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07.20.09

Signs of Microsoft on the Decline (Roundup)

Posted in Finance, Google, Microsoft at 9:55 am by Dr. Roy Schestowitz

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Summary: More news about Microsoft’s situation amid declining margins, increased spendings in some units, and pressure from Google/SaaS and GNU/Linux

YESTERDAY WE wrote about Microsoft's expected sharp decline in profit. It turns out that not only profit declines but revenue does too (these two yardsticks can go in separate directions). According to this report from Romania:

Microsoft Romania, the local subsidiary of world’s biggest software producer would end the fiscal 2009 (July 1 2008 – July 3 2009) with a 10-15% decline in revenues, thus missing the growth estimates made at the end of last year by 1 to 4%, stated Calin Tatomir, the company’s chief executive.

Microsoft’s revenue also declined in the last quarter. It was claimed to be a first-ever, but as past stories suggest, this may not be true. Expectation is that Microsoft’s profit erosion will be sharp, so IDG has just published an opinion piece titled: “Seven Reasons Microsoft’s Profits are Tanking”

To give one reason:

* Bing: Microsoft’s latest search engine effort will cost in the ballpark of $100 million to market, and that doesn’t include development costs either. Is Redmond tilting at windmills here, or does Bing really have a shot at challenging mighty Google for search dollars? Whatever the case, Bing is one expensive gamble.

It is not just Microsoft’s finances that are declining. Microsoft’s public image too is suffering. Consider for example the following new reports:

i. Microsoft Customer Satisfaction Plummets in VendorRate Q2 Report

VendorRate, the only Web-based business information service that offers quick, confidential performance ratings and comparisons of technology vendors, announced today that customer satisfaction scores for Microsoft plunged dramatically in the second quarter of 2009 while IBM Informix and telecom equipment maker ShoreTel earned the top scores in the quarter.

ii. Survey: Microsoft customer satisfaction takes second quarter hit

Customer satisfaction for Microsoft’s applications and operating systems took a hit in the second quarter, according to a report by VendorRate, an outfit that tracks vendor satisfaction.

iii. Startups give Google thumbs-up over Microsoft

Analysts and executives say Google, which unveiled the Chrome this week in a direct challenge to Microsoft’s decades-old dominance of computer operating systems and business applications, will take years to get significant share of the market, but startups might be their way in.

A growing number of tech entrepreneurs argue that Microsoft’s current software is out of date and inefficient because, unlike applications that run off the Web in a “cloud” environment, they run one copy per person at a time, rather than allowing multiple users to share information.

So how can Microsoft defeat Google? Well, Joe Wilcox is back after Microsoft Watch closed. Writing for BetaNews, he gives Microsoft advice not on how to improve Microsoft products but on how to FUD rivals.

Microsoft should use Twitter data theft as hosted apps marketing FUD

[...]

Microsoft talks about the “Apple Tax,” but I’ve heard plenty of IT managers complain about the “Microsoft Tax” in reference to Software Assurance fees or CALs (client-access licenses). They see that off-premise hosting can cost loads less per employee, provide immediate software and feature upgrades and reduce management costs. It’s to these businesses considering hosted services — and not from Microsoft or one of its partners — that the Twitter/Google Apps data breach could be used as effective counter marketing. Microsoft sales people can spin the story to emphasize the importance of on-premise software and to call out new security features coming in Windows 7.

The explanation may seem reasonable, but the headline shows sheer bias and intent to FUD as a business strategy.

“I’m a huge fan of guerrilla marketing.”

Joe Wilcox, Microsoft Watch

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