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.

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