Dying company ? Yup ! [LWN.net]

Dying company ? Yup !

Posted May 29, 2007 13:33 UTC (Tue) by i3839 (subscriber, #31386)
In reply to: Dying company ? Yup ! by khim
Parent article: What Microsoft and Novell agreed to

I'm afraid that there are too many small companies too deep into MS software and data lock-in to get out of it easily. MS does more than generic software like an OS and office suite, it has a lot of (customer tuned) business software too. Not speaking out of experience here, so can't back it up. It's just a thing people seem to underestimate, as that market is huge.

Maybe MS is getting old, but dying? Nah.

(Log in to post comments)

MS died once already.

Posted May 29, 2007 15:37 UTC (Tue) by AJWM (guest, #15888) [Link]

Today's -- this century's -- Microsoft isn't the same company it once was. Back when it was a growth stock, the share price was doing amazing things, employees were happy to be paid in options and nobody cared about dividends.

This is no longer true. The share price peaked a few years ago. Relative to the Dow Average, Microsoft has been underperforming (check the last four years or so). Since stockholders aren't seeing growth, they demand dividends, and this is drawing down MSFT's cash reserves. Employees want to be paid in real money, not (relatively) worthless options.

Microsoft may not be dead, but its old way of life is. None of their new projects are financially successful - which goes to show that most of their prior success was a combination of luck and first-mover advantage (yeah, and ruthless business tactics), and their only cash cows - Windows and Office - are meeting increasing competition from OSS alternatives.

There's an adage about business: "you're either growing, or you're dying". Microsoft isn't growing.

That said, it still could take a decade or two to die. (My guess is -- barring some government breakup because of another anti-trust action -- that the company will linger on pretty much as-is, becoming decreasingly relevant but still big, until Gates and Ballmer leave. Then various pieces of it will get sold off over a few years until there's nothing left. Unless of course they can manage to completely turn around the corporate culture.)

Possible endgames

Posted May 31, 2007 11:56 UTC (Thu) by robilad (guest, #27163) [Link]

I'd put the time frame at around 5 years, depending on whether someone wants to invest a handful of billions of fresh money from China / Russia / India into pairing Microsoft down, and plundering their cash kitty by using the same successful tactic that worked so far : patent lawsuits.

While Microsoft spends 100M per year defending themselves on patent lawsuits, they also spend more than 1 billion per year on lost lawsuits (and there is a couple more coming, as far as I've seen, from Alcatel/Lucent, among others) or making those dreaded patent deals. With 1 billion fresh money flowing into Microsoft each month, there is a lot more Microsoft could afford lose, and remain the duck laying golden eggs for patent scheme 'investors'.

The fun thing about patent lawsuits is that Microsoft is virtually indefensible against an investment fund playing patent lottery against them, and there is a variety of reasons for others (outside USA) to get involved: money, market power, long term strategic interests, etc. In addition, since Microsoft started the patent war, it won't get any backup from other local companies in the field, until it quickly starts arguing for abolishing the current software patent regime in the USA. Not going to happen. ;) So it is ripe for plucking.

Finally, people with hot money outside the US now know how the US capital market works, and where the levers are. China has recently acquired a nice stake in Blackstone, for example, which is a fun little company that specializes in carving up beached whales. That deal has received highly hysterical commentary by the Economist, for example.

To give you just one fun scenario, Blackstone has the third-largest stake in Deutsche Telekom, who happens to have some interesting patents, now that Microsoft is going into the phone business in order to fight off the iphone. There are many other fun businesses Blackstone has a major stake in, and as Microsoft blunders around searching for a new profitable foundation outside its core competencies, it will inevitably tap into patent mine fields. Whoever controls them, gets to extract healthy royalties from that company, one way or another.

So, I guess Microsoft's worst case scenario could go a bit like this:
1) They will start facing an increasing number of high payout lawsuits globally, as more investors want to get their fair share of Microsoft's pile of cash,
2) They will start bleeding real money, resulting in a stock price correction,
3) They'll be carved up by a consortium of private equity firms

And only afterwards will the software patent laws in the US change to avoid 'losing' more of the local 'IP industry'. ;)

Dying company ? Yup !

Posted May 29, 2007 16:43 UTC (Tue) by TxtEdMacs (subscriber, #5983) [Link]

RE: " ... too many small companies too deep into MS software and data lock-in to get out of it easily."

While I do not know about small companies, I know something about the situation that existed at a few very large companies. One was a quite large pharmaceutical company, where I had a short assignment, that used a consultant doing nothing other than customizing Office applications for a wide set of users. Next I saw a power user at an insurance company customizing his own applications. And finally, at a very large financial firm where I spent personal capital pushing alternatives, I was informed that such customizations permanently precluded ever breaking away from MS applications.

Don't despair, for some, particularly developers, the Linux Desktop option appeared to have a chance, whether it succeeded I do not know*. This same person that said this also told me Linux had no chance at this company, since its history was in Sun's Unix and Windows. Nonetheless, Linux on the server was almost a monopoly by the time of my exit, though there were still many Windows servers still in use. This was a LARGE firm.

* [I have this propensity to shot my mouth off at inconvenient moments. That resulted in my being shown the exit. This result stemmed from my naive belief that I should deliver what I had promised. I compounded the error by explaining how ignorant the decision makers were. Might have survived had I not copied the user on this set of hot emails.]