01.26.09
Posted in Microsoft at 9:24 pm by Dr. Roy Schestowitz
IN OUR PREVIOUS ANALYSES of Microsoft’s tough situation [1, 2, 3, 4, 5] we supported the allegation that Microsoft is in effect firing a lot more than just 5,000 people. The company has a handle on its peripheral workforce whose contracts it need not renew.
Pseudonym Cringely, in another one of his spectacular stabs at the subject, points out that another methodology for quietly firing people may be the company’s routine of discarding the least-performing tier of employees, some of whom may leave voluntarily. In Microsoft’s HR department, significant reductions have already been reported, which suggests that new hires will be left at the backburners. Here are some other portions worth quoting:
Next let’s consider how big a layoff this really is – 1400 people right away and up to 5000 by sometime in 2010. Microsoft has, depending on how you count it, about 100,000 employees. If the average time in service is 10 years that implies that 10 percent of the Microsoft workforce leaves every year, which feels about right. That’s 10,000 folks leaving of their own accord EVERY YEAR. So what does this layoff mean, anyway? “Over the next two years we’ll be eliminating 5000 positions.” It means nothing.
[...]
So unlike every other public company, Microsoft traditionally manages its earnings not by cutting expenses but by increasing spending. It’s a legacy technique invented years ago by legendary CFO Frank Gaudette and embraced by Bill Gates and Jon Shirley because it accomplished the task of meeting Wall Street expectations, allowed the company to hide spectacular true profit margins, while still generally keeping anti-trust officials off Microsoft’s back.
[...]
Instead of 5000 positions, the company should drop 50,000. It should decide what businesses it is in and close or sell the rest. It should be a lot better than it is at running its true core – the muscle that’s been hiding beneath all that fat.
Yesterday we wrote about Microsoft projects, division, services or products that had been rendered dead. Here is another one which was caught by Mary Jo Foley.
It looks like Microsoft’s Global Foundation Services (GFS) team is, indeed, among those taking a hit.
This won’t be formally announced until later in the week. They must be working out a way to perfume, embellish pr beautify it somehow. █
“Microsoft’s perspective is best reflected by Bob Herbold, Chief Operating Officer, to whom the CFO reports. Bob very sincerely replied, “Bill, everyone is doing it.” My response was that Microsoft is a leader and that others are now seeking to emulate these fraudulent practices they have legitimized. Naturally Bob was not pleased by this perspective and that was our final conversation.”
–Bill Parish
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Posted in Bill Gates, Deception, FUD, GNU/Linux, Microsoft, Steve Ballmer at 10:26 am by Dr. Roy Schestowitz
Mechanic conversations
IN A PREVIOUS SERIES of posts, we showed that Microsoft had exploited analysts’ lack of integrity to generate case studies and other material against GNU/Linux [1, 2, 3, 4, 5]. In the following antitrust exhibit, Exhibit PX08887 (September 2004) [PDF], we find evidence that relates to this. It arrived a couple of years after Microsoft had planned to produce some ammunition against GNU/Linux.
This set of documents contains “talking points” that relate to the “Get the Facts” campaign against GNU/Linux (see page 12). As we showed before, using another antitrust exhibit, “Fear Uncertainty Doubt (TALKING POINTS)” is part of the game at Microsoft.
Today’s exhibit starts with an E-mail from Larry Cohen to Bill Gates and Steve Ballmer. He is writing or assembling talking points for them. Here is how it’s titled:
Microsoft Company Meeting
Draft Talking Points
It’s a phony debate that they must be prepared for.
It starts with a lot of ‘fluff’ about “innovation”. Bill Gates has people writing answers, such as:
What was the reason for cutting WinFS from the Longhom release? Are we abandoning the whole LH Wave concept?
- Vision and commitment to LH has not changed
- We are still on a path to deliver advances well beyond the magnitude of our prior innovation leaps.
- Prioritizing and getting it right
- Outline Customer & ISV benefit
- Specifically highlight commitment to WinFS
In many of the answers, almost everything revolves around the theme of “innovation, innovation” or “R&D”. It’s funny how they get spoon-fed answers and all sorts of buzzwords that are intended to appeal to viewers or readers.
Then it moves on to Ballmer, who is being prepared to answer questions about the massive buybacks that will soon put the company in debt [1, 2, 3, 4, 5]. He is also asked about GNU/Linux, which they lump in with OSS (Open Source software). It’s worth emphasising because Microsoft is now pretending that it’s a friend of OSS.
