Windows of change at MSFT – Ballmer announces his retirement

So the winds of change, or should I saw the Windows, of change are coming to Microsoft. Today Steve Ballmer, bombastic and often demonized, CEO of the software giant will be leaving once his successor is found. Clearly the changing of the guard at the technology giant.

As Ballmer points out in his internal memo (see below), he points to some

After hearing that the Surface and Bing weren’t doing so well

impressive statistics of the company when he started and how he is leaving it. Of course he isn’t the only driving force behind this…a certain Bill Gates also has a few finger prints on this success.

Many who have been in the technology world have their opinions on the MSFT CEO. In a nutshell, to me he was an arrogant and pompous blow hard who thought he was the greatest thing since sliced bread. Then again are those characteristics so foreign for someone running one of the largest and most dominate brands in business? From what I have heard, from anecdotes, he appears to have been an inspiration to some of his employees, wasn’t a tyrant (for the most part) and was able to guide Microsoft effectively enough to maintain its lofty status. So net net I would say he was a good CEO for Microsoft. Did he make mistakes and miss opportunities? Of course. But which leader bats 1.000? None.

So now what for Microsoft?

• Bring in a CEO from outside. Ballmer had been there for a long long long time. Get some fresh blood.  It does not necessarily have to be a tech giant either…why? Because…
• This is a great time to “break” up the band. Microsoft, and it sounds like they are moving in that direction, is shifting focus. Well take the opportunity to bite the bullet. Does not mean sell off parts, but rather start managing MSFT much like a GE. Have separate and autonomous divisions that might have nothing to do with one another. For example: split off a corporate division, one that could restart talks with acquiring an SAP type company. MSFT already does a lot in areas such as supply chain and business intelligence. Make this a separate group. You could potentially have this division manage services – the consulting arm for MSFT. Spin off  consumer division, stick the XBox in that group. That group would be ideal to look at acquiring assets such as Yahoo! as it almost did a while back. Create a mobile division – go after the likes of Android and IOS – allow them to really push the Surface see what is there. Maintain a Windows and office division. Just milk that cash cow and prepare to continue battling Google for control of the desk top.
• By doing this the new CEO would be looked at to manage these disparate groups and divisions. Much like Jack Welch at GE. The new CEO would be asked to check her ego at the door and allow these sub groups to run autonomously, at times acting as peace maker or ensuring the buck stops with them. Innovation and new directions would be expected to come from the sub teams, not from the top.
• Microsoft needs to do something to shake things up. They are woefully behind when it comes to devices (tablets, phones etc). They have no social play nor are they in the app game. Their assets such as Bing, Hotmail, Surface and XBox do not seem to be able to crack the nut of Google, Apple, Facebook, Twitter or even capture buzz like did the Wii.

Not sure if this will happen. There were rumblings that Microsoft had debated spinning off Xbox in a consumer centric group. Time to go all in with that concept and allow the parts compete.

The parts are more nimble than the whole.

Memo from Ballmer:

I am writing to let you know that I will retire as CEO of Microsoft within the next 12 months, after a successor is chosen. There is never a perfect time for this type of transition, but now is the right time. My original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company focused on empowering customers in the activities they value most. We need a CEO who will be here longer term for this new direction. You can read the press release on Microsoft News Center.

This is a time of important transformation for Microsoft. Our new Senior Leadership team is amazing. The strategy we have generated is first class. Our new organization, which is centered on functions and engineering areas, is right for the opportunities and challenges ahead.

Microsoft is an amazing place. I love this company. I love the way we helped invent and popularize computing and the PC. I love the bigness and boldness of our bets. I love our people and their talent and our willingness to accept and embrace their range of capabilities, including their quirks. I love the way we embrace and work with other companies to change the world and succeed together. I love the breadth and diversity of our customers, from consumer to enterprise, across industries, countries, and people of all backgrounds and age groups.

I am proud of what we have achieved. We have grown from $7.5 million to nearly $78 billion since I joined Microsoft, and we have grown from employing just over 30 people to almost 100,000. I feel good about playing a role in that success and having committed 100 percent emotionally all the way. We have more than 1 billion users and earn a great profit for our shareholders. We have delivered more profit and cash return to shareholders than virtually any other company in history.

I am excited by our mission of empowering the world and believe in our future success. I cherish my Microsoft ownership, and look forward to continuing as one of Microsoft’s largest owners.

This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love; it is the thing outside of my family and closest friends that matters to me most.

Microsoft has all its best days ahead. Know you are part of the best team in the industry and have the right technology assets. We cannot and will not miss a beat in these transitions. I am focused and driving hard and know I can count on all of you to do the same. Let’s do ourselves proud.

Steve

iPhone 6 – a “cheaper” version of the iPhone? Is that really wise?

