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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Posted in America, Free/Libre Software, Law, Patents at 11:21 am by Dr. Roy Schestowitz
“The genesis of this [patent trolling] idea was when I was at Microsoft. We had a problem with patent liability. All these people were coming to sue us or demand payment. And Bill (Gates) asked me to think about if there was a solution.” —Nathan Myhrvold, WSJ: Transcript: Myhrvold of Intellectual Ventures
THIS is a quick rundown through developments which have potential to affect the playing field.
Government Intervention
Lincoln memorial
The pro-software patents folks at IP Watchdog recognise the fact that the battle over patents is one that can determine the outcome in Freedom’s triumph over proprietary oppression. The author also speaks about the role which the new president plays:
It has already come to light that President Obama is interested in moving the United States federal government away from proprietary software to open source solutions. I am not sure this ought to a top priority that is so important that it is on his mind during his first 48 hours in Office, but it is apparently ahead of a lot of things.
[...]
A little more than 21 months ago the United States Supreme Court issued its decision in Microsoft v. AT&T, but not much has been written about this decision, at least not when you compare it with the amount that has been written about the other patent decision that was issued the same day by the Supreme Court, namely the obviousness decision in KSR v. Teleflex. The lack of coverage for the Microsoft/AT&T case is no doubt at least in part due to the fact that KSR v. Teleflex was so highly anticipated, and completely jumbled the law on obviousness to a point where you cannot get a patent on an invention if you actually thought the invention would work.
In order to facilitate proliferation of Free software, Obama will also need to look into a serious patent reform and elimination of software patents — a point that was stressed here:
Tech to Obama: Think patent reform
[...]
Repealing software patents could give a much-needed boost to the tech industry in troubled economic times. Software patents affect all developers, commercial vendors, and open source hobbyists alike. Patents restrict what functionality we can include in our applications, how our programs can interoperate, and how and where they can be deployed. In turn, this affects every computer user, by limiting features, raising prices, and slowing the pace of progress.
It seems as though things are changing gradually, but there will be barriers if the maximalists are being put in charge. It’s a point that we raised some days ago.
DOJ Gets Another Copyright Cop
[...]
Among the tech community, there was some belief that the Obama administration understood some of the key issues, such as the damage done by draconian copyright laws — and they had shown that with the way they went about running their campaign. However, there’s an increasing realization that the techies on the campaign are entirely separate from the policy people now involved in the administration. First there was the appointment of one of the RIAA’s top lawyers as associate attorney general, and now comes news that Neil MacBride, the BSA’s antipiracy enforcer, has also been appointed to a high level role in the Justice Department.
Academic Intervention
Nature, which is a highly respected journal, has published a very important article. Despite the fact that it speaks of biology as an example, it argues against intellectual monopoly.
Abstract
A new survey shows scientists consider the proliferation of intellectual property protection to have a strongly negative effect on research.
Introduction
A system of intellectual property (IP) rights can encourage inventions by scientists and help promote the transformation of research achievements into marketed products. But associated restrictions on access can reduce utilization of inventions by other scientists. How is this trade-off working out in practice?
Here is the truth right from the horse’s mouth:
A Patent-Holding Software Engineer Explains Why Software Patents Harm Innovation
It’s no surprise that many technologists and engineers dislike software patents — even as their company’s execs and lawyers push them to get more patents. Stephen Kinsella highlights an anonymous comment from a software engineer who clearly works for IBM (though he doesn’t come out and say that directly), where he explains how IBM actively encourage engineers to file for as many patents as possible (it rewards them with monetary bonuses).
There are other new findings and articles which make similar assertions. The following article even points a finger at IBM, claiming that the company’s lust for patents is only providing ammunition to patent trolls. [via Digital Majority]
The reason patent trolling is so profitable is that over the last quarter century the courts have expanded patenting into new areas like software and business methods, and dramatically lowered the bar for receiving a patent. As a result, patents that would have been rejected 30 years ago (like this ridiculous patent on removing white space from database entries, which IBM received earlier this month) are now routinely approved by the Patent Office. As a result, patent trolls are able to buy up low-quality patents by the truckload. Even though the vast majority of the patents won’t survive legal challenges, defendants can’t take the chance that one of them might survive and force the firm into a 8- or 9-figure settlement.
