MICROSOFT : Counter-attack from an ageing company

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12/04/2012 | 05:48 pm
A reading of its performance curve, Microsoft could validate the theory of life cycle of a business. For a decade, the company is in a long period of maturity without any real winning innovations. The group led by Steve Ballmer must react quickly, otherwise fall into a period of decline.
Currently, its quasi-monopolistic position (9 out of 10 computers in the world run with its operating system) still allows the firm to maintain its cash ($ 50 billion), but margins should be reduced.
Windows segment represents more than a quarter of sales but more than half of the result. Its current profitability is accomplished by majority of the PC market.
 
The graph clearly indicates the lethargy of Microsoft share price for a decade, which opposes the explosion of Apple share price and its many innovations.




Too many failures over 10 years

Only investment in the Xbox game console is effective. In addition, 8.5 billion spent in Skype will enable the Group to offset the more or less successful initiatives in instant messaging or VoIP telephony.

In 2002, Bill Gates and his team had developed a real innovation with the first tablet that has subsequently been a resounding failure. The hyper-publicized manager announced a revolution when launching a product called the Tablet PC. It was just a special version of Windows XP. The failure was soon revealed: the model very expensive ($4,000) had a low autonomy and disproportionate power to use.

The challenge
 
Microsoft has decided to hit hard with the recent launch of its new tablet SURFACE conjunction with the launch of Windows 8. The Company strongly encourages users to update the operating system with a unbeatable price ($70). The famous tablet comes out with this new interface to compete with Apple. To create a real event, the U.S. firm has not hesitated to imitate its competitor, creating a rare phenomenon because only the Microsoft website is marketing it.
 
The output is accompanied by the desire to develop the use of “skydrive” network that stores data and allows the interconnection of devices running Windows. Nevertheless, it is necessary that the company builds trust with developers to find a sufficient number of applications to attract consumers tablets.
The real challenge for Microsoft is played on the latest innovations, another failure further tarnish the image of the group, confirming its difficulties to interpose against Apple and Google in particular.
 
Since his arrival at the head of the company ten years ago, Steve Ballmer could not take off the stock price to the chagrin of investors. Although sales reached record levels again this year with a return of 30% but this trend can be reversed at any time in a company that some call as ageing, like IBM a few years ago. This is confirmed by the departure of many of its leaders over the past five years.
 
If the tablets are a real turning point in the consumer office equipment, Microsoft has to transform its ultimate test to avoid major changes. In times of crisis, it was common to see back the old leaders, Michael Dell, Steve Jobs and Jerry Young made ​​their "comeback" with the success that we know in their business Dell, Apple and Yahoo.

In contrast, Bill Gates too busy with his foundation certainly could not follow the same path ... It will then find other solutions !
Patrick Rejaunier
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