Zune
Microsoft plans to go head-to-head with Apple on the portable music device market. It was but a few short years ago that some folks at Microsoft told me that they would never enter such a market.
Times change.
“This is not a six-month initiative, where somehow in six months we will have captured the marketplace,” Microsoft Entertainment & Devices Division President Robbie Bach said Thursday. “This will be a four-, five-, six-year investment horizon.”
Funny how Bach used the word “investment”.
From a recent InformationWeek story:
Trying to persuade analysts to trust Microsoft as it sinks billions into new “high growth” projects like Zune and its expanding unified communications and business intelligence software lines, Ballmer argued that the company won’t repeat its Vista mistakes.
And the stock remains stagnant.
Zune. I wonder where that name came from…
Funny, I missed this one.
MSN, profitable after years of investment.
SQL server, 35% growth, 2B business.
All up business, 16% growth last quarter.
Windows mobile, taking off (90% growth) – after years of investment.
XBOX, Christmas 2006 is all XBOX 360 as the competition has no product. 2007 is Halo 3 and the Halo movie. The race is on – first step was to enter, second phase is compete.
IPTV launches (after 10 years of investment) WW in 2006, with some of the biggest names in the world and a multi-facet strategy.
Novell, Netscape, Sun … While your Apple centric view is interesting, remember that there are many other facets to the business that have yet to come into play …. we will see.
The market is fickle. 11% revenue growth (YoY), 13% operating income growth. At some point, the market will wake up.
Or it won’t, and MS will keep growing and spurring stock growth through 40B stock buy backs.
This move has more to it ….
Hope so. Wired magazine had an interesting article on Rebuilding Microsoft.
One tagline: Microsoft has been outmaneuvered by faster, hipper competitors, from Apple and Google to Flickr and YouTube.
Here is a quote:
“Microsoft has been in a funk since 2003. Its travails could be the subject of a Harvard Business School case study on the innovator; dilemma. The company made – and still makes – billions selling desktop software, mainly Windows and Office. But the center of gravity has moved, and desktop software is about as cutting-edge as a nightly newscast… despite all the visionary pronouncements, Microsoft has been outmatched on this new battleground [web-based apps].”
So, yes. Please let the move have more to it… soon.
Lets take your examples.
Apple. The Apple product remains a great niche OS. iPOD was a break out hit. But, they prove time and time again that they cannot partner well (See the ROKR). So, iPOD will continue to be successful, Apple desktops a strong niche. But will they get the next hit? We will see. Meanwhile, MS enters with the ZUNE, which will have the support of Media Center, XBOX and IPTV synergies to help build marketshare – long term.
Plus, Apple beat everyone on the iPOD. But Microsoft beats Apple desktops with a huge partner eco-system, every single day. Microsoft has defended that base, but people forget that.
Google. GREAT search. Making lots of money. Anything else successful? IM, marginal player (In Canada, 2% share, with MSN IM with 60+ percent), GMAIL, still in beta. And there are other’s innovating. Google launched video on the internet and got their clock cleaned by You Tube. Google launches online classifieds, every heard of it? No, craig’s list is the WW standard and many are in the business. Google has images (We all do image seach), but do you use their service? No Flickr .. Google got beat.
Google faces that challenge, doing well in core business, but where is that next win? Oh yes, and Yahoo and Microsoft will launch ad engines in the next 6 months. Real competition is coming.
Now, lets look at MS move into the XBOX. One could argue (And many have) that MS will never win against Sony. Microsoft is doomed to No. 3.
What happened? XBOX set the standard for online gaming with LIVE, and Sony is not known as a good online/software company. Halo 2 was the No.1 entertainment release of all time. XBOX 360 beat Sony to market and will have 10M+ sold before Sony releases. Sony will miss Christmas 2006, leaving the battle for Christmas 2007 (When Halo 3 and the Halo movie will launch) and Sony’s biggest box driver (Grand theft auto) will launch on the 360 and the PS3 at the same time. A different landscape.
Now, lets look a the balance sheet.
Client – yep, still a big profit center with 97% share. 13B. But no one is challenging that yet. While Vista is delayed, it will still come out and sell like crazy with a new UI and a bevy of business value.
Office – Information Worker – 11.8B, but it has expanded to 35+ products including Office (Word/Excel/PPT are now a minor part) .. but expanding to collaboration (SPS), web meetings (Live Meeting), voice (Unified Communications Products) which could be a market changer, and on and on (Excel server, forms, etc.). Not Office like it was before …
MBS – 1B business with CRM growing like crazy
MSN – 2.3B business with lots of upside once the new search and ad products are in market, providing real competition.
The big one – SERVER AND TOOLS – 11.5B, and growing at a rapid rate (SQL growing 35% last year)
Home & Entertainment – $4.2B
Mobile – .5B, growing 90% YoY. Note recent market share shifts … With the Q and the PALM Treo, the Samsung Blackjack, and more than 100 devices in market, Windows Mobile has finally become a player.
The war is more than the sizzle … and funky cool web based apps.
We will see. Will the share price move? Who knows, it might become a model where we see the stock move when MS shares the wealth (stock buy back, bigger dividends) due simply to the size of the market cap. After all, 11% growth is 50% of Google’s revenue last year, that is healthy growth.
We will see.
🙂
The examples were not mine. They were taken from Wired Magazine. I just quoted them because their coverage is typical of the general media coverage on Microsoft: neutral to negative.
I know a number of really talented people with passion at Microsoft. The test is really to the leadership of the company to harness that talent and that passion.
And to get that stock moving in the right direction!
🙂
One last thought for consideration.
Microsoft’s role is not to be the radical new service on a regular basis. Analyst often forget that Microsoft wants to plumb internet apps, not build everything.
If they did that, then where would be the room be for partners?
Consider this article: Microsoft – the best SaaS (software as a service) platform?
http://alwayson.goingon.com/permalink/post/5552
What runs on Microsoft?
”¢MySpace””built on Microsoft from the start””100 million users, more traffic than Google, 2nd to Yahoo
”¢NewsGator–receives nearly 10 million API requests on an average day and nearly a million users are signed up for its consumer products
”¢ExactTarget””email marketing company–more than 5,000 requests per minute and over 200 million new records added every day
ӢEchoPassРdelivering end-to-end customer contact solutions for clients at a fraction of the cost and with far greater flexibility than traditional solutions
ӢLathianРoffers life sciences companies an integrated, full-service range of online sales and marketing tools that help them improve customer relationships
”¢Inrix– By leveraging the strength of Microsoft”™s server platform, Inrix processes and analyzes billions of traffic-related data points to “literally predict the future”?. (IP Ventures deal)
ӢDigipedeРproviding a key technology for anyone providing SaaS on the Microsoft platform: distributed grid computing for greater application performance
And there in lies one of the issues. When people looks at MySpace, they think no Google, no Microsoft. Microsoft is losing.
But it is 1000’s of Microsoft servers and .NET that runs MySpace, and for Microsoft that is a win – and for the partner, that is a win.
Just because the MS logo is not on the web page, it does not mean that Microsoft is not innovating and winning.