Friday, March 27, 2009

Microsoft-A Change of Mentality is Required

In the last post we stated that General Motors failed because it became complacent. Microsoft is a company that for several decades commanded over 80% share in OS. Similar to General Motors it controlled a near monopoly within its sector of business. However, Microsoft became complacent. It rested on its laurels, it is losing share in OS. It fails to innovate. It is being outpaced by competitors. It has lost brand value.

Microsoft continues to have the mentality that everything is ok. It continued to believe that the cash cows would never be threatened. Microsoft allowed its size and success to believe that it was indestructible. However, there is competitors such as Apple and Linux. Google dominates the important search sector.

The lesson to be learned is, that if GM as one of the world's largest companies can be pushed into bankruptcy, a company must avoid the temptation of being misled by its own success (and size) into believing that it is indestructible. Management must cultivate a sense of vulnerability and the potential risk of mortality. That is part of the formula for the survival and growth of a company. However, this is the area were Microsoft is failing.

Someone should remind Ballmer that MS products are not like Proctor and Gamble. Microsoft makes software products, but this isn't a product where it is consumed and replaced on a monthly basis. That mentality has gotten Microsoft to where it is today, and to where their vision is run like a corporation not an innovated company. Refer to the following

Perhaps the most interesting comment in the above post is "The Internet group is the tail of Microsoft; every other part of the dog is more profitable and therefore more influential -- no matter the lip service to the Internet".

General Motors failed because it continued doing business in the same manner despite competitors recognizing consumer trends. Slowly competitors gained more share and eroded General Motors revenue, profits, and image. Microsoft seems to be conducting business in the same manner as a decage ago. Its survival is contingent upon the sale of its Client, and Server and Tools divisions.

The problem is the emergence of free software. The emergence of Apple and Mac OS. The emergence of netbooks, SaaS, mobile services and the Internet. Microsoft is trailing in all these arenas.

On the blog Mini-Microsoft is the following comment which we have extracted:

"I hate to be a naysayer because I support what Crandea wants to do, but I say "nay." "Nay," I say. MSFT will not change until the dagger is at the throat. Things will get much much worse before they will get any better".

A Microsoft employee has indicated that the company will continue to deteriate. President Obama released a bailout plan for General Motors. This once "Great Company" requires a government bailout. However, on CNBC it was stated that President Obama was demanding the resignation of CEO Rick Wagoner. It was indicated the government held the CEO accountable for the instability of the company.

Question. Who is holding Mr. Ballmer accountable?

During his tenure the company despite massive spending is still dependent on its same business model. Additionally, the same business model (cash cows) are failing to secure consumer loyalty and is losing share to competitors.

After a decade the company appears to have no real continguency plan and lacks vision. Its core business is losing share, it has failed in mobile, search, Zune. It is being battered by Apple in share and advertising brand perception (which even CBS Marketwatch is stating Microsoft requires a new ad company). It appears evident that Microsoft requires a drastic change in mentality.

However, after sites such as MSFTextreme, Mini-Microsoft, analysts, reporters, stagnant shares for eight years--Mr. Ballmer still refuses to listen. Therefore, it seems evident that Microsoft requires a dagger at its throat. Before it becomes the next General Motors, shareholders need to place the dagger at the Board and demand the removal of Mr. Ballmer.

The Board is responsible for overseeing strategy, perfomance and succession. After eight years of Mr. Ballmer displaying "no strategy" and "no performance" its time for a successor. It is time for a change of mentality.

We suggest that shareholders forward letters to the Board demanding the resignation of Mr. Ballmer and hold the Board accountable to act in the interest of the company and its shareholders.

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Microsoft requires a change of mentality. However, it will never happen as long as Mr. Ballmer remains at the helm.

Thursday, March 26, 2009

Could Microsoft become the Next General Motors

There are numerous articles concerning quantitative analysis of Microsoft. There are articles referring to revenue decline, earnings decline, charts and graphs demonstrating analysis of Microsoft's problems. This campaign within this blog has also engaged in providing quantitative analysis of Microsoft.

In this post we wish to pursue a more qualitative analysis. In this post we will be examining its non-numeric characteristics, such as management, employee morale, customer loyalty, and brand value.

