Microsoft is dying

microsoftLook, I try – I really do – to maintain this little hobby blog’s focus on digital media and music, but if we’re looking at technology then we’ve got to address this point:

Microsoft is dying.

It seems to offer no innovation. Its operating systems aren’t sufficiently user-centric. About the only great product it sells – the Xbox – is so heavily subsidised the company loses money on the range.

Look at the corporate results. Microsoft’s sales fell another 17 per cent in the just gone quarter as profits slid an astonishing 29 per cent. And the management – rather than self-disclosing their own inability, point to a weakness in global PC and server markets as cause.

Isn’t it truly the case that it’s a weakness in demand for Microsoft’s own offerings to global PC and server markets . Compare and contrast the company’s fortunes with those of Apple in the same period.

Apple’s third quarter financial results constituted the best non-Christmas quarter for revenue and earnings in Apple’s entire corporate history.

Read that again, “entire corporate history”.

Revenue, margins and Mac sales climbed, with iPhone sales reaching 5.2 million – up 626 per cent. Gross revenue reached $8.34 billion for profit of $1.23 billion.

Gross margin was 36.3 percent, up from 34.8 percent in the year-ago quarter.

Apple sold 2.6 million Macs, representing a four per cent unit increase over the year-ago quarter. 1.75 million notebooks sold during the quarter, up 13 per cent from the 1.553 million it sold in the same period last year. Desktop sales fell from 943,000 to 849,000, year-on-year. iTunes sold its 8 billionth song in the second week of July, Apple executives said.

Over at Microsoft we see a different story. Sales fell 17% to $13.1 billion in the company’s fourth quarter ended June 30, far short of analysts’ forecasts of $14.4 billion. That’s the second consecutive decline.

The software giant said its fourth-quarter net income fell 29% to $3.1 billion.

And if we quickly add it up. Microsoft holds c.80 per cent of the computer OS market and offers a horde of ancillary products, and plays in a host of different to Apple areas.

But Apple, with its c.5 per cent share, returned profits of $1.23 billion.

How does a dominant company manage to become so bad at making money?

Shareholders may be curious.

I think Microsoft is dying.

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27 thoughts on “Microsoft is dying

  1. Jonny Post author

    Well, it’s dying slowly, falling down the profitability plughole and shrinking in power and relevance. Im sure they have a bunch of tricks up their sleeve for when DOJ oversight times out, though.

  2. qka

    MS will not die; it will go the way of IBM. Think about it. IBM used to be dominant. Today, while they are still big and important, most of what they do is behind the scenes stuff -servers and such. Windows on the desktop will eventually fade, but MS will hang on in the background. However, my prediction for the year 2020 isthat IBM will be bigger than MS.

  3. macsmarts

    I wish you hadn’t said that. Now as soon as one of our idiot government officials sees this, the company formed by the richest man in the world will get a government bailout.

  4. Jumping

    This is “Jumping” again.

    I’m a Mac fan (though I would not characterise myself as an Apple Fanboi or Apple Fan antyhing). I like Macs and have used them since 1989.

    I really don’t think Microsoft is dying or going anywhere soon. Like many other businesses, it’s just in a slump in part due to the economy. OH well…

  5. Flash Jack from Gundagai

    Microsoft…soon to be Picosoft… It could not happen to a more deserving company….

  6. Tem

    The Internet will erode MS’s marketshare as the tech world evolves better solutions for people. As people become more technically sophisticated they will look for solutions to simplify their lives and work as well, not a product that requires specialty tech support to keep running. Look at how us auto companies produced crap and got called on it. They didn’t listen to customers, didn’t innovate, etc. They are turning things around, but it’s a deep hole to get out of. Maybe, MS is in a similar situation, regardless of the current economic cycle? Or, I should drink less coffee before reading these Blogs?

  7. hugh

    Hi Jonny, nice article.

    Is MS dying… no i dont think it is. It is certainly becoming less relevant and less influential, however it is not likely to die.

    A bad copy of something (windowz) was only sustainable for so long, particularly when those who created it have no vision of their own industries future. By nature copycats cant and don’t innovate…… Henc at e their destiny was always going to be mediocrity and obscurity, some point.

    They will survive of that there is little doubt. However their influence, power and muscle will fade, slowly over time……… and yes, as QKA states above, they will become the ‘IBM’ of the software word.

    Yes, there will be much more blood letting, and grief, before they realise and accept their destiny as a mediocre commodity peddler.

  8. John

    MS is not dying, but probably is fading. They’ve had the benefit of a monopoly on the main desktop OS and office suite for 20 odd years. In that time they’ve had little success at anything else. As those two product lines lose their steam MS will fade. Perhaps this will be good for them. Maybe this will force a management change. Maybe they will break up into two or three divisions that would prove to be more nimble and creative?

  9. britmic

    Microsoft isn’t dying, but it is downsizing and culling brand extensions, much like Apple did when Jobs returned. However, with the likes of Ray Ozzie and Steve Ballmer leading the company, it’s not going to take risks and I’ll be surprised if my kids consider Microsoft a leader once they grow up. I’m sure MS will reinvent itself much like IBM did in the 80s/90s. It’s the cycle of a corporation’s life. The sooner Ballmer can pocket his ego and step down, the better, IMO.

