"Microsoft's execution in mobile has been excellent".
This could not be farther from reality. Microsoft has consistently lost money in the mobile market, to a point they are ashamed of it, and don't even give sale figures for the Windows Phone OS anymore. Profits from this business unit is reported in the "Entertainment and Devices" unit, which has turned a loss this quarter, again, of $229M.
The only argument the author makes for claiming Microsoft's execution has been excellent is that "Windows Phone 7 is really good". Well, guess what? It may or may not be true that Windows Phone 7 is good, but it takes a whole lot more than a good OS to make a profit. You need to establish a community of developers who will write apps for your platform, you need to create an easy-to-use market place for end-users, you need to talk to phone manufacturers to make plenty of phones running your OS, you need to make deals with carriers to sell your phones, etc.
Microsoft has failed at most of this, hence their financial losses. Microsoft's execution in the mobile market is, so far, a failure, and Ballmer is partly responsible.
Exactly. Microsoft has been sitting on the smartphone market. For. A. Decade. And they took that commanding lead and had their lunch eaten overnight by iPhone and Android. It took them NEARLY FOUR YEARS to respond to the iPhone with Windows Phone 7.
Yes, WinMo 7 is a good product as far as platforms go, but it may not be good enough to catch up. They still have a lot of catch up to do with the marketplace and the ecosystem and with courting developers and manufacturers to their cause. They need to be making dramatic plays at this point, but they're not. When MS needed to bootstrap the XBOX gaming ecosystem they went out and straight up bought gaming companies, bringing Halo (one of the most popular game franchises in history) to their platform. When Sony needed to rescue the PS3 from a poor game library they bought media molecule and made Little Big Planet an exclusive title, among other purchases they made. Both companies also did a lot more to encourage developers to make games for their platforms. WinMo needs to make the same sort of efforts, but they haven't.
Meanwhile, look at the state of hardware. The best Windows Phone you can buy is 2 to 3 generations behind the state of the art relative to the iPhone or Android. You can't expect to push single core WVGA phones into a market where 300+ dpi screens, dual core CPUs, and a gig of ram is rapidly becoming the norm.
Even if we were to accept the notion that Windows Phone was the best mobile OS on the market the overall experience of using a Windows Phone (which is heavily influenced by the apps and games available, the speed and quality of the hardware, the quality of the screen, etc.) is not even remotely the best. Similarly, while Google and Apple have been adding new capabilities, better performance, and new features to their phones by leaps and bounds with each release, the Windows Phone has comparatively stagnated.
And there's every indication that each one of those gaps will continue to grow wider over time. Microsoft managed to catch up just barely by putting forth a concerted effort, but if it takes such a diving-catch sort of effort to continue to catch up at every step in the future then they will invariably miss on a few occasions and fall behind for good.
This isn't really an issue that you can take an extreme on. Even in relative "failure," Microsoft has executed correctly in mobile.
Actually, their execution has been way better than I would have expected. It is losing money, sure, but short term losses are not important when you're talking about entering a market as large as the mobile phone market after the existing players are firmly entrenched. The traditional metrics of success only matter after you've been successful.
No, they didn't. Over the course of its life, the XBox brand is still billions in the red. It only started turning up a relatively small profit a year or two ago. It has a long way to go before anyone should consider it successful.
The problem with consoles is that there's no brand loyalty (except for Nintendo). It only takes 1 bad console for an established player to vanish, and 1 good console for a newcomer to succeed.
Xbox live might be changing that, but it's still waayyy too early to call it either a success or failure. Though, certainly financially, it's been a small disaster so far.
I won't make any judgement on leadership, and want to just point out this fact. A peer of Microsoft is succeeding very well in consumer electronics, meaning Microsoft could potentially as well and would become insanely successful (big profits beyond enterprise). Disclaimer: I work for Microsoft and so would love for them to realize that potential. I'm sure it is much more complicated than "replace CEO" to get there.
Everyone on this thread has to realize that they're effectively rebooting with Windows Phone 8 later this year again.[1] Maybe not to the degree of WinMo -> WP7, but it's certainly another disruptive (to the app devs) refresh.
