Winning depends on the pitch staying playable.
The launch of Microsoft Office apps – Excel, Word, Powerpoint – for the iPad has been hailed by some as a turning point for the company and a bold leadership stroke by new CEO Satya Nadella. If anything, the excitement is a fair measure of Microsoft’s problem: the best it can do is port thirty year old software to the market leader’s tablet.
Ironically, Excel and Powerpoint were originally developed for the Mac OS. Only Word began life on a Microsoft operating system – Xenix – and then later made its way to MS-DOS and Mac OS. The three eventually came together as the core of the Office package on Windows, but for the most part have also been a mainstay of OS X. In other words, Office is not a mere sub-set of Windows and has always been cross-platform software.
The strategic point of departure for Nadella is the requirement to buy an Office 365 subscription in order to use the apps on an iPad. You can download all three for free, but they’re just glorified read-only file viewers without the subscription – you can’t change anything or create new documents. The subscription price starts at $100 per year for home users and $150 for businesses (there’s a $60 annual Office 365 package, but it doesn’t include desktop or tablet apps).
Nadella’s strong suit is said to be cloud services, and that might be the rationale behind Office for iPad: forget about Surface tablets and Windows phones, and start selling software and add-on services for any user, on any operating system. It’s a great idea, as Google would have told you nearly ten years ago when they started doing the same thing, except they’re still giving it away for free to basic users, which are most of us.
Batting second is usually considered an advantage in cricket, Nadella’s game of choice. Google scored well in its innings, making it a long chase for Nadella, who has to hope the field of play doesn’t wash out from under him while he’s at it.
Sometimes the best you can do is watch the stumps.
Instead of seeking fresh leadership, Microsoft’s board of directors has opted to double down on the status quo as the company struggles to regain relevance in a world that’s moved away from the personal computer and toward mobile devices and cloud services.
The choice of Satya Nadella as Microsoft’s CEO was an exercise least-worse decision making. His most recent assignment in his 22 year career at Microsoft was running cloud and enterprise services, where he produced mediocre results. By Microsoft’s current standards that’s high performance, beating its mobile hardware and operating system disasters and ranking marginally more innovative than its creaking Windows PC platform.
Bill Gates will join Nadella’s team as babysitter-in-chief, I’m sorry, technology advisor. It’s a recipe for inaction, at a time when Microsoft needs to make radical changes to its strategy and product lines in order to maintain its market weight. If Gates was truly engaged with the transformation of the company he founded, he could have come back as CEO much as Steve Jobs did at Apple. But he’s not that interested. So Gates will hover behind Nadella, who is a Microsoft careerist, the rapturous hosannas about his intellectual powers and agility notwithstanding.
Nadella, who counts cricket as one of his passions, has to bring clarity and direction to a rudderless corporation, a challenge best described by Rethink Wireless’ Caroline Gabriel…
Microsoft’s mobile strategy often resembles cricket – a long game so obscure to outsiders that it is unclear whether there is a clever strategy at work, or the players are just slogging along, trying to stay in the game and secretly praying for rain to stop play.
Microsoft has a long chase in front of it, and Nadella has no wickets to spare.
Vestberg living large at CES.
“It’s normally not given that the winners in the first phase are the winners in the second phase”, said Hans Vestberg, CEO of Ericsson at CES last week. It might be that someone on the Microsoft board was listening hard, because the rumor of the day has Vestberg on the shortlist to be its new CEO, replacing Steve Ballmer, who announced his impending resignation last year.
Vestberg was talking about the challenge in front of Ericsson, which was an early behemoth of the mobile phone business, but has remade itself as it fell far behind in handset manufacturing and its infrastructure business lost ground as voice networks were upgraded to handle broadband. But also it’s a deadly accurate description of the predicament that Microsoft is in, as its 30-year dominance of PCs becomes increasingly irrelevant in a mobile-centric world.
As a successful CEO and thought leader in the mobile industry, Vestberg can set a new direction for Microsoft. The bigger question, though, is whether he – or anyone else – can make the floundering company respond and steer it onto course. Other candidates have reportedly taken themselves off the list because Ballmer remains on the board and Bill Gates is still the chairman, potentially handcuffing any new CEO. Microsoft benefitted in the past but largely suffers now from harsh competition between internal fiefdoms. Vestberg joined Ericsson as a college student and has never worked anywhere else – it’s a fair question whether his experience coming up the ranks of a major Swedish company is the right preparation for a parachute assault on the baronies of Redmond.
There’s no doubt, though, that he’s a plausible and applaudable choice, far preferable to any internal candidate. The problem with Microsoft is that no one there seems to realise that the industry is in a new phase and it isn’t a winner anymore. More than anything, Microsoft needs the perspective and insight that an outsider like Vestberg can bring.
Mollenkopf prepares to step into the spotlight.
“We continue to be optimistic about the future of the Windows ecosystem”, said Steve Mollenkopf, the man picked to take over as CEO of Qualcomm, starting in March. He was responding to a question about Qualcomm’s relationship with Microsoft, during a refreshingly informal press conference at CES today.
What Mollenkopf didn’t say, though, was even more important.