True to form Apple will release the iPhone 5s later this year, probably scoop up some of those iPhone 4 users who have not yet upgraded. Maybe Apple does not want to lose them to Android…nah no one would make that switch!! Anyways. What is interesting is the rumors that Apple plans to follow that release up with an iPhone 6…but it will not be a generation leap for the phone but more of an inexpensive model to go after emerging markets aka China and India. Wise move or sign that the Jobless company is still struggling to find their innovative fast ball? Going after the likes of China and India makes perfect sense – that is where much of the growth is happening.

Apple needs to get a product into those markets that can compete with the less expensive Android versions as well as the likes of Nokia. Makes good business sense. However, this feels like a shift for our friends at Apple. Couple this with the iPad mini, which from a business stand point made sense – go after the tablet market that was being dominated by the Kindle. The iPad mini coupled with the iPhone 6 and it feels as if Apple is not longer looking to lead with innovation but instead focus on diversifying their existing product portfolio to compete in markets they otherwise ignored. Has the Apple innovation engine run out of steam? Maybe. Or is Apple looking to solidify some of its business, focus on some aspects that could be seen as weak spots in their business. Let us imagine the following:

• Apple leverages the iPad mini to go directly after Amazon with their Kindle. One might argue that introducing the mini has already knocked out one competitor, albeit a weak one, the Nook from Barnes and Noble. While I do not think it will take out the Kindle, it is clearly offering a viable substitute product for those looking for a 7 inch tablet. Apple now has a product that can compete at all levels of the tablet market. Check.
• The new iPhone 6, if it is what the rumors claim, gives Apple a device that can go head to head with the less expensive smart phones. This will give Apple a device that can compete with Nokia, who still has a large ownership of the emerging market. Really this is a play to try and fight off Microsoft and their OS that has, no surprise, been adopted by Nokia! Of course it will also allow for Apple to expand its portfolio to compete with Android.

With Apple putting together some offerings that can get them into a more diverse market, they will then be able to refocus on bring us the “next” innovative device. The iWatch? Refocus on the Television? Enhance the iTunes experience?

Let us see what the next few months hold for Apple. For now I think that what we are seeing a business being run like a more “traditional’ business. It is too much to ask for any company to innovate at the pace they did at the end of the Steve Jobs era. Does this mean that Apple is done innovating? Let us hope not. But making sure your business is taken care of first will allow for Apple to one day be able to get back to giving us innovated consumer devices.

Xbox One, weak name but strong move to controlling the entertainment hub

This seems to be the year that the big video game console manufacturers decide to release new consoles. Microsoft went first yesterday, Sony is expected to follow this Fall. Unlike other technologies – smart phones, tablets, laptops to name a few – video game consoles have appeared very slow with regards to new generation releases. It has been 8 years since the XBox 360 and 7 years since the PS3…wow…to put that in perspective, 2007 is when the first generation iPhone was released. So 2013 will give us the opportunity to have two major generation upgrades in the gaming console world.

The Xbox One

The first console out of the gate – the Xbox One. From all reports it brings some new bells and whistles – voice activation, enhanced Kinect, centralized control of music/video/game etc. Of course it has some “negatives” such as no backward compatibility with video games…ugh. All expected evolutions for the console. What this is really about is the continued battle for control of the home entertainment hub. Microsoft said as much:

Indeed, Microsoft is totally explicit about Kinect (and Kinect-related IP) being the central part of its strategy in the console battle as well as in the wider war for the living room — far beyond other aspects of the hardware.

Microsoft, as does a host of other technology companies, sees the entertainment center as the next frontier a place where all their software, content and devices will converge. As much as we love our smartphones and tablets, the television still provides the powerhouse of displays. We still gather around the television and leverage it as the communal entertainment hub some even use it as their personal dance trainer. However no one has really taken the “lead” when it comes to this space. Cable companies are trying to leverage their control of the content to be their play. Microsoft and Sony both look to their gaming consoles as the conduit to the entertainment hub. Google has made forays into the actual hardware – Google TVs. Of course Google is also embedded with search and YouTube in many new smart TVs. While Apple TV has been around for a while but has yet to really get into the game – they do have a firm lock on the streaming content via iTunes. What about Amazon? They also have a massive library of content as well as a device – the Kindle – that can force their way into the conversation. Question for Amazon, do they make an investment in hardware to put themselves physically in the living room?

All these moves will be good for the consumer – allow for a host of choices. Of course the problem might arise if all these vendors go with a walled garden strategy. Where the choice we make in hardware is one we might have to live with for a long time or buy multiple platforms!

So much for DotCom 2.0…Apple and Facebook dissappoint

Oh yeah and Zygna is also heading in the wrong direction – stock price wise. I digress. This week we say Facebook “beat” their estimates, well beat them because they had set such a low bar to the street. Their shares opened at a new low today as well. During this week Apple also missed some numbers, causing some mild panic in Appleland. Add to this the rumblings about the Samsung v Apple smartphone battles and it was not a good week for the consumer electronic giant. But not all is bleak in the land of DotCom 2.0…

What…me worry?

