Kind of lost in the Chicken Little coverage of today’s Microsoft announcement of 5,000 layoffs and quarterly results is the noteworthy fact that the company actually grew revs, albeit just 2 percent and $900 million short of forecasts. Microsoft isn’t tanking like the banking or auto industries, in other words. And its Windows dominance means that all that has to happen is for the global economy to turn around and start selling more new computers. As PC sales go, so will go MSFT.
Still… Microsoft has a problem. It’s reflected in the grim irony of former and to some extent present MSFT partners IBM, Apple and HP, all companies that have done surprisingly well while Microsoft wallows. Microsoft built its monopoly on the backs of these three companies. Now each is thriving partly by eating its way back into markets Microsoft owns, or at least has owned. And they’re doing so by being creative, reliable and innovative.
Microsoft’s results would be easier to dismiss if the company had anything really dramatic or promising on the horizon. We’re given Windows 7, which looks like it mainly fixes problems Microsoft itself caused with Vista, which was supposed to fix XP’s problems. Windows upgrades used to be a huge profit center for Microsoft, but more recently are simply part of the purchase of a new computer. (Once today’s results are fully analyzed they may provide some enlightenment; I’ve not seen pricing for Windows 7 either.)
Microsoft is promising some big things in search, social networking, phones and other emerging arenas. But it may not be able to apply against Google, Facebook and YouTube the embrace-and-extend tactics it used against IBM, Apple, HP and others in building its monopoly lo those many years ago.
Perhaps the folks in Redmond can take heart from the encouraging rebounds of their former partners/foes. IBM endured withering layoffs in the late 1980s and early 1990s, far worse than Microsoft’s today. Apple and HP have had their share of bad quarters. In each case, though, these companies stopped thinking of themselves as the companies they had been. They reinvented. They innovated. Hopefully steveb’s next memo will tell us what Microsoft is doing to move away from its Windows dependency and become the next Apple, IBM or HP.
(P.S. Apple’s cage-rattling over “protecting our IP” — viewed as a veiled threat against Palm for its new multi-touch Pre — might well have been aimed more at Microsoft over any anticipated interest in purchasing Palm. No one’s going to buy Palm if there’s a patent cloud hanging over the company, especially someone with MSFT’s deep pockets.)
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Microsoft is promising some big things in search, social networking, phones and other emerging arenas. But it may not be able to apply against Google, Facebook and YouTube the embrace-and-extend tactics it used against IBM, Apple, HP and others in building its monopoly lo those many years ago.
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Microsoft has been making big promises for years that have mostly resulted in big missteps, Vista being the most recent (a very major disappointment in view of the time, money and hype devoted to this product!)
They were very fortunate, incidentally, that Jerry Yang didn’t sell them Yahoo for their offer price of $33 – it now trades at $11 and change.
The company long ago lost its mojo. How it reinvents itself remains to be seen. For IBM the focus shifted to outsourcing services (and those high margin mainframes of yesterday provided a boost in the most recent quarter).
“Now each is thriving partly by eating its way back into markets Microsoft owns, or at least has owned.”
There’s one exception that comes to mind, which might seem a mere nitpick, but it’s a multi-billion dollar one and a linchpin to that company’s resurgence. That’s the iPod, in a market that Microsoft never “owned”. And it’s hardly certain that there’d be an Apple today if it weren’t for the iPod. It bought them fiscal breathing room while they got the Mac hardware and software up to snuff.
Also, IBM isn’t thriving by any means, they’re going through another round of layoffs (the third in two years?) and continue to offshore as much of their consulting work as possible.
I hope Microsoft survives as a viable OS developer, we all need the competition. But like the banks they’ve grown too large to succeed (only a near-billion shortfall in expected revenue? A few of those and you’re talking real money).
Not to pick a nit, but didn’t IBM maintain its no layoff policy until the early 1990’s? While they had long cleverly ‘cut’ jobs, actual layoffs didn’t occur until about 1993, as I recall.
TameGeek, right on the iPod…but if Apple had just sat there it would be hurting. Instead it built on the iPod with the iPhone … and we’re back to MSFT buying Palm :^)
@3, Steve, technically IBM wasn’t laying people off in the late 1980s, but it cut tens of thousands of jobs through natural and “forced” attrition. I’d argue semantics, but your nitpick is correct.
Microsoft buying Palm is the best way to kill it. And don’t they already have all the gestural mojo they need with Surface? Buying Palm would be a repudiation of their previous in-house development, and the only time I can recall them doing that was when they killed Blackbird and (slowly) moved to HTML (not that they didn’t add their own special sauce, as usual — JScript, C#/.NET being examples).
@5 Yeah, it was just a nitpick, Paul, a minor point that doesn’t detract from what you wrote. I once worked for IBM back in 1975 as a contract employee (just one way they avoided layoffs) at the R&D and manufacturing facility on the Diagonal between Boulder and Longmont in Colorado. There was a lot of employee pride in the no layoff policy so I recall it well. The people there were great to work with. At the time, IBM reminded me somewhat of the LDS church in that they semed to take care of their own. And something I’d never seen before – it was a workplace that had basketball courts, softball fields, a football/soccer field, tennis courts and a picnic area. Not only that, but the cafeteria food was great and very inexpensive. All in all, I very much enjoyed working there. If it hadn’t of been for a hiring freeze in place at the time, I might still be there.