Summary: Microsoft litigation against Linux (not just via proxies like SCO and maybe Acacia) is chosen as a principal route by this company that cannot compete and whose biggest investors are bailing out

JUDGING by Microsoft's behaviour alone (never mind the layoffs, dead products, departing managers, etc.), Microsoft is in serious trouble. It's SCO's successor. Its market presence with Windows and Office is the only thing which really keeps it going for the time being (same with few of SCO's remaining deployments), and that too is an eroding market where Microsoft relies on chasing poor people (whom it labels "pirates").

"BlackRock cuts Microsoft stake below 5 percent," alerts Reuters.

BlackRock (BLK.N), one of the biggest holders of Microsoft Corp (MSFT.O) shares, has cut its stake in the software company below 5 percent, according to a regulatory filing on Tuesday.

As another headline put it (all caps), "BLACKROCK AND STEVE BALLMER ARE SELLING MICROSOFT SHARES, SHOULD YOU? (BLK,MSFT)"

BlackRock (NYSE:BLK), which is one of Microsoft's (NASDAQ:MSFT) largest shareholders, cut its stake to below 5%, just days after Steve Ballmer sold 50 million shares of the company.

Chips B. Malroy gave us those two links along with some insights last night, quoting the above as saying: "At the end of last quarter, BlackRock's major units held about 470 million Microsoft shares, according to Thomson Reuters data, about 5.5 percent of the company."

"Just like the CEO of Microsoft, Steve Ballmer," argues Malroy, "BlackRock has no expectations of MS stock rising. In fact, this next link maybe the reason for all the selling."

“Just like the CEO of Microsoft, Steve Ballmer, BlackRock has no expectations of MS stock rising.”
      --Chips B. MalroyTo put some of these recent developments in context, Ballmer will possibly lose his job if he does not manage to keep up and catch up with the mobile market. He joked about it about a month ago and last week we started urging for people to share sales figures of Vista Phony 7 [sic], where Silverlight came to die. Just as we wrote some days ago, they refused to give numbers, which was indicative of failure because they always brag when they can.

Well, we finally have some numbers regarding Vista Phony 7 [sic] sales. It's looking pretty ugly. The Inquirer's headline says that "Microsoft is failing to shift many Windows Phone 7 handsets" (just as The Inquirer claims to have predicted).

Over here in Blighty, Microsoft and mobile operators have been cagey about releasing sales figures, making vague statements about "strong demand" that did nothing to quell speculations that WP7 hasn't got off to a rousing start. The 40,000 handsets that Microsoft apparently has sold in the US in the first 24 hours are a sign that even after the Vole spent hundreds of millions of dollars on marketing, punters are simply not buying into the hype.

"Market researchers claim that the Vole's WP7 handset partners have managed to flog only 40,000 WP7 smartphones during the first 24 hours on sale in the US," Malroy quotes it as saying. He adds: "So is the WP7 to become the "next of Kin?" Or rather, the next Kin."

One of the original reports with the number can be found here ("Microsoft Sells 40K Windows 7 Phones"). It says that:

The anemic sales number does not include the 89,000 Microsoft employees that will be given free Windows 7 phones.

Vista Phony 7 [sic] is doing pretty poorly and "Microsoft reps declined to comment," according to the article. Anything they say would help verify the embarrassing reports. To put things in perspective, Google (Android's nearly sole maintainer) activates 5 times more Linux phones than Microsoft does upon hyped-up product launch. How many units per day ship with Vista Phony 7 [sic] after this launch? Could it be less than 10,000 a day? That's quite likely. The few people who bought "KIN" (just 503 people according to Gruber) are sometimes getting rid of them on eBay. Is Vista Phony 7 [sic] too going the way of the dodo ("KIN") within years? Microsoft made a big bet on it by giving it to all of its employees (for internal use, so Silverlight may now be required for internal use too). One has to remember that Vista Phony 7 [sic] users are Microsoft employees a lot of the time. Microsoft seems to have also made some deal with Dell. Few other companies would adopt such an immature product because, as IDG helps show, a platform being "Windows"-labeled is not expected to be secure, either.

Many businesses will not be able to support Microsoft's Windows Phone 7 operating system, which began shipping in the United States today. Like the competing Google Android, Windows Phone 7 does not support on-device encryption to protect data stored on it. Many businesses require such encryption to be able to access corporate data through EAS (Exchange ActiveSync) policies and automatically block connections from devices that don't support device-level encryption.

