News / Science & Technology

Microsoft Transforms, but Will It Leave Past Behind?

FILE - In this Aug. 24, 1995 file photo, Microsoft Chairman Bill Gates sits on stage during a video portion of the Windows 95 Launch Event on the company's campus in Redmond, Washington.
FILE - In this Aug. 24, 1995 file photo, Microsoft Chairman Bill Gates sits on stage during a video portion of the Windows 95 Launch Event on the company's campus in Redmond, Washington.
​Microsoft surprised analysts and investors on Thursday (October 24) when it posted a 17 percent increase in profits over the past three months. The profits come at a time of transition for the tech giant which recently reorganized itself as a “devices and services” company with two groups;  one focusing on devices and consumer products and the other on commercial products.

  • FILE - A 1984 photo of Bill Gates, founder and chairman of Microsoft Corporation.
  • A worker packs the shelves of the computer shop PC World, at Croydon in south London, Aug. 23, 1995, with copies of the Microsoft Windows 95 computer package.
  • Microsoft's Steve Ballmer (L) and Bill Gates react to a question during a news conference, Jan. 13, 2000 in Redmond, Washington, where Gates announced that Ballmer will become the new chief executive officer.
  • Microsoft CEO Steve Balmer holds a placard checklist for the new Microsoft Office XP at a release party for the software on March 2, 2001, on the Microsoft Campus in Redmond, Washington.
  • Jeff Bezos, founder and CEO of Amazon.com (L) meets with Bill Gates, Microsoft Corp. chairman and chief software architect, at a New York news conference to launch Microsoft's new software, Office XP, May 31, 2001.
  • Attendees of the Comdex computer show try out the new Microsoft XBox game, Nov. 13, 2001, at the Las Vegas Convention center.
  • Jeff Raikes, group vice president of the Productivity and Business Systems Group at Microsoft (L) jokes with Actor Rob Lowe, as he describes his experiences using a Tablet PC at the product launch event in New York City, Nov. 7, 2002.
  • Photographers surround the console of next generation video game and entertainment machine Xbox 360 during an unveiling in Tokyo, Japan, May 13, 2005.
  • Bill and Melinda Gates attend a forum of 300 malaria scientists and policy makers, Oct. 17, 2007, in Seattle, Washington.
  • Microsoft said on Jan. 22, 2009 in Redmond, Washingron it is cutting 5,000 jobs over the next 18 months - a sign of how badly even the biggest and richest companies are being stung by the recession. The layoffs appear to be a first for Microsoft, which was founded in 1975.
  • In this photograph taken by AP Images for Xbox, Actor Rich Sommer plays Kinect on Xbox 360 at the Xbox booth during the E3 2010 conference held at the Los Angeles Convention Center in Los Angeles on June 15, 2010.
  • Aaron Woodman, Microsoft's director of their Mobile Communications Business, talks about the Windows Phone 7 during Microsoft Corp.'s shareholders meeting, Nov. 16, 2010, in Bellevue, Washington.
  • Visitors try out Microsoft Corp.'s "Surface" touchscreen tablet computers, Oct. 31, 2012, at "Build," Microsoft Corp.'s developers conference, in Redmond, Washington.
  • Show attendees play the Killer Instinct video game on the Xbox One at the Microsoft booth during the Electronic Entertainment Expo in Los Angeles, June 11, 2013.

Microsoft at a Glance:

  • 1975 - Bill Gates and Paul Allen found “Micro-soft”
  • 1980s – MS-DOS or Microsoft Disk Operating System – the main operating system for IBM compatible PCs launches
  • 1990s – Microsoft launches Various incarnations of Windows operating system; its first Internet Explorer browser
  • 2000 – Steve Ballmer is named Microsoft’s CEO; Windows 2000 launches
  • 2001-2006 – Microsoft releases Xbox, Microsoft Office, Windows Vista
  • 2008 – Bill Gates moves from day-to-day role at Microsoft to The Bill and Melinda Gates Foundation
  • 2009-2010 – Windows 7, Kinect for Xbox 360, Windows Phone 7 launch
  • 2011-2012 – Microsoft acquires Skype, releases Windows 8

Source: Microsoft
The reorganization will likely be the last major endeavor of CEO Steve Ballmer who recently announced he would retire from the company in 12 months. In a July letter to Microsoft employees, Ballmer laid out his strategy for the future of Microsoft.

“Going forward, our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe, at home, at work and on the go, for the activities they value most,” he said.  

Ballmer’s “One Microsoft” plan transforms the 37-year-old software firm to a faster- paced company that can carve out market share in a post-PC world dominated by rivals like Apple, Google and Amazon.