First, Facebook. Not really surprising that Facebook, stock wise, is under-performing. Facebook revenues were $1.18b, most from advertisement, nice chunk of change…but pales in comparison to the $11b Google did in the same time period. Granted the amount of users is reaching immense proportions – getting close to 1billion. But that no longer matters. Sorry Facebook. Investors and the market want to see how you are going to exploit and make money from those 1billion users. Based on the numbers, if each one just gave you $1.18 a quarter you would match your current revenues. That is not really a good business model for growth! Not to over simply the situation and I realize that hindsight is 20/20 but the reality is Facebook IPOd too late. Had Facebook IPO’d a few years ago, when they were hovering around 300m in users they would have been able to ride the user growth curve. Investors and the like would have rewarded Facebook for their growth curve – might not have scrutinized the economics as much. Now that would not have taken away the fundamental issue – how to make more revenue. However with a few quarters if not years of earnings under their belt, Wall Street might have been “kinder” to the stock. As is, the numbers of users leveraging Facebook does not get anyone excited. Whether it is 400 million or 500 million or a billion…so Facebook gets no “pop” from showing greater user growth.

The reality is that Facebook is no Google, the ability of Facebook to generate revenue from ads will be a major uphill battle. The major issue for Facebook, is that is really a walled garden. It is really a personal phone book via social media – unlike Twitter or Google, which are open to the entire public. You tend to go to Facebook to see how many marathons your friends are now running, how cute and wonderful their children are, that their pets are adorable or how fat your ex-boyfriend has gotten. You do not go there to search…looking for a product or service. Until Facebook realizes this and more importantly how to make revenue off a non-Google model their stock and valuation will continue to suffer.

Now what about Apple? Apple failed to meet what have become incredibly lofty expectations. Is this a malaise that will only affect Apple or more of an indication of the overall market? I think the latter, as do others click here. Of course the amazing fact is that iPhone revenues for Apple

No pressure…

are greater than all revenues for Microsoft…ouch ($22.7 b v $17.4b). Apple’s financials remain strong and cash on hand is slightly ridiculous – $110b, click here to see what “toys” they could acquire with that cash.  Of course it was not that long ago that someone else had that problem…Microsoft. And they did not know what to do with all that money, buy SAP? Stock repurchase? Dividend? So Apple will have to navigate some tricky waters to keep the halo it has worked so hard to create.

The main issue for Apple, what next? The market for the iPhone remains strong, but is has some serious challengers in Samsung and Google. If Facebook gets into the mobile game add them to the mix, not that I think a Facebook phone will do what the iPhone did, but still a device linked to a strong brand name. What about the iPad? Google announced a new tablet, granted it appears to be going head to head with the Kindle and Nook, but still a device that will inevitably scrape off market share. Apple is rumored to be looking at creating a “mini” iPad to get into this market. The new MacBooks are supposedly wonderful (I love my older generation MacBook!) but not sure that will excite the masses.

Apple, I have faith, will weather this “storm.” Will they continue to reach for stratospheric like levels…probably not. That pace is impossible to maintain. With the new iPhone due later this year, they have a chance to once again grab top dog stature. With the cash on hand, they can invest in and make some plays and take some risks. The real worry for me is can they weather this storm without their inspirational leader Steve Jobs? Time will tell.

Microsoft looks to regain its place in corporate IT with new Surface tablet

Well well well, look who is getting back into the tablet game! Microsoft. Least we forget that before the iPad became a part of our every day vocabulary, the Microsoft operating system was powering the first versions of “tablets.” I remember my boss had a tablet, which was really just a lap top with a screen that swiveled to sit flush on top of the key board and a stylus that allowed you to write directly on the screen. Very sleek, but nothing compared to the iPad or the Android powered tablets we see today.

But now our friends from Redmond have come out with a new tablet, one that is going after the Galaxies and iPads of the world. But is it too little too late?

The video demonstrating the device is sleek and the device itself looks intriguing, but the reality is it looks like…a real thin laptop. See video:

Is Microsoft wasting its time? Maybe. But they are big enough that they can afford the investment and even if this is a lost leader they need to try and wrestle away some of the momentum that Apple and Google are enjoying in the tablet world.

The reality is that tablets, like the iPad, are cutting into the Microsoft domain of corporate IT. I remember a meeting I had about a year ago with a dozen members of my company at the time, including executives. There was one laptop open. 5 years ago there would have been one laptop for each participant. Instead we were all on our iPads. IT departments have been racing to find a way to monitor these new devices and ensure they are secure. It used to be so easy – windows and Blackberry servers and you were set! Not anymore.

The introduction of the Surface for Microsoft might give the IT departments an out, a way to get tablets in the hands of their employees while retaking control of the device. It is a gamble, and I do not think you will see people giving up their iPads. However, the Surface gives Microsoft a fighting chance to become relevant in tablets and could curtail the explosion of non Windows devices getting into the corporate ecosystem.

As the laptop’s role as the computing power horse for corporations continues to wane, the Surface might just give Microsoft a chance to regain some of the market share they are losing.