The news is somewhat less disastrous in that it's because Microsoft had to write down a purchase they made a while ago. So they didn't lose money this quarter so much as acknowledge that they had previously lost a lot of money and put that on their books this quarter.
What's really disastrous, though, is Steve Ballmer's recent comments about how they are determined to compete with Apple on every single front, regardless of whether they have any other reason to be in that portion of the market. This aQuantive debacle is a result of Microsoft trying to do exactly the same thing with Google. With that statement, Ballmer indicated in no uncertain terms that he has learned absolutely nothing from that mistake.
I am not surprised at the renewed calls for Ballmer's head but from a technical perspective he's executing well. Which is to say the company's net revenue against sales is right in line as is their operational expense. Where he is failing though is in the whole 'vision' thing.
That would suggest to me that he needs a better CTO. The closest thing they have is Craig Mundie (yeah I know, you probably never heard of him and that is a problem).
If you take Apple as the exemplar, Steve Jobs was huge on vision but he really sucked operationally, because of that Tim Cook was the 'go to' guy who ran day to day operations.
You need that blend in a company, good manager, good vision. They are rarely in the same person. Combine that with a 'star' issue (which is to say its better if they both don't want to be the person getting all the credit) and the 'trust' issue, which is to say they both understand and respect the others job and allow them the last word on decisions in their space.
When Microsoft had Bill Gates as the 'vision' guy and Ballmer as the 'execution' guy it worked well. Prior to Bill's leaving day to day operations it seemed like none of the other CTO candidates could (or perhaps would) do the job.
My claim is that kicking Ballmer out would pull the company off the tracks financially and that would be bad. But adding someone who had a clue vision/direction wise and could push that agenda through the company, that would help them get back on their feet.
"Steve Jobs was huge on vision but he really sucked operationally, because of that Tim Cook was the 'go to' guy who ran day to day operations. You need that blend in a company, good manager, good vision. "
Who is supplying the vision at Apple now? Ives?
"When Microsoft had Bill Gates as the 'vision' guy and Ballmer as the 'execution' guy it worked well."
If the vision + operations hypothesis is true, doesn't it mean that Apple is now starting the same journey that MS did when they lost Gates? The ops guy is in charge, without a counter balancing visionary.
That sir, is the $64B question. Many people has suggested that without a replacement for Steve's vision, that Apple will be just as likely to end up like Microsoft today, executing against the last known 'good' plan. Sadly it will take a while before "we" (the folks outside of Apple) know whether or not they have developed new talent or leadership to replace Steve.
Steve Jobs originally conceived of the interface of the iPhone as a device that used the clickwheel from the iPod. And Steve Jobs did not come up with the clickwheel, when the iPod was conceived.
One of Steve's biggest mistakes at Apple was probably that he had a really bad habit of taking credit for other people's ideas and subsuming all promotional achievements under the aegis of "Apple" - which inevitably pointed to Steve Jobs.
At the latest All Things D, Cook emphasized how Steve's great feat was to change his mind at any time - which implies that he didn't always come up with the solutions or, dare I say, the ideas. You could argue that he was great at making decisions and keeping focus, but I think there is still at lot of talent and vision to go around at Apple.
I would not be surprised to learn that all of these things you say are true. But you miss what Steve Jobs did, he made them happen. Which is to say that he may have been claiming credit left and right but he looked (from the outside) to be fearless in his drive to get the next product done and shipping. A really fascinating story in WSJ today about Nokia and their smart phone dreams in 2007 [1]. Which if you read the article has this quote:
"If only they had been landed in products," Mr. Elop said of the company's inventions in a recent interview, "I think Nokia would have been in a different place."
And that is so key. To go to production requires a crap ton of work, there are manuals, there are repair strategies, there are warranty kits, there are certifications and approvals, there is testing and injection molding tooling. The list seems nearly endless. Then once you ship the product (unless you're HP apparently :-) you commit to supporting it for 2, 3 even 5 years. That is a Big Deal(tm) and so making that commitment requires Big Decisions.
Now when you are small its easy, you have to ship product to survive and you don't care that you're committing to 5 years of long term support if you're just happy if you still exist in five years. But if you're a big name and a big company you see that investment meaning you can't invest in something else. And if you don't passionately and honestly believe that what is being proposed is or can be the next big thing, you don't dare ship it and miss the real big thing.