As far as I know, they have yet to disclose the full developer story around WP8. We can certainly speculate, but I doubt they'll do anything too disruptive or they'll risk losing the small amount of market they've worked so hard to gain.
If you consider the Windows Phone line to be merely the next iteration of Windows Mobile, then, yes, thus far it has been a complete failure.
But I don't think that's a very holistic viewpoint. Despite how terrible Windows Mobile was, it had a good hold of the market until the iPhone came along. It wasn't really a "failure" until it started declining in 2008. Microsoft's response, Windows Phone 7, was a complete reboot of their mobile line, and we have yet to see how it will perform in the long run.
What I expected was for Microsoft to react as quickly to the iPhone as they did to Netscape. They didn't. Google did that however, and today Android has a chance at getting the 80% market share that Ballmer talked about when he laughed about the iPhone and said that he was pretty happy with their efforts in the mobile industry (Windows Mobile).
Not seeing what they were up against with the iPhone was not "executing correcly", it was incompetence. The same kind of incompetence that is killing Nokia today.
In order to dominate the mobile space now, Microsoft has to not just make something comparable to iOS and Android, they have to out-innovate them.
> It is losing money, sure, but short term losses are not important when you're talking about entering a market as large as the mobile phone market after the existing players are firmly entrenched.
I think the point on mobile is that Microsoft itself was a well-entrenched player in mobile, and they laughed[1] while allowing that position to get completely eroded by less experienced competitors.
It's true that after that happened, they've seemed to build a pretty good project in Windows Phone 7. But I don't think it's really accurate to start the scorekeeping so recently.
They've managed to avoid electrocuting any of their users. Other than that, if they've done anything "competently" in the mobile space, I haven't seen it.
Look at recent US (and global) adoption rates of Windows Phone [1]. It's increasing, and with Nokia and their Lumia phones it is bound to continue. WP7 is a good OS, and more and more developers are backing it, and consumer satisfaction is excellent, and more and more people are starting to realize all this.
"Market research company Kantar WorldPanel has revealed in the last 12 weeks to mid-April Windows Phone has shown strong growth in the 7 major markets they monitor on the strength of Nokia’s offerings.
In 5 of the 7 markets (Germany, Britain, Italy, France and United States) Windows Phone market share is now in the 3-4% range, up from less than 2% in January 2012. In Germany Windows Phone market share more than doubled year on year to 6%.
In contrast RIM saw its US market share collapse to just 3% from 9% a year earlier, suggesting Windows Phone may have matched or even passed RIM’s market share in USA.
Kantar has predicted in January Windows Phone market share may hit 10% in Europe in the second half of 2012, and it seems to me with more Windows Phones being announced all the time that this may very well be achievable."
1. The "marketshare" that is referenced by Kantar is new sales marketshare, not overall marketshare. Its an important difference to point out.
2. Even with these gains in WP, iOS and Android are seeing similar absolute gains (e.g. in the 2-3% absolute marketshare growth). All WP is currently doing is taking a small piece of the symbian/BB pie
3. Given Microsoft's track record, the problem with WP is how long it takes for them to release a new product. Mango was what WP should have been initially, yet took a year to release. By the time WP8 is out, we will be looking at iOS6 and the Android version AFTER Jelly Bean.
Overall, I believe WP will not go away, but will stabilize at around 5-6% overall marketshare. The problem then is that given Microsofts development costs, they will continue to lose money. (Just look at Bing vs Google and even with 30% of US search shared, Bing loses billions of dollars a year)
"The "marketshare" that is referenced by Kantar is new sales marketshare, not overall marketshare."
The point is that the number of users of WP is increasing at a fairly decent pace. The most important thing is that people are using the phone.
"All WP is currently doing is taking a small piece of the symbian/BB pie"
That seems very difficult to prove and I don't believe there is anything out there that states this. I know several people who switched from Android to Nokia WP phones, and several more that are intending to make the change. This isn't proof necessarily but I could see it happening.
Concerning #3: It's hard to say what the first version should have been. The iPhone didn't have many of the "standard" features either in version 1. The main question is whether the pre-mango version hurt or has helped Microsoft's cause. The fact that they've had the phone out there for a larger period of time I would think would be a positive thing, being that they've had so much more feedback as a result.
