The Irrelevance of Microsoft
MSFT Connected Devices
Source: (Benedict Evans)

 

Benedict Evans writes up this very interesting analysis that sums up the entire Ballmer era of Microsoft (MSFT).

From most of the 1990s and 2000s, the vast majority of connected devices had Microsoft operating systems. Even as late as 2009, their share of connected devices were still over 90%.

Since then, they have fallen to under 25%. This is indeed an astonishing failure of management, innovation and corporate acumen.

They are not quite utterly irrelevant, but they are fast becoming Maytag — a reliable manufacturer of needed if unsexy utilitarian appliance. “Micro$oft’ stopped setting the agenda 18 years ago. Windows 95 was the moment of victory, but was also the peak.

They are not going to go gently into that good night. They still have an enormous cash hoard; their lock on Office keeps them relevant for those of us cannot rely on Google Docs; Lastly, their Desktop OS is still viable, if fading. It may take a decade or more before the desktop Windows as we know it disappears, replaced with who knows what?

To quote Evans, “an overnight collapse can take a long time.”

Here is the question for investors — I don’t know the answer to this — how much Microsoft would you be willing to buy and put away for a decade? You can’t tough it for that entire period. What about Apple (AAPL)? Google (GOOG)? Something else?

~~~

Go read Benedict Evan’s full piece here.

Category: Corporate Management, Economy, Investing, Technology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

42 Responses to “The Expanding Irrelevance of Microsoft”

  1. Chad says:

    I would hold zero Microsoft. I wouldn’t mind holding some Apple and Google very long-term.

    Apple, if they don’t screw it up and release a cheap phone, can be the Mercedes of the phone/tablet industry for a long time. They just need to make sure the rich and hip of developing countries wan their product.

    Google is fairly solid too, it’s always hard to beat a company whose name becomes a generic term for a product/service.

    Plus, they both have walled gardens that make it difficult to leave. Apple’s wall is a higher and stronger, while Google’s kind of moves with you and gently nudges you away from competitors. You could still get to competitors if you want using Google, but you slowly wonder why you bother with the extra click.

    At the very least I think they could be great dividend stocks going forward and they still have shot at disrupting TV. Though, TV is more difficult than music.

    • VennData says:

      “…You could still get to competitors if you want using Google, but you slowly wonder why you bother with the extra click…”

      Allowing you to exit, lowers the cost of entry. That’s why Apple sucks, unless your some status-craving fluffball.

      • Richard W. Kline says:

        Or unless you want products which actually work.

        Too much commentary discounts the reliability factor which Apple delivers, in part, I think, because Apple soes not relentlessly advertise this. Users get on an Apple device, and all those crashes &etc. which were once an irritating fact of life just . . . disappear. This is again Chad’s example of a low, soft wall which keeps users on the premesis. Apple is NOT just about ‘look and feel’ or the cool factor: Apple’s greatest cachet is as a headache free zone for the user.

        In 25 years, I have never had a virus on an Apple product. I have never personally had fatal crash of any Apple device, and I can recall fewer actual crashes than I can count on one hand. Now obviously these can happen, but the point is that they are simply far rarer than on competitors’ system. Competitor’s have done some catch-up on ‘interface simplicity’ which was once a product space wholly owned by Apple because other company’s either didn’t bother or forced their buggy, unintuitive crap on the user a la Microgod who’ve cared less than nothing about the end-user’s experience from Day One right up until post Windows 8 madness. But competitor’s inherently _cannot_ catch up on platform stability because no one else has that high, walled garden with the low, soft comfort zone inside it.

        When someone comes up with a device system as stable and clean as Apple, I’ll be interested. Until then, I, like most folks, just want the &%^$&ing thing to work for _my business and interest_. If that inhibits the whiners’ business opportunities . . . just what do they have that I need again? I missed that part.

      • netpenthe says:

        ha that is ridiculous

        i’ve had macbook pros and macs.. and grew *very* accustomed to the rainbow ball of death: http://en.wikipedia.org/wiki/Spinning_pinwheel

        common mac crash, very common. Unless you’re doing the most basic things on your mac, you would have experienced this.

        Windows 7/Windows 8 and newer Mac OSX versions all hardly crash at all, they’re all about par… (Windows 95 and PowerPC Mac all crashed/hung a LOT)

        the reason you haven’t had viruses is that mac’s have traditionally held less that 5% of the OS market, hence no one bothered writing viruses for it. Even now they’re only at 7% OSX, with Windows at 90%…

    • netpenthe says:

      i disagree with your ‘walled garden’ argument.

