The Verge has an interesting article talking about the plans from one of the potential next Microsoft CEO candidates, Stephen Elop. The eye opening line is where he discusses selling the Xbox and Bing portions of the company and focusing on Office on Android and iOS platforms.
A while back one of my bosses from Nikko Citigroup mentioned that (at that time) whenever Microsoft would sell an Xbox, they would garner a loss; half-humorously, that justified my old boss in purchasing one. However, the statement was a sort of in-joke for techies and gamers a like in Microsoft’s long term strategy with that platform. Although the Xbox has been made into a competitive console platform, it really hasn’t dominated the industry the way I feel Microsoft probably wanted it to in the same manner Windows had dominated the OS market in the 90s. The end result is what Elop describes as a “distraction” for Microsoft.
Similarly, Bing is another aspect of Microsoft that probably has slowed them down a lot in trying to fight for internet dominance. The thing is that no one has made significant in roads against Google’s search dominance; as with everything Microsoft, one can only be as suspicious (if not more) about their intentions in using the data collected. But that’s somewhat besides the point.
The message here I believe is that Microsoft simply is just too big at this stage of the game and has lost too much ground to smaller, hungrier and nimbler companies that managed to dethrone their gate over their core product, which is the operating system. Although Windows still remains dominant, other platforms have emerged like Android and iOS and have been able to dominate the mobile market. While I have seen the potential for Windows Mobile, it’s more than probable that it will end up being a case of being too late to the game.
At this stage, I think Microsoft will end up becoming an enterprise level company, something similar to IBM, HP and Oracle. Even if they have tons of cash in the bank, I think they are losing the consumer ground very fast as mobile and the internet go beyond their grasp. Their best product at the moment is Office but there are free options with Google Docs and to a limited degree, Open Office available that can perform at adequate levels. At their current price, Microsoft really is becoming out of reach for the average consumer.
However, Microsoft does have a huge amount of legacy remaining in the enterprise. You still have tons of servers running Windows, C#, .NET code that require the mental hand holding of upper management that Microsoft can supply. Newer companies most likely will stay away from Microsoft related products as their SLAs are still archaic in practice to be competitive against open source software and the numerous choices of the cloud for start ups.
Games too will slowly move away from Microsoft as consoles offer better overall support, PC become less important, mobile increases in power and capabilities and the net evolves the front end. So moving away from the Xbox will help alleviate what probably has been a poor long term investment while, if the Xbox is, indeed, spun off, might do quite well independently.
Then going back to Bing, the real issue there is that it’s always attempted to be a competitor to Google. But it never has tried to exceed it, except on minor features. The acquisition of Powerset I think is what helped try to fuel a search race against Google but no one bothered noticing after the expectations were met with silence. More than likely, I could see Facebook pick up Bing since supposedly they are a major partner with Microsoft. But whatever partnership was formed at that level didn’t really seem to pay off for Microsoft’s side.
Either way, at this stage I think Microsoft needs to be splintered. It’s too big, lacks identity and has a plethora of internal problems from all the reports that I’ve read. Sure, it might be a great place to work if you’re looking for a stable, well paying job. But as an industry leader, it’s become morbid obesity in its own success.
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