Clayton did a much better job than I at describing the Innovator's Dilemma but the essence of what he speaks about is the will to ship. Steve had that in spades and its a rare gift. It can work against you too (see Adam Osborne who announced but shipped late the Osborne Executive as the HBR exemplar of killing yourself).
In light of what came out in the authorized biography, it's sounding like that might not have been the case after all. It's not just that Jobs didn't come up with all the best ideas to come out of Apple over the past decade. It's that, all too often, he was fighting them tooth and nail, and other powerful (if lesser-known) figures at Apple managed to push them through despite.
The implication is that while it might have looked like all great ideas came from one man, that was just part of the carefully-managed public image and the real machine driving it all is a whole lot of creative tension.
I don't mean to argue a black to the Jobs fans' white; as long as the discussion is nuanced, I am perfectly satisfied. Just compare the org chart of Apple to that of Microsoft to see how much they differ.
Cook's job is still hugely significant, but it's too Hacker News-like to reduce everything to a catchy one-liner or word meant to suggest that Apple is in dire straits, when it's more complicated than that.
Don't disagree at all. There is a proverb says that "The constraints of the horn determine its music." This is true for company organizations as well, how a company is organized determines what it can and cannot do. When we moved to the SF Bay Area my wife worked for Xerox and saw that every day. At Sun Microsystems, when the 'portable' launched, we joked "You can make any kind of computer you want as long as its a workstation!"
This. Microsoft has always executed its fully-baked plans very well, and credit should go where it's due there.
The problem is with a lack of a fully-baked overall vision. And the problem is even more so with the combination of undignified heel-nipping and desperate clinging to a zombie vision from the 1990s (most recently re-branded as "Windows Everywhere") that is being allowed to serve as a substitute for a real vision.
More fundamental than that: I think the issue is poor performance management and the well-connected tenured employees that can't break free from decades-old paradigms.
Not having the CEO be the vision person in a highly politicized environment like MS means there will never be a vision person. Good "vision people" (are they smoking peyote or something? ;) don't like to put up with that kind of crap that shackles their ability to make change.
That is the trust thing. Lets say Ballmer anoints Mundie or someone else to 'fix' the overall vision thing. That person then sets down a plan for moving the company forward and if it means that the Office guys have to so suck their thumbs because it won't help their product then so be it.
What happens in these situations is that the powerful subgroup does its sort of machination move and tries to ambush the guy in some meeting or email or something. At that point Ballmer has to basically shoot the ambushers and allow the vision guy to exit untouched with this plan in place, up to and including firing someone on the ambush team. That is how you send the message through the highly politicized environment, you shoot people who try to put roadblocks in front of "your guy" (or gal). It works really well.
However, and its a real problem, Ballmer has to realize he has to do this, he has to get the vision guy on board or promoted, and then he's going to have to shoot some of the political party leaders publicly in order to get the others to fall in line. Now if he can't do that, then he's missing an important skill as CEO.
The iPhone bashing was just pathetic, I remember watching the presentation and thinking that it was going to change everything and then Ballmer responded by talking like a delirious apple-hater and mocking the price.
It is hard to innovate if you are always one step behind and need to shoehorn everything into Windows and Office.
Whoever decided it would be a good idea to make a guy without any engineering or computer science education and just 2 years of experience working at a soap company before joining the company the CEO of Microsoft needs to be fired too.
As I mentioned elsewhere, I would love to see a charasmatic product guy like Scott Guthrie at the helm.
But, Ballmer had nearly 20 years experience running teams in a large and successful technology company before he was became CEO.
Furthermore, the dude has a mathematics degree (with honors) from Harvard. That means that he probably earned an 'A' in Math 55, the hardest undergraduate course at Harvard[1], which implies that he would have no trouble keeping up with most of the theoretical computer science stuff.
I am almost certain that Ballmer did not take Math 55, though Bill Gates did (and supposedly got a ‘B’). Do you have a source citation for that? You don’t have to take Math 55 (a freshman course with 10–20 students per year) to graduate with high honors in Math/Economics. (Which isn’t to say that Ballmer is a slouch: he is clearly very sharp, and was even as an undergraduate.)
Theoretical computer science stuff has little overlap with shipping a quality product and a great customer experience. Microsofts success has always been a combination of "good enough" and cunning yet cut throat business practice.
