Seriously, those investors are morons. MS has never been a a company that fits the adjective: "lean". MS is practically a post-secondary institution unto itself! MS' far-reaching speculative research is the stuff of legend, and far too infrequently translated into the commercial sphere. Anyone who thinks they should narrow their focus and ignore more of the fruits of their labor instead of less is an idiot.
Well, not necessarily idiots. I'm sure they understand the longer term value of those brands and products to Microsoft. Investors are not necessarily in it for the long-term, though. They might buy a substantial stake, pressure the CEO into cutting valuable (but currently loss-making) divisions, and be looking to sell that stake after a couple of really strong-looking quarters.
None of that is good for Microsoft, but the investors are potentially behaving quite rationally. (if a bit destructively...)
This is the thing that is often glossed over when discussing what investors want out of a company. The primary goal of an investment is to provide a large return in a short timeframe, regardless of what happens after cashing out. Burning up a company's future to inflate short-term profits can be a perfectly fine strategy for an investor. You could argue that the last people who should have a say in how a company runs its affairs are the investors, because they are the most likely to make decisions that are bad for the company.
Microsoft started as business software company, then switched to be a OS company, when this happened, their dev software divisions for example were assigned to support Windows, not develop on their own.
After Bill Gates left, that Ballmer tried to do several things at the same time, resulting specially into a Windows division detached from everything else, MS stopped making good games for windows, stopped making tools specially geared to windows (tools obviously still work, and depend on windows, but Visual Studio team is not a "windows API" team anymore, and a team on its own, with its own profits and vision), and so on.
Then they alienated windows costumers with a insistence in driver changes and creating shitty drivers (like... Xinput, instead of using the still much better Direct Input). And the destruction of some of their most popular services (ie: MSN Messenger, in Brazil people used solely the MSN Messenger to communicate, and mostly on windows, MS killed it in favour of Skype, and shot themselves in the foot HARD, because Skype is crap, and so people use other stuff)
Then they alienated Xbox costumers with the shitty Xbox one (less power than PS4, more expensive, and their headless chicken policy decision making).
They don't have a choice now, the only stuff that they are STILL making right is the business software side, everything else (costumer facing windows, xbox, mobile, games, etc...) became a sort of trainwreck.
Going "lean" on the business side, and later rebuilding the other side is possible, but trying to fix everything at once I think is much harder.
The fact that they turned the product in to horrific ad-riddled bloatware killed MSN Messenger. Facebook chat and instant messaging in mobile, where MS may as well not exist, twisted the knife.
Still, the MSN Messenger client (specially in Brazil, where many people still used Windows XP, and thus by default had to use older clients with less ads) was still much leaner than Skype
I am actually considering uninstalling Skype until I need it again for a job or something, because it makes the boot process MUCH slower, and I don't even log on it ever (I just wait it to launch, and then close it again)
I refused to install Skype for work, pointing out that it's not as secure as it's alternatives. Plus the fact it's disrupting, crappy software and you still can reach me by email, phone, VPN or walk down the hall to my office.
Microsoft has never made a profit with Xbox. In fact, they've only lost billions of dollars on it, and the chance to recover them isactually smaller than it was for Xbox 360, not just because I think Sony has a stronger showing this time around (and at a lower price to boot), but because I don't think the new consoles have a life bigger than 5 years in them.
Listen, I'm no fan of Microsoft, but those investors better keep their hands of the ergonomic keyboard product line, or I'll... I'll... probably have to stockpile them?
Seriously though, the ergo 4000 is the best keyboard I've ever owned and I'd hate to see it gone by the hand of somebody who just doesn't care enough.
Not yet, as far as I know. I just wanted to point out that, if they are willing to axe the Xbox or Bing, an unimportant but great product such as the ergo 4000 could be killed any time.
I feel like making a u-turn to be "all in" on enterprise is the wrong move and just delaying the inevitable.
Computing devices are no longer bought in large numbers by exclusively big businesses. The iPhone has shown that business customers go home, buy consumer products, love how much better it works than what they use at the office and want to bring it to work. The recent data on mobile device sales compared to Windows PCs is especially damning.
