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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Anonymous said...

Become? It's there already.

Anonymous said...

Until true leadership is shown at the highest levels of that company, I don't expect things to change. Until that change happens, morale will continue to sink and that more than anything else will be the undoing of Microsoft.

Lots of discussion can be had about where the company should go and what they should do, but the single biggest step that needs to occur is replacing Steve Balmer. With that action can come other, healthier actions concerning the long term outlook and direction for the company.

So enough of talking about what needs to be done, let's start with the discussion and outline the plan of how to get it accomplished!