"Overall, I believe WP will not go away, but will stabilize at around 5-6% overall marketshare. "
That's reasonable, however I'm curious why you believe this? You don't believe many Android or iPhone users would be interested in switching?
I think people are also conveniently forgetting that the first Windows Mobile reboot was ACTUALLY the Kin. Its funny to look back at it now, but the Kin cost Microsoft 2 years as well as a ton of talented engineers.
Just imagine what things would be like if WP7 was released when the Kin was ... it probably would have been even earlier than that if they had focused all of their effort on WP instead of fragmenting the company (and causing a ton of internal strife) between the Kin and WP. We would be looking at a much different situation right now.
Can you give us a realistic game plan that starts with the iPhone launch & WinMo6 and ends better? After iPhone excellent execution gets you failure, that's just the current state of the market.
They've made awesome deals with companies like HTC, even convincing HTC to pay them $15 for every Android phone they sell, etc.
They've pretty much got Nokia on lockdown almost exclusively WinPhone7.
"They've made awesome deals with companies like HTC, even convincing HTC to pay them $15 for every Android phone they sell, etc."
Suing hardware companies like HTC is not "convincing" them of anything. It's strong arming them using "software patents" (aka. patented math) because they realized they were losing. I believe I read somewhere that microsoft makes more money from suing manufacturers over Android than they make on their own mobile platform/software. Seriously... WTF kind of business plan is that?
Can't innovate and make something amazing? Just sue the company that does!
1. Start working on the reboot immediately, rather than dismissing the iPhone as a fad for over a year.
2. Include at least some source-level backwards-compatibility so existing developers don't have to start over from scratch, even though the foundation is changing.
3. Be nicer to your existing OEMs (early OS access/input, wider hardware support, skip royalties for a year or two, etc.)
1-3 are just about cutting off the next potential disruption (which, in this case, turned out to be Android) off at the pass. To be successful in mobile, Microsoft didn't have to beat the iPhone. They just needed to defend their position against everything else, which they spectacularly failed to do. There's also:
4. Don't buy Skype or if you do, give up on carriers and work on direct-to-consumer (and direct-to-business) "Skype smartphones" using data-only SIMs.
A realistic game plan would be for Microsoft to immediately recognize iPhone as a threat and immediately start improving or rewriting WM6, just like Google did with Android.
Remember, Android looked more or less like WM6 and Symbian before the iPhone was introduced, and you can hardly call Android a failure today. Basically, Android is exactly where Microsoft would have loved to be with WP7, but it's pretty much not going to happen now unless they pull a bunny out of a hat with WP8.
Balmer's and Gate's 9% ownership stake allow Microsoft to be organized into a divisional structure along the lines of profit and cost centers. Wall Street can fuss and fume about Online Services or Entertainment and Devices quarter after quarter but Balmer is free to run them as the massive R&D organizations which they are (e.g. field testing of Kin, development and support of Metro, and social graph construction via Xbox Live).
Windows Phone 7 is a field test of the technologies which allow Windows on ARM to scale. Five years after the iPhone Microsoft has a competitive OS that scales and is robust enough for their enterprise customers.
Balmer understands that Microsoft's success in the consumer market segment comes from treating those relationships as B2B by providing long term support - my 8 year old laptop still gets OS updates - they sell on improvements not by breaking systems into obsolescence.
Windows Phone 7 could have the slickest API, the best hardware, the largest numbers of users, and the most developer and customer-friendly application market and I would still resist making apps for them. This is a company that has a long and storied history of sitting on their ass and doing nothing to push the state of the art, once they've captured market share. Their mobile strategy over the past decade is itself a good example of this. And it isn't like there has been some big culture shift over there that might put the lie to this, either. In fact it seems to be getting worse.
(Although, in fact, if they were to pull off all of the above without e.g. first buying Samsung or some bullshit, my opinion of their capabilities and culture might need some reworking at that point.)
Unless you're really exciting by the prospect of developing for Windows Phone 7 for the next fifteen years, you should be glad MS barely qualifies as an also-ran in the smartphone game, and hope that never changes.
