Thursday, December 18, 2008

"New Strategy" for Microsoft

We have obtained feedback for our "New Strategy" via email. Therefore, we want to take a opportunity to discuss our rationale for Microsoft entering financial services.

Through research and gathering information it has become evident that numerous shareholders, reporters and analysts believe that Microsoft is languishing in regards to technology. Although we cannot argue that the company has increased revenue, we can however mention it is lossing its hold on the PC market to Apple and to other free services which Microsoft offers customers for a price.

General Electric began initially as a technology company. Although its technology is different from Microsoft, regardless, at the time of its inception it was leading technology. During the tenure of Jack Welch the company expanded into financial services. Through acquisition growth it aggressively entered this sector. Currently, financial services accounts for approximately half of the company's $130 billion in annual revenue. since over half of the company revenue is derived from financial services, it can be argued that GE is a finance company with divisions engaged in manufacturing.

It began by offering its customers credit for heavy equipment purchases. It has become an integral division for General Electric. I am confident that when Mr. Welch announced that a appliance company was going to enter financial services there was opposition and confusion. I will certainly not compare The Crandrea Group to Jack Welch. However, we will draw similarities in that both Microsoft and General Electric were originally technology based companies.

When initially researching for the "New Strategy" and considering the proposition that Microsoft enter financial services, we discovered a company that has been featured through Barron's, BusinessWeek, USA Today, The Wall Street Journal, and the NY York Times, proposed the same idea. This company in their website posted an article which suggested Microsoft enter financial services. This was based on the observation that Microsoft was more reflective of a bank.

The article can be found at Parish and Company called "Taking a Closer look at Microsoft". Parish and Company state :

"As Microsoft matures, however, it could make significant changes in its way of life that are more in keeping with its status as a industrial and financial giant.

Perhaps it should imitate GE. With over $40 billion in cash and investments, Microsoft, is becoming more and more like a bank anyway. Microsoft could expand its scope and aggressively enter the financial services industry , perhaps by purchasing a major bank. Just as GE founded a credit business by financing its customers purchase of heavy electric equipment, Microsoft could base a finance division on its customers purchase of money-managment software and web services".

After reviewing this article it confirmed our ideas that Microsoft could proceed into this sector. Microsoft has the capacity and the ability to emulate GE. It has the ability to offer financial services to consumers and additionally enhance other divisions in the process.

Hypothically, let's suppose that Mr. Welch was confronted with opposition. Executives indicated that it was a poor strategy. Subsequently, GE never entered this sector. General Electric never grew in this sector through acquisition, it never established GE Real Estate. How much value would have been lost?

Would GE remaining in its previous course had the capacity to exceed $100 billion in annual revenue?

Would Mr. Welch had the ability to create in 20 years a company that grew from $30 billion to $130 in annual revenue?

Without entering financial services would Mr. Welch been able to create $400 billion in shareholder value during his tenure?

It is interesting to review that in the 1960's GE was a major manufacturer of computers. It was considered one of the big eight. It was a sector that GE was engaged in maufacturing. However, in 1970, GE sold this division to Honeywell. This demonstrates that companies require the ability and agility to examine its business model and constantly change to meet the demand of trends and economies.

Shareholders, reporters and analysts agree that Mr. Ballmer during his tenure has failed to create value. They also agree that Mr. Ballmer has deployed enormous amounts of capital on stock buy backs which have failed to elevate the shares. They also agree that Microsoft is languishing in innovation, lossing the PC market, lossing search market share to Google, and lossing mobile service to iphone.

If Mr. Ballmer continues with current strategy shareholders will continue to expereince poor performance and massive overspending on ineffective strategies. The reality is how much revenue growth can Microsoft achieve through current strategies and tactics. Will shareholders be subjected to Mr. Ballmer attempting another $45 billion premium bid for a languishing company?

Entering financial services enables Microsoft to create a division that will accelerate revenue and earnings. Numerous other companies have entered this sector proving beneficial. For example, Canadian retailer Loblaws, through PC Financial has established a valuable company division. However, would it have been conceivable that a grocer create a valuable finance division?