      if google disappeared tomorrow, you could move to bing and it’d be a very similar experience. It will probably feel like google from about 2 years ago, totally usable. (but with google around, theres no reason to use bing). If you wanna test, try using bing for a few days, its not *great* but its 95% of google.

      the same goes with all google’s products, there is almost zero lock in.

      google are at risk at being destroyed if someone does come out with something better (remember how quickly alta vista/web crawler etc died?). I think their greatest lock in product is Gmail, which is ahead of competitors, but i think most people could still get by on yahoo mail/hotmail etc.

      Apple also has little lock in, their whole proposition is ‘easy to use’, which means you can move off them tomorrow. If Apple disappeared tomorrow, you could move to Windows for computers and Android for phones and have almost zero loss in productivity.

      If Microsoft disappeared tomorrow? you’d be screwed, almost every corporate workplace in the world would stop working (Active Directory/Exchange/Sharepoint), almost every single stock analyst couldn’t do their work (Excel). Word might be replaceable for basic things.

  2. capitalistic says:

    Like other pseudo niche technology companies, MSFT should become a publicly-traded tech investment firm. Invest in rapidly growing private tech companies, bring them to market via an IPO, rinse and repeat.

    Apple should do the same. Tech companies can’t “grow” forever.

  3. as.value says:

    Microsoft did buy into Apple at under $10/share; and did buy into Facebook well before the IPO
    But I agree that the premise is highly flawed. Microsoft is still very entrenched in the corporate computing world, but who knows what will happen in the future.

  4. mockware says:

    I admit I have a good chunk of it that I’m holding for the long haul. I don’t see outstanding growth here but Microsoft has a niche in the PC OS market that I don’t think anyone can knock out just yet. When we have a paperless society as I have been told over and over again was just around the corner, I’ll probably change my mind. That said, the best thing that could happen to Microsoft would be to fire Ballmer. I don’t mind mistakes being made but the inability to see them quickly and brow beating anyone in your organization that identifies them has hurt this company greatly.

  5. dsucher says:

    A related (albeit very local) question:

    What if anything would this trajectory mean for the local Seattle economy?
    Would it hurt?
    Or alternatively, might (as happened with Boeing in 1970) gradual decline in M’sft employment be offset by unleashing new businesses?
    Or is the Seattle economy diversified enough, though with some 40,000 (!) employees…
    http://seattle.about.com/od/largecompanies/a/topseattleemployers.htm

  6. thatguydrinksbeer says:

    One day, not far away, a phone will be as powerful as your laptop. If today were that day, Microsoft would own most devices (IMHO). Imagine getting to the office and plugging your phone into a monitory/keyboard setup, then just taking your phone home/plane and docking into another setup.

    So to me the question is, will MS still be the business OS when that day comes? Despite being on few devices, I don’t really see a challenge to MS on the OS front.

    • How much less powerful is your iPhone/Android than your laptop? Other than the form factor, they are in similar ballparks — that was not the case 5 years ago.

      Sold to you!

      • mitchn says:

        But the form factor is not insignificant. My mom can get by with a smartphone, but lots of professionals need — and will need the bigger screen for some time to come.

      • winstongator says:

        People already connect their laptops to external screens when they get to the office. Input problems are bigger issue.

      • winstongator says:

        I have to use some msft tools for my job – word and PowerPoint at least. Can’t do that on my iPhone, yet. Plus the interface for typing is sub optimal, although I am typing fair
        Quickly on my ipad right now. My apple products also boot from sleep in 1-5 seconds while my current PC laptop ISP > 5 min. Terrible for small time chunks.

        I do have a real workstation – 8-core, 64 GB RAM that will never be replaced by phone/tablet unless a nice thin client comes along and I can connect to powerful machines and display the screen via tablet.

    • BottomMiddleClass says:

      thatguydrinksbeer, I understand where you’re coming from, but I think in the future all data will be stored in “the cloud” (much as I hate to use the term). You’ll be able to access all your information from your phone, your friends phone, your TV, or the touch screen on your refrigerator. Out of the big tech companies, poor Microsoft seems to be the farthest behind on this vision, although you could make an argument for XBox I suppose…

      This also means no more employees having laptops stolen or lost and losing days of work because they forgot to run their backup program.

      • pmorrisonfl says:

        Not just a little ‘cloud’ data is going to be stored in relational databases. Microsoft’s SQL Server is a key piece of infrastructure already, and will likely remain so.

    • rd says:

      Moore’s law says that will happen.

      In my engineering career, I have seen a laptop computer the size of a large book have more computing power, graphics capability, and storage than a mini-computer that required a full room.

