If you are new to this, you are encouraged to read the links contained here:
Microsoft is not in a healthy state with its aging business model. This post followed another one about Novell, which is faking it as well:
The first among these two might shock you. Microsoft is fooling a lot of people and it’s making good use of biased publications such as Motley Fool (it’s part of MSN, i.e. Microsoft). They hypnotise people. Microsoft is claimed to have done the same thing with Salon in the past. It’s a case of media control, which some could label “propaganda”.
Remember that most people get Microsoft Windows only with a new PC. Based on the prices of GNU/Linux PCs that are available from major OEMs, Microsoft gets paid very little for Windows. You could see it in some leaked contracts as well as in the press, especially after Linux had become available from the “big channels”. Mind the dumping of products too because we saw a lot of this in the past week.
Linux will win it Microsoft elevates the price. Linux would devour Windows gradually had Microsoft not permitted so-called ‘piracy’ and introduced $3 Windows, even for embedded devices (and no, not just for the developing world, i.e. poor people). As for the latter, look where it ended up just a fortnight ago:
SOFTWARE giant Microsoft has decided that it does not love its popular Mobile and Embedded DevCon any more and has pulled the plug.
Do not be misled by hyped, of which there is plenty. It’s mainly the money which generated this deceptive hype.
Office is Microsoft’s most major cash cow and it’s hardly surprising that Microsoft resorted to well-documented corruption in the fight against ODF. There is undeniable proof of this.
Let’s go a week back and remind ourselves of the new year’s staff exodus, which involved some high-profile departures such as Jeff Raikes
Microsoft is shuffling its executive ranks, with today’s surprise announcement that Jeff Raikes, president of the Business division, will leave the company. Uh-oh. He’s not the only executive on the way out the door.
Raikes departure will have huge impact on Microsoft as it completes its 2008 fiscal year on June 30. His division is one of two responsible for nearly all Microsoft’s profits.
This is part of a much larger exodus which left Microsoft reporters very worried. XBox 360 saw a quiet exodus last year and the next post will provide some more detailed listings for the sake of completeness. To quote the above again (with emphasis):
“His division is one of two responsible for nearly all Microsoft’s profits.”
Be aware that he has just left after many years of loyal service in the company. He was not too old to carry on with the job. He joins the likes of Bill Gates and James Allchin.
Allchin seems to have disappeared into the darkness after he unleashed Windows Vista, which had him nervous for years. One of his leaked E-mail is very revealing.
[Jim Allchin:] “I must tell you everything in my soul tells me that we should do what I called plan (b) yesterday. We need a simple fast storage system. LH [Longhorn] is a pig and I don’t see any solution to this problem. If we are to rise to the challenge of Linux and Apple, we need to start taking the lessons of ‘scenario, simple, fast’ to heart. Jim”
The industry as a whole is cutting down at the moment. Many people are being sacked and larger companies stop recruiting. Some companies are wealthy enough to play financial games. Microsoft and IBM, for example, are on heavy buybacks at the moment, but their pains are undeniable and inevitable.
IBM has sliced some of its wages by 15% as it carries on offshoring (sacking of staff in Europe and America, followed by recruitment in the East, if any at all). At the same time, IBM is able to manufacture this illusion that all is well. So does Microsoft.
Dell and Novell and totally bluffing while at the same time axing jobs and sending only some of them abroad. Novell is crumbling very fast. Don’t believe their financial figures. It’s called recession. Novell has admitted cooking the books (see the link proving this at the top as well as this summary). Even SCO pretended to be doing well just before filing for bankruptcy (Chapter 11).
Here ares some new headlines, courtesy of a new talk from Soros (forum in Davos)
Financial Times: Soros Sees ‘End Of An Era’
Reuters: Soros: world faces worst finance crisis since WW2
Telegraph: Dollar’s golden era is ending, warns Soros
Financial Times: The worst market crisis in 60 years, by George Soros.
The Independent: Soros warns ‘systemic failure’ may be upon us
The Guardian: Soros: Britain cannot escape US recession
Salon.com: The gloomy gospel according to George Soros
Also from the past week:
U.S. stocks were hit by losses in large technology companies, including Microsoft Corp.
The slide could be halted, however, if bellwether companies such as Apple and United Technologies engender hope that the U.S. economy can avert recession.