4. How are we doing vs, Linux? Can you give us some specific comparables so we know where we are winning, holding our ground and still losing ground? Do you see a threat from Linux in the home PC market?
(Core question: Winning: Will we win in our competition with OSS?
- We are hitting our stride in understanding how we meet the challenge
- Competing with Unix through innovation, quality support execution, and facts-based customer education.
- Confidence for our success- OSS evolution and the commercial model
- Need for flawless execution
- Getting traction- The facts are speaking for themselves
- The home market threat- customer value, our investments and partner ecosystem
Later on in this document, answers are listed in greater depth.
4. How are we doing vs. Linux? Can you give us some specific comparables so we know where we are winning, holding our ground and still losing ground? Do you see a threat from Linux in the home PC market?
(Core question. Winning: Will we win in our competition with OSS?
- Hitting our stride in understand how we meet the challenge
-
We know how to compete with Linux through innovation, quality support execution, and facts-based customer education.
- Confidence and strategy
- I have a for of confidence in how we stack up competitively with Linux in terms of strategy, sales and marketing, and our product offerings. As terms of Linux distribution model matures, we see vendors like IBM and RedHat adopting a commercial model around Linux, which, due to high services costs, is quickly putting to bed the notion that there is a cost advantage over Windows.
- But we have to keep making sure we’re doing the right things:
- Where we have a good story to tell vs. Linux are we telling it well?
- Are we talking to customers and engaging on the right fronts?
- Where Linux has traction, are we delivering the dght products forthe workloads?
- With single-purpose server scenarios such as file/print/web server, it’s a battle, no question, but we are responding with very strong workload-specific SKUs such as Windows, Server 2003 Web Edition, Windows Server 2003 Storage Edition and an upcoming High-Performance Computing offering.
- The facts are speaking for themselves
- We now have independent studies from respected analyst firms like Forrester, IDC, Yankee Group and Beading Point underscore the advantages over Windows over Linux in key areas such as TCO, performance, reliability, interoperability, security, support, indemnification and a worldwide partner network. Our Get the Facts campaign is focused on educating customers about these facts
- Customers are taking notice- we’re making significant strides. (invite employees to look at the site.)
- Specifically, the home market
- In the home market, OSS products simply do not provide meaningful customer value on the client compared with our offerings. Customers are demanding easy home networking, great integration with digital media, games, etc., and here, we and our partners are absolutely in a position of leadership. I am confident that will continue as long as we continue to execute well.
- Most importantly, nobody is really making the investments to completely understand the customer in the home and also investing to make the PC experience easier and easier.
Ballmer is asked to say that they have “independent studies from respected analyst firms like Forrester, IDC, Yankee Group.” But who paid for these studies? There were controversies before which involved “independent but Microsoft-commissioned studies.” Those affected were rightly outraged.
We already know that Microsoft pays Forrester for slime on GNU/Linux. IDC and Gartner are the same [1, 2, 3, 4, 5, 6, 7], not to mention the Yankee Group [1, 2, 3].
This entire “Talking Point” routine is a cheap stunt, fueled by an expensive smear campaign against GNU/Linux. █
Appendix: Comes vs. Microsoft – exhibit px08887, as text
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Posted in Finance, Microsoft, Office Suites, Vista, Vista 7, Windows at 5:49 pm by Dr. Roy Schestowitz
MICROSOFT CORPORATION, a company that was accused of engaging in financial fraud with similar doubts still lingering and debt around the corner [1, 2, 3, 4, 5], is no longer able to hide its poor health. Since the announcement of the layoffs we have already published:
Today we take a closer look at the points that were not covered in previous posts.
It Hurts
MSN, which is Microsoft’s news Web site, put up a BizJournal article — one that’s titled “Gloom at Microsoft headquarters.”
The morning was appropriately foggy and dark as Microsoft employees came to work today, bracing for details of the unprecedented cutbacks announced by the company before dawn.
Google’s sales rose 18% compared to just 1% from Microsoft and Microsoft employees foresee what’s coming.
Microsoft’s announcement it will lay off 5,000 in its biggest-ever job-cut rippled through the Seattle area on Thursday, further unnerving residents of an already-bruised city of just over 3 million.
The Forbes article above may suggest that this is not over and another Forbes article is titled “Microsoft’s Massacre.” Microsoft’s business model, just like Novell's, is dying.
It’s Going to Get Worse
Analysts are saying that Microsoft’s layoffs are not sufficient and this assertion is consistent with previous words from several independent analysts [1, 2]. The scale of the layoffs is simply too low.