Users will get the error code 85010013 when trying to sync their email on a Windows Phone 7 device, rather than an English description of the problem. Microsoft's support forum confirms the lack of on-device encryption support.

So, just like Swiss cheese, Windows would not be what it is without lots of holes. The 'secure' Wi-Fi is simply flawed in Vista Phony 7 [sic]:

A flaw possibly linked to Windows Phone 7 itself may be preventing devices from connecting to secure Wi-Fi points, new owners have discovered since launch. Those trying to reach a locked network are told they "couldn’t reach the Wi-Fi network" even when using a known good password. The issue doesn't appear confined to one device and has affected at least the Dell Venue Pro and HTC HD7, BGR has heard.

This makes Vista Phony 7 [sic] unsuitable for many business-oriented uses. What's left for it to go after? Any niche at all? Probably not.

“Microsoft employees can meanwhile use yuppie-Nuremberg defense to justify extorting the competition.”Microsoft has a Plan B however. If it cannot make something which works, then it wishes to make money from other companies' products (which do work). Continuing its tradition of extortion (Horacio and his thugs can just sue more), Microsoft recently initiated two lawsuits against Motorola. Microsoft tries to make this company along with other companies surrender and pay Microsoft for Linux without even a challenge. It's racketeering [1, 2, 3, 4, 5, 6, 7].

Some would conveniently try to label Microsoft a "patent troll", but as long as Microsoft delivers a mobile platform -- no matter how useless it is -- Microsoft can't be called "patent troll" due to these cases of aggression while extorting Android phone makers. Microsoft employees can meanwhile use yuppie-Nuremberg defense to justify extorting the competition. There's no good excuse for such a behaviour.

"While it might be too early to tell if WP7 is the complete failure like Kin was," argues Malroy, "the rumors coming out seem to support this. Could this be why Steve Ballmer and BlackRock are selling shares off? After all, Steve Ballmer already knows the WP7 sales figures from Europe, which he is not sharing with the world. But he is dumping stock. As WP7 maybe starting to fail in a big way, Microsoft turns to more legal action. And Motorola countersues MS:"

The lawsuit comes just a day after Microsoft filed its second lawsuit against Motorola in recent months. Last month, Microsoft took aim at Motorola for the alleged infringement of nine patents in Motorola handsets that use Google's Android mobile software. On Tuesday, Microsoft filed suit against Motorola over licensing terms for technology Microsoft uses in its Xbox game machines.

Motorola Mobility filed the current lawsuit in the U.S. District Courts for the Southern District of Florida and the Western District of Wisconsin, it said in a statement Wednesday. The patents are related to a number of technologies, including digital video coding, e-mail technology including in Exchange, Messenger and Outlook, and Windows Live instant messaging software. Motorola also directly attacked the Xbox patents in question in the recent Microsoft case, which are related to video coding and Wi-Fi technology.

"Since WP7 cannot compete with Android based on Linux kernel," says Malroy, "MS sues companies that use Android like Motorola. Clear sign of the coming end for Microsoft when a company is desperate and cannot compete. This lawsuit is most likely MS attempting to apply more pressure on MS to settle on using Android and pay MS. Which resulted in Motorola counter suits. Motorola is not going away quietly. Is this all that Ballmer and Microsoft have, lawsuits because they cannot compete and turn out products that sell without monopoly power?"

Wayne Borean's ongoing roundup called "Microsoft Death Watch" is now accumulating evidence from Business Insider and it includes the news about Vista Phony 7 [sic]:

So if Microsoft only sold 40,000 phones on the first day, it’s quite possible that Windows Phone 7 is going to be a flop. There are also rumors of stores that sold out however. Whether this is because of limited stock, or because of higher interest in some areas, we don’t know. A final rumor was that there have been shortages of touch screens, and that this may have affected launch stock.

So to summarise, as long as Vista Phony 7 [sic] is around, Microsoft cannot be called a "patent troll", but it's clear that litigation against rivals is Microsoft's plan for the future. It's all about software patents and the only ones which are named correspond or refer to FAT, which should give Mono a clue. Microsoft APIs are an Achilles heel and ActiveSync too is an example. We'll expand on Mono in the next post. ⬆

“That’s extortion and we should call it what it is. To say, as Ballmer did, that there is undisclosed balance sheet liability, that’s just extortion and we should refuse to get drawn into that game.”

--Mark Shuttleworth