Even Mark Shuttleworth responded to this alarming issue:
Yesterday, we saw the most extraordinary failure of economic leadership in recent years, when the US Federal Reserve pressed the “emergency morphine” button and cut Federal Reserve rates by 0.75%. It will not help.
These are extremely testing times, and thus far, the US Fed under Bernanke has been found wantinbxg. Historians may well lay the real blame for current distress at the door of Alan Greenspan, who pioneered the use of morphine to dull economic pain, but they will probably also credit him with a certain level of discretion in its prescription. During Greenspan’s tenure at the Fed, economic leaders became convinced that the solution to market distress was to ensure that the financial system had access to easy money.
More on the Mark:
Pretty standard Economist-type analysis you might think; but what’s interesting about this lengthy piece is that it’s written by Mark Shuttleworth, head of Canonical, the company behind Ubuntu. What struck was not just that it’s extremely well written, but that he took the time and trouble to pen it. I don’t think there are many CEOs who would be both willing and able to do so.
I think we can deduce from from this is that Canonical – and hence a key player working towards GNU/Linux on the desktop – is in good hands.
And this isn’t the first time that he expresses political concerns by the way. Consider:
In his interview today Shuttleworth also said Ubuntu will support GPLv3 and was careful not to criticize Linus Torvalds, who supports GPLv2, saying the differences in the contracts is more of a kernel issue than anything else.
But it’s Shuttleworth’s swipes at Microsoft and his rallying of anti-American sentiment which I believe will be the headlines, and should be.
More on the economic problems (news from the past week):
Investors disappointed with Apple’s (AAPL) tune slammed the stock 13% lower Wednesday during another wild market ride.
Sources are telling us that the outfit has recently put on an abrupt and unannounced hiring freeze, or at least an abrupt hiring cutback, and this is not for low level workers either, but the cream of the crop.
National Semiconductor Corp. will cut 115 jobs at its Arlington manufacturing plant, about one-fourth of the facility’s workers.
Can anyone escape the wrath of these changing tides?
Microsoft Not the Exception
From a reliable source (offline) we hear that it’s the same old business for Microsoft. “If you can get hold of this article, it is probably time to dig it out again and use in the context of the current financial troubles. Microsoft execs bluff like anything, but basically it seems much of the Vista sales aren’t sales.” (I’ve said that for over a year)
“Anyway, in 1998, Microsoft ran an $18-billion loss. Bill jumped ship as CEO.”
“Share and share unalike“, Aug 5th 1999, The Economist
“Now he’s jumping ship from his role as Chairman to be. Though that seems to me so that admit he is full time politician and cause damage worldwide. Yes, that’s why he decided to ‘retire’.
The Economist article used to be readily available as well, until fairly recently.” (when it was apparently heavily cited)
I’ve actually been writing about this for over a year. Microsoft lost over half of its savings in the past two years based on the Seattle P-I’s count.
Here is another new article from that Microsoft-affiliated Web site, Motley Fool. It was published just 2 days ago:
You don’t need to watch the ‘I’m a Mac, I’m a PC’ commercials to see that Microsoft is taking a beating. You see it in the company’s financials where its online unit, incredibly, is operating at a loss; overheating Xbox 360 consoles find the company taking a huge warranty hit for a system losing market share to the Wii; and the upgrade wave of its flagship operating system has been more of a ripple than a tsunami. That last point is important. This was supposed to be Microsoft’s final feast, the major last hurrah for its Windows Vista operating entry and its Office 2007 suite of applications before the inevitable embrace of cheaper open source operating systems and Web-based apps… In fact, even Microsoft will tell you that its fortunes peaked several months ago.
Another source that has followed Microsoft’s business from a distance adds (offline):
“Also, Microsoft has made lots of acquisitions, and so they will say that they have gotten value their dollar (by buying companies) and they have returned value to shareholders, which is an appropriate use of capital, if the circumstances call for it. And the Microsoft shareholders were getting grumpy because the stock was stagnating for a while, and Microsoft was sitting on a pile of cash, which they disbursed in December 2006, I think it was. And I seem to recall that it was the largest one-time cash dividend payment in the history of the world. It was something like $40 billion USD, IIRC.
So the challenge for us here will be to show that the value was simply eroded. I don’t think that is the case.
I do think that Microsoft’s sales have not kept pace with the growth of PC sales, and that is the interesting thing. Or, to put it another way, Microsoft is losing market share. IMHO, that might be easier to prove than to say that they are experiencing a loss of capital.