In the last few posts we have referred to the current management of Microsoft. Refer to the posts "Microsoft, With or Without Ballmer", or "Is it Steve Ballmer or Steve Yang". Since launching this campaign, the consensus with the feedback that has been obtained from Microsoft employees, is that the company requires new leadership. This subsequently leads to the next issue.

There are numerous sites created by frustrated Microsoft employees. The sites MSFTextrememakeover and Mini-Microsoft were created by anonymous Microsoft employees. They have become a forum for Microsoft employees to post anonymous comments. The site Mini-Microsoft has become a place where Microsoft employees and others engage in an open discussion about all aspects of the company and what it is like to work there. The site is credited with providing some of the impetus for internal changes at the company in 2006, specifically concerning how employee reviews are done. This site has numerous comments concerning the company morale. Refer to

There are also numerous articles referring to consumer loyalty and company brand value. There are articles referring to loss of market share in OS. There are articles referring to the commercials with Seinfeld and the failure to improve the company brand and image. Therefore, in this segment we will not create an exhaustive list of articles and links. However, we will simply refer to an article concerning this campaign. A leading Microsoft analyst Mr. Barnicle of Pacific Crest Securities states that the company biggest problem is image. Refer to

Perhaps one of the biggest problems facing Microsoft is the General Motors mentality. General Motors in the past was Number One of the Big Three. It was a company that dominated auto sales and commanded a large market share. In these circumstances it is easy for a company to become complacent. A company can rest on its laurels and fail to be cutting edge. Such was the demise with General Motors. The once number one auto company is headed towards bankruptcy.

The lesson to be learned is, that if GM as one of the world's largest companies can be pushed into bankruptcy, a company must avoid the temptation of being misled by its own success (and size) into believing that it is indestructible. Management must cultivate a sense of vulnerability and the potential risk of mortality. That is part of the formula for the survival and growth of a company.

General Motors failed because it became complacent. GM continued to manufacture its range of gas-guzzling models, its Japanese competitors had designed and launched fuel-efficient vehicles. The second mistake was while GM concentrated on upgrading sports utility vehicles, its competitors upgraded their range of normal cars and increased their market share in this premium segment.

Microsoft is a company that for several decades commanded over 80% share in OS. Similar to General Motors it controlled a near monopoly within its sector of business. However, Microsoft became complacent. It rested on its laurels, it is losing share in OS. It fails to innovate. It is being outpaced by competitors. It has lost brand value.

Microsoft continued to have the mentality that everything is ok. It continued to believe that the cash cows would never be threatened, additionally they had the mentality of protecting the cash cows. Microsoft after a decade of acquisitions and R&D spending is as equally dependent on its cash cows for revenue as it was a decade ago. Microsoft allowed its size and success to believe that it was indestructible. However, there are competitors such as Apple and Linux.

Microsoft continued with its operating system and missed the Internet. In essence, Google has become to Microsoft similar as what Toyota was to General Motors. Google has increased share in a premium segment. Meanwhile, Microsoft is left with minimal share. Google has a market valuation that is comparable in size to Microsoft. This demonstrates how the market perceives the respective companies.

The final analysis is simply that Microsoft is quickly becoming the General Motors of the tech sector. Unless the company changes its mentality, similar to General Motors it will be eventually seeking bankruptcy protection. We will affirm this analysis from a recent comment in an article with CBS Marketwatch. Refer to

It states:

"Microsoft is obviously reacting to what it deems as a big threat to it's backwards retarded mentality, and I do mean that literally as in try to slow down the progress through it's twisted negative spin on what is to be an inevitable future of progression in technology and shifting of infrastructure led by Google, IBM and Amazon. Microsoft has long had a delusions of grandeur superiority complex of invincibility attitude because it doesn't want to do anything to upset its height advantage of 1) proprietary software and code and 2) tethering OS and software to PC. For Microsoft, power blinded and handicapped their ability to truly innovate years ago and this will ultimately be The Great Fall of the Microsoft Empire".

This ultimately leads into our next post "Microsoft-A Change of Mentality"

It is time to rally support. It is time to effect change. After nearly a decade of stagnant share price, it is time for shareholders to demand change before Microsoft becomes the next General Motors.

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Tuesday, March 24, 2009

Is it "Steve Ballmer or Steve Yang"

Mr. Ballmer while speaking to analysts stated ""I don't want to be known as the Jerry Yang of this market." Refer to:

Mr. Ballmer was referring to Jerry Yang the former CEO of Yahoo. Jerry Yang was eventually forced to resign. Mr. Ballmer in his statement was referring to the fact that Mr. Yang invested heavily in the search business and still failed to remain competitive with Google.

