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Re: Unrest Inside Microsoft -- People Leave, Investors Grow Impatient

On Aug 27, 7:09 am, Roy Schestowitz <newsgro...@xxxxxxxxxxxxxxx>
wrote:
> Will Work For Food: Why I Left Microsoft for a Startup
>
> ,----[ Quote ]
> | While I was at Microsoft, many things didn't make sense to me. I didn't
> | understand the massive "re-orgs", which, if you hadn't heard about ahead of
> | time, it meant nothing material changed for you.

Reorgs rarely have to do with the lower level workers and management.
Most often, an executive manager sets the agenda.  They decide what
business will be persued, what investments should be made to improve
profit, and what it will take deliver what was expected, when it was
expected.

Unfortunately, for executives, it's very easy to be wrong.  The big
"squeeze" is that higher level executives often have their own agenda
and priorities, while the clients and customers are telling the
executives and customer facing people something that is in direct
conflict.

It's a bit like when the General knows his brigade is being shelled by
a position protected by a pill-box.  The major is only looking at the
pill-box and is concerned with the welfare of his platoon.  To take
the pillbox, the major knows he has to send 75% of his command into
the line of fire, and certain death.

The general understands the major's concerns, but has no time to be
nice.  He finds a captain who is willing to issue the order, and tells
him to take the pill-box no matter what.  The General knows that about
700 of the Captain's people will die, but he knows that if they don't
succeed, several thousand more will die.

Ironically, by succeeding in the campaign, the Captain promoted to
Major will earn the respect of the General, but will probably have a
bit of trouble maintaining the loyalty of his subordinates.

> I didn't understand why we'd
> | try to enter dominated markets with an uncompetitive offering. I didn't
> | understand those little table tents on the cafeteria tables or the giant
> | banners and posters promoting intranet websites. I didn't understand why site
> | searches on MSDN were abysmal. I wasn't the only one who was confused.

Again, most of these smaller tactical maneuvers were designed to
attempt to protect the larger picture of assuring that Windows, MS-
Office, and MS-Project maintained their revenue and profit margins.
If giving away an antivirus allows Microsoft to legally claim that
they have improved security, it might be enough to keep corporate
customers and OEMs from sticking with XP (no revenue or profit) or
switching to Linux (no revenue or profit).

Unfortunately, sometimes the tactical offenses are misdirected.  The
problem is that the opposition is making a strategic withdrawal to get
the opposition forces into a more vulnerable position.

Linux/OSS decided to "play nice" with Windows XP, but Microsoft
decided that Vista would not "play nice" with Linux.  With
virtualization making it possible to run both systems concurrently on
the same machine, with multi-core 64 bit processors assuring that
performance doesn't suffer, and with Linux providing better memory and
hard drive management for "real world" environments.

Ironically, Virtualization has reduced the number of physical Linux
server boxes, but has also lowered the TCO of Linux substantially in
the process.

Virtualization on the server has worked so well, that more and more
companies are looking very seriously at Virtualization of the
desktop.  Many companies have already explored virtualization of
Windows XP as a way to reduce the cost of reconfiguration.

Keep in mind that recovering an employee workstation can be several
times the cost of the hardware.  For example, if it takes 2 days to
get the machine reconfigured with "the basics", and another 3-5 days
to get all of the applications, passwords, and "personalized"
information configured, that could be up to a staff-week, just of the
employee's time.  If the "crash" happens at a critical time, such as
when a bid, proposal, or deliverable is due, the costs can be
astronomic.

With virtualization, the PC can be backed up to a USB drive every few
days and the back-ups can be zipped and rotated out.  Often, a 500
gigabyte USB drive can provide a month worth of back-ups.

If the back-up can be done without having to sacrifice all
productivity it's also easier to save the snapshots to the USB drive.
Often, the back-up can be done almost as fast as a couple of reboots.

Microsoft over-played their hand, and fell head-long into a trap.
They tried to force Linux off the desktop by being hostile to
virtualization.  Net result, corporate IT departments are rejecting
Vista, even paying the price of Vista Business for XP Professional,
rather than allowing Vista machines to create a "Forced Upgrade"
situation into a system that has become unmanagable.

In the short term, Microsoft is happy.  They get the "windfalll" of
being able to charge a premium for the "option" of selling XP instead
of Vista.  Microsoft was very lucky that the OEMs did demand a
reduction in price or refuse to offer Vista at all.

> http://blog.redfin.com/blog/2007/08/will_work_for_food_why_i_left_mic...
>
> Microsoft -- Growth play, value play, or just lousy play?
>
> ,----[  Gist ]
> | 1) Fact: Microsoft stock has performed abysmally over the past 5 years

Microsoft is not only no longer a growth company, but it's not even a
value play any more.  They have their huge cash horde, but they have
been dipping into that to provide flooring and up-front financing for
their channel stuffing operation.  XBox has been unprofitable.  Even
many of their "Service" offerings are suffering.  MS-Office sales are
down, and many corporate customers are opting NOT to upgrade to Office
2007.  Instead, they are sticking with OfficeXP and exploring
OpenOffice and other Open Document based alternatives.

Fundamentally, Microsoft's "bread and butter" customers are not
willing to pay as much as they used to, and are willing to consider
alternatives at every level.  Meanwhile, Microsoft hasn't really
generate a good high-profit market to replace what they are losing.