The unprecedented layoffs and other cutbacks announced yesterday by Microsoft haven’t appeased Wall Street. Microsoft shares are down more than 6 percent since the news came out, and some analysts assert that the company needed to go much further.
Here are some more details.
Microsoft Corp. (MSFT) announced the first significant layoffs in its 34-year history Thursday. Investors, analysts and even some employees say the cuts likely won’t be the software giant’s last.
The Redmond, Wash.-based company said it would eliminate 5,000 jobs, or 5% of its workforce, over the next 18 months, as well as cut some travel and other expenses. The cuts are needed to bring the company’s costs in line with the rapidly slowing sales of its flagship Windows software, which are dropping along with sales of PCs.
Which areas of the giant company’s operations will be affected – and how deeply – remains unclear. But investors and analysts say the company hasn’t moved dramatically enough to turn its fortunes around. And on Internet chat boards, some Microsoft staffers said they were concerned the day’s layoff announcement was the beginning of a drawn-out staff reduction.
Beginning of the End?
Microsoft’s fan press, the Motley Fool, has actually done the unimaginable by urging people to sell away Microsoft shares.
Vista: Microsoft lost nearly half its value in 2008 as it faced a tough year like many other tech companies. But it wasn’t all due to events outside the company — many argue that Vista did a spectacular job at lowering the company, as the unpopular operating system was shunned by many corporate users.
According to this column, “for Microsoft, the pain is just beginning.” The explanation is long.
And Microsoft’s stock? On Thursday, as Microsoft was announcing the layoffs, one cable-TV reporter commented that MSFT has “gone nowhere for years.” Actually, the stock has lost nearly half its value over the past year.
So now, for the first time, Microsoft — like IBM 16 years ago — is resorting to a major layoff.
It won’t be enough, any more than a layoff was enough for IBM.
Microsoft has been coasting for years on Windows and Office. Those have been the cash cows that enabled the company to fumble its way through years of halfhearted “innovation” and watered-down imitation. Microsoft has lost ground (or never gained a footing) in search versus Google, music players versus Apple, Web browsers versus Firefox.
Worse still, Microsoft has forgotten how to improve even those cash-cow products. Office 2007 is a mess for usability. Vista is a disaster in almost every way.
Mish Shedlock calls Microsoft “An Aging Gorilla”:
Microsoft is an aging Gorilla facing many battles. The first is declining PC sales as discussed above. A second more serious problem is that it’s products are too expensive and too buggy. A third problem of Microsoft is a shift to web-based services.
Cash Cows Starve
Revenue extracted from Windows and Office already declined at the beginning of 2008, but it continues to get worse for these core products which are among the few that are actually profitable.
Job cuts call for Microsoft to rethink Windows client
[...]
[E]ven Microsoft acknowledged Thursday that a flat PC market could continue to affect the overall Office business, while the entertainment and devices unit’s performance had more to do with holiday sales of the Xbox 360 game console than overall growth in that market.
IDG is citing its bosses at IDC (Al Gillen in this case). They spin it in favour of Microsoft, as they very typically do. What can Microsoft do now other than engage in new viral marketing campaigns for Windows? At the moment, Microsoft markets a product that is not even on the market (Vista 7) while neglecting those which do exist. It’s consistent with the evangelism strategy which Microsoft adopted.
“My initial evaluation of Windows 7 shows that it’s really just Vista with a fresh coat of paint.”
–Randall Kennedy, InfoWorld (IDG)
Need to Eliminate Products
Microsoft needs to eliminate products. The question is, “which ones?”
Well, Om Malik from the broadband arena believes that Microsoft should concede its main race on-line.
Should Microsoft Reconsider Its Search Efforts?
[...]
As the company tries to get its act together, one question comes to mind: Should it give up on its search and online advertising efforts? The division brought in $866 million in revenues but lost $471 million.
The Wall Street Journal mocks the Zune and asserts that it’s time for the Zune to just go.
At its much faster rate of decline, the Zune player looks like it’s headed from low to no market share — unless Microsoft jazzes up the product soon.
The Zune is doing very badly, according to the following new report:
Sales for the Microsoft Zune MP3 player tumbled by 54 percent during the last quarter while the Apple iPod grew more than 3 percent in market share. The battle of the multimedia players might have met its final match.
Microsoft Corp reported last week that sales on its Zune MP3 player tumbled by 54 percent during the last quarter. The Zune rival, Apple Inc’s iPod, grew more than 3 percent in market share and is seen as the dominate music player. While the software giant is cutting divisions that don’t have improved sales, some analysts wonder if Zune is on the way out.
