A Look at Microsoft's Problems - Part 1
First, I'd like to disclose a few things before proceeding.
- I am not a Microsoft hater. In fact, I want Microsoft to do well and because I still own properties in the Redmond/Bellevue areas, and Microsoft's well-being has tremendous impact in that area.
- I am an ex-employee. I have been with Microsoft for almost 8 years since 2003 in both individual contributor and managerial program management roles. By all accounts, you could call me "a good employee".
- I left Microsoft on good terms. There was no argument or ill will in my decision to leave. I simply feel like I need to be doing something different.
With that, let's begin.
I will start with the fact that Microsoft treats its employees very well. Its comprehensive benefits are among the best in the industry. Its compensation is competitive, so you can understand why many people still work there. Furthermore, there are many extremely intelligent and talented people working there, and I have been blessed to have had the opportunity to work with them.
Today, I saw the headline: Microsoft is Dead Money for Investors. That is certainly true. Ever since Bill Gates ceded his CEO role, Microsoft stock has be stagnant.
The blue line is the Microsoft stock line. Ya, it's a bit difficult to see. I like to joke with my family that I should have joined Amazon out of college. The stock option they offered me at the time had a strike price of $17.
I joined Microsoft right out of college. Back in those days, Microsoft still had a halo around it. I believed that it was the place where you can truly make an impact on millions of people's lives by creating products that people love. That was the reason I joined. I believe that is also the reason why many others joined.
While that statement is still largely true as Windows still dominate the PC OS market, it certainly doesn't FEEL that way. Microsoft is in an increasingly precarious position for many reasons.
- PC shipments will not grow nearly as much as new generation of mobile devices such as smartphones and tablets. In fact, Gartner just lowered PC shipment forecast this week, citing new generation of Tablets as a factor.
- Many developing countries will skip over the PC and directly move to the new generation of mobile devices.
- Even console entertainment is moving increasingly mobile. Just take a look at what's happening at GDC this year.
- Not only is the world going mobile, it's also going OS agnostic. Web applications don't care what OS you are running and Google is working to make web applications do more everyday.
- Microsoft has no strength in the smartphone or Tablet markets. Windows Phone 7 is 3 years late to the game and still behind in many areas; Microsoft's next-gen tablet OS reportedly won't arrive until 2012.
In other words, Microsoft is still trying to milk its cash cows in the world of PCs, while the rest of the industry is moving on. Steve Jobs was very intentional in using the words "post PC devices" in his iPad 2 media event earlier this week. The world IS moving beyond the PC, and that's not good for Microsoft. Microsoft is being killed by its own success because it cannot let go of the businesses that have done so well for itself. Microsoft is not willing to innovate and cannabilize its own sales, but its competitors will. What were its cash cows (e.g. Windows and Office) are now killing its ability to innovate and take risks. Layers of management and fiefdoms across VPs are killing employee morale. A company who consumers used to love and competitors used to fear, is now a giant who seems to have lost his direction. People don't hate Microsoft anymore; they just don't care. In a geek's term, Microsoft is a no-op.
Of course, calling Microsoft a no-op is not fair at all. It is still the largest software company in the world and it still makes more money than Apple does (probably not for much longer). But Microsoft has clearly failed to innovate in recent years. What makes this story even more sad, is that Microsoft was once a leader in Smartphones, and Microsoft was also the pioneer in Tablet PCs. Tablet PCs never gained mass adoption, and it's a bit heartwrenching when Steve Jobs pointed out that Apple sold more iPads this year than all of the Windows Tablet PCs 10 year history. There was also a time when Microsoft was doing pretty well with Windows Mobile OS, and even Palm used its OS in the Treo 700w. So what happened?
I will leave this for the reader to ponder for the time-being. I will present my personal perspective in a part 2 post in the future.