In the age of the web though, the market will now continue to out step Ballmer and whatever Harvard theoretical math he could throw at his developers developers developers developers.
Dude, whatever you think of Ballmer, he started as the first business manager at msft in 1980 and worked there in roles of increasing responsibility until he was made ceo in 2000. There's not many people with that track record of experience.
In the sense that Microsoft's online division is losing tons of cash and seems to play second fiddle to Yahoo, and their efforts to have any meaningful traction in the phone and music player markets has been futile, then yeah, they're doing great.
Good question. A "qualities" list might be useful. Needn't hit on all cylinders, but most/many would be a positive.
Someone with experience in:
- Software and/or hardware experience, obviously.
- International regulatory affairs. Microsoft continues to face (and initiate) anti-trust issues in the US, EU, and elsewhere.
- Deep corporate/institutional relations. If not from the inside, then on the "working with" basis. Extant large enterprise sales are still a large part of Microsoft's domain.
- Mobile. Devices, form-factors, interfaces, applications, future directions. It's clearly an important space, though I think Microsoft are a bit too obsessed with winning-at-all-cost (and failing as a consequence) in it.
- Entertainment. One of the current growth avenues (and one posited end-game for Microsoft) is in the games and content consumption space. It's one of the few areas in which Microsoft are arguably executing well, especially compared to major stumbles on competitors' (viz: Sony) part.
- Financial services/products. Even in enterprises which are otherwise Microsoft-free, the one standout is typically the CFO or bookkeeper's Windows box running Quickbooks, or other financial software.
Additionally, addressing Microsoft's traditional failing points would be helpful. Platform security against viruses, malware, etc. Hostile industry relations (Microsoft rabidly treats all peers as enemies, and has since very early times). General consumer trust. "Cool" factor (you've got to earn it though). A revenue model that can survive loss of software licensing / corporate sales / OEM. Chronic UI / usability issues -- very hard to address without pissing of existing customers. Relations with the Free Software community. As Bill Joy observed, "innovation happens elsewhere", and as Microsoft is knocked off its king-of-the-hill perch, it should find that being able to share and integrate software really is a good thing.
Things I'm not mentioning: Most prominantly, cloud computing. While I think it will be a part of Microsoft's future, I think it will emerge as something the support out of addressing much of the above, rather than as a primary focus.
I don't know enough industry personalities to put a finger on who's a good fit, but it might be fun to see who comes up.
If Microsoft really wants to compete with Apple they should kill Office on OS X and revoke license for Windows on BootCamp and all OS X virtualization products. Though really they should have done these things 5 years ago. Apple doesn't allow Windows users to run OS X, Microsoft shouldn't allow the other way.
First, how can they revoke a license for Windows on Bootcamp? If I purchase a retail Windows license, I can install it on any PC.
Second, I don't think OS X is the real threat to Microsoft. Sure, the Mac still grows in popularity, but it's relatively marginal. The biggest threat to Microsoft is the popularity of tablets. The iPad convinced people that they can use it for the majority of their home computing. Every time the average consumer buys an iPad it's a lost or delayed PC sale. Imagine what happens when Google gets things right, and the tablet market explodes like the smartphone market before.
Even if Microsoft retains the market they are sliding into trouble. Because they can't extract the high prices in licenses for Windows and Office anymore.
Given how large a portion of business users are now buying / owning Mac laptops and/or iPads, pulling Office from OSX would probably do more to damage that very profitable business than hurt OSX. It would just push more people onto the lower cost Office 365, or Google Apps faster than they've already been going - in particular at Universities and other places where the additional functionality of desktop office is mostly wasted on the end users.
It would be a hell of a lot easier than that - simply revoke the ActiveSync licenses for iOS (and Android).
When I heard that iPhones back in 2008 (and later Androids) were going to be citizens in the Exchange world, I did a double-take... in BillG's day this would've never have been allowed.
Full-on Post-PC without Exchange (especially 4 years ago) would have been a tougher sale.
Why would anyone advocate this? The Office division doesn't need to protect any other division. They should make the best product they can on whatever OS's that are profitable to make it on. Office is a cash cow, they don't need to defer to any other division.
The original Vista Home Edition EULA had a clause preventing it from running on any virtualization product. There was such a backlash over it that they removed it later.
That must be part of the reason apple built iwork. And there would probably be antitrust issues if ms used their near monopoly in office productivity software to aid their declining near monopoly is OS software.