This troubled Zune makes headlines only when disaster strikes.
Another site contends that Microsoft is not cutting down in the right departments.
Seriously, how is it that, when the ax comes down, you pick the people that make you look good? Why don’t you fire the people who get you sued? Because, I tell you, the people who really love Microsoft have no idea what the big deal is with Office 2007, don’t care about new calculators in 7, and surely wouldn’t pinch a loaf for a more-compliant IE8.
But go ahead, divest yourself from the Zune. I was going to buy a Cowon, anyway.
Microsoft put some other products in the firing line, though.
Eliminated Products, Divisions
There are various elements in Microsoft that are affected immediately. One of them is another game studio which is shut down. Ensemble, which we mentioned in [1, 2, 3, 4, 5, 6], is lonely no more.
[I]t does seem that tips that the company’s Entertainment & Devices (E&D) unit (Windows Mobile, Xbox, Zune) was impacted most heavily by the first round of layoffs. And it’s increasingly sounding like the games side of the house bore the brunt of the E&D cuts.
Microsoft has closed completely its Aces Studio, the game group that developed and maintained Flight Simulator, sources close to the company confirmed. Aces’ other franchises include Combat Flight Simulator and Train Simulator.
This is also covered here:
There are other dead services, a pile of which has been growing since last year.
According to this, Popfly, the .NET poison that we mentioned in [1, 2, 3, 4], might get the axe too.
Microsoft on Friday said that it may discontinue its free Popfly service that lets non-programmers build Web 2.0 apps.
Popfly “is in a transitional phase,” said a Microsoft spokeswoman on Friday. “We have no other details at the moment.”
Popfly is essentially poison on the Web, just like Silverlight [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12]. It’s designed to harm Web standards which make the Internet a commodity. It lumps proprietary elements onto it.
Another big setback is cancellation (Microsoft prefers saying “postponement”) of a massive datacentre in Iowa.
A day after reporting flat revenue for its online services business, Microsoft said it is postponing construction on a planned data center in Iowa.
It’s one of several other cost-cutting measures the software giant announced along with a disappointing financial report Thursday, including laying off around 5,000 people, reducing the use of vendors and lowering marketing spending.
There is also covered here and more news is likely to come regarding products and services that are taken off the shelves and called off, respectively. Withdrawals are urgently needed.
Monetary Problems
Hidden deep inside a stack of papers was this nugget of information.
Microsoft paid the federal government $3.1 billion between July and September of last year to settle a tax debt that was discovered during an Internal Revenue Service audit, the company disclosed in a regulatory filing.
We’ve already summarised Microsoft's tax evasion stories.
It’s very obvious that Microsoft is stressed for cash when it aggressively sues those who spread its software and it’s doing it again, along with its funded ally/pressure group, the BSA [1, 2, 3, 4].
Microsoft Gulf coordinates with Bahrain Ministry of Information on latest software piracy offensives in Manama
Microsoft GulfMicrosoft GulfLoading…, a member of the Business Software Alliance (BSA), the leading global organisation that is the voice of the world’s commercial software industry and its hardware partners before governments and in the international marketplace, has announced successful anti-piracy raids by the Bahrain Ministry of InformationBahrain Ministry of InformationLoading… (MoI) on two resellers operating in Manama. The offensives highlighted Bahrain’s comprehensive nationwide anti-piracy program and its thrust to make the capital city in particular a model of a piracy-free environment.
To summarise and to close off this tour through reports, regardless of the scale of future layoffs, one must remember to keep track of contractors and temporary workers, which is hard because Microsoft keeps it secret.
Microsoft says it plans deeper cutbacks in contract workers
[...]
Microsoft doesn’t report publicly the number of contractors who work for the company through job agencies. There have already been reports that the company hasn’t been renewing many contracts as they come due. Overall, Microsoft said it reduced operating expenses by $600 million in the recent quarter, and no doubt contractor cuts were part of that.
As we pointed out the other day, since not all staff is permanent, a lot of the layoffs (they don’t officially count or qualify as “layoffs”) are not visible to the public.
Remember the rule of thumb: things are much worse than Microsoft needs us to believe. It’s not unique to Microsoft, either (remember Enron?). █
“There is such an overvaluation of technology stocks that it is absurd. I would include our stock in that category. It is bad for the long-term worth of the economy.”
