Not Even Bill Gates Could Save Microsoft

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Not Even Bill Gates Could Save Microsoft

Posted By: Lion [Send E-Mail]
Date: Saturday, 7-Sep-2013 12:23:32

------------------------- The Motley Fool http://www.fool.com/investing/general/2013/09/07/not-even-bill-gates-could-save-microsoft.aspx Not Even Bill Gates Could Save Microsoft By Sam Mattera | More Articles September 7, 2013 | Comments (10) salesforce.com CEO Marc Benioff thinks Bill Gates should return to Microsoft (NASDAQ: MSFT ) as CEO. He's not alone. With Steve Ballmer set to retire, the Windows-maker is in need of a new CEO. Who better to fill the spot than the man who started the company in the first place? Unfortunately, Microsoft is in a tough spot, and based on Bill Gates' recent comments, not even he could turn the company around. Microsoft's management, including chairman Gates, just doesn't seem to understand the nature of the PC market. Two different theories of the PC Fundamentally, it goes back to the definition of the PC. At the AllThingsD conference back in 2010, Microsoft's Ballmer and Apple CEO (NASDAQ: AAPL ) Steve Jobs offered very different theories about the future of the PC market. Jobs: When we were an agrarian nation, all cars were trucks, because that's what you needed on the farm. But as vehicles started to be used in the urban centers...cars got more popular... now... maybe one out of every 25 vehicles, 30 vehicles is a truck, where it used to be 100%. PCs are gonna be like trucks. They're still gonna be around, they're still gonna have a lot of value, but they're gonna be used by one out of X people. Ballmer: I think PCs are gonna continue to shift in form factor... real question is what's a PC? ... There may be a reason why they call them "Mack" trucks, but Windows PCs are not gonna be trucks -- they're not -- they will continue to be the mass popularizer of a variety of things people want to do with information. In short, Jobs offered a view of the market that was highly fragmented. One with different devices satisfying different niches. Tablets would never fully replace traditional PCs, but for many users, they would be enough. In contrast, Ballmer appeared to predict the emergence of a single unified device, one that combined the benefits of a tablet (portability) with the benefits of a traditional PC (content creation, power). More recently, in an interview with CNBC, Gates echoed Ballmer's comments, arguing that Microsoft's Surface was that ideal, hybrid device: In terms of the devices themselves, Windows 8 really is revolutionary in that it takes the benefits of a tablet and the benefits of a PC, and it's able to support both of those... Surface, Surface Pro, you've got that portability of a tablet, but... the richness of the PC... iPad... users are frustrated, they can't type, they can't create documents... We're providing them with the benefits...without giving up what they expect in a PC. The Surface RT bombs and Windows 8 fails But Microsoft's vision of a unified product is clearly wrong -- the market has spoken. Last quarter, Microsoft took a $900 million writedown on the Surface. Microsoft admitted that its tablet had not sold as well as expected, and that it was forced to cut the price by 30% in order to boost demand. It also noted that among consumers, demand for traditional PCs had fallen roughly 20%. Consumers just don't seem to want what Microsoft is selling. Evidently, people are not as frustrated with the iPad as Gates believes. Last quarter, Apple sold 14.6 million iPads; in comparison, Microsoft sold just 1.7 million Surface devices from its debut last October through the end of June. Throwing good money after bad Microsoft's recent reorganization intends to shift the company to one focused around "devices and services" -- a strategy it said it will stick with even after it brings in a new CEO. This is why I find Microsoft's situation so alarming -- management just doesn't get it. Even after the Surface RT's price cut, Apple's iPad is still a better buy than the Surface RT, and will probably continue to be for the foreseeable future. With its far better selection of apps, the iPad offers a much better tablet experience. Sure, you might not be able to edit Excel documents on your iPad, or type a paper in Word, but how many people really want to do that on their tablet? A 10-inch screen just isn't ideal for work, regardless of how powerful the device may be. Meanwhile, Apple continues to give consumers what they want. The King of Cupertino is expected to unveil a refreshed lineup of tablets this fall, including an iPad Mini with a Retina display, and a full-size iPad that's both thinner and lighter. Both devices are ideal for the sort of quick, on-the-go computing tablet users demand. Microsoft commits to devices with Nokia buy Microsoft's announcement that it was buying Nokia's (NYSE: NOK ) handset business only strengthened its commitment to being a devices company. By adding Nokia's workforce, Microsoft will be able to produce its Windows Phones in-house, just as Apple has done with the iPhone since 2007. Unlike tablets and PCs, there doesn't appear to be much of a difference in Microsoft and Apple's phone philosophies, outside of Nokia's long-standing commitment to produce phones at multiple price points (a strategy Microsoft is unlikely to abandon). But despite copying Apple's proven strategy, Microsoft is unlikely to find success. Apple has a six-year head start -- and far more developer support. Investing in Microsoft Given that Microsoft's management is clearly out of touch when it comes to understanding the PC market, the company's decision to embrace a strategy centered around "devices and services" -- as emphasized by its recent purchase of Nokia's handset business -- is distressing. Even Gates appears to believe that the market wants these sort of hybrid devices -- Surface tablets that can double as a laptop, a Windows 8 operating system that works as well on a tablet as it does on traditional PC. As long as Microsoft sticks to this flawed philosophy, alternative operating systems are going to slowly chip away at its Windows empire. For that reason, investors should consider avoiding Microsoft. The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. 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In the meantime, you can get the full story on 3 top holdings he’s considering "doubling down" on for his next round of stock purchases on Oct. 1 and claim a bundle of other valuable gifts absolutely free of charge by simply entering your e-mail address below. Privacy/Legal Information Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Read/Post Comments (10) | Recommend This Article (0) Email Print Feedback 34 Email Print Our CEO's NEXT big stock purchase... 18 months ago, Motley Fool co-founder and CEO Tom Gardner sold every last stock he owned and pledged to reinvest ALL of his personal investment capital quarter by quarter in full view of his Motley Fool ONE members. Since then, Tom's "Everlasting Portfolio" is up 53.9% whereas a "white hot" S&P 500 is only up 28.6%. On Oct. 1, Tom will reveal his NEXT round of stock purchases -- and in the days leading up to this highly-anticipated event, Tom will re-open his "crown jewel" service to a select few new members for only the second time ever. In preparation, he'd like to give you the full story on 3 current holdings he's considering "doubling down" on Oct. 1 -- absolutely free of charge. Click here for details on how to take him up on this offer. Comments from our Foolish Readers Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment. Report this Comment On September 07, 2013, at 10:49 AM, Justice007 wrote: Thus says one of Apple mouth pieces. Report this Comment On September 07, 2013, at 10:49 AM, techy46 wrote: Job;s loved to redefine the world to fit it into his new definition of words. Ballmer and Gates are realistic and know that despite consumers arogance and hubris all personal computers including smart phones and tablets are just different forms and sizes of the same basic device. Analysts and commentators love to fed the PC's Dead machine so they can pump and dump their Apple and ARM holdings but Intel is about to level the PC playing field next week with Bay Trail 22nm 3D chips. Stay tuned and have fun with your overpriced iToys and plastic Droids. Report this Comment On September 07, 2013, at 11:11 AM, Petronilus wrote: There is a good rule in the world of consumer electronics: People do not want to go backwards on any primary use case. For example, if you have an excellent performance of retina display browsing, high quality keyboard word processing, big screen e-mails etc. on your Macbook in your home, why would you want a Surface to replace it that is inferior on these use cases with a crappy keyboard, small screen and mediocre apps? Convergence is great ONLY when you ensure that the primary use cases are not compromised. For example, Apple's first iPhone was a clearly successful convergence of the iPhone + iPod (MP3 player) because it was the best phone and the best MP3 player in one device. The Surface is neither the best tablet or the best laptop. Actually it's very far from either of those. Report this Comment