Bing works, in a lot of measures it works just as well as Google search.
Bing may be losing money but if MS keeps it in place, it will be able to capture search if Google just happens to seriously stumble somehow.
MS has an indefinite stream of nearly guaranteed money from the Windows/Office franchise. It makes perfect sense for them to use that money to chase all other high-profit, high-tech markets that other companies pioneer. They've had some successes doing that(Xbox). Apple has a got track record creating such markets so why not use them as a searchlight for opportunities.
What should MS do instead? "Follow it's dream"?
Not every company can be Apple so what can the non-Apples in "consumer computing" do but chase Apple?
I think that Microsoft's big problem has been its Windows fetish. Imagine if Microsoft treated Office as a truly independent business. Office for Android, Linux, and iOS.
It seems to me that Microsoft so desperately craves monopoly power, it is blind to the opportunities simply afforded by making a good product that people want and selling it to them.
> It seems to me that Microsoft so desperately craves monopoly power, it is blind to the opportunities simply afforded by making a good product that people want and selling it to them.
Microsoft will do that when all else fails - IE4 was a wonderful browser.
However, that strategy works well only when you can wait until your competition does a mistake. The main reason for NetScape's demise was NetScape. The main reason for Lotus' demise was Lotus. Similarly for Borland. (Not sure about Caldera and WordPerfect, though).
However, so far Google have been executing very competently. So have Apple (mobile os + hardware), Nintendo and Sony (game consoles). And up until a couple of years ago, even Macromedia/Adobe with Flash (remember Liquid Motion? No one does, but it was MS' first attempt to displace Flash. Remember Silverlight? That's the newest)
Microsoft strategy has been to execute on par with competitor, and wait until they stumble. Microsoft doesn't know what to do against competent execution. So far, it didn't really hurt them.
(Not that I know what to do against competent execution a-la Google, and Apple -- but Microsoft seems to want to be the end-all-be-all of everything software).
"...what to do against competent execution a-la Google, and Apple"?
Give the customer what they want. Do it faster, better, cheaper than Google or Apple. Then print money until somebody notices and starts competing with you.
It's hard to get right, in practice, but that's the theory.
> It's hard to get right, in practice, but that's the theory.
That's not even the theory. That's wishful thinking. Or, it is true in a tautological way if you define "what the customer wants" by "as shown by attaining market leadership".
Also, even if it were the theory, it's as useful as saying "the way to make money in the stock market is to buy low and sell high".
Google's customers (advertisers, mind you, NOT users) want access to users with an intent to buy. Microsoft can't provide or manufacture that.
Apple's customers want something that "just works, does so intuitively, and is what their friends and all the cool kids have". Microsoft does not know how to deliver that. (You can argue about the "just works and does so intuitively", but I would say that they failed, with the possible exception of WP7 -- which I don't like, but is not as horrible as other MS stuff).
I completely agree with you. I'm no Microsoft shill, and unless they can find something that gives them market leadership their dominant position in the market is a big juicy target for all competitors.
Please cite sources for "that's not even the theory." Here's my statement and a source:
That's what I meant by tautologically useless. You might be able to test it for commodities like bread or crude oil, but you cannot for anything remotely differentiable. A recent example:
Apple supplies tablets. There is great demand. Market participants conclude: "If we supply tablets, we can profit of some of that demand". Market is filled with tablets at various price ranges ($50-$700) with various capabilities. Almost none of them sells.
Conclusion: there is demand for ipad, no demand for tablets.
Any theory that requires you to retroactively define your terms is "not even theory" in my book.
The Kindle Fire in particular is selling well, primarily because the Amazon media experience is almost as good as Apple's. I don't think that's tautologically useless: there is a market there, but apparently you need to spend a _lot_ of time writing the software - Apple had a decade to get iTunes to where it is today.
Amazon seems to understand that and has taken total responsibility for the software on the Kindle Fire, to the point they forked Android. I think that's a mistake long-term but short-term they get this one thing: Apple's hardware comes with Apple's software, and it is the combination that is so valuable.
P.S. It took me forever to research these tablets and post this list. The experience of trying to find a decent Android tablet is incredibly frustrating (unless you just go straight to the Nexus 7). The prices are all over the place, which to me indicates junk marked up to catch unwary buyers. The reviews are pretty scathing about poor build quality, unusable Android builds, and horrible customer service. All of that has an effect on the marketplace.
