02.29.08
Microsoft Rarely Before Seemed So Weak…
One reader has requested that we organise our writings about Microsoft’s financial difficulties. We can publish these as an article which summarises and serves as an index. We shall do that shortly, probably over the weekend.
In the mean time, we wish to share with the readers some new perspectives from other journalists whose conclusion is that Microsoft absolutely must evolve in order to survive or at least maintain its omnipresent form.
The first article comes from Glyn Moody, who writes in Linux Journal about Microsoft’s financial pains. He also covers the abuses, for which the company deserved to be fined in the European Union. His headline is nice and catchy and the discussion is worth a glance also.
That would be bad enough, but on top of that, Microsoft will, for the first time, be taking on a huge amount of debt to help pay for Yahoo if the acquisition goes through. So as well as a hugely-stressed and possibly warring management structure, Microsoft will also have to cope with interest payments on its debt, which will need to be funded out of earnings. In addition, those earnings have to rise pretty steeply to justify the whole Yahoo adventure, or shareholders will start to express their dissatisfaction.
Against this background, the last thing Microsoft needs is fines. Remember that we are not in fact talking about “just” €899 million here: as the EU commissioner Neelie Kroes noted during the press conference announcing the latest fine, the cumulative amount that Microsoft must pay the EU is €1.6767 billion. The fact of the matter is that if the Yahoo deal goes through, Microsoft will be strapped for cash, and paying out over one and half billion euros for “nothing” will hurt.
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Whatever happens with OOXML and the Danish complaint, the key gain for openness has already been achieved. Unable to regard fines from the EU with indifference or even contempt, Microsoft will have to start really playing by the rules. Finally.
Bill Snyder has another good article which takes a slightly different approach but presents the same perspective. The article talks about the fines in the EU and it focuses on Steve Ballmer’s need to make changes — and fast!
Can Ballmer steer Microsoft out of the roadblocks?
The highly competitive Ballmer, you might say, is the man who cried “nice.” And like the boy who cried wolf, no one believed him. The software giant’s attempt to make nice with much of the developer community by opening up its APIs for key products was greeted with a jaundiced eye by regulators at the powerful European Commission.
However sincere Microsoft’s stated change of heart may be, it is becoming clearer and clearer that Microsoft — which knows it has to change — is still struggling to find a fresher path.
What’s a poor CEO to do?
Now that Bill Gates has effectively left the building, Ballmer is free to transform Microsoft, a job made all the tougher by the enormous reservoir of mistrust the company has engendered over the years.
For those who do not know, Bill Gates stepped down when the honeymoon (or the Golden Days) was pretty much over. The recession in the United States (even more globally prevalent) makes it harder to know what factors are/were involved, but we may soon get some facts — as opposed to just projections — particularly when definite answers about Yahoo/Microsoft are received. This looks like an ugly, messy and wasteful merger, if it ever becomes a reality at all.
Microsoft, by the way, has just dropped 15% in terms of search engine market share (relative to self). This was published in Barron’s a couple of days ago. The chief of that division left the company just a couple of weeks ago, ‘joining’ several others who escaped the very same role in a division that operates at a loss measured at billions of dollars. █