Microsoft has the cash flow and resources to accelerate growth through acquisition. Microsoft through its finance division has the ability to offer loans and financing to other companies. It has the ability to use current market conditions to acquire a valuable asset at a discount. It enables Microsoft through financial services create synergy with other divisions. It provides potential to offer services that cross promote other divisions and enhance consumer loyalty. This reality can be demonstrated through PC Financial that offers consumers discounts with mortgages, insurance and groceries. Consumers of PC Financial obtain "Reward" points that can be used to obtain other Loblaws services. Microsoft through a similar concept could offer credit cards to corporate customers that earn points towards Microsoft Mobile and other Microsoft services.

We suggested in our "New Strategy" that Microsoft propel growth of Microsoft Mobile. We suggest that it expand beyond an alliance with Sprint and acquire the company. Our "New Strategy" enables Microsoft to own a bank and provide "reward" points to corporate and individual customers. It enables the corporate client to use the bank credit card and obtain points. These valuable points are used by the consumer towards mobile service or Internet and software service. It creates synergy and value within different Microsoft divisions. It enables Microsoft to offer an attractive service over conventional banks, mobile companies and search companies.

The primary success to retailers offering finance divisions to consumers is the services they obtain. PC Financial enables consumers to use a credit card and obtain free groceries at Loblaws. Consumers will use PC over conventional cards for the added bonus. It creates tremendous value for Loblaws and PC Financial. Subsequently, Microsoft has the potential to emulate GE and acquire a major bank and through the process offer consumers an additional service that will enhance other Microsoft divisions.

The company Time Warner, which has merged with AOL is considered a conglomerate. It operates a diverse portfolio of companies. However, these properties are also linked, such as, Internet access and Internet content. Their diverse portfolio of assets provide the company with the ability for cross-promotion and economies of scale.

Our "New Strategy" involves Microsoft emulating GE. It involves the company entering into financial services. It provides the company the ability to expereince growth with this sector. It enables the company a similar tactic as Time Warner. Microsoft through our "New Strategy" has the ability to utilize its assets through cross-promotion. It enables the company to cross-promote financial services with finance and managment software. The finance division can be cross-promoted with mobile services or Internet services. The company has the ability to cross -promote and the assests will enhance the value of each division of operation.

Microsoft has the potential to emulate GE. It has the ability to become a financial and technology company. It has the ability to essentially become a finance company with technology or manufacturing divisions. This strategy provides the opportunity for the finance division to enhance the revenue and value of other sectors of operation. Therefore, ultimately, the "New Strategy" has the ability to enhance brand awareness and consumer loyalty.

Our "New Strategy" enables Microsoft to propel revenue and earning's growth and increase its product mix. The acquisition of assets and involment in finance enables the company to offer the commercial or consumer multiple services. The individual consumer can obtain loans, mortgages, Internet, mobile and home entertainment from the same company. The individual consumer will use the finance division to qualify for "rewards" with other services.

The commercial customer can use credit cards, loans, financing, and also obtain mobile services, software, Internet access and services. The commercial customer has the potential to use a credit card from Microsoft and obtain points or "rewards" towards securing mobile service for its employees.

We have outlined a "New Strategy" for Microsoft. We do not have all the definitive answers. However, we offer shareholders a "New Strategy" and a forum to offer feedback and rally support. The reality is, without rallying support and creating a "New Strategy" where will Mr. Ballmer lead the company and how much value will be created for current and future shareholders.

We have additional information and ideas concerning the financial portion of the "New Strategy". We have recently through our posts provided a brief synopsis of the "New Strategy". We are through blogs limited to the quantity of information that can be posted.

We want to thank those that have been reponding via email. We are aware that there are numerous frustrated shareholders. However, the resolve is NOT to sell shares BUT rather rally support to effect change.

We are confident that we can continue to rally support from frustrated shareholders and effect change that will establish lasting value for shareholders.

We can be contacted via email at

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