of root" :-D
Sig Nature
I'm sorry. That was me.
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."
The situation for Microsoft is somewhat worse than GM in our example. Consider Microsoft Word 6.0. Unlike an automobile that wears out, breaks down, and needs to be replaced, Word 6.0 has eternal life. It does not ever wear out. After you have used Word 6.0 for 15 years, Word 6.0 works just as well as it worked 15 years ago.
So, you have no need to replace Word 6.0 unless you want to upgrade. For most people, the upgrade is unnecessary because Word 6.0 already has all the features that you need.
Other software programs have the same "problem". Microsoft has so relentlessly added feature after feature to its products in order to capture most of the marketshare that most consumers now have no further need for additional features.
The only way for Microsoft to grow is to enter into other markets. Hence, you see Bill Gate's fist print in the gaming market as Microsoft pushes the XBox. Unfortunately for Microsoft, there is no guarantee of success in markets beyond the computer-software market.
As a side note, Microsoft will continue to invest heavily in R&D in order to enhance the likelihood of success in those other markets. I would not rule out the possibility of buying Bell Laboratories.
As soon as the market opens on Monday, I'll buy a few hundred shares, and watch the tumble.
Get out while you can.
DT
Is this thing on? Hello?
Microsoft is where IBM was in the old days. The excitement that lures glamor-seeking job applicants can't last when you've already grown to fill your entire ecosystem. Ditto the press buzz.
In other words, where Malone sees senility, he may actually be looking at maturity.
Microsoft will just buy Glade, the company that makes plug-in air fresheners.
Your computer will emit a little wisp of air freshener the mext time you smell a hint of rot.
You will actually look forward to seeing Clippy...
Take the cheese to sickbay, the doctor should see it as soon as possible - B'Elanna Torres, "Learning Curve"
In 15 years, employers will no longer expect your resume to be in Microsoft Word format.
I think Microsoft will become like J.P. Morgan: still huge, still important, but not what it was.
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
If you sniff the air, you can just make out the first hints of sensationalistic journalism.
Of course, Microsoft is too big for that to happen. But "collapse" doesn't necessarily (or even usually) mean total disappearance. It more often means mass firings, loss of market share, plummeting stock price. As happened at SGI.
Speaking of SGI, I worked there during their waning days as a graphic workstation powerhouse. When people talked about where the company went wrong, a common theme was this: Wall Street fell in love with SGI and threw money at the company. All that cash helped them avoid measuring risks carefully or look for efficient ways to do things. By the time money ran short and it was obvious SGI had to reform, it was too late to claim a permanent place in key markets.
That's different from Microsoft, of course, since MS's pile of cash comes from their tithe on every PC sold. But the effect on corporate culture is the same. Cash can be toxic to a good organization.
... 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.
On October 5, 2000, Mr. Malone predicted the end of Apple and the PC.
a lone.html/
But with falling profits and plummeting stock, and having hastened the end of the desktop PC era, Steve Jobs has put Apple again in a precarious position.
http://www.forbes.com/columnists/2000/10/09/1005m
Microsoft may have a few years left too.
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.
Microsoft makes almost all of their profits on sales of XP and Office. I would argue that both of these products are adequate, but neither compelling nor great. Both continue to be successful because people must endure great pain if they try to choose any other alternative.
/.er. And they know how to build hardware that they can sell *for profit*. The PS3 will own the next generation just like PS2 owns this one.
Lets list the other great applications or product categories MS has pioneered since the beginning of the internet era- the early 90's:
(sound of crickets chirping)
Where have they completely missed the boat?
1. The Web. If it weren't for Netscape we would all be using a closed, proprietary, for-pay MS network much closer to the old pre-internet AOL model than the public internet we have today. And since MS stole the browser market from them how much innovation has happened in the browser space? For all practical purposes - Nada! Hopefully the Firefox phenomenon will convince smart, hungry people that success can be had inovating in this space.
2. Search. Google is kicking their butt back and forth and truly innovating on a regular basis. I never realized how piss-poor the Windows search functionality was until I tried Google Desktop Search. It is a revelation to get results immediately that would take several minutes or hours of searching to find with the MS provided pap. And have you seen the other stuff coming from Google Labs like the new Maps? Great stuff.
3. Music. Tiny little Apple has single-handedly eaten Microsofts lunch on this one. Even though MS compatible players are (or at least were) far more widely available to consumers.
4. Gaming. The XBox seems like a contender, but only because it has been propped up by the profits from other divisions. MS blew it in the first generation - using PC components sealed their fate - the machine was too big for the Japanese market and too expensive to make a profit on. Xbox would have tanked long ago if the division was actually dependent on making money. Switching to G5 chips may help with those issues but will consumers buy a machine that isn't backward compatible? If the PSP is any indicator, Sony has not forgotten how to make hardware that inpires lust in the average
Please somebody provide a single example of something important that Microsoft has truly inovated with in the past decade!