Secondly, Google, Facebook and the rest of "new tech" industry is not built on MS tech. What is actually enterprise? Size? If a gigantic company like Google can crunch all that data and have such amazing uptime without MS tech, then who needs MS? Every year a new generation create their own startup and they choose anything but MS. To me, enterprise means established, old and slow. If all the old guards will be disrupted and die out like I think they will, then MS will have no one left to sell to! Increasingly even the old guard is messing around with Linux and OSS in order to be more agile.
Consumer is the future and MS needs to embrace it or die. They just have to stop making mistakes like Windows 8.
"Consumer is the future and MS needs to embrace it or die"
Google and Facebook may be huge, but as a percentage of the global economy they are still pretty small (e.g. look at the Forbes Global 2000) - the enterprise world is everything all those other companies need to operate and it's the world of IBM, Oracle, SAP and Microsoft and thousands of specialized ISVs.
I'd be rather surprised if Google or Facebook wrote their own consolidated financial reporting or payroll software (indeed Google seems to use Oracle Hyperion FM for consolidated reporting and planning, as does Facebook).
At the moment, Microsoft has some pretty decent enterprise products, but they only sell them through partners - one possibility for growth and really focusing on the enterprise space would be to emulate IBM and focus on services and products - either by greatly increasing the size of their existing consulting arm and/or buying a few of the existing large service partners.
The decline of the desktop and rise of the tablet / smartphone / wearable computers forces enterprises to have heterogenous systems that can support these platforms. It no longer makes sense to have a Microsoft only solution in the longer term.
Bing and Surface I can understand to a degree, but they want Microsoft to kill Xbox, one of their strongest brands, and one of Microsoft's only hopes for differentiation? For what, to chase the smartphone game or something?
The $2.5 billion per year figure is of course beyond silly. That'd be $20+ billion, off of 80 million consoles, or $250+ per console (an impossible figure right off the bat; their per unit losses from day one were lower than that).
$3 billion in losses over eight or nine years is irrelevant, literally, to Microsoft's fiscal picture. They have $84 billion in cash, and are compiling another $25 billion every year. Their ability to stay in the game financially, has helped result in the death of Nintendo when it comes to hardware, eliminating a big competitor. Microsoft can fund these losses forever so long as there is a good strategic reason for it (Sony on the other hand cannot).
Why should MS invest in hardware, when PC's offer better hardware, run the windows store to share profit with MS and have good enough DRM(as steam shows, and might even be improved by working with pc manufacturers) ?
Most likely in the future, MS will do something similar to steam - just sell software for so called "consoles", and have hardware partners. That will help with the losses issues.
I think there's a case for MS to make hardware either to show what top notch PC kit looks like or a cheap minimum to stop OEMs pumping out worse than that.
MS don't need to make the consumer device everyone has they just have to force OEMs to not make piles of crap. In a way I think intel kind of own how well MS can perform with hardware. If they didn't push utlrabooks I don't know if we would have gotten anything in the pc space as well built as some apple kit.
I honestly don't know, especially with Valve's Steambox on the way. It was a losing fight from the beginning, and this generation is already doomed right from the start.
"Morfit is a 37-year-old activist investor whose employer, the private hedge fund ValueAct, acquired a 0.8 percent stake in Microsoft in August. That was enough to put Morfit on the board."
Slightly OT, but how does owning < 1% of a company's shares qualify for a board seat? Can someone who knows about these things enlighten me?
> Slightly OT, but how does owning < 1% of a company's shares qualify for a board seat? Can someone who knows about these things enlighten me?
That's easy to explain:
1. Corporate boards should show a fair representation of the largest stockholders.
2. For a board with 100 members, it should be apparent that anyone with more than 1% of the corporation's stock must be given a place on the board. But this only makes a point and isn't a typical board -- 100 members is unwieldy.
3. Another case is one in which the majority of the corporation stock is held by many small investors and there are only a few majority stockholders. In this case, someone holding more than an individual investor but less than the majority investors may still earn a place, even on a relatively small board.
4. Another way to describe this is to take the number of board seats and distribute them among those individuals who hold the largest stock holdings, in declining order. For example, let's say there are ten board positions, five majority stockholders and a pool of smaller investors with quickly declining stock percentages. In this case, a stockholder with a very small stake might acquire a position on the board simply by being counted among the ten largest stockholders.
At 300 billion market cap .8% = 2.4 billion investment. It seems ValueAct demanded changes from the management and they could argue they represent the vision of also other (activist) shareholders.