When quizzed about Qualcomm’s ability to move beyond media consumption and into mobile productivity devices, such as the Windows tablets that have stalled in the marketplace, Mollenkopf talked up the benefits of supporting multiple operating systems – which Qualcomm vigorously does – and then started waxing poetic about the wonders of media consumption. And, incidentally, pointing out that people are doing a lot of productive things on Android phones and phablets.
It was clear that he doesn’t think Qualcomm’s future will depend on Microsoft figuring out how to create and support mobile products and services.
He also dodged questions about the potential development of ARM-powered chips specifically for use in servers. In general, Mollenkopf was unapologetic about keeping tighter control on new product details. “We’re in the leadership position and don’t feel it’s necessary to tip our hand as early as others”, he said.
Qualcomm’s strength is in mobile products, and the chips it produces are putting more and more power into those smaller form factors, increasingly satisfying consumer demands that were previously met by more traditional CE products, like TVs and PCs. “It’s all about mobile”, Mollenkopf said. “If you’re looking at what’s driving growth, what people are excited about, they’re excited about mobile”.
The familiar scent of Blackberries.
Wall Street investors seem happy to take what Fairfax Financial Holdings is offering for Blackberry and let the dwindling mobile phone company waft away in the wind. Subtract out the cash that Blackberry is holding, and the net sale price is about $2 billion, a sad end to a psychedelic slide that began at $83 billion five years ago.
Like Microsoft’s purchase of Nokia, Fairfax’s offer seems to be based on the chemically impaired notion that Blackberry isn’t in the final stages of a terminal crash. Fairfax head Prem Watsa babbled about “execution of a long term strategy” in a press release but, according to the San Jose Mercury News, he’s a fan of Blackberry’s two biggest and most recent flops, its new CEO and operating system…
Watsa is likely to keep current CEO Thorsten Heins in the job. He said in April that he’s a big supporter of Heins and has called his promotion the right decision. He also said he’s excited about the company’s new BlackBerry 10 operating system.
Watsa has a reputation as a savvy investor, so he might just be blowing smoke to keep the headquarter troops in Waterloo, Ontario from coming down with the shakes. There are three ways to suck $2 billion in value out of the deal: 1. sell off Blackberry’s intellectual property, 2. milk its remaining 50 million customers for whatever they’re worth and 3. try to turn it into a much smaller mobile and IT services company, providing security and backend support to other platforms.
But as it stands, Blackberry isn’t even worth stems and seeds anymore. Without a thorough corporate detox, Watsa will be just licking the ashtray.
When you have to buy corporate affection.
Finally, there’s a plausible explanation for Microsoft’s purchase of Nokia last week: an Android phone was under development, on the only major mobile product line that supports its Windows operating system.
It couldn’t have been because Microsoft wanted to hire away the management team that took Nokia from world domination to being a life member of the sub-five percent market share club. I believe that Steve Ballmer thinks that he can scream loud enough to make Finnish engineers turn out hip, frictionless iPhone clones. But Microsoft’s board includes adults who know how to spell Blackberry and, in any case, would probably point out that even Apple isn’t doing that anymore.
Fear is a powerful motivator, though. Nokia makes about 80% of Windows-powered phones. If it defected to Android, Window’s market share – which, if only by default, has just edged past the Blackberry OS – would sink out of sight.
Any hope that the deal meant that Microsoft had found a secret pathway back to relevance is completely gone. Microsoft’s Office software package is still the big kahuna of productivity applications, but that’s the only bright spot.
Its Surface tablets are underwater, Linux is slowly but surely crowding Windows out of the booming cloud computing sector, and the personal computer side of the business is being squeezed between slowing sales and tentative moves by manufacturers towards alternative operating systems like, gee, Android.
Now it turns out that Microsoft grabbed Nokia to keep any of the other kids from playing with it. When the only way you can hang onto your friends is to buy them, your days on the playground are numbered.
Steve and Mini-Steve.
The best news Microsoft has had in many months came Friday with the announcement that CEO Steve Ballmer would be stepping down some time in the next twelve months, and a top level board committee, that includes Bill Gates, will be looking for his successor.
Ballmer took over as CEO in 2000, when Gates began pulling back from day to day management of the company and increasingly focused on tackling the big problems that face mankind via the Bill and Melinda Gates Foundation. The company has done well enough financially in that time and maintains its commanding share of desktop operating systems and productivity software.
Unfortunately, that’s not where the market is heading. Unable to gain traction in mobile phones or tablets, and facing steadily growing pressure on the operating system side from Android and, in the server sector, Linux, Microsoft is in the difficult position of being the leader in a consumer and desktop market that’s coasting to a plateau while the mobile and server businesses rapidly accelerate away.
Whoever the new CEO will be, he or she has a tougher job than Steve Jobs faced when he returned to lead Apple in 1997. The PC business that Apple dominated in the early 80s was still very recognisable then: sell beige boxes that sat on desks and ran shrink wrapped applications that did things to files. Jobs had the luxury of blazing a trail to new markets. Ballmer’s successor will have to figure out how to catch the Apples, Googles and Samsungs of the new mobile world.
The worst thing Microsoft could do is promote someone from within. The company needs shock treatment, not a logo refresh. Second best option would be to bring Gates back, but that’s not going to happen. Bill is having too much fun – and success – saving the world. The best choice would be an outsider, to both the company and the desktop market. There are plenty of people in Redmond who understand desktops. They need to be led by someone with vision and experience that comes from another world: mobile, consumer electronics, services.
Amazonian elephant coming up from behind.
There were three global technology elephants left standing at the close of the Consumer Electronics Show in January – Samsung, Google and Apple. Microsoft was last seen rumbling toward the elephant’s graveyard and the two likeliest candidates to replace it, Amazon and Facebook, were still shy of the necessary bulk.
Recent days have shown why Samsung and Google will rule the herd for a long time to come.
Google has so many market-default services that it’s accounting for 25% of daily Internet traffic, with 60% of the world’s devices touching it every day. Samsung has the same kind of diversification across sectors it either dominates or ranks within the top tier of competitors.
Although Samsung has nearly a third of the global smart phone market and just reported a quarterly operating profit of $8.5 billion, there was something of a panic last week because it’s looking like it is close to exhausting the immediate growth potential of this planet’s 7 billion or so potential customers.
Samsung’s response was to talk about chip and screen making as new growth areas, allowing it to continue its march to higher profits while it tries to figure out a reason to get everybody in the world to trade in their current Samsung Galaxy for a new one. It’s a company that uses dominating heft in one technology sector to gain market share across all business lines. In contrast, Microsoft’s warring fiefdoms keep it from building strength upon strength. The post-Jobs Apple looked like it might be going in that direction, too, but Tim Cook seems to have headed it off for now.
Facebook staged a stock price come back last week as it demonstrated a new command of the mobile advertising market. But it’s still a one platform pony. With global leadership in online retailing and a front-of-the-pack position in core Internet services, Amazon is best positioned to occupy the empty fourth elephant’s slot. It has enough weight, it just has to learn how to throw it around.
It goes both ways. But maybe not much longer.
Microsoft continues to slide toward the back of the mass computing market pack. Three more signs it’s losing its grip on consumer-grade devices:
- Acer is coming out with an ARM-based desktop PC that runs the Android operating system. Earlier this year, Acer was the first major manufacturer to report that Linux-based Chromebooks were trending better than Windows PCs.
- Asus just announced a hybrid tablet/desktop product with two Intel processors that runs Android in tablet mode and Windows when it’s docked. Apparently, Asus thinks any clunkiness caused by having two OSes onboard will be outweighed by the superior user experience Android delivers on mobile devices.
- Microsoft is slashing the price manufacturers pay to install Windows RT on small tablets. It seems particularly desperate because RT was the first Windows version released for ARM processors, which dominate in mobile devices.
Windows simply doesn’t add enough value to a device to justify its cost. Arguably, it doesn’t add any value at all compared to Android, which is free.
Cutting the price for RT isn’t an exception. It’s the first step onto the slippery slope of competing on price rather than relying on the power and user experience of Windows to make the sale. Such as it is.
Keep a close eye on how Acer and Asus fare with their new products. If Acer starts to expand its desktop Android line – particularly into Intel-powered devices – and Asus stays the course with a dual OS strategy, it’ll be a clear sign that Microsoft will eventually have to cut its margin on Windows across the board.
Android is just a consumerised version of Linux developed for mobile devices. If it “just works” with consumers, there’s no reason full scale distros, like Ubuntu, can’t do the same. Microsoft is learning it’s hard to compete with free.
It’s not a smart watch unless it looks smart.
Microsoft is the latest company to get into the smart watch business, or so the latest rumors say. It could be a way to give Windows a competitive boost in the mobile OS market, if Microsoft can integrate it into the ecosystem in an interesting way.
The hot smart watch at CES in January was the Pebble. It links to a smart phone via Bluetooth, allowing users see messages and alerts or control phone functions. Other manufacturers, such as Casio, were showing watches that did similar things although on a less ambitious scale.
Wearable tech is slowly entering the marketplace. That’s one of the potential benefits of the flex screen Samsung demoed at CES – it can put a larger, but less intrusive, screen on your wrist. Google Glass and other head-mounted displays and cameras could do the same thing, if the product is attractive enough. People already wear glasses and wristwatches so adding functionality to those devices is easy so long as the form factor doesn’t change.
Ear buds and Bluetooth earpieces are also ubiquitous these days, which tells you people will add tech to their ensembles if it truly enhances their lives. Earbuds took off with the Walkman thirty years ago as a way to listen to tunes without bulky headphones. Bluetooth earpieces let people talk on their mobile phones whenever they want, without tying up their hands or getting caught up in cords. I doubt, though, that the market for Bluetooth earpieces would have taken off as quickly as it did without the help of hands-free requirements for drivers.
The best way to introduce a new product (or service) into the market is to make it just like an existing one, only better. Adding convenient functionality to a wrist watch is a no brainer in that regard. But the operative word is convenient: it has to blend seamlessly into lifestyle and fashion choices, not dictate them.