      Within the next 10 years, the actual computing and storage capabilities of today’s laptops and desktops will fit in an iPhone case. The only major physical limitations would now be the input and output dictatedby our own abilities. So, we will still likely have today’s monitors, keyboards, and mice at their current sizes or some other specific replacement for those functions. However, I suspect that all of those will be able to roll or fold into a small tube for carrying.

      • winstongator says:

        I/O and UI for laptop replacement should not be that hard and could be done by peripheral 3rd party vendors.

    • thatguydrinksbeer says:

      I don’t think anyone uses anything but a laptop or desktop for serious work. MS Office, finance tools, and software development come to mind. Windows dominates that space, right?

      I don’t think location of the data is what matters. It’s the horsepower to run big applications paired with a full keyboard and monitor.

      • winstongator says:

        They would be thin client terminals connecting to more powerful devices. For my real engineering work, a PC is now nearly powerful enough, but I can VNC (virtual network computer) and access my Linux machine. I would love if vns options went to other devices as I’m not hacker enough to write my own.

        It has been a while since I wrote a nice, professional looking document in anything but word (FrameMaker 15 years ago and wordPerfect before that).

  7. BennyProfane says:

    Following in the steps of the American auto industry. Amazing that Ballmer is still head honcho.

  8. rd says:

    The irony is that Microsoft largely displaced IBM for a lot of corporate computing by taking advantage of a then new-fangled niche desk-top (instead of room sized) device market. Desk-tops, other than dedicated word processors, were just home hobbyist devices until the early 80s.

    They are now repeating IBM/Rand Xerox’ mistakes by being displaced by other companies that have focused on the hand-held market.

    Microsoft was threatened before by Lotus 1-2-3 and Netscape for spreadsheet and browser applications but was able to use their platform dominance to swamp them. It is harder to do that though when people are moving to different platforms.

  9. Molesworth says:

    You have to like Google, don’t you? The best search. Maps, self driving cars, glasses. They’re wiring communities. Chromecast has sold out, selling on ebay for $100 and they’ve cancelled the Netflix promotion. They appear to have the right mix of innovation and execution.

    • Bob A says:

      …and the Moto X, to be formally announced next week, is going to reignite (google owned) motorola

      http://mobicuppa.com/2013/07/20/motorolas-moto-x-press-event-set-for-august-1st/

    • Biffah Bacon says:

      Google disappears products in a seemingly capricious fashion-Reader, Talk, etc.
      Who’s to say they won’t exit Google Docs at some point, or Gmail, or G+? The cloud is not like thin client computing from the IBM days, when your stuff was somewhere in a building you owned; it’s not like desktop where it is trapped in a hard drive. Your stuff is floating in a cloud, which means in one or several data centers around the world subject to the whimsy of nerds, hackers, and intelligence agencies.

  10. Bob A says:

    it’s a shame but there’s little hope for improvement until there’s a thorough housecleaning of the clueless and incompetent leadership at the top.

  11. Ben Dover says:

    What about the enterprise business/ server management tools, MBD in i365 / online service division? Xbox and xbox live market place as a high growth transactional software piece embedded in the entertainment division is not mentioned in the post either. I think these are all important and mostly ignored/ under rated in most 3rd party research on Mr. Softy. All growing revenues and all high(er) margin segments.

    I can’t argue with your comment on the windows division, it is in decline which is alarming as this their flagship product, and surface (while still a quality product for those that have checked it out) maybe another zune.

    All the same I think that is well baked into the stock price at the current level and these other areas are worth a look before dismissing the company as a fossil.

  12. jlj says:

    Do not disagree with the assessment.But i think the chart above would have more information if there was a right hand y axis with the increase in the number of connected devices since 2009.

    • Mike in Nola says:

      You got it as far as the chart, but it does appeal to BR’s prejudices. He had to find some graphic to support his narrative.

      Today he tweeted that Win95 was the peak, which is utter nonsense that I suppose he got from the guy he’s reprinting. The peak was around the antitrust time, which was the justification for the ruling. The peak may even have been later, as even today something like 400M people are still running XP.

  13. VennData says:

    Hold the market weight of all of them in an index fund.

  14. Bob is still unemployed   says:

    “they are fast becoming Maytag — a reliable manufacturer of needed if unsexy utilitarian appliance”

    The analogy to Maytag may be correct, but not quite for the reason you cite.