This is about the myopic quarter to quarter focus on profits by the market, the stock market in the last 30 years has been increasingly unable to to focus on the long game - if it does generate income or profit by the next quarter, its rubbish.
This attitude has wormed its way all through the economy, its part of why its hard to get a company to promote from within - they expect their employees to come from the outside with all the tool/skills/knowledge to hit the road running - even if they are at a significant disadvantage in actually understanding a companies operations. It used to be you could get an entry level job and company X, and expect a regular set of promotions up the chain, now, to get that promotion, you need to go work some place else almost.
> This is about the myopic quarter to quarter focus on profits by the market, the stock market in the last 30 years has been increasingly unable to to focus on the long game - if it does generate income or profit by the next quarter, its rubbish.
I've seen this sentiment about the market like, forever. Yes, I've been investing in the market for 30 years.
But I seriously doubt that investors are so stupid. If they were pushing up stock prices based on quarterly results and the long game be damned, then where are all the smart investors shorting those companies? Are you making money on shorts?
And, why are there companies like Amazon with enormous P/E's? Clearly, investors are playing the long game with them.
You sorta made my point for me. My argument is that the market wants quarter to quarter growth over stability. There are many industries that are stable, generate lots of revenue, are profitable, but do not generate high stock prices because of no growth, like:
My argument is before the mid 80's - the focus was on the dividend not on the stock price itself, IMO, buying and selling based on stock price, rather than earning disbursed to shareholders, is merely speculation, rather than investing.
The focus on dividends vs stock appreciation is driven by the difference in tax treatment of the two. Tax policy has alternately favored one over the other, with the predictable resulting shift in investor focus.
Saying stock purchasing anticipating future growth in the stock price as "mere" speculation is very incorrect. A company can choose to issue a dividend or repurchase stock (thereby pushing up the price), these are economically equivalent. The choice is made based usually on tax treatment.
I'm not too convinced this is due to short term thinking: if you're a short-term investor you still benefit from a company using a long term strategy because you can just sell the stock.
That's not going to happen anytime soon. Especially for Bing which powers not only the search website but many other Windows infrastructure in the background. With the Surface, even if it doesn't make any money, it serves the purpose of showing OEMs what they could/should be doing (much like with Google Nexus devices). And Xbox... they will be holding on there for as long as the whole console industry can (same for PS4).
We are going to see all Microsoft stakeholders (from investors to employees to managers) try their hand at the new CEO. No surprise the first movers are some investors, they're greedy and in just for the money.
That's completely different. OS X is not really free, the same way iOS is not free. It just comes bundled with the hardware and you get updates till the EOL of the product.
Killing XBox brand and not killing Windows Phone? I don't understand. WP8 is getting numbers hugely thanks to very cheap Lumia 520, which, to my understanding, is barely generating any profit or is even generating loss. And even then I haven't seen anyone who said "Wow, this is great, my next phone must have WP in it!"... a priori fanbois aside.
I wonder if they could sell Xbox to Lenovo for $huge. I don't think consoles are going to do very well this time -- mobile gaming killed the market for 'people who will tolerate lower spec hardware because it's convenient', and IIRC the PS3/360 were better relative to $2k PCs when launched than the PS4/Xbone are today relative to $2k PCs. The PS3/360 have been pretty mediocre for years, so the PS4/Xbone are going to get mediocre in a couple of years, so there's a long period of ugh ahead.
Media convergence is the only reason to keep the Xbone business, but if Microsoft focuses on Enterprise (or at least "work"), that doesn't matter, either.
It doesn't make a lot of sense for Microsoft to kill XBox. Killing XBox would mean throwing away a successful line of business that is finally generating substantial profit after nearly a decade of investment. It would also be terrible for morale at the company. Here is a scrappy part of the business that went into a market where Microsoft was laughed off when it entered: game consoles. And after a dozen years, they've gone from last-place losers to a dominant, #1 position with the XBox 360. If the reward for this victory was dissolution and abandonment, then what motivation would there be for anyone to do any kind of innovative or disruptive work at Microsoft?
Killing Surface may be premature. As far as I can tell, Surface Pro 2 is currently out of stock basically everywhere.