Patent trolls make good poster children for the patent system’s dysfunctions, but focusing too much on them ignores the fact that abusing the patent system is a game played by large companies as well. For example, Verizon managed to extort tens of millions of dollars from Vonage to settle a lawsuit over an absurdly broad Internet telephony patent. Verizon, of course, isn’t a “patent troll,” but a competitor interested in hobbling an up-and-coming competitor. Any patent reform needs to address the Verizons of the world too, not just the NTPs.
Over at Glyn Moody’s blog, there is proof that backlash against intellectual monopolies has proven effective.
This is extraordinary. It equates those who wish – legitimately – to minimise intellectual monopolies as the moral equivalents of counterfeiters. In other words, the intellectual monoplists seem to regard *any* threat to their fat-cat lifestyle as illegal, almost by definition.
The good news is that by identifying those against intellectual monopolies as this “second threat” on a par with counterfeiting is proof of just how successful we are becoming.
That’s basically a way of saying that those who challenge bad laws or ‘dare’ to see them as illegitimate are now “criminals”. It is a nice method for shielding broken laws that are often acquired by stakeholders and put in place not because of logic.
A positive adjustment is no rebellion; it’s a simple case of striving to restore sanity, just as women needed to fight for equality and slaves needed to resist slavery in order for it to end. To suppress opposition is akin to banning organisation of labour unions. This characterises a broken democracy and deprivation of free speech.
For a little more context, worth seeing is this opinion piece from Mike Masnick.
One of our readers, Virginia, alerted us to a report concerning a gathering of US IP Attaches (basically, the US gov’t’s international copyright cops that we send around the world to try to enforce draconian IP policy), in which they spend most of the time complaining about how countries around the world don’t agree with the US’s view on intellectual property and are quick to ignore it when possible. In fact, those countries often don’t even want to invite their US counterparts to meetings because they’re “too aggressively pro-IP.”
More here:
Nations ranging from Brazil to Brunei to Russia are failing to properly protect the intellectual property assets of US companies and others, and international organisations are not doing enough to stop it, seven IP attachés to the US Foreign and Commercial Service lamented recently.
Meanwhile, an industry group issued detailed recommendations for the incoming Obama administration’s changes to the US Patent and Trademark Office.
Other News
As further reading material on this broad subject, one might also consider:
1. CES: TiVo CEO sees end of legal fight as catalyst
TiVo Inc (TIVO.O) Chief Executive Tom Rogers hopes his next day in court will give him the legal leverage to sign new cable and satellite partnerships that can boost subscribers to its digital video recorder service.
New licensing agreements with operators in the U.S. and overseas may become easier to score, once TiVo puts behind a long battle with EchoStar and the Dish Network (DISH.O) satellite TV service.
2. TTB Technologies Files Patent Application
TTB Technologies announced it has filed a continuation patent application entitled “Electronic Advertising Device and Method of Using the Same,” with claims covering methods of and devices for delivering entertainment services for free to individuals in exchange for the individuals providing identifying information and thereby displaying targeted advertisements based on the identifying information provided.
3. Vlingo’s CEO Fires Back at Nuance Over Patent Lawsuit—Says ‘When they Couldn’t Win Yahoo’s Business, This Was Their Reaction
As soon as news broke Tuesday that Burlington, MA-based Nuance Communications was suing Harvard Square startup Vlingo for allegedly infringing one of Nuance’s speech-recognition patents, I requested an interview with Dave Grannan, Vlingo’s CEO. Grannan, who came to Vlingo from Nokia last year, has spent quite a bit of time with Xconomy in the past, talking about Vlingo’s speech-to-text technology and its deal with Yahoo, which is using the disputed software for its oneSearch with Voice mobile search service.
In summary, things are definitely happening. Not much has changed, but some things might change very slightly pretty soon. It is agreed among academics that intellectual monopolies are harmful, programmers do not want them, and the new administration in the United States probably requires their elimination in order to support a software reform at the very least. █
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