Google is not Netscape or Novell or anybody else that Microsoft can just execute incompetently against and "wait out". Not to mention the fact that "Bing" is just the latest rebranding of MS' search attempts going back many years so they have been waiting for Google to stumble for a while. And if you think Bing is even on the same plane of existence as Google search you are severely deluded.
>What's really disastrous, though, is Steve Ballmer's recent comments about how they are determined to compete with Apple on every single front, regardless of whether they have any other reason to be in that portion of the market. This aQuantive debacle is a result of Microsoft trying to do exactly the same thing with Google. With that statement, Ballmer indicated in no uncertain terms that he has learned absolutely nothing from that mistake.
What a stupid strategy that is. The best defense is a good offense, not copying your enemy movement for movement. With this approach, they're always on the chase and never lead. Bad position to be in if you want to, you know, be the leader.
(CBS/CNN) - Microsoft is in danger of reporting its first quarterly loss in the last 20 years.
The world's largest software company will absorb a $6.2 billion dollar charge stemming from an online advertising service it bought in 2007. Analysts estimate Microsoft earned about $5.3 billion dollars in the quarter that ended in June, so that charge would send the company into the red.
More information about this can be found in their press release [1] from a couple weeks ago. It appears that they are having to do a writedown [2] on their purchase of aQuantive [3]. The original purchase was to be more competitive in the online advertising marketplace when they lost out to Google in acquiring DoubleClick [4].
Unfortunately, there is little information about this will actually affect their financials. The single-sentence blurb from the source doesn't shed much light on the situation.
This is more of an accounting trick then an actual problem. Normally a company would write down a bad asset over a series of quarters to help drive good will from investors. As MSFT is currently preforming very strongly I think they chose this route (The quarterly loss) so that subsequent quarters when they launch their new products , and more specifically the Microsoft surface. They have good comparison numbers.
Microsoft Corp. today announced quarterly revenue of $18.06 billion for the quarter ended June 30, 2012. Operating income and loss per share for the quarter were $192 million and $0.06 per share.
It's weird to me that aQuantive is apparently not viewed as a massive failure for MS, even though they paid billions in cash for it and it's now worthless. But not only that, it was supposed to make them more competitive in a big market and didn't do that at all. So from a lay perspective it seems like that should be a disaster for Ballmer and probably others at MS, but it's being met with an attitude of "yep, that happened, and it doesn't really mean anything".
Analysts surveyed by FactSet Research estimate Microsoft MSFT +0.91% will
earn 62 cents a share on $18.2 billion in revenue, compared with a profit of
69 cents a share, on sales of $17.37 billion, in the same period a year ago.
[...]
At Citigroup, analyst Walter Pritchard said that even with the huge
writedown, he expects Microsoft to report results in line with expectations.
Still, Pritchard said, in a research note, that there are “many moving pieces
in the numbers” from Microsoft, and that the prospects for Windows 8 will be
a big driver of how investors treat Microsoft over the next year.
Microsoft shares rose 64 cents, or more than 2%, to $30.32 Wednesday, and the
stock is up by almost 17% since the start of the year.
I can't comment myself, due to lack of information. We'll all see in four hours.
For the quarter ended June 30, Microsoft reported a loss
of $492 million, or six cents a share, compared with a
year-earlier profit of $5.87 billion, or 69 cents a share.
Writing down a loss on a purchased company is not a taxable benefit at all. They are writing off goodwill and intangible assets which were acquired when they purchased a company, and this has no tax consequences. Maybe if they wrote off tangible assets, they could accelerate the depreciation, but it's most likely that all of the write down is in goodwill and maybe intangible assets.
A mix of desperation, and having no idea of what you're doing. Hats off for Steve Ballmer
Goog payed 2B for DoubleClick right? Funny thing is that "everybody knew" who DoubleClick was, but I'd say it was hard to find someone to have hear about aQ before the acQuisition.
What's really disastrous, though, is Steve Ballmer's recent comments about how they are determined to compete with Apple on every single front, regardless of whether they have any other reason to be in that portion of the market. This aQuantive debacle is a result of Microsoft trying to do exactly the same thing with Google. With that statement, Ballmer indicated in no uncertain terms that he has learned absolutely nothing from that mistake.