    Maytag, since the late 1990′s, is no longer the maker of quality appliances for which the name had been known. Things in the Maytag brand deteriorated so greatly that the carrion was purchased by Whirlpool somewhere around the mid 2000′s (2006?).

  15. 4whatitsworth says:

    Bill Gates had a famous saying something to the effect of “over a two year period things don’t change as much as you think however offer a 10 year period they change more than you can imagine” .It appears that under Balmer’s leadership this is not really relevant any more.

    I sold my Msft at the end of last year and did not buy it back. I own Google and have for some time I also bought some Apple recently because I liked the dividend and Tim Cook. If MSFT pushed its dividend up like the cash cow it is I might get interested again.

    On a side note I recently visited the new Microsoft store and bought a surface PC and a keyboard. Well to make a long story short the product was not really ready for release and had problems downloading drivers etc.. It took me 5 hours to get it to work right. On a positive note I like the Bing thing that they have going on if I were Balmer’s replacement this is where I would place my bet.

  16. Orange14 says:

    I sold all may MSFT stock earlier in the year and don’t plan on buying anytime soon. I’m disappointed in Balmer as he was always late to the game with almost everything except for the gaming hardware. I still use Win7 and have done three computer builds so far this year (one is a home theater PC) with that OS. It’s rock solid and always runs. For anyone building a computer it’s the easiest way forward without having to configure a Linux (or variant thereof) system. MSFT Outlook is still a good email client and the other Office programs are good as well. Apple is in the same boat but has a lot of fan boys and girls who will over pay for proprietary hardware.

  17. Onemoretime says:

    I would quibble that xp was the peak.

  18. GeorgeBurnsWasRight says:

    The problem with tech companies is they have to keep coming up with revolutionary products. Their moat is very narrow, and competitors quickly duplicate successful products.

    People look at Apple’s trifecta of iPod, iPhone and iPad and think this means that other companies can do the same. Heck, it’s not even clear that Apple can continue to innovate this well.

    Add to that the fact that size is mostly a negative in technology. Huge companies have trouble moving into new markets, while tiny companies focus on a single product.

    Look at FaceBook as an example. Started tiny, made the big time. What people miss is how many hundreds (thousands?) of similar companies started tiny and failed. Let’s be optimistic and say that the chances of a new tech product succeeding are 1%. Can a company the size of MicroSoft risk much capital on products which have a 99% likelihood of failing?

    Arguably, Jobs’ chief talent was being able to recognize which products had a decent chance, and even he had a lot of product failures over the years.

    • winstongator says:

      Apple also has an os – a product that anchors msft. Without its edge making the default OS for PCs it doesn’t have the applications edge it does in the office suite.

      DOJ and Boies screwed up the anti-trust litigation. The browser was irrelevant. The real deal was how msft used early access to dlls and other internals to have the next gen office suite out fastest. Msft should have been split into an OS company and an applications company.

  19. Robert M says:

    Today i would buy 1% of assets in Mr Softie. The cash hoard is too great to ignore. As to Ballmer he is a symptom of a bad board of directors. At some point it will be time for money, guns and lawyers.

  20. bear_in_mind says:

    Funny to hear people yowl about Apple being proprietary, but not Microsoft…? Uh, denial much?!

    I wouldn’t touch MSFT as an investment or a trade. They drifting away from what consumers want and need without seemingly a clue how to tap the zeitgeist of what works. Windows and Office are fading in importance and MSFT’s move to transition to annual software subscriptions smacks of desperation.

    If it weren’t for the aforementioned installed base and the improbable success and revenues from XBox, the company could be hemorrhaging. Can you imagine employee morale within the walls of MSFT knowing all the innovation that’s going on with Apple, Samsung, Google, Roku, Netflix, and so forth? And with buffoon Monkey Boy remaining in-charge to boot?!

    I think Google is over-valued and likely to see an Apple-like Eiffel Tower chart pattern due to so much money rotating through the hot stock du jour. Keep an eye on the action in FB, as it could lure momentum traders from Google.

    I hold an over-weight (i.e. 10 pct) of Apple @ $431 a share in my play money account, but didn’t add it to my Roth. Besides, it’s a component in a couple Roth ETF’s where I’ve parked longer-term funds.

    I think AAPL stock can appreciate an honest 7-10 pct annually, plus a 3 pct dividend for your trouble. Don’t forget the share repurchase plan, which if Apple is anywhere near as good deploying as they were with the bond issuance, will potentially roll-up another couple pct to add to the equation.

    MSFT: Dance Monkey Boy! (Ballmer: “Give it up for meeeeeee!”)
    http://www.youtube.com/watch?v=edN4o8F9_P4