Ballmer strategy could tie hands of yet-to-be named successor

That push includes the recent $7 billion purchase of Finnish smartphone manufacturer Nokia – a deal that might give Microsoft a toehold in the smartphone market, says Lawrence Hrebiniak, Emeritus Professor of Management at the University of Pennsylvania’s Wharton School, although he cautions that Nokia “hasn’t been doing well.”

But these are major changes for an outgoing CEO, says Hrebiniak, author of Making Strategy Work.

“Normally, a new CEO comes in and makes his own strategic moves. But Ballmer is saying “I am leaving, but I’m going to buy Nokia” – a major move that he’s basically saddling the new person with,” he said.

“All of the things Ballmer’s doing is basically a challenge to a new person coming in to make it work,” he said.

Microsoft has declined comment. But Rob Helm, President of Research at Directions on Microsoft, an independent company that analyzes Microsoft for large organizations, says the Nokia deal represents Microsoft’s future in that it is going to have to take more direct control of manufacturing its own smartphones and tablets.

“So as Steve Ballmer bids goodbye to the company,” he said, “the company is bidding goodbye to the business model that made it a success at its beginning.”

Helm says Ballmer has changed the character of Microsoft, which built itself on PC software and computers controlled by end-users. Now, he says the company is being “forced by circumstances” to shift to computing that is centrally-controlled by a company.

Windows success hurt innovation

Microsoft facts:

  • There are currently 1.3 billion Windows users worldwide
  • More than 100 million Window 8 licenses have been sold to date
  • Office 365 Home Premium has 1 million subscribers
  • Windows Phone store now carries more than 175,000 apps and games
  • More than 76 million Xbox 360 consoles have been sold worldwide
  • Xbox Live now has over 48 million members in 41 countries
  • More than 24 million Kinect sensors for Xbox have sold worldwide
  • Internet Explorer’s usage share was over 56 percent worldwide in July 2013
  • Bing holds 17.86 percent of US search market share according to comScore Explicit Core Search

Source: Microsoft
​Over the years, Microsoft created a culture around a few profitable products like its Windows operating system, which has some 1.3 billion users worldwide. That culture ultimately led to what Hrebiniak calls “silos or fiefdoms” among the company’s departments and prevented it from adapting successfully to market changes.

Realizing this, Ballmer, who has run Microsoft since 2000, “created a new functional structure to coordinate things at a centralized level around new products,” said Hrebiniak.

He also raised revenues, says Roger Kay, an analyst at Endpoint Technologies, a technology market intelligence firm, even though he was unable to extend the Windows franchise.

According to Hrebiniak, Microsoft has some $61 billion in cash and, in its latest year, close to $78 billion in revenue.

Around 60-70 percent of that is generated by Microsoft’s cloud-based enterprise business - remote servers that host software that businesses need.

“That gigantic real estate, which we never see, has put it [i.e., Microsoft] on roughly the same footing as a company like Google,” said Helm.

Pushing into the hardware market has been less successful. But it is “where the change in Microsoft’s philosophy is the starkest,” Helm said, because Microsoft has typically relied on other companies to build PCs and devices to run its software on.

The company probably had no choice, he argues, given rivals like Apple, which controls its hardware end-to-end, and Google, which tries to set the bar higher with its hardware.

But building computers and phones is a “completely different business,” he cautions, and one in which Microsoft will make some mistakes learning.

And it “is going to have to come from behind” in both mobile and hardware markets, he added, and “win back some trust” because there is “a lot of suspicion of Microsoft” among phone carriers and retailers.

Microsoft has been building its Xbox gaming system and PC peripherals for years, although its recent line of Surface tablets has faltered.

And Kay says that with Surface, “Microsoft is competing with its own customers, the current source of much revenue.”

Consequently, “those partners have been only lukewarm in supporting Microsoft’s recent initiatives in the critical high-mobility space, which includes smartphones and tablets,” said Kay.

To be successful as a hardware manufacturer, Helms says Microsoft has to rewrite its successful applications for touch-based or high resolution devices and attract developers to build market share. Paradoxically, “they don’t have the market share to attract developers,” says Hrebniak.

While Microsoft’s Windows phone has gained ground and is the third leading mobile phone platform, it still trails its rivals in apps.

The road will be tough, warns Hrebniak. He says Microsoft needs an innovative CEO who knows more about mobile devices to see it through.

Some say Microsoft is already changing. But Kay is skeptical. He says Microsoft’s “byzantine empire” is conservative and “falls back on its old ways – things that worked before” and “may not be working now.”

You May Like

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Goodbye, New York

This is what the fastest-growing big cities in America have in common More

Job-Seeking Bangladeshis Risk Lives to Find Work

The number of Bangladeshi migrants on smugglers’ boats bound for Southeast Asian countries has soared in the past two years More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs