Microsoft analyzed
Introduction:
Microsoft, the tech giant had a dream run any company could have had from 1985 to 2000. The stock soared from 9 cents to 58 dollars at the zenith of the 2001 technology bubble. Bill Gates was the king of the technology world. Microsoft entering a market segment struck fear in the hearts of the incumbents. Microsoft, arguably, almost killed IBM and Yahoo at different points. And yet ten years later, the stock price has gone down to 26 dollars, the company seems to be desperately trying to bolster a weak entry into the growing mobile technologies segment, and reposition itself in the new technology world. The internet is filled with stories of its impending demise. So, is the software giant really dying? Clearly something went wrong – what was it? The following analysis seeks to find an answer to these questions.
So what does Microsoft really do?
Microsoft seems to have its tentacles in every technology business there is – it develops client operating systems, servers, productivity software like MS office & project, application development tools, package solutions like ERP &CRM, web browsers, internet websites such as MSN and Bing, gaming consoles (Xbox) video games and many more. One looks at the portfolio and one wonders what is the company really trying to achieve? What is the underlying vision – if there is one? But the portfolio of the plethora of products starts making sense when one thinks of Microsoft as a software platform company. From its early days, Microsoft has strived to develop the underlying platform on top of which other developers can develop their products. The idea is to create a huge ecosystem defined by applications, peripherals, and accessories around the platform and monetize the platform. By nature, it's a business with high operating leverage, marginal variable costs and where money comes hand-over fist once you have scale.
The five operating divisions of Microsoft are:
Division |
How to think about the division |
Windows & Windows Live Division |
Your PC/Laptop and Browser Platforms |
Servers & Tools Division |
Big Computers that organizations like Darden or your workplace care for but you probably don't |
Business Division |
Your Word, Excel, PowerPoint, Project, Visio etc. |
Entertainment Devices |
X-Box and Windows Phone |
Online Services Division |
Websites like Bing & MSN |
Let's do a quick SWOT on each division to see how Microsoft fares:
Windows & Windows Live Division:
Strengths:
|
Opportunities:
|
Weaknesses:
|
Threats:
|
Servers & Tools Division:
Strengths:
|
Opportunities:
|
Weaknesses:
|
Threats:
|
Microsoft Business Division:
Strengths:
|
Opportunities:
|
Weaknesses:
|
Threats:
|
Online Services Division:
Strengths:
|
Opportunities:
|
Weaknesses:
|
Threats:
|
Entertainment Devices Division:
Strengths:
|
Opportunities:
|
Weaknesses:
|
Threats:
|
Your Verdict? :
So does the above business look like it is going to die anytime soon – today, tomorrow, may be day after? If not, why is there a distinct market pessimism around the company? If Microsoft is doing "just fine", how do you see it competing in the emerging world of tablets, smartphones and cloud computing? What is the company's REAL problem, if any?