Typically, after obtaining feedback in regards to the length of previous posts, this campaign is attempting to refrain from long posts. However, for the purpose of providing the "New Strategy" in its entirety, this post will be longer.
It has been indicated that this campaign was seeking to use a tactic similar to Ironfire Capital and its "Plan B" for Yahoo. Ironfire used wiki's to enable shareholders to edit and revise the "Plan B".
It has been mentioned in previous posts that this campaign was seeking to obtain insight and analysis from Microsoft employees to edit and revise the "New Strategy" for Microsoft. The "New Strategy" is edited. It has evolved modestly from when we launched the campaign. It fails to involve Microsoft acquiring Sprint. Instead in now involves Microsoft acquiring Research In Motion.
It also will focus on improving effeciencies with Research and Development spending. Below is the edited version of the "New Strategy".
NEW STRATEGY FOR MICROSOFT
1)Steve Ballmer is required to be replaced as CEO of Microsoft.
It has been communicated by reporters, analysts and Microsoft employees that Mr. Ballmer is required to resign. It is the fundamental responsibility of the Board to ensure that it acts within the best interest of shareholders.
a)During Mr. Ballmer’s tenure an acquisition of Yahoo was pursued. Mr. Ballmer pursued a 65%premium bid for Yahoo valued at $45 billion. An analyst with Goldman Sachs stated this was the stupidest move the company history. According to a recent report the company commands only 8% of the search sector. This is despite massive spending with acquisitions and R&D.
The largest dilemma with the Yahoo bid decision was the lack of strategy and correct communication. During a meeting with analysts Mr. Ballmer when confronted with acquiring Yahoo stated that Microsoft prefers organic growth. Less than one year after this statement Mr. Ballmer pursues a Board approved 65% premium bid for Yahoo.
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. However, in 2007, it appears that it had declined to approximately 6% market share.
Currently, as indicated in a recent PC World report Microsoft controls only 8%. Therefore, despite various acquisitions within this sector there is minimal improvement. According to reports, the company in 2008 within Online services experienced a loss of $468 million. However, Google commands over 60% market share and generates in excess of $20 billion in revenue and $4 billion in net income.
b) Microsoft is failing within the Web 2.0 sector. Mr. Ballmer has tried to put Microsoft into the Web 2.0 game but his efforts-to-date haven't been very effective. Microsoft isn't a leader in Web 2.0.
c) Mr. Ballmer during his tenure deployed $40 billion towards share buybacks. Despite this massive expenditure the shares have remained flat. The most disconcerting event with this failed expenditure is the announcement by Mr. Ballmer that Microsoft intends to deploy an additional $40 billion through to 2013 on share buybacks.
d) During Mr. Ballmer’s tenure the company shares have remained flat and stagnant for a long-term period of approximately eight years. In 2004, at a shareholder meeting when confronted with a stagnant share price Mr. Ballmer indicated that the company had plans and subsequently the shares would take care of itself. Despite this statement and Mr. Ballmer’s plans, the shares have continued to remain flat and fail to create shareholder value. During Mr. Ballmer’s tenure Microsoft has lost $300 billion in shareholder value.
During Mr. Ballmer’s tenure he has presided over massive spending, poor decisions, poor execution of plans, failed to communicate strategy to shareholders and employees, has failed to create shareholder value and is responsible for Microsoft losing $300 billion in market value. This subsequently leads to a no-confidence with Mr. Ballmer.
2) Microsoft is required to improve its image and brand perception. Today more than ever before, it is essential to establish a powerful brand to enable a successful and profitable business, and position your company as a differentiated thought leader. It is important to consider your companies’ brand as a critical asset to your business. Your brand is more than a graphical mark. It is an investment that you make in your customer relationships. Brand equity is your return on that investment. Your brand is also a promise to your customers.
The primary role of your brand is to establish & enhance customer relationships to create attention, loyalty and drive business results. Building a unique brand identity is the key to acquiring and retaining this attention and loyalty. Successful branding sets your firm apart from the competition, and therefore, makes your company products and services more desirable and valuable to your target prospects and customers.