–Steve Ballmer
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Posted in Google, Microsoft at 12:13 pm by Dr. Roy Schestowitz
No lessons taken from the founding fathers
ACCORDING to the press, Windows Mobile contains back doors, just like other versions of Microsoft Windows. Surveillance is a feature to the NSA and Microsoft, but more of an antifeature to the respective user. Having witnessed Bill Gates speaking to Obama and putting money in his pot, it’s somewhat unnerving to see that Microsoft just can’t let the president [s]elect a phone of his choice. It’s lobbying for him to choose Windows Mobile by citing “security” as a reason, probably ‘forgetting’ the back doors in its own software. How convenient.
Microsoft, however, has questioned the wisdom of the president relying on a device whose maker is based in Canada. “You would be sending your data outside the country,” says Randy Siegel, a Microsoft enterprise mobile strategist who works on federal government projects. “We wouldn’t want the casual musings or official communications of the most important person in the world being intercepted by others.”
As shown on several occasions before [1, 2, 3], even Microsoft’s sympathetic crowd had lost hope for Windows Mobile. Why can’t the presidency be left alone without Microsoft breathing down its neck?
Well, let’s explore some some other stories about Microsoft’s impact on the United States government. Microsoft has already used diplomats to fight Google, and quite successfully so. It’s a systematic routine.
Other people out there try to defend Microsoft from allegations that were made in a recent Wired story.
The story casts Google as the green (as in naive) political victim of more experienced and cunning adversaries who saw Google disrupting or undermining their respective franchises and markets. The now-tarnished myth of American capitalism is that markets are transparent, fair and operate largely on their own. In fact, as this case shows in microcosm, success in the “free” or “open” market is as much about politics and political influence as it is almost any other factor.
The Wired piece even implies the killing of the Google-Yahoo search deal is partly a Republican political vendetta for Google’s historical support of Democrats. However U.S. Senator Herb Kohl, chairman of the Senate Antitrust Subcommittee and Google critic, is a Democrat.
We mentioned Herb Kohl in [1, 2], but he is the wrong person to look at. The Department of Justice, which is corrupt, has other Microsoft lackeys inside of it and they offer Microsoft ‘protection’ or immunity. Tom Barnett is a good example. From The New York Times:
“The official, Thomas O. Barnett, an assistant attorney general, had until 2004 been a top antitrust partner at the law firm that has represented Microsoft in several antitrust disputes. At the firm, Justice Department officials said, he never worked on Microsoft matters. Still, for more than a year after arriving at the department, he removed himself from the case because of conflict of interest issues. Ethics lawyers ultimately cleared his involvement.”
Also:
State officials said they were angered by Mr. Barnett’s letter in large part because before he joined the Justice Department, he had been the vice chairman of the antitrust department at Covington & Burling, a law firm that represented Microsoft and played a central role in settling the antitrust case. While at Covington, Mr. Barnett did not work on the antitrust case, although he did represent Microsoft in other matters.
There is more background here as well as an official Barnett bio. Political intervention is often the reason why Microsoft gets its way, but less so in the EU (Commission), which Microsoft uses its press to daemonise.
Speaking of Microsoft’s fight against Google, there are some interesting, yet not-so-reassuring, moves. Move appoints Steve Berkowitz (formerly of Microsoft) as its new CEO, so the company may as well be ‘poisoned’ by Microsoft already. We saw this happening in companies like Amazon and Yahoo before and there are many more examples.
Online real estate site operator Move said on Wednesday that it is tapping former Microsoft executive Steve Berkowitz to serve as its next chief executive.
He quit his role as the head of Microsoft’s unit that’s responsible for never-ending Web ambitions. Billions of dollars have already been lost there and Microsoft is longing for Yahoo’s userbase. The Yahoo-Microsoft staff swap is meanwhile carrying on. Here is the latest example.
One of Yahoo’s top marketing execs, Eric Hadley, who came to the company with a lot of acclaim in only November, is set to leave for a new job working in branding and global marketing for Microsoft’s MSN online service, several sources said.
Microsoft is still flirting with Yahoo! and various blogs continue to analyse the role played by the newly-installed CEO. There could be a proxy war there.
Ballmer met last week with Yahoo Chairman Roy Bostock. And he says Microsoft will keep challenging market leader Google in search even as it continues to cede ground.
To Microsoft, Yahoo’s search business is related to the need for injuring a company that makes Web-based office suites and other disablers of Microsoft cash cows (even Android). It’s less to do with control of search and advertising, which are currently the lifelines of Google. The added bonus is control of information as a gatekeeper. Microsoft is breaking search results so as to advance its business goals rather than provide relevant information to users. █
“Search engines be da**ed, it’s the OS that generates money – if the world switches to linux, it will switch to OpenOffice too.”
–Motley Fool, days ago
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