Apps & Software
All's Well With Microsoft (MSFT) Except Its Plans
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The Daily Racing Form’s take on Microsoft’s (MSFT) fourth quarter is that there was nothing good about it. The company missed earnings and will have to fire almost 10,000 people.
Redmond forecast that its sales for the last period would be $17.3 billion to $17.8 billion. No one believes that will happen, so the questions are what parts of the company will be accountable for poor results and how may employees will pay for it with their jobs.
The easy way to attack the world’s largest software firm is to say that its Window’s franchise is losing steam and that the company is in too many odd businesses which have nothing to do with its main long time money-makers. Any intelligent look at Microsoft would show that it is still an astonishingly profitable company, and that if it can replace its unpopular Vista OS with an even slightly better Windows 7 product earnings should recover. PC sales may be slipping, but the profit margins in software aren’t.
Microsoft has continued to make a set of decisions about its ancillary operations which noone on Wall St. can understand or explain. The company is still in the video game business, which has poor profits and creates all sorts of product liability issues when the game consoles overheat. Microsoft also persists in selling its Zune media player although its share of the market will never be more than 5%. Both businesses are a drain on money and management time.
The most vexing part of Microsoft’s business is the company’s internet operations because they hold a key to the company’s future but are a confusing menagerie of zoo animals.. But, if the economy gets bad enough, the decisions about what Microsoft should do with its portal and search businesses will sort themselves out quickly. CEO Steve Ballmer is under enough pressure that whatever patience he has will desert him. The MSN portal loses money and has no value to Microsoft, now or in the future. The company’s search product could be set up like Google’s (GOOG) without any content or interfaces. Pure search. The consumer either uses it for his own benefit or he doesn’t. When the search engine is combined with a portal supported by display ads, the combination just confuses the consumer.
Microsoft also does not need the MSN portal to support its aspirations to sell its software online or to allow its software to work remotely on its customers PCs supported by Microsoft servers. Google has no special claim to this method of service delivery. It is commonplace in the software market so Microsoft does not need to blaze a new trail.
Microsoft has confused having a splashy presence on the internet, producing losses of hundreds of millions of dollars each year, with the opportunity to market its products and distribute its search business. A website with a video of Britney Spears, stock quotes, and classified ads has nothing to do with serving software customer needs. It is like putting a gorilla in a race car.
Douglas A. McIntyre
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