Over time, your brand image and brand reputation will lead to committed relationships with your customers. This is because a consistent image builds familiarity. Familiarity strengthens relationships, and relationships build revenue. Ultimately, branding builds your market place reputation and drives improved financial performance to the bottom line.
Microsoft has failed to establish a brand that attracts and maintains consumer loyalty. Through failures such as Vista, Microsoft Mobile, and Zune it has failed to deliver on its promises to consumers. Subsequently, the company has failed to enhance customer relationships. Ultimately, this will result in a negative impact with improving financial performance and building revenue.
Brand Expert Rob Frankel has indicated that "Microsoft has no brand strategy. Never did. They have an identity, but no brand strategy. As a result, Microsoft is never proactive, but always reactive to its competition." Therefore, it is imperative that Microsoft fire its current advertising agency Crispin.
Microsoft is required to allocate capital towards establishing a brand identity and positive brand perception that will secure consumer loyalty and propel revenue growth.
3) Microsoft is required to improve R&D spending. Microsoft's strategy (and, therefore, its technological developments) are directed only at extracting more and more money from the customer, and at continuing to do so in the future. The customers' needs are irrelevant.
Subsequently, this mentality has resulted in poor brand perception. This campaign obtained the following comment from a Microsoft employee “Microsoft responds to one thing: the painful pressure of market realities. If we can sell you garbage and get away with it, we will sell you garbage”.
One of the fundamental dilemmas with Microsoft is that consumers complain that the company roles out products that are satisfactory. As one MSFT employee stated “MSFT has its hand on everything BUT a grip on nothing”.
It is critical that Microsoft utilize its R&D budget and focus on improving its core products. Rather than deploying capital to create new products, it is crucial to direct capital to improving existing products to secure consumer confidence and loyalty. Without this as a “goal” Microsoft could deploy $9 billion on R&D and still fail to capture consumer loyalty.
OS X is built on a solid, high performance, secure BSD UNIX foundation. LINUX is based on a solid, high performance, secure kernel. MS Windows, immature technolgies and never properly modernized. Poor performance. NO security. Weak development tools.
By focusing on its current core products, the company will deploy capital to ensure that the core products are superior and therefore will capture consumer confidence and loyalty. This will unlock shareholder value through increasing brand perception and consumer loyalty.
Through focusing on the core and establishing the core products functionality, consumer friendly this will capture consumers. Subsequently, market share will increase in within the core product sectors.
b) First and foremost, get rid of the existing, dysfunctional senior management. Now. Unless the senior management people are engineers and have a patent or several to their name, they have no place managing engineers.
Microsoft was a software engineering company first, so they have to get management on board with that NOW! There is a fundamental difference in mindset between engineers and business/accounting types and until the senior management team at MS recognizes this again, the company is lost.
Therefore, Microsoft has committed to lay off employees to satisfy Wall Street. Rather than lay off developers, engineers, instead MSFT is required to lay off managers that are not engineers and promote engineers into managerial roles.
To put it succinctly, the people at the top are too far removed from both the people in the trenches and the customers who buy their products. With that many layers of “middle management”, the message either way gets lost and no one has a clear sense of what is going on. They even have exercises in that very issue and they don’t learn from it. What good does it do if you follow process to the letter while producing the wrong product?”
Therefore, although this campaign fails to approve layoffs, since Microsoft has committed to layoff employees, it is integral that it layoff managers that are “middle management “ and not engineers. This will produce respect within the R&D labs. It will create vision and direction. It will improve efficiencies and reduce spending on process. This will make R&D spending efficient and ensure innovation is pursued. Ultimately, this will reduce wasted capital on process, and create a greater return on investment through innovation.
4) Microsoft is required to abandon its share buyback plan. Microsoft has disclosed its plans to buy back stocks of worth $40 billion. The company will buy back its shares from investors and it will be the biggest single buy-back plan in history.