"Microsoft makes an endless quantity of software that is alluring to big businesses, like Office, SQL Server, Exchange, SharePoint, etc..."
Let me offer some perspective on this. I worked for a number of years as a programmer at a large (read: "enterprise-scale") entity. Being in closer physical proximity to the general workforce than our IT department, I was often the go-to guy when employees needed tech support.
And one thing I learned is that Microsoft's overcomplicated software saps countless hours of productivity from organizations. I shudder to imagine the salary dollars that go to waste every day as people search for a certain button in the Outlook interface, fiddle with Word's quirky indentation logic, try to set up mail forwarding in Exchange, and panic over the "lost" (actually hidden) rows in their Excel workbooks.
If I were running a BigCo, I'd avoid exposing my regular employees to MS products. If my DBAs wanted to use SQL Server, ok, no problem. When it comes to software that is purely internal to the tech department, I'd trust their decision. But if I would never force my marketing department to do all their mail and calendaring with Outlook, unless of course I were willing to accept the inevitable productivity hit.
After using Lotus Notes and Open Office, and trying to use Google Docs to make presentations and write reports, I have nothing bad to say about Microsoft Office anymore.
p.s. try inserting a nice video into a presentation made using Google Docs, and decide if you'll be happy showing said presentation to your clients.
The stock market is all about the future, not the past. A lot of people see Microsoft's future as being less profitable than its past. That's why people belittle it.
Microsoft makes a ton of money, no one will deny that, but they make less money than they used to. It's funny how the OP shows the financial numbers for one quarter and says the "the trend here is clear". You can't determine a trend on one quarter, you have to compare to other quarters.
"Their stock price is flat only if you don't include the dividends they've paid out."
You have that backwards. If people think a company will pay out big dividends, then they bid up the price of the stock. That Microsoft's stock has remained mostly flat despite good dividend payments suggests that the stock would have plummeted without the dividend payments, and it will plummet if the dividend payments stop.
A flat stock price despite good dividends suggests weakness, not strength.
Buyers will only bid up if they expect the dividends to increase without compromising the ability of the company to pay further dividends, or if the dividend is paid out with an asset that is currently worthless the way it's being used. It's really no different than growth stocks -- they are bid up with the idea that the last owner of the stock will ride it out in dividends until the final sale of assets.
Neither is it entirely non-efficient nor non-rational.
Obviously, the stock market isn't about the actual future -- nobody knows that.
It's about the expected future, calculated in a pure informational way.
The price = the market's overall evaluation of all currently available information. Obviously it's not perfect, but the point is that if you know better, then you ought to be in investing, not programming, because you'll make a lot more money.
If your life savings is invested in one undervalued company then sure, that's pretty risky. If you happen to have a portfolio spread amongst many undervalued companies, then I'd love to be in your shoes no matter what people quote at me.
That's incorrect, your looking at profit margins and not actual profits. Profits have actually been increasing every year in the last few years (except in 2009).
>Also, their stock price has been basically flat for 10 years. That tells you what the market thinks of Microsoft.
If you consider MSFT stock price to have been flat over the last 10 years, then the market itself has essentially been flat over the last 10 years.
MSFT stock is up 20% over the last 10 years.
The S&P 500 is up 26% over the last 10 years.
That's not that big of a difference when considering (1) the immense volatility that we gone through over the last two boom and bust cycles and (2) some large portion of that 26% S&P 500 gain is Apple's 100x increase in split adjusted stock price.
Microsoft isn't beholden to the stock market in the way Google or Apple are. The two largest shareholders are Gates and Balmer. They have about 9% of the company between them - that's more than the three largest institutional investors.
As part of Dow Jones Industrial Average, many index funds have to hold Microsoft stock and have a strong disincentive to create turmoil which might drive the price down. Unlike the tech stocks to which they are often compared, Microsoft pays dividends which keeps the stock price lower.
As for the stock market being the future, that future is based on speculation about the next quarter not long term innovation.
Jobs sold his founder Apple stock in the 80s (except for exactly one share), and I don't think he ever amassed very much of it after he came back, definitely not enough to be considered a major holder.
>The stock market is all about the future, not the past. A lot of people see Microsoft's future as being less profitable than its past. That's why people belittle it.