In the last post on this blog we cited the fact that "search" for Microsoft has reached a record low with 8% of the market. However, rival Google commands over 60% share. Refer to

Microsoft has pursued numerous acquisitions to remain competitive with Google and Yahoo. Refer to

Within the Wikipedia post there are references to numerous acquisitions by Microsoft. The article refers to acquisitions such as Medstory, Jellyfish, Farecast, Fast Search and Transfer, Greenfield Online and Powerset. These acquisitions alone total approximately $2 billion.

It also acquired Onfolio which was integrated into the Windows Live tollbar. However, by 2008 Microsoft announced that this was discontinued.

The number of acquisitions in this sector, such as search technology, the company has displayed very minimal revenue growth.

In 2005, Microsoft generated online advertising revenue of $1.5 billion. In 2007, Microsoft reported revenue of $2 billion. In 2005, Microsoft controlled 8% of the market share. In 2007, it appears that it had declined to approximately 6% market share. Currently, as indicated by the PC World report Microsoft controls only 8%. Therefore, despite various acquisitions within this sector there is minimal improvement. According to Microsoft Watch, the company in 2008 within Online services experienced a loss of $468 million. Refer to

Yahoo in the period of 2005-2007 was able to increase advertising revenue from $4.5 billion to $6.5 billion in 2007. However, it has lost minor market share to Google, and currently controls approximately 20%. In 2008, Yahoo posted revenue of $7.2 billion.

According to the data, Microsoft pursued numerous acquisitions from 2005 to 2008. The company has failed to increase market share and has experienced minor increase in revenue. Yahoo within the same period has created marginal increase in share and increased advertising revenue by approximately $2.7 billion.

Mr. Ballmer stated "he didn't want to be the Jerry Yang of the sector". One major dilemma. It appears as though he is.

To add further to Mr. Ballmer, he also failed the Yahoo bid. During his tenure shareholders have lost over $300 billion in market value. The stock has been stagnant for eight years. He has presided over poor decisions, massive spending, and poor company image (products, layoffs, Vista, Lawsuits).

The conclusion. Mr. Ballmer might as well legally change his name to Steve Yang.

Ironfire Capital through shareholder activism was instrumental in forcing Terry Semel to resign from Yahoo. Additionally, if shareholders rallied and forced the resignation of Jerry Yang, why haven't Microsoft shareholders forced the resignation of Mr. Ballmer?

This leads to one final reference. Although the article was posted in 2006, it still pertains to current issues because it appears that nothing has changed . The author states "If shareholders ever want to make decent money on their MSFT stock, they are going to have to fire Steve Ballmer". Refer to

This campaign is seeking to rally support to effect change. Microsoft employees have stated if Mr. Ballmer remains at the helm Microsoft will eventually become a penny stock.

To offer shares for support contact

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Saturday, March 21, 2009

Microsoft and Yahoo

Microsoft CEO Mr. Ballmer recently announced there is still interest to create a deal with Yahoo concerning its search business. Refer to

Last year Microsoft through Mr. Ballmer's leadership pursued a 65% premium bid for Yahoo valued $45 billion. Despite Carl Icahn of the hedge fund Icahn Partners numerous converstations with Mr. Ballmer to finalize the deal it eventually collapsed. Yahoo founder and then CEO Jerry Yang rejected the deal. This rejection lead to his eventual demise at Yahoo.

Numerous analysts had stated that the actual acquisition of the company was not necassary. Microsoft could have acheived the same results as a full acquisition through a "search" only deal.

What is of interest is an article at

According to a recent report through PC world Microsoft U.S search has fallen to a level of a all time low. However, Google commands 63% of all search queries compared to Microsoft's 8% of all queries. Refer to

This campaign has indicated the necessity for Microsoft to pursue a "search" deal with Yahoo. Based on the numbers released through the PC World article, it appears evident the reason Mr. Ballmer announced intentions to pursue a deal with Yahoo. However, the combined assests will still only command approximately 30% of all "search" compared to Google's 63%. Although it makes Microsoft more competitive there is still a 30% share margin.