Windows RT, I'd be happy to call that one pretty much dead anyway. Unless they can figure out a way to get full windows apps running on ARM devices, I don't see the point. Intel chips are going to improve in performance and battery life to the point where they are nearly comparable with ARM (or at least to a point where it matters). Then, the argument would be mute and we won't be making a decision between RT and Full Windows.
Bing, I'm not so sure. I actually quite like Bing, but I don't see where Microsoft is going to make a huge impact with it.
XBox, I can't believe they're loosing money on it, particularly after the huge success of the kinect. Either way, it's Microsoft's ticket into the livingroom.
I don't own a surface, but I think future version of the Surface might end up being a very good product, and thus profitable.
I imagine the next version of Surface being 1/3 lighter, 1/3 less expensive, and I am likely to buy one, even though I don't even own a Windows device right now.
Off topic: the new lighter iPads are awesome. A very light weight bluetooth keyboard cover that is designed by Apple and is extremely thin and light weight would potentially eat the Surface's lunch - for users who don't specifically need Windows applications.
I don't think many would miss Bing, but killing off the Surface, Windows Phone, and especially the Xbox, to focus on being another Oracle? What a pair of fuckwits these moron 'investors' are! I can think of no better way to give a company like them a slow 10-20 year death. Somebody should fire these poison shareholders.
Hardly. PC gaming was big before the Xbox and one could argue that the platform would be actually better off without it: a lot of PC games are shitty console ports or just crippled in general because the low-end hardware of these consoles.
And the "next-generation" doesn't look better either. Console hardware is already outdated right out of the gate, the second half of their generation will be painful.
"I rather use C++ than being stuck in .NET 3.5, without any more modern C# goodies" - I use all modern C# features with XNA - what is the issue (except for async/await maybe)?
"I guess one has to decide if they want to make a game or a game engine" - exactly, but there should be a choice. XNA being a framework rather than engine provided such a choice in a high-level way.
> Regardless how much XNA was praised, it was a indie only thing.
The majority of professional studios still use C++ based engines.
Unity is the Microsoft's endorsed replacement for XNA, as announced in the Visual Studio 2013 release keynote.
Doesn't matter. Goodwill is important, Microsoft is big enough they can afford to maintain 1 library.
They have a bit of right, though. Bing is just downright horrendous, Xbox is a not-so-good tier compared to other consoles in the sector. They need some optimization with allocating resources and offering services.
With Amazon and Google finding some success in diversifying their offerings, one must posit if this is what companies need to do to remain competitive and sustain. Leaders lead!
Well Microsoft got XBOX wrong two times in a row. So no surprises here. Only the first XBOX was good console IMO. XBone and 360 were disappointments [1].
Surface is also one of the products Microsoft almost got right - there was real interest on windows on ARM at the time. But full windows.
And Bing - well its only advantage over google is the turned off content filter.
> [1] Owned 360 for 5 years, played 5 hours on it.
so because YOU only played 5 hours on YOUR 360, the console was a failure?
Let me counter your anecdote with one of my own: The XBOX was a disappointment and the 360 was a good console. Reason: I played much more on my 360 than the original.
The 360 was around for a much longer time than the original and there were many more games made for the 360 than for the original.
If you don't believe that to be enough, there were 24M original xboxes sold, compared to 80M xbox 360.
The run of X360 was almost twice of the Xbox. Correct for that. Also PS2 shipped 150 million units by which metric the whole 7th gen was disappointment because PS3 and X360 managed to ship slightly more combined.
But yes - 360 was a failure. We got stratification of the published, ballooning budgets, total homogenization of the games. Every abusive trick ever from publishers on the consoles, red ring of death, needlessly complicated online survives (the whole MS points crap), XBOX live gold subscriptions and the console barely broke even at best from every report I have ever read. The decision for the HDD to be optional was "brilliant". The first few revisions of the hardware were poorly made. Instead of the ugly but perfectly cool able and boring xbox we got something elegant, pretty, noisy and overheating.
Seriously, those investors are morons. MS has never been a a company that fits the adjective: "lean". MS is practically a post-secondary institution unto itself! MS' far-reaching speculative research is the stuff of legend, and far too infrequently translated into the commercial sphere. Anyone who thinks they should narrow their focus and ignore more of the fruits of their labor instead of less is an idiot.