Google's stock is worth less than what it was 4 years ago, it has also basically stagnated.
> but they make less money than they used to
No, they make more money in absolute terms than they used to. Their margins went down because they're investing more in mobile and tablets.
Forbes named "worst CEOs" based on one pretty clear criteria: These CEOs have failed to create value (or stopped creating value) for their shareholders over long periods, yet remain employed, and their companies remain pretty large.
GE has underperformed the S&P by 40% since Immelt took over, Microsoft by 30%, Walmart by 40%, and while both Lampert and Chambers created value for a while, their companies have substantially trailed the market over the last 3 and 10 years, respectively.
Ballmer is perhaps guilty of inheriting a growth company just as it stopped growing, but you can't deny that Microsoft has essentially stopped growing under his watch.
First - my point was about shareholder value. That has been depressed substantially since he took over, on a market relative basis.
Second, It was the largest company in the world when he took the reigns. He's been the boss for 12 years. 9% annualized revenue growth and 6% annualized earnings growth doesn't strike me as astronomical, particularly when people were calling for 25% annualized growth for MSFT in 99/00.
Again, you can argue that Microsoft was overvalued when Ballmer took over (and you'd be right), but the point is that even on the basis of fundamentals, his performance has not been outstanding.
I used to work for Microsoft, and while I now work for a "cooler" company, it's good to see people doing some actual analysis about it instead of blind M$ bashing.
I used to work for them too. The atmosphere just got worse with every passing year. I don't think Ballmer's done anything to rejuvinate the culture. It just keeps getting more cutthroat and political.
Well said. It's amazing to see high level publications bashing Microsoft without even mentioning their hugely successful set of offerings for enterprises, and the impressive speed at which they're building the Azure services platform. I never bet against Microsoft.
It's true there's much to be learned from microsoft on commercially successful platforms. They began with BASIC interpreters - a platform - which became a standardization across machines, to the extent that manufacturers boasted they were Microsoft BASIC compatible.
Then, their insight that DOS was important. The original PC had a choice of three OS's - MSDOS was cheapest. Start at the low end, as the article says.
Perhaps one reason they failed where iPhone succeeded was that the iPhone initially wasn't a platform. There was no appstore, you couldn't actually run apps on it, only those built in. The original iPhone was an app, not a platform - and it seems likely that that's what was needed to create that market. Of course, that doesn't excuse MS from not playing catch up as fast as Google did.
But Ballmer really is clueless. When I was at Techcrunch, we were preparing for an interview with him a couple of years ago and decided to throw in a couple of fun questions. Mike and I were both Age of Empire fans, so we decided to bring up the gaming division and ask why Microsoft got rid of Ensemble Studio's.
He had no idea what we were talking about. Here was a major company decision that affected millions of customers world wide and it was obvious that he didn't know what we were talking about because he gave a generic 'sometimes you have to make tough decisions' answer after a long pause and no real explanation.
When it came to asking about anything else, such as Google, he would ramble on for minutes about how they suck. Nothing deep, all just threats and insults about how Microsoft are kings.
The problem is that all the smart people at Microsoft have left. The guys who could steer the company through the technology space - like Gates, Ozzie, Allard, etc. These guys were visionaries, Microsoft is now run by MBAs. The Ballmer group of business guys forced out the smart geek kids and are now running the camp. It has gone from being a leader to just reacting to competitors and then ranting about them.
Microsoft makes a killing in the enterprise services market (aside: where, arguably, quality and user experience is less important than scaleability, end-to-end services, and feature set). The problem is that the latest round of technology (mobile, gaming, etc.) is not enterprise in the least. For an example of enterprise thinking failing in recent years, look no further than Research in Motion.
Businesses will always have their own set of problems and solutions. As Dustin points out, this is very profitable. But I think the line between enterprise and consumer software (and hardware) is blurring to the point that there's not a clear delineation. If you can't be attractive to the consumer market, you're going to start seeing other people eating your lunch in the consumer market (see also: rise of iDevices in corporate IT shops, entrants like Google and Dropbox, etc.).
Microsoft throws its legacy weight around, which counts for a lot. And they have some genuine good products, which counts for a little. But, IMO, their progress moving forward is more hindered than helped by Ballmer.