  10. Jonny Post author

    See, I think the best thing the company should do is to do what the DOJ originally wanted it to do – split up into different non-connected firms, software, hardware and other products (xbox etc), for example.

    Ironically, considering how hard the company fought to stay as one unit, the best thing for it is to split itself up, not just notionally into different business units, but totally.

    At the moment it’s a badly-led monolith, an example of a business set-up that’s no longer relevant to its time.

  11. Louis G Wheeler

    Does Microsoft have anything to live for? Does anyone really like Microsoft? Sure, there are people who think that it is necessary despite its flaws. But, they are either ignorant or have built their organizations around Microsoft’s inadequacies.

    Is there a reality, outside of Microsoft and its clique, which will assert itself? Is there competition which will overcome Microsoft’s dominion and free the peons working on its Enterprise market plantations? Yes.

    Does Microsoft even have a future? Will it go out of fashion? Like an aging con man or doxy, will it be unable to persuade people to accept its dubious, corrupted wares? Will it cling to life and sink ever lower as younger, more vibrant and vigorous substitutes gain prominence? Why not? Microsoft’s monopoly is only 14 years old.

    Microsoft has only two products which makes it money: Microsoft Office and the Windows Operating System. The former is being undercut by free software or Web applications such as Google Apps.

    The Windows Operating system is an aging, bloated insecure stand alone system which is responsible for billions of dollars, each year, being wasted on antivirus software or from malware. System Seven will lessen, but not prevent, those attacks.

    Only a few reasons incline people to stay with Microsoft Windows and MS Office. They may be forced to use them by their employers. They may be unaware of, and never tried, any alternatives. They may have been conned into believing that Microsoft is the only game in town, that everything else is too expensive, or that Microsoft’s inadequacies are merely part of the computing experience.

    We’ve all heard of Microsoft FUD, the Fear, Uncertainty and Doubt with which it addresses any competitor. Is there anything which will over come this prejudice so that the truth will come out? Yes. But, overcoming prejudice is difficult; especially when so many opinion leaders make their money by supporting the conventional wisdom — Microsoft.

    Troubles are on the horizon for Microsoft. The world computer marketplace is declining. It’s sales are flat — a replacement market. Businesses are not buying computers due to the poor economy; they are making do with what they have. The only computer manufacturer making good money in these trying times is Apple.

    Also, a sea change is coming to the computing experience. The old desktop paradigm is ending. The computer will explode as Computers-on-a-chip invade every peripheral. Your present computer will break up into five or six devises which will work together wirelessly. Most of those devises will be driven by Linux and open source.

    You might think that this will make the Operating System unnecessary, but not so. The numbers of devises will multiply, so that getting them to operate flawlessly will be difficult. Cheap systems will be problematic; poor integration invites chaos.

    Microsoft will be mired in the old paradigm. What will it do when very cheap linux devises or peripherals replace many of the functions of a computer? Google’s Chrome OS on a netbook is just an early example.

    Only one company, by selecting the hardware and software, controls the total computer user experience. Apple has been setting the stage for this for a decade. But, Apple has a pattern of putting all its ducks in a row, before it reveals where it is leading us. Good things lie ahead, but not for Microsoft. No one will even care about it when it is gone.

  12. iphonerulez

    One bad quarter is hardly going to affect a company of Microsoft’s magnitude. There is no company that can take it’s place, so there is no reason to think Microsoft is going away in the near future. As long as Microsoft can continue to make their sheeple upgrade faithfully, year after year, minor upgrade after minor upgrade, they will stay in power because they industry really doesn’t want to change no matter how poorly the operating system is designed. Even though most users are happy to be running Windows XP, mighty Microsoft will try to convince them that they need to upgrade just to get more revenue. MS needs the sheeple. The sheeple do not need Microsoft.

    Microsoft is not dying because it is a vampire business and as long as it can continue to freely suck the blood of the sheeple in upgrade fees it will live forever.

  13. Matthew

    > One bad quarter is hardly going to affect a company of Microsoft’s magnitude.

    That’s *two* bad quarters. In a row.

    > There is no company that can take it’s place

    And your point is…? There was (and still is) no company that could take Ma Bell’s place before they broke up, but the phone system hardly went into meltdown. There doesn’t need to be *one* company; a collection of companies is perfectly capable of doing the job. And we *have* that collection.

    > MS needs the sheeple.

    Couldn’t agree more with this, however.

  14. tiffany

    users are happy to be running Windows XP, mighty Microsoft will try to convince them that they need to upgrade just to get more revenue. MS needs the sheeple. The sheeple do not need Microsoft

  15. Toby

    What I would like to see, really–
    Microsoft: Make something that’s actually COOL! Something I tell my friends at work to look at. If it’s cool, people will buy it. Same deal with American cars…if they look cool, people will buy them.

  16. sag

    no…microsoft is marketed to business owners and hardcore gamers. linux will be for people maintaining a server(website). and mac just…edits..oh and it doesnt have any viruses.. as we all know this is false its only a matter of time before it becomes profitable to make a virus for mac…u people know it theres no security on that os

  17. Pingback: COMMENTARY: “The Death of Microsoft” or “How to sound like a broken record” (a historical perspective) « Kurt's Thoughts

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