Xv) Microsoft

The dominant player in computer software for desk tops/lap tops since the 1980s but now under threat from mobile phones/pads players like Apple, Google, etc in the post-PC world

In 1985 Microsoft starts Windows Operating System (managed the complex interface with other hardware/software, etc) for personal computers (PC); by 2005 it dominates all computers (96%); but now under threat from mobile phones/pads players like Apple, Google, etc. Microsoft has exploited its dominance with computer users via Windows software.

With the rapid technological advances in mobiles phones/pads and less around desk tops, Microsoft has lost its dominance as there is no indication that desktops and phones/pads will use the same operating system and user interface. The loss of dominance by Microsoft is shown by the poor performance of Windows 8, ie the latest, mobile-inspired version of its operating software and its earlier Vista fiasco. Players in the mobile phones/pads arena like Apple, etc have pushed Microsoft aside, ie

"Windows 8 is a remarkable piece of engineering but the world does not buy remarkable pieces of engineering, it buys useful products"

Michael Cusumano as quoted by John Gapper, 2013

In addition to falling behind on new trends like mobile,internet search, cloud computing, etc, Microsoft is overstaffed with 50% more staff than Apple yet 50% less revenue & profit (2013)

For years Microsoft has squeezed cash out of existing businesses and it expected to continue to do so. Its challenge is that its operating systems and business software divisions account for 80% of operating profits.These divisions' core products were developed for personal computers (PC). Yet the PC is in decline, eg 2013marked the worst decline in global PC shipments with 7 consecutive quarters of falling demand; this threatens Microsoft's core products while mobile phones are rising and there is a transition to"cloud", ie

"...The new cloud workloads and mobile apps that are redefining how millions of people interact with the digital world are already running on Amazon Web Services and the iOS and Android platforms...Google has beaten Microsoft...creating a hardware ecosystem with the free android operating system; a position it has cemented with the pending sale of its Motorola handset business to Lenovo, which removes the risk. It will compete with its own hardware partners. Apple has taken the profitable high ground with the alternative, integrated approach represented by the iPhone. That has forced Microsoft to buy Nokia's handset division to maintain even its current tenuous foothold in the business..."

Richard Waters, 2014

The development of android and iOS destroyed Microsoft's near monopoly in operating systems in a mere 5 years, with people adopting mobile computing more than 3 times faster than they did a desktop. It took around 15 years for Microsoft to dominate the desktop market from the 1980s. 2013 marked the worst decline in global PC shipments in history, ie 7 quarters of declining revenue. Microsoft has fallen behind on new trends like mobile,internet search, cloud computing, etc & overstaffed with 50%more staff than Apple yet 50% less revenue & profit (2013)

Some recent products have had a mixed impact. One new product (server software) is a success while others (online services, Xbox, phones) have been failures.

There is a trend towards software sales becoming server sales. It is uncertain how the license sales/action sales mix is going to change.

Technology companies are rising and falling faster. As consumers and businesses are becoming more mobile and data intensive, the likes of Microsoft, Apple and Google are becoming vulnerable to smaller, nimbler competitors. For example, the once invincible Microsoft failed in its attempt to take on Apple's iPad. It is hoping to counter this trend to computers going mobile, it purchased of Nokia's hardware division (US $ 7 b.) to protect its core business (Windows Operating System, Office & Software) This acquisition turned another industry icon into a footnote in history books!!!

In early 2014, there was a senior management shakeup in Microsoft when it appointed Satya Nadella as CEO to replace Steve Ballmer; Bill Gates has moved into a more technical advisory role.

Also, Bill Gates has moved into a more technical advisory role. Microsoft is trying to re-invent itself by  i) re-branding (2011 - 2012), eg logos, products, services, website, etc
ii) acquisition (since 1986 purchased around 200 firms; with 22 in 2015) iii) new products iv) staff changes Some acquisitions - aQuantive (US$ 6 b. in 2007 - Internet advertising) - Skype (US$ 8.5 b. in 2011 - VOIC) - Yammer (US$ 1.2 b. in 2012 - social network) - Mojang (US$ 2 b. in 2014 - maker of home video games like Minecraft; replaced Xbox that started in 2001)
- Noki's handset business (US 7 b. in 2014) to protect its core business (Windows Operating System, Office and Software) with computers going mobile
- LinkedIn for US$ 26.2 b. (2016) Developed some new products  - Bing with Yahoo (2009) - Azure (2010 - entry into cloud computing market for Windows) - Windows server 2012 - Patent tracker (2013) - Kinect (2010 & upgrade in 2013 - motion sensing input device) - Surface (2012 - first computer in the company's history to have its hardware made by Microsoft)
- Outlook.com web service (2012 - competes with Gmail)
- Surface Hub (2015 - interactive whiteboard)
- Windows (2015 - latest version of computer operating system)
- HaloLens (2016 - 3D headset)

Staff changes
- Changed CEO, ie Satya Nadella replaced Steve Bulmer (early 2014)
- Starting in mid 2014, massive staff lay-offs as rationalised business, eg    
i) July 2014 - 18,000 out of around 130,000 staff    
ii) May 2015 - 1,850 staff    
iii) July 2015 - 7,800 staff (Wikipedia, 2016b)

In 2014 Satya Nadella replaced Steve Ballmer as CEO of Microsoft. Satya has reignited growth based on leadership style (eg his accessibility), cultural change and innovation edge like focusing on cloud device. When Satya became CEO, Apple could do no wrong, Facebook was changing the world of communications and Amazon was dominating cloud computing. At the same time, Microsoft had an internal culture of competition which was destroying the company; this is sometimes called Microsoft "lost decade".

In early 2017 the stock had doubled in value and was trading at its highest level ever, ie higher than the turn of the century tech bubble (see graph below).

Microsoft is now focusing on artificial intelligence and cloud computing. Significant resources have been invested into Azure cloud computing infrastructure and in early 2017 it was number 2 in the marketplace after Amazon. It is making considerable progress with new products like cloud-based office 365 Productivity software and Dynamic 365 Enterprise offering plus Xbox Entertainment console.

Microsoft's new vision of "One Microsoft" and mission is "to empower every person and every organisation on the planet to achieve more" so that

"...can we do something that is unique, differentiated and, most importantly, valuable to our customers......and not to ever be driven just by competition..."

Satya Nadella as quoted by Paul Smith 2017

Microsoft, which used to have a reputation for dragging its competitors through the courts in anti-trust trials, is now working with them, eg

- Adobe is now offering its services on Apple devices

- embracing open source in a big way with Linux operating system is now supported by Azure cloud

- in 2016 Microsoft became the largest contributor to open source code online exchange GitHub (exceeding Facebook and Google).

On the organisation's culture, Satya is focusing on growth and innovation with a positive attitude; the growth mindset represents a desire to encourage staff to take risks when thinking about new ideas. Rather than worry about how to respond to popular products released by rival firms, he wants his staff to be thinking about what the company can do to forge new paths.

"...we had to go from being know-it-alls to learn-it-alls. This is not about new dogma, it is about being able to give team members breathing space to be able to bring their A-game, to be able to be vulnerable and not have to put on an act of knowing everything but to be curious and learn..."

Satya Nadella as quoted by Paul Smith 2017

msft_shareprice20181004

 

 

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