One thing could be sure is that he's business man, not really a product man, and hundreds of miles from a technology man. The problem of this is, he can't really manage his reports because he has no real idea of what they are doing, and what's going wrong. Jobs isn't a technology man either, but he knows what a good products is, and who are good in technology.
Microsoft needs a great CTO to compensate what's not there in Ballmer. Btw, they should fire the one who decided WP7 doesn't need native development kit. That is the most stupid idea I've ever seen. Gee, they had the best native toolchain inherited from years of work on WM!
If MS had thrown all their weight behind WP7 and made it their base platform for mobile computing going forward, with no compromises, I'd say fine. They missed the boat in 2007 but they're doing all the right things to catch up.
But their'e not. WP7 is a technological dead end that will be replaced within the next 12 months by a phone version of Windows 8. Current Silverlight apps will run on that, but in reality developers will need to rewrite for the WinRT platform to get the benefits of full native performance and functionality. Meanwhile you can't develop WP7 apps in C or C++, it's .NET/XNA only.
Who actually is this Dustin Curtis guy? Looking at the list of the members of the "svbtle blog network" (here: http://svbtle.com/), he seems to be the only one without a company or achievement by his name (instead, he's labelled as "villain"). His writing is good, I'm just wondering who he is :-)
With Excel, I'm not sure. But if customers who are getting increasingly greater exposure to UNIX, through various channels, learn about UNIX alternatives to Active Directory and Exchange that work as well or better, but which cost less, it may well come to pass.
> learn about UNIX alternatives to Active Directory and Exchange
Can you name one, good alternative to Active Directory and Exchange that runs on a Unix platform?
As someone that spent almost a year trying to find an answer to that question I can tell you that there isn't one. These are the areas where Microsoft is still above and beyond anything else out there.
Apple's 'Numbers' is actually quite good for most use cases, it's quite a bit more elegant as Excel anyway. The problem with Apple is their lack of experience in business support and their shortcomings in Q&A in the mac department lately. But windows 8 will definitely open up opportunities for contenders like Apple and Google in the business world.
Here's the key feature of Numbers vs. Excel: It not only has multiple Sheets, but multiple tables per sheet. Besides tables you can for example add text fields and images to a sheet. This makes it much much more natural to create reports and it encourages to split up your huge tables in logical units.
Oh and one other thing: Modifying columns/rows is consistant over all iWorks applications: Alt + arrow-keys let's you insert rows/columns above, below, to the right or left. MS Office's inconsistency and lack of hotkeys for such an essential feature makes me rage every time I use it.
Numbers sure has shortcomings though: no pivot tables, very limited scripting support, limited filtering / data manipulation. That's why I look at it as a very good spreadsheet tool, but not a data analysis tool - that's when Excel and/or Matlab come into play.
A lot supported Forbes' Adam Hartung, but the number that rose up and spoke in support of Steve is amazing. The summary, Microsoft and Balmer are doing averagely well and shouldn't be tagged with that WORST label thing.
The contrarian opinion is refreshing but the fact is that Microsoft does not own any of the platforms that emerged in the past 10 years, maybe with the exception of game consoles, which is a rather fleeting business.
Blamer should have been gone a long time ago. They have lost some real visionaries because of him and lost site of what they are in the market to provide.
Kinect and Xbox came to fruition under his leadership. And that division alone can become billion dollar business for MSFT. Agreed WP7 was late but MSFT takes pride in being late to any market. After all, they are last man standing in most of the markets. Zune failed but can't he have couple of failures? Btw, their core enterprises business is growing.
They didn't lose money on the 360 (this past quarter anyway, clearly they did for a first few years of the device's life), they lost it on winding down the remnants of Zune and ramping up Windows Phone.
Also, while the 360 is still king of the consoles in terms of overall sales and is profitable, it is selling less quickly than before because this console generation is past its peak and is riding the downward slope on new units sold until the next hardware refreshes appear.
So the 360 is still a net positive, but less positive than recent past quarters and not positive enough to offset other losses.
However, 360 is only net positive now on a per quarter basis, which only counts current costs against current revenue. That doesn't count the initial investments made on R&D for the 360 or its predecessor. When you look at it from that perspective, "success" is much more difficult to claim.