> | 2) Fact: Investors have been more than patient

The last time Microsoft was this flat was 1991 to 1995, when Windows
3.1 failed to measure up to Sun's SunOS and Solaris offerings, and OS/
2 threatened Microsoft's existence.  Microsoft was able to spend $4
billion/year to keep these competitors out of the papers while they
tried to release Windows NT 3.x and Windows 95.  The release of
Windows 95b and Windows NT 4.0 began to shift the market and it began
to move again.  But since 2000, Microsoft has been virtually flat,
even in the face of their huge profit margins, dividend payouts, and
stock buy-back programs.  All of these measures should have sent the
stock higher, but instead, Microsoft has "flat-lined" between 25 and
35.

While it is highly unlikely that Microsoft will be going bankrupt any
time soon, it seems that Microsoft's best efforts have lead to a
situation where the only return seems to be a few cents of dividend
every quarter.  Bill Gates gets a nice fat paycheck, about $3 billion/
quarter, but most others who are holding only a few hundred shares,
are mostly trying to play the swings between the $25-$35 range.

> | 3) Fact: Management's statements are at odds with observable facts and the
> |    stock's performance

Microsoft's executive statements made in SEC filings are the only ones
that must be legally correct by law.  Lying to the press is not a
crime.  It is the job of the journalists to check the facts before
they print them.  Most publishers now simply offer the quote, along
with references to contradictory claims (not included in the main
article).

It's even possible that Microsoft has built-in "plausible deniability"
by offering the OEMs "Vista Liceneses" that can be downgraded to XP,
without telling Microsoft "Officially".

This may be one of the reasons why Microsoft is acting like all of the
licenses they have sold since Vista was released are Vista licenses,
while companies such as Dell, HP, and Lennovo are reporting that less
than 1/2 the machines being ordered are being shipped with Vista.

When XP came out, Microsoft tried to strong-arm corporate customers
into forced upgrades to XP and XP licensing terms.  Microsoft was also
aware than when Vista came out, similar tactics would have backfired,
since most CIOs and CTOs were fully prepared to migrate to Linux if
Microsoft tried that stunt again.

> | 4) Fact: The leadership team's actual track record of investments is
> |    decidedly mixed, if not in fact poor.

Unfortunately, top management is not thinking ahead 20 years, the way
it used to.  As Bill Gates turns over more of his responsibilities to
subordinates, in preparation for retirement, the management seems more
focused on quarter-to-quarter survival.  They don't own 25% of the
company and they CAN be fired.

> | 5) Fact: Management is arguing with the market and results, and shareholders
> |    are paying the freight for that hubris and failure

Investors pay a premium for the Microsoft monopoly.  If Microsoft is
perceived to have lost that monopoly control, it could trigger a sell-
off, especially among institutional investors.  After Enron, WorldCom,
and Banks loaded with sub-prime mortgages, the big mutual funds and
pension funds are much less willing to gamble on a CEO who doesn't
provide honest reporting.  If Microsoft attempts to hide this loss of
control for too long, it could turn into yet another Panic/Crash.

> | 6) Fact: External shareholder are the majority owners of this company
> `----

This is probably true.  Bill and Steve have been gradually selling off
their holdings, often as much as 1 million shares per day.  This may
be one of the reasons that they are making the optimistic statements
(trying to keep the price off while they sell off), but the
institutional holders are still willing to buy Microsoft based on
their apparent "Lock" on the market.  If Microsoft is perceived to
have lost that "Lock", it could trigger a flight to quality.  While
Microsoft stock has held flat, Apple's stock has shot up 1200% since
the release of OS/X.

Apple's biggest problem is that it can't keep up with demand.  This
exposes them to competition from Linux and Solaris, but Apple has the
30 second ads between Mac guy and PC guy that tells the "*Nix vs
Windows" story quite eloquently.

> http://msftextrememakeover.blogspot.com/2007/08/growth-play-value-pla...
>
> Remember that Microsoft is still buying back its own shares to keep the stock
> from falling (as it did before the buybacks began).
>
> Related:
>
> Software Notebook: Microsoft's cash pile isn't what it used to be
>
> ,----[ Quote ]
> | But Microsoft has taken a series of steps to reduce its cash
> | balance. Specifically, by Microsoft's count, the company has
> | paid out nearly $100 billion through dividends and repurchasing
> | its own stock in the past five years.
> `----
>
> http://seattlepi.nwsource.com/business/309852_software02.html
http://news.zdnet.com/2100-3513_22-6195764.html
http://www.businessweek.com/innovate/content/oct2006/id20061013_28385...http://tinyurl.com/yxdr4j
http://www.marketwatch.com/news/story/microsoft-quarterly-profit-expe...
http://www.gamerscan.com/articles/06/10/09/microsofts.massive.losses/
http://www.microsoft-watch.com/article2/0,1995,1990243,00.asp?kc=MWRS...
http://www.forbes.com/2006/12/05/stocks-markets-investing-pf-ii-cz_ag...http://tinyurl.com/yjzfbo

> http://seattletimes.nwsource.com/html/businesstechnology/2003437957_v...

> http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B685EFB89%2D5...



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