"Now the company seems to have trouble executing even the one task that should take precedence over everything else: getting 'Longhorn,' its Windows replacement, to market. Longhorn is now two years late. That would be disastrous for a beloved product like the Macintosh, but for a product that is universally reviled as a necessary, but foul-tasting, medicine, this verges on criminal insanity. Or, more likely, organizational paralysis."
Or, more likely, Windows, with its backwards compatability, integrated applications, and security flaws, among other design problems, is so sprawlingly complex that it is reaching the level unmanageability. IANAME (MS Employee), nor have I been, but I know they hire the best. If even teams of such people struggle for so long to produce a major upgrade to Windows, then that seems to me to be a sign that they're now dealing with an unmanageable monstrosity, rather than a sign of organizational paralysis. Not that such a distinction matters much to the author's argument, though...
Flying is easy, just throw yourself at the ground and miss. -Douglas Adams
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"
A well run company that initially succeeds and then fails will carry on making record profits right up until it starts going downhill.
Perhaps it's more like Enron recording record profits until it collapsed. I'm not saying it's the same thing, but don't believe everything an accountant tells you. Keep your guard up. Record profits don't mean much if an IT company isn't spending much on research and development and is just coasting on licensing revenue.
Q: Is it true that capitalism is rotting away?
A: Yes. But what an aroma!!!
- Back off man. I am a scientist
Consider this. They have a monopoly (the Justice Department has said so) They have $55 BILLION dollars in CASH. To take an example, American Airlines lost about 300million this year. At this rate, Microsoft can keep on kicking for 183 years. And this is a bad scenario. If companies like Dell continue to patronize them, Microsoft will continue to post profits. As much as /. may want it, it probably won't happen. At least until we are dead.
A tautology in the logic sense is effectively a statement whose truth table is entirely true.
E.G., "A or Not A"
A | A or Not A | value
T | T or F | T
F | F or T | T
Contrast that with a contradiction, for instance "B and Not B"
B | B and Not B | value
T | T and F | F
F | F and T | F
So, no, an argument that assumes the consequent and is therefore circular is not a tautology.
Microsoft has as far as I understand two cash cows: Microsoft Windows and Microsoft Office.
Now both of those are being challenged by open software.
Microsoft Windows is being challenged by both Linux and Mac. Windows is still king, but Mac is gaining popularity and Linux is becoming ever easier to use. I think Windows will lose substantial market share over the next 3 years or so.
Microsoft Office is also being challenged. Open Office has come along nicely. A main threat here is the fact that users don't use more than a few percent of all the functionality within Microsoft Office. They pay for stuff they don't use or need. Once Open Office comes with some really slick templates and default fonts, I bet it will gain popularity. I think Open Office will start stealing license money in the not too distant future. The 2.0 release is coming up, and then that will become really good after a few minor updates.
Once profits decline for Office and Windows, Microsoft will lose a lot of its current freedom to waste money. They will need to be more focused. Given the impression they have a nasty case of infighting already, this focusing will not happen. They will instead continue to decline.
Stop the brainwash
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.
The collapse has been evident, and although it's surprising to see someone go out on a limb, I think those in the know have felt the tide turning for a while:
1) Stalled growth. The stock price has flattened. MS has thrown out dividends to keep investors interested, but the stock is played out.
2) Tapped markets. Financials show a disturbing trend: the only operations in the black are the Windows and Office units. Despite relentless spending in R&D, acquistions and experimental to expand their market (MSN, WebTV, etc.), nothing seems to pan out.
3) Apathetic customers. Inability to move entrenched (NT, 95, 98, ME) users, especially business users towards new products. The threats to drop legacy OS support have always ended in retreat -- and for a company as powerful as MS, those actions betray their ultimate dependence on Windows sales to stay alive.
3) Longhorn. For a company that makes so much of its money in OS sales, the inability to deliver a next-generation OS on time and as promised (Avalon, Indigo, WinFS moved out either to bolt on to XP or "for the future") is not an indication of engineering failure, but instead management failure. MS is too large to turn on a dime anymore.
4) Security. This is the death knell, and truly the slippery slope that Apple and the Linux community will use to the most advantage. If you can't get your customers to upgrade to a faser OS (see 3), then you're doomed to see them suffer the fate of today's spyware, malware, trojan and virus ridden reality.
5) Dubious "initiatives." IPTV? Tablet PCs? Wired watches? Again a management failure. Someone needs to keep their "visionaries" on an even keel.
And you can add to this list for a long time. Do one or two of these things signify the end of MS? No, but the trend is clear and the "end of MS" meme is gaining momentum. MS has finally become IBM of yesteryear. IMHO, their pathetic "grasp" at Google's share makes this clear.
When a company throws the term "innovation" around like rice at a wedding, you know that's the thing they're most nervous about.
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.