Consoles are sold at a loss, so that more people will buy the console (licensing fees are proportional to the size of the audience/consumer base). Even the PS3 when it first came out at $600 was a loss leader; if i'm remembering right for the PS3, the cost of the hardware was something close to $1000.
Companies expect to make that money back through 1st party game sales and licensing fees from 3rd party developers for access to the sdk.
That doesn't explain the loss at all. The 360 is liely not costing more to build at this point in its lifecycle and all the games are actively paying their royalties.
The Xbox is profitable. The problem is the other businesses lumped in with them.
i don't disagree; i stupidly answered the question poster asked (how could microsoft not make a profit selling xboxes) instead of the question s/he meant to ask (why did the entire bu lose money).
They only recently started making money with every sale of a Xbox 360. Typically console makers sell their hardware at a loss to get it into as many hands as possible and then make money with software.
That is why Nintendo is taking such a bath this generation. People buy a Wii for the novelty and only get one or two games where Microsoft and Sony are much more about the games they have on their consoles.
Nintendo has always sold their hardware for profit. They made money on the Wii from day one.
They're taking a bath right now because the strength of the Yen versus USD removes a lot of their export profit. That, combined with the fact that they're ramping up production of the 3DS and the next console, is the reason they lost money.
Nintendo's taking a bath for multiple reasons but in regards to the wii (1) they rode it for too long and (2) all it did was games while the more robust hardware in the PS3 and Xbox made them more useful.
"While Microsoft is no disruptive force in tech today, the truth is that it has never been."
This is so false it is painful for me to read. I'm embarrassed for the author.
"The company's core competency is a process it uses for entering and consuming existing industries. After it enters a market, it rides off the innovations of its competitors, uses its existing brand power and sheer size to tackle a large surface area at the bottom of the market, and then, finally, it develops a valuable platform on top of the new market. As the platform grows, it slowly squeezes out the existing players."
Name one instance of this in the past 15 years. One. Oh wait, the author lists a few!
Xbox? Well, they have operated at a loss for the first seven years or so, ousted the entire create leadership team (Bach and Allard say howdy), and now are turning nice sums of coin. But this isn't truly Microsofts win, it is the entire industry's failures. Nintendo and Sony are seeing bad times. The currency difference is hurting Japanese companies, who are tired of innovating. Even many lead game designers are admitting the Japanese are years behind the US market. With Sony in turmoil and Nintendo trying to figure out how to right the ship, it is no wonder the years Xbox has seen a profit are only recently.
"Windows Mobile"
In 2010 Ballmer himself said they' lost a "whole generation of users". They dropped the ball so hard that even after the debut of the iPhone, when Google realized it was time to explore a new approach to Android, Ballmer didn't understand why it would be popular. Ballmer displayed a weak passion for mobile yes, but the crime here is that he displays no vision.
Windows 7 is years too late. Nokia will die in a vain attempt to give this OS a chance, but it will never work. The audience only sees two contenders in the ring.
"Windows"
This is the only horse worth mentioning. It, and thus Office, are the default winners. Xerox, Kleenex, and Windows. They win this category by default as 99% of users could care less about the OS they use.
But there are an insane amount of products not mentioned here! Where are the Zunes, the silverlights, the Vistas, or the Azures? There are hundreds of horrific decisions we all watch spiral out of control. Remember the Kin? How I so wanted to play with its awkwardness. Or the Courier? How I pulled at my hair when they killed not only the product, but laid off the entire team. Remember Ensemble or Bizzare Creations? They made some beautiful games. Remember Surface? Remember a decade of IE's disgraceful finger in the face of all web users?
This is a history of successes? It sounds like a meandering path of exploration, where one in one hundred connects. This is luck.
The overall premise here is that Microsoft deserves a gold star for existing. They made 6.3B profit last quarter! Give them a break.
For comparison, Apple made 11.6B profit last quarter. That was a 47% increase from the previous year, which also had a 41% increase. These products were ideas that Microsoft had left behind, too busy swerving around trying to find a mission. Apple took the best ideas and developed a valuable ecosystem to grow as a platform. Sound familiar?
