This is in response to an article by John C. Dvorak, Steve Ballmer: good news and bad news
It’s not just an image problem.
Since Steve Balmer took over, Microsoft’s market cap has fallen to less than half of what Gates left it at. And it’s just because the stock market is irrational.
Microsoft rakes in tons of profits because of exactly two things: Windows and Office. (And that’s why its margins are higher than Apple’s too; software is inherently higher margin than hardware, especially when you can sell the same OS for the better part of a decade without any real updates.) The problem is that these two cash cows aren’t growing, and Microsoft has failed spectacularly in literally every other venture it’s attempted. Apple didn’t sell phones three years ago; now they account for 40% of its revenues and 60% of its profits. And this year it suddenly made tablets cool, and has been selling them like hotcakes. Steve Jobs has carefully steered Apple into new, extraordinarily lucrative markets, and the stock has risen as a result. Microsoft, in contrast, has lumbered around with rehashed versions of products that sell only as a result of its (convicted) monopoly status, while making desperate stabs in every direction imaginable.
Let’s discuss some of Microsoft’s failures:
- Tablets. They’ve been pushing these for almost a decade and nobody bought them. The problem was that they just threw some touch controls on top of a UI designed for a keyboard and mouse. Apple made an entirely new Cocoa Touch UI layer.
- SPOT. Watches, with some MSN crap. Probably cruel of me just to mention.
- Silverlight. It has all the disadvantages of Flash, except that nobody uses it.
- Zune. They started with brown and never recovered. All it did was kill PlaysforSure
- PlaysforSure. Based on the false notion that people want/need “choice” (where “choice” means a Microsoft software platform and various commodity hardware partners). Killed by Zune.
- Xbox. Popular, you say? Not from a shareholder standpoint. It’s making a slim profit now, but it will never be enough to dig itself out of the multi-billion dollar hole it’s in. They’ve lost a massive fortune in order to buy second-place in console gaming. And now Apple has, practically by accident, become a major player in mobile gaming.
- Windows Mobile. They’ve had mobile software for years, and it’s always sucked, but they formerly held a respectable share of the smartphone market. Then smartphones actually got popular (meaning sales reached numbers that mattered), but not for phones running Microsoft’s frequently renamed mobile OS. The battle is still waging here, but Microsoft has become an irrelevant bit player.
- Search. They’ve resorted to outright bribing users to search on Bing, but it’s been only modestly successful, where “successful” means a single-digit share of the search market, and no profits.
There are others, of course. I didn’t even discuss any of the “concepts” it’s publicly floated but were killed before they got the chance to die in the market (but should have died privately) *cough* Courier *cough*. Windows Vista (6.0) was a complete disaster in every possible way, ridiculously late, overpriced, and reviled by users. Windows 6.1 (or, in market speak, Windows “7”) is regarded as respectable, but I don’t think I’ve read even a single review by a serious journalist who would call it the best OS available. At its best, Windows 7 is a fine OS for someone who is too cheap to buy a Mac.
Office, meanwhile, is facing stiff competition from all directions. On the Mac specifically, Apple now offers a fairly complete suite in iWork, for half the price of Office, which itself had to drop in price just to stay competitive. More broadly, sophisticated productivity web apps are becoming a serious threat. Of particular note are Google’s offerings, which increasingly obviate the need for MS Office for many users. Google can offer these services for free due to the huge profits it makes from search. Microsoft can’t offer similar free services without sacrificing sales of Office.
The short version of all this is simply this: the last time Microsoft released anything that actually grew the company substantially, in an area of real profits, was 1995. Since then it’s really just been coasting along on momentum. And that is why the media and market lavishes attention over the things Apple does and ignores what Microsoft does.