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.)