During the high of the tech boom AOL CEO Steven Case orchestrated a merger with media giant Time Warner. This deal eventually evaporated. Refer to

In 2003, according to a New York Times article Microsoft was pursuing a deal with Google. Refer to

Analysts and even Microsoft employees indicate the Microsoft is required to initiate a game changing move. However, this reality still presents a couple of questions.

First, after losing the original Yahoo bid will Mr. Ballmer finally succeed the second time around?

Perhaps this comment extracted from the CBS Marketwatch article best captures the potential of Ballmer succeeding:

"Can someone shut Ballmer's mouth? He needs to resign! The worst CEO"

This leads to the next question. If Jerry Yang was forced to resign for the Microsoft and Yahoo blunder why is Mr. Ballmer still at the helm of Microsoft and why was he not forced to resign for his part in the blunder?

Lastly, were would Microsoft stock price be if in 2003 Google and Microsoft made a deal.

Microsoft is required to make a game changing move to compete in the "search" sector. This campaign is advocating a acquisition of Yahoo's search business. However, with Mr. Ballmer as the CEO will Microsoft ever get it right?

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Wednesday, March 4, 2009

Microsoft "With or Without Ballmer"

Prior to launching the campaign "New Strategy" for Microsoft several letters were forwarded to the attention of Mr.Ballmer. This resulted in a letter from Investors Relations stating management was confident in the direction of the company.

In a interview with Microsoft SubNet this campaign was asked if "Do you advocate the restructuring of Microsoft's top offices such as getting rid of Steve Ballmer or Kevin Turner? Why or why not?"

The initial response was "Typically, I believe that activists prefer to work in conjunction with management to enhance shareholder value. However, there has been occasions when the activist campaign has sought the resignation of management". The campaign also stated "Based on the history of Microsoft and its inability through current management to create shareholder value, we certainly have concerns with current management and Mr. Ballmer".

Since launching the campaign numerous comments and reports have been reviewed concerning Mr. Ballmer and his departure.

We will begin by reviewing a comment on this blog:

"MS needs new management, not new ventures. And they'll probably start by consolidating rather than expanding".
February 23, 2009 7:16 PM

This campaign has on multiple occassions referenced reviewing the blog Mini Microsoft. This is the name of a blog maintained by an anonymous author who appears to be a Microsoft employee. However, other Microsoft employees have the opportunity to post comments anonymously without fear of retribution from the company.

Recently, we obtained an email from a former Microsoft employee. (The former employee has agreed to conduct an interview with Microsoft SubNet concerning the problems with Microsoft).

The former employee in their email referenced a recent post on Mini by Anonymous 5:48 located at

We suggest reading Anonymous 5:48 and then the response by Anonymous 6:34. Perhaps what is of greater interest to this campaign is the comment within the email we obtained from the former Microsoft employee:

"The more I read about leadership and as I observe leaders in organisations I’ve come to believe the Russian proverb that “A fish rots from the head..” as true and found that it applies equally to organisations. An organisation is the shadow of the top leader. An organisation and a team is only as successful as it’s leader. John Maxwell calls this “The Law of the Lid".

The blog Boycott Novell recently posted a article concerning the campaign located at

Within The Boycott Novell blog there is a link to sites concerning Ballmer being replaced.

Another interesting read is "Ten Reasons Ballmer Should be Replaced". You can also imagine David Letterman reading out the Top Ten. It can be accessed through a link at msftextrememakeover or can be accessed at,1558,2317347,00.asp

A April 2008 CNet article refers to potential internal employess to replace Ballmer. This article is located at

It appears that other companies have competent CEO's guiding the company, injecting vision and creating shareholder value. However, Microsoft has Mr. Ballmer. Refer to

This leaves us with three questions:

1) Does Mr. Ballmer act like a monkey to hype the employees to believe what probably only Mr. Ballmer believes "I love this company" he states in the youtube post.

2) Does Ballmer act like a monkey to create hype because the products and company vision won't?

3) Should Microsoft hire a real Monkey to replace Mr. Ballmer and be its mascot?

Atleast a real monkey is cute and probably doesn't scream near as often. More importantly, atleast a real monkey will listen to its trainer and is teachable. Don't think that the same can be said about Mr. Ballmer. With Mr. Ballmer throwing chairs, ranting and screaming, failing to listen to employees (ie. Mini Microsoft and msftextreme.,), failing to listen to seems evident that its time for "Monkey Boy to Go Home".

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