The analysts are claiming that this move is an attempt by the company to sustain its share price drop which has gone down almost 30% this year. According to reports, the plan will help company to renew its share price which has declined sharply due to its failed $47.5billion bid to buy the internet portal Yahoo.
The company has never been in debt since its establishment and at the end of June this year, currently the company has approximately $23.7billion. The company was following a buy back 2004 plan which started as a $30billion project and was later boosted by another $10 billion. The new buy-back, which will run until 2013, is the single biggest share buy-back in history. The new program will expire on September 30, 2013.
The original buyback plan resulted in the company deploying $40 billion in capital. Despite deploying $40 billion in capital the shares remained stagnant. In 2004, the company shares were trading at approximately $25 per share. During the next four years and deploying $40 billion the shares remained flat. In 2008, the shares were still trading at approximately $25 per share. Therefore, this strategy failed to prove beneficial for shareholders.
The $40B buyback over 5 years continues what they've done in the past. This averages $8B a year and over the last 12 months they've bought back $9B. It will prove to have a similar effect as the previous initiative. It will result in the company deploying $40 billion without having an effect on the share price.
The company is required to abandon its share buyback plan and allocate the deployment of capital to acquisition growth. This will prove a superior utilization of capital and create a greater long-term return to shareholders. It will prove to have a greater return on investment then the proposed share buyback plan.
5)Microsoft is required to increase market share in search and advertising. According to PC Plus Magazine Microsoft currently controls approximately 8% of this sector.
Microsoft is required to enter negotiations with Yahoo to complete a search deal. This will enable Microsoft to command approximately 30% of the market.
Microsoft is required to acquire Ask.com. This company has potentially better algorithms than Google. However, the company lacks market presence. Microsoft through acquiring a search deal with Yahoo and acquiring the technology from Ask would be able to integrate the two acquisitions to compliment its current platform.
These acquisitions would provide Microsoft with potentially better technology than Google and with the combined ‘search’ from Yahoo, would enable Microsoft to become a viable competitor within the search and advertising sector.
6) Microsoft is required to acquire Research In Motion. Wireless delivery definitely has to be examined. Citi analyst Mark Mahaney states Microsoft's recent deal to provide search to Verizon mobile users won't be a winner for Microsoft, as it will require each user to conduct 17 searches per month on their phones in the next five years just to break even.
Microsoft is required to acquire RIM. RIM is a company with a good degree of loyal "addict" mindshare, which provides a more profitable moat with less price elasticity than multiple alliances. It would boost the MS image, even if it requires a more significant investment. And MS' recent difficulties attracting new customers wouldn't hurt as much here, because of the loyal user base and the inherent attractiveness of the RIM platform to those who consider themselves more "business people" than "technologists".
Absent a telco willing to pay Microsoft for new customers (AT&T / Apple iphone), if Microsoft is intent on operating in the mobile space, it is necessary to be disruptive in the market. What Microsoft has done so far hasn't been resoundingly successful. RIM is viable because they've been running a successful service business -- along the lines of the cloud computing model -- for an extended time.
Another reason to avoid alliances with Sprint, and Verizon as well, is that those companies use CDMA cellular technology, as opposed to the GSM technology in use in most other countries.
Consider that Microsoft already owns Danger, maker of the Sidekick. Acquiring the Blackberry platform would mean that Microsoft would have presence in both the "youthful consumer" and "business" segments of the cellular communication device market.
We are seeking to rally support and effect change. We are seeking to establish a coalition of frustrated Microsoft shareholders to effect change.
To offer support through shares contact:
We can be contacted at email@example.com
The youtube videos were recorded with a live webcam. The initial web cam file was visually fine. However,when downloaded onto youtube the streaming or timing is a couple of seconds off. I apoligise. Subsequently, this is the reason for the two links. Based on my discontent with the first link, a second attempt was completed. In the future, a video recorder will be utilized to hopefully improve the quality. Additionally, on the first youtube page (JNJEPsmOAK) is a link to Ironfire Capital titled "Yahoo!Shareholders in favor of Selling". This will provide information concerning the success of this campaign against Yahoo.