“This isn’t to say competition from Apple is stunting Microsoft’s growth. That isn’t the case. Rather, the things Apple is doing right are the things Microsoft is not,” Dvorchak writes. “In other words: Apple’s successes have diminished Microsoft’s growth prospects.”
“The technology industry thrives on innovation. Microsoft is, and always has been, more of a ‘fast follower,’ than a product innovator,” Dvorchak writes. “In its cash-cow, historical product segments, notably the operating-system and Office software, there are few valuable new features that the company can offer to drive upgrades.”
Dvorchak writes, “In more recent growth categories, such as mobile, Microsoft generally isn’t a relevant player… Apple’s key competitive advantage — the reason it can create such great products — is the integration of hardware and software. Microsoft is somewhat stymied by the multitude of hardware platforms it must support, which inevitably creates a poor customer experience. I see a high probability of Microsoft buying a PC company — perhaps Dell — and a mobile-handheld company — maybe RIMM? — so that it can begin to offer a fully-integrated, more robust product to match Apple’s offerings.”
Dvorchak writes, “Absent such a strategic move, I believe Microsoft will continue to struggle to offer relevant products.”
Full article here.
As far as earnings of any significance, microsoft has only ever been a two product company, the OS and the office suite. They claim servers as another division, but that’s just more windows OS.
So how are they a fast follower? The free browser? The xbox got so far underwater they are still nowhere close to breaking even, and likely never will. The zune? The retail stores? Mobile? Search? None of this makes money.
And then to say the company is stymied by the multitude of hardware platforms. Rather, the multitude of hardware platforms are stymied by microsoft’s mediocre bloatware.
Microsoft is still what they were all along, makers of a crappy office suite and a crappier OS, and the world does not need them, as we shall see.
Many of you younger readers here probably have never seen an Apple manual from the very early Macs. Just reading the manual back then you knew Apple was very different and actually created something with the end user in mind.
You could actually enjoy reading thru it and it really taught you how to use a computer. I remember comparing it to some other PC manual at the time and it was just amazing the difference between the two.
Had many users back then say that the Apple manuals were the first computer manuals they ever understood.
Hopefully Steve has a set of manuals on how to run Apple, so when he goes, then can check the reference books to stay on the same path. Seen to many companies with new blood just get run into the ground because the new guy thought “he” had a better way of running things.
“May Ballmer be CEO for life!”
and then let his kid take over.
Microsoft can’t fix what ails them with one more acquisition. They’re rotting from the head.
-jcr
Much like a very old royal house, continued inbreeding has had some effect on the kingdom’s wealth, and some pretty horrific offspring.
M$ will continue to hold onto the only things it can do: Office, Windows and Server. They won’t meaningfully innovate with any of these offerings – to do so would risk alienating the most loyal customers they have: corporate IT drones and legacy users. They’ll continue to wrench the milk from those drying udders until they poof dust.
Meanwhile, Redmond will continue to regurgitate 2nd or 3rd rate me-too offerings – based on real innovations – that will vomit revenue into spaces that couldn’t care less about them.
Every product triumph and every earnings call Apple has had in the last 2 years has pounded the Microsoft brand into the dirt a little bit more. Like erosion, the effect is slow, but inevitable.
The author’s advice to MS would indeed be fatal.
Dell is a losing player in the PC commodity market. To buy the loser and create an integrated WinTel (WinDell?) PC would lose it massive licence income on its OS base to start with and then on its Office streams. As all other PC makers migrate to Linux or Chrome (are there other choices?), they lose the ability to run Office. They would have to migrate away from Windows because there would be no Windows OS available to them. You cannot and optimise your OS by integrating it into one brand and still licence your OS to several others. They would have to fall even further in price.
It would also make MS a laughing stock. A reversal of the software only strategy it has trumpeted the merits of for decades now. An admission of gross error. We wuz wrong and Apple wuz right all along.
Why do you think Gatesy took early retirement? Who would want to be at the ‘wheel’ leading up to the most enormous train-wreck of all time? Especially after insisting you knew what you were doing all the way to the end.
Becoming an integrated computer player is a path that MS simply cannot follow without the guarantee of failure within 3 to 5 years. Severing itself from the likes of HP, Sony et al would be perceived as a beginning implosion. Even MS fanboys are not so trapped in their faith that they could fail to read the writing on the wall, such a departure would represent. The only reason for MS to do it would be to try and emulate Apple’s profit model. But who would now agree to pay significantly more for a WinDell, when it is a cheap commodity item now? Even if GM were to partner with Merc on engines would you pay a very high premium on that new FordBenz? It just cannot work. The words Lipstick and Pig come to mind.
Funny how the second largest company in the world can strategise itself into an untenable, inescapable corner of the playing field it used to own. And yet the third largest company is still a minority market share bitplayer (say 10% of MS’ OS share) but is 80% of MS’ market cap and rising fast. Apple has been a bit-player by choice – the bit that’s at the top of the milk … aka the cream. No reason why they cannot move down-market to hoover up the sweepings too. They won’t, but they could absorb the lucrative middle market and corporates too.
Tell me why Apple cannot go to $1000 if it can reach $260 with less than 10% of the computer market and little more than 5% of the phone market? If it succeeds in reaching 50% in computing and in phones and tablets, reaches 50% in TV (still to begin but coming), in publishing too and maintains 60-70% share in Apps, MIDs, Music and Music players, why shouldn’t its share price rise fourfold? I’m not saying it will happen anytime soon. It can happen in less than a decade though.
Go back and chart AAPL’s vital signs over the last 20 years. A rocky ride at the start of that period, but a star-bound trajectory in the last 10 years and rising closer to that elusive vertical climb angle.
Chandran
Microsoft beat wall street estimates and is at a two year high as of today. They are not hurting.
Sure apples stock is going nuts, but don’t pretend that Microsoft is in trouble.
I work for a company that has well over 100k employees world wide. And while many people are buying MacBooks to replace laptops… You never see one in a datacenter and you also almost 100% of the time see the macs with vmware or paralles with Windows and or Linux running in addition to OSX. So. MS is still making money on their OS and apps.