With all the talk about how the once-great Microsoft is losing talent, shedding massive amounts of consumer weight and facing increasing competition from companies like Google, is Microsoft doomed?
John Dvorak, noted PC World and MarketWatch columnist, thinks so. So do others. Is there reason for alarm? Remember this -- MSFT shares recently hit a five-year low on the heels of the Redmond giant's latest lackluster quarterly results and rumors continue to fly that the next Windows operating system, Windows Vista, will be delayed until the year 2010.
Robert Cringely from PBS writes rather eloquently that Microsoft's business model can't be re-engineered fast enough to meet these challenges and he hints at the software giant taking another corporate direction before it's too late, even though he thinks MSFT will survive no matter what.
Like Cringely, I don't think Microsoft is doomed. Why? Several reasons. First, it has the cash hoard to make acquisitions to catch up with almost any competitor it chooses -- and yes, Google will prove to be the biggest challenge.
In addition to a cash pile, Microsoft also has a raft of corporate applications that the mainstream press conveniently forgets when the juicy headlines of Microsoft versus Google comes up again and again. There is an entire Internet ecosystem being powered by Linux, Sun and Microsoft software that can not be replaced overnight with anything. That is a poker chip Microsoft can play with the acquisition face as it sees fit, although the increasing prevalence of open-source computing (specifically, Linux) is causing sweats with. Also, the challenge it faces in the consumer world is causing one heckuva ruckus right now -- a fact we hear about daily -- and sometimes, hourly. Windows Vista and Microsoft Office (fill in year here) are, and should be, the top dogs in the Redmond labs in terms of getting products shipped
Is Microsoft dead in the water, as Dvorak suggests? Well, I see the reasoning behind his points, but disagree with the end opinion. He makes good points, and hits (a little) on the Xbox 360 issues that caused Microsoft some pain recently, as it under-planned to meet demand and lost sales because of it. Still, it is ahead of the competition in that space. Microsoft may have some large bruises right now, but it's definitely not headed for the corporate graveyard.
[Disclosure: I own MSFT shares as of 5-15-06]
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Reader Comments (Page 1 of 1)
5-15-2006 @ 3:44PM
Pedro Yegues said...
Microsoft will crush Google, Look at the big picture. Why do you think that they are delaying their operating system so long?? Why do you think they are re-branding every single internet service they provide to contain the word "Windows" (ie: Windows Live)???? Simply because users use windows for everything, and mainly windows services... Example Netscape crushed by windows ie; realaudio crushed by WMP, and so on.. Google, crushed by Windows live search??? I just bought a lot of stocks in MSFT, as you said, they have enough tools to win this battle.
5-15-2006 @ 5:14PM
LLJ said...
You forgot to say that iTunes is becoming more popular than WMP.
5-15-2006 @ 6:06PM
EJ Passeos said...
Microsoft doomed? I hardly doubt it. Intense obstacles in the fields they aren't dominating, yes. People thought the X Box was a distraction, and despite the gaming community trying to ignore them, the X is a success, albeit not a big money maker.
Who knows what will happen when the Vista/Media Center PCs hit the market. Billy and Mr. Otenni wrote an op-ed in the Journal today questioning the "end of the pc" which Walt Mossberg started heralding again. Dvorak is a great journalist--and a certified MSFT basher. He's entitled to that opinion, but the rah rah from him and Mossberg about Apple products hasn't done a thing to help their market share.
As for Live v Google,Yahoo,AOL, I look forward to more war footing moves like shaking things up with the $2 b CAP-EX. I expect at some point this year a more coherent plan to destroy/catch up with the competition will emerge--sadly, under the watchful eyes of intrusive government officials. Perhaps a big merger, something.
Great blast, though.
5-15-2006 @ 8:08PM
cellularcoffee said...
MSFT can't get worse that it is right now. I'm too waiting for Window Vista as the rest of business world which actually pays for the window license fees.
5-15-2006 @ 10:07PM
Brian said...
While I can agree with some of the mainstream media that continually bash MSFT, I highly doubt they will be hurt big-time any year soon. Sure, they have many holes to plug and a business model to tweak (they are getting started now that Ray Ozzie has kicked things around), but MSFT is far from irrelevant. They do get attention in the consumer space because that is what is interesting and attracts readers. This is good ole' American competition, though, with Google. It's a really interesting race to watch and I enjoy it. I'm a huge fan of Google for what they do, but I am an equally-huge fan of Microsoft for the infrastructure they have built over the years in the consumer and business space.
5-16-2006 @ 12:19AM
Michael said...
Okay there are two important ideas that have yet to be presented. I briefly mention them here:
1) There is a distinction to be made between Microsoft the company, and MSFT the stock.
Sure, the company will always be around. The doubt investors have is that Microsoft doesn't know how to invest their cash properly. They have wasted a lot of money so far. For an investor, it doesn't matter that Microsoft has a large mountain of cash when you believe Microsoft will just waste it.
2) Google is not easily reachable. The culture, the systems, and the knowledge that Google currently has is not something you can buy. It will take at least five years for Microsoft to catch them, and it's not unreasonable to expect they could fail.
I think #1 is the biggest drag on the stock right now. Microsoft needs to increase the dividend to assure investors that they'll get some money out of their investment.