On September 07, 2013, at 11:14 AM, wgcross2 wrote: First of all, PC's are NOT dead. They will be required by businesses and corporations for years to come. Power users and gamers, who build there own rigs, will continue to support the PC. All we're seeing is the buying wave has hit the shore. Remember, PC's can be easily upgraded and expanded garnering additional life out of them. I'm sure the components industry is doing quite well. Next, we really don't talk about today's laptops. They can be a real power house for a very reasonable price. The laptop provides true mobility by not having to be connected 24/7 to the internet. Laptops can come with 500 GB to 1 TB hard drives, Universal DVD/CD RW including Blue Ray, 6-8 GB of DDR3 ram, a quad-processor (I5 or I7) and an internal graphics card (Radeon for instance). Thumb drives can be had all the way up to 1 TB. All of which makes the tablet and the cloud unnecessary. To generate real work, a keyboard is necessary. To be using a keyboard through most of the day, it must be large enough, robust and ergonomic. The touch screen is simply a non-starter for most workers/professionals. MS is making so many bad assumptions about the future, you've got to really wonder. Report this Comment On September 07, 2013, at 11:25 AM, shimpainai wrote: I MISS STEVE JOBS! Why can't intelligent, enthusiastic people run the world instead of the egomaniacs and the greedy? It would be so good for our country and our businesses if we could do that. So many computer businesses are going to go under because of the loss of pure, unadulterated genius. Report this Comment On September 07, 2013, at 11:26 AM, mkepalmer wrote: As an IT professional I find this article laughable. Just take a look at Dell's new Lattitude 10. Is it an tablet or a PC? It's both and with Windows 8 loaded on it there is no need for an Ipad to take home with you and hope you can download apps to help you with work. This tablet is your work machine and is docked at your desk. Add a 20 hour battery life and you now have no need for anything Apple produces. How is it again that MS is committed to clunky desktops ??? Report this Comment On September 07, 2013, at 11:33 AM, Spock69 wrote: A CEO " out of touch" That's not even news! These over-priced, self- serving guys killed GM, Merrill, and countless others. Only when they quit insulating themselves with layers of yes-men and salaries they clearly don't "earn", will they guide their companies properly. The whole system needs help not just Microsoft. Report this Comment On September 07, 2013, at 11:34 AM, MPA2000 wrote: Microsoft was doomed after XP. It should have stopped with XP and just worked on fixing the kinks there. But nope, they had to come up with the clumsy and bug ridden Vista. Almost no third party software was compatible. It just stood there sucking all of your available memory. Then came Windows 7, which was really Vista Redux. I won't even discuss Windows 8. XP as sucky a system it was, is still the best PC OS for business or home, IMO. Report this Comment On September 07, 2013, at 11:57 AM, Rustman80 wrote: Surface's failure was the use of the ARM architecture. I was interested in buying one... completely intrigued with the idea... until I found it was running on ARM. Nothing against the architecture... I'm sure, fundamentally, it works fine... but if you are a PC user, which are the only people that would buy that, everything you already own runs on x86 or x86_64. I can't install any of the software that I already have onto it. That is a deal breaker for me and a lot of other people. I'm not rebuying software that I already have through their app store just so it'll run on that one device. Had the surface been x86_64, I think it would have been a totally different story... but Microsoft was looking to capitalize on the "app" trend by limiting choice to only using their app store to buy software, and that has NEVER been a good business decision. Report this Comment On September 07, 2013, at 12:01 PM, jjoensuu wrote: @wgcross2 wrote: --- First of all, PC's are NOT dead. They will be required by businesses and corporations for years to come. --- Try to tell that to Motley Fools - they wont get it. I am guessing their idea is to peddle their point of view to increase the stock market value of some companies that they get paid from - companies that do not have a presence in corporate server rooms and who knows perhaps depend more on the tablet PC industry... Add your comment. Your Fool username will be displayed with your comment. Please be respectful with your comments. Review our Fool's Rules. ----------------------