Because, after all, it is far for the shareholders to expect a dividend payment. So no one is going to be critical of Microsoft for expanding by buying new businesses (unless they are expanding into areas where they do not excel, which I think is the real problem for shareholders with their acquisitions) or unless they buy bad businesses (not the case) or unless they fuck up the acquisitions, which they sort of have done with hotmail, which never caught up with Yahoo mail.”
“To sort of summarize, my main point has always been that Microsoft cannot compete in areas where it is not able to leverage its Microsoft Windows monopoly, because Microsoft is not an innovator, except for a few minor areas, such as their recent photosharing project, which did not take off in a commercial sense. I even forgot the name of it.
The Xbox is popular, but not immensely profitable for Microsoft; certainly not on the level of the Microsoft Office or Microsoft Windows cash cows. Halo sold well, but not on the level of Microsoft Windows or Microsoft Office. It’s because they have real competition with Nintendo and Sony. Same for MSNBC. In every area of their business except for Windows and Office, Microsoft is just an ordinary revenue generator.
They are bullies, plain and simple. They are not innovators. Where they must compete, they exhibit lackluster performance.”
If people tell you that Microsoft is seeing great financial success at the moment, point them at this page and ensure that Microsoft’s little vanity campaign gets buried before it gains any ground. It is extremely hard to defeat self-serving media that is funded by corporations, but a little corner of the Web will usually gain perspective and see past the public relations Great Wall. █
Update: Another reader has just sent in an E-mail to add some information.
Here’s another resource you might find interesting:
Taking a closer look at Microsoft
By BILL PARISH
It was written in 2003, but I remember the name Bill Parish from the Billwatch days before 2003. While the US-DOJ case was making headlines, he was writing articles critical of Microsoft accounting practices as “a voice in the wilderness.”
Having just taken a look, here is one bit of interest:
While Linux may be attractive to poor countries because it’s less costly and more reliable than Windows, Linux users in the developed world are excited too because it gives them the ability to see and alter the actual computer code to fit their particular application. Seeing the actual code also allows users to recommend improvements, innovations that enable them to create more competitive products and services.
Microsoft’s current attitude about source code is like that of a math teacher hiding numerous parts of an equation and then expecting the students to understand the formula and make optimum use of it.
I am personally familiar with some of Parish’s other writings, including this one from 2007:
The following report regarding Microsoft?s financial practices is the most widely read report on my website since 1999. Numerous major news stories have appeared based upon the report titled Microsoft Financial Pyramid Summary
There is also this popular report which is older:
Sadly, many of these brilliant people have been blinded by the stock price and unable to see that Microsoft is also the key architect of the greatest financial pyramid scheme this century.
It is not uncommon for participants in pyramid schemes to lose their emotional bearings. My close friends who work at Microsoft are particularly upset over my work and it is possible that even Bill Gates and Steve Ballmer do not realize the implications of their financial practices.”
There are more such writings (from different authors even) which describe this as a modern-age “pyramid scheme”.
Update #2: Another reader had this to add:
MS went over to permatemps way back when to avoid having to report major downsizing. So right there you can see the start of the end. I’d guess that the savings have been long gone. I’d also guess that much, if not most, of its money comes from buying and selling its own (and other) stock.
I’d also point out that a few years back there were many articles showing that MS only makes any money on MS Office and MS Windows and then only because of OEM sales. Everything else is about control of the market and based nearly exclusively on extending the DOS monopoly inherited from IBM via family contacts. There is some documentation in the book “Just Say No to Microsoft”, which despite the flamebaitish title is really only about the history of desktop computing. It would be nice to be able to get the historical facts more visibility and stop the revisionsist history that’s eroding our knowledge base.
Professionally, with 24 years of work experience, much of which with desktops and workstations, I have to say that the time for half measures is long since passed. And that while I sometimes begrudgingly accept some best-of-breed closed source software, in regards to Redmond, the only possible answer is one of zero tolerance.
The largest barrier I see is one comprised of several forms of cognitive dissonance. If you discuss events, laws, standards, or any other metric separated from the name ‘MS’ people will 100% side against MS. How to get decisions to stick once the real names of the parties involved become known.
In regards to the net, one of the things keeping MS aloft is the insane number of man-hours of corrective, after-market maintenance work done on a volunteer basis. If all the family/neighborhood geeks stopped fixing MS for free, the problem would solve itself in short order.