You're focused entirely on the consumer space, completely missing one of Dustin's big points. Where is Microsoft still doing big business? The Business Division, which is not only Office products like Word and Excel, but also SharePoint. They do huge business with SQL Server and Exchange, and products like Lync and Forefront are still growing. --Consumers could care less about those products, but obviously businesses have chosen to continue investing in them.
Comparing Microsoft and Apple is silly. Microsoft is still primarily a software and services company while Apple has always been a hardware company - the only reason they're in software at all is to help sell their hardware.
I'm focused on the consumer, because I feel Microsoft wins enterprise by default. Who is the competition? Open source? I've been laughed out of Fortune 50 meetings for suggesting it. Small to Medium size software firms? They just don't integrate with Windows or Office as well. No one in the enterprise ever gets fired for choosing Microsoft. This is changing, but it will take years.
The problem is that the enterprise is a limited field. Once you sell to the Fortune 1,000 there isn't anywhere to go, outside of creating new products to resell to this group. This is why Microsoft feels like they are meandering, they need new revenue streams. This is also why they don't work so well in consumer products. Running after market leaders in hopes to find a revenue stream pisses off consumers.
Consumers are a different story. There are 7 billion individuals that don't have a procurement department. They buy smaller goods more often. There are entire industries that could be changed with one breakthrough product.
Comparing Microsoft and Apple is natural. Microsoft begs this comparison with its technology competitors by entering their markets and taunting them. They just do such a horrible job they don't feel like competitors.
MS Stores built as fancy luxury consumer hubs. Xbox 360, the billion+ dollar winner for MS last year, was born out of building hardware with software. The Nokia Lumia 700 is effectively the same mix of hardware and software (as Nokia was shadow taken over). The Zune was. Safari, Firefox, and Chrome lead the browser revolution, and all I see on TV now are IE commercials. Zune Marketplace. Windows Phone (the blackberry ripoff). Bing. Silverlight.
Courier looked extremely promising and I'm saying that as an OSX,iPhone,iPad user. How they could kill that thing off still blows my mind. Then again we have only ever seen an interface mockup, haven't we? Maybe the software / device they had didn't work. Still no excuse to just let this idea go, I still think that a booklet style tablet with pen, capacitive touchscreen and these GUI ideas would be great for many usecases. What's MS's thought process here? "Yeah no, we don't think specialized solutions like these are great for us, let's instead keep smashing on Win32 until it fits unto smartphones and tablets and serve one huge shit sausage."
I wait with pleasure for the business user reactions once Windows' most useful and perfected feature, the start menu, is gone and replaced with a touch optimized fullscreen window with gigantic whitespaces and huge mouse paths for achieving anything. It is going to be beautiful.
The rumor I'd heard was that Courier was killed because independent teams created the device components. When put together it wasn't refined enough to pass review. Plus, they didn't see tablets as a viable market...again. Fingers crossed there was a much cooler reason.
Ha, ha - agreed on the start menu as well. I really do wish MS well (they can't have not tested this, right?), as their plan is pretty much a Hail Mary pass. But these sorts of decisions don't instill hope.
Microsoft is only as good as the people paying allows it to be. If/when Windows refunds becomes popular, and people get the next-door kid to install an OS and LibreOffice. Then MS dies fast.
This could not be farther from reality. Microsoft has consistently lost money in the mobile market, to a point they are ashamed of it, and don't even give sale figures for the Windows Phone OS anymore. Profits from this business unit is reported in the "Entertainment and Devices" unit, which has turned a loss this quarter, again, of $229M.
The only argument the author makes for claiming Microsoft's execution has been excellent is that "Windows Phone 7 is really good". Well, guess what? It may or may not be true that Windows Phone 7 is good, but it takes a whole lot more than a good OS to make a profit. You need to establish a community of developers who will write apps for your platform, you need to create an easy-to-use market place for end-users, you need to talk to phone manufacturers to make plenty of phones running your OS, you need to make deals with carriers to sell your phones, etc.
Microsoft has failed at most of this, hence their financial losses. Microsoft's execution in the mobile market is, so far, a failure, and Ballmer is partly responsible.