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

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Religion Aside, Christmas Gains Popularity in Communist Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal 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.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid