My Sunday Washington Post Business Section column is out. This morning, we look at how Microsoft’s slow decline in What’s behind Microsoft’s fall from dominance?.

The short version is this: Once Gates & Co lost its Monopoly, they were unable to generate much in the way of successful new businesses line. Their decline was inevitable unless they could become, well, a different company. That was highly unlikely.

Here’s an excerpt from the column:

“The decade since Steve Ballmer took over as chief executive at Microsoft from his Harvard pal Bill Gates has not been kind to Microsoft: The company saw its stock price plummet, it made ill-advised acquisitions, demonstrated poor capital management and suffered a significant loss of market share. The once-dominant software giant lost its way.

The firm, considered the mac daddy of technology at one time, missed every major tech innovation of the new millennium. The Zune, its foray into portable music players, was an embarrassment. It let Apple gain a toehold on the consumer desktop, which Steve Jobs then leveraged to show consumers a superior alternative to kludgy Windows software. Microsoft was late to Web search and failed to monetize online properties. A belated attempt to jump into advertising by acquiring aQuantive for $6.2 billion led to its first-ever quarterly loss, in 2012.

It wasn’t just the existing software. Microsoft failed to recognize the impact of nearly every worthwhile development. It missed the rise of touch-screen technology and the mass appeal of social-networking sites (i.e., Facebook and Twitter). Perplexed by tablets, it lost more than $1 billion in that venture. Late to user-generated content and blogging, it built MSN Spaces — a Windows-only ghetto that failed to catch on or turn a profit. It blew its early lead in smartphones by failing to understand their significance. And it certainly never threw the same weight behind them as it did its mainstay PC business. Indeed, it is hard to think of new technology since 2000 that Microsoft had a significant role in developing, marketing or monetizing — other than the Kinect device for the Xbox 360.”>

There’s lots more details at WP.

I like the graphic they put together from some data we assembled:
click for ginormous version of print edition

data graphics

Source:  Washington Post

UPDATE: We discovered an error in the spreadsheet from which this chart comes from — Microsoft  market cap is down 34% ($399B to $261B ) not up +58%. Its my error; I’ll get that fixed ASAP



What’s behind Microsoft’s fall from dominance?
Barry Ritholtz
Washington Post, September 8 2013

Category: Apprenticed Investor, Corporate Management, 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.

20 Responses to “How Microsoft Lost Its Dominance”

  1. raholco says:

    When Microsoft entered the smartphone market, they were joined at the hip with a small company called Sendo-and that relationship crashed and burned even before a product was shipped, leaving Microsoft to rely on HTC (who was making the Pocket PCs for Compaq/HP) to break open that market.

    The best place where you can see the smartphone history rise and crater for Microsoft is www, years ago it was awash in Microsoft smartphones; now they’re just a footnote, lost in a massive sea of Android hackers. Microsoft locked down Windows Phone so tight compared to what it was in the old Windows Mobile days that alone alienated the developer community-and they’ve stayed away in droves, only moving into Windows Phone space if the cash incentive is worthwhile.

  2. chartist says:

    Microsoft lost its dominance because it had a monopoly…..One of the few things I learned in b-school that I actually believed was companies with a monopoly position lose their ability to innovate as they don’t perceive a need.

  3. sellstop says:

    The graphic is interesting. (So is the story!) But I was intrigued by the RIM column. Particularly the revenue and profit…… ??

  4. Iamthe50percent says:

    I wonder what part Linux played in this? I’ve seen growing popularity for the Ubuntu distribution, not with techies like me who detest it’s Microsoft like attitude, but with non-technical people unwilling to spend $300 for Microsoft’s “upgrades”. I think Micro$oft shot themselves in the foot when they stated demanding the re-purchase of windows after simple hardware upgrades and PC vendors no longer supplied DVD’s.

  5. S Brennan says:

    When I first read that Bill’s money is being used to advance LFTR technology I was pleased. But reading the article below, it’s clear that Bill’s minions are more interested in capitalizing on a needed technology by attempting to “bottle” up, with patents, the paths forward. IE, you boys over there, do the real development work…oh…and pay us handsomely for patenting all the logical paths forward.

    The bane of our age, instead of government led projects to solve our nations long term needs, our “privatization” of such endeavors leads to a class of rent seeking moochers, whose only intent is to exploit those who toil to render a technology to practice.

  6. peacock says:

    The internal structure of Microsoft discourages revolutionary creativity. They like to add small new additions to successful applications. The big product ideas are copies of other companies, desktop software, music players, search. They don’t have Research and Development as much as Copy and Develop.

    To copy and develop a famous speech by Steve Jobs, Microsoft would write.

    “Here’s to the sane ones. the safe, the practical. The money minded ferrets, The square pegs in the square holes, the A students. The ones who watch the leader and copy. They are afraid of changing the system, so they wait until someone creates something new, then they copy it. They love the status quo and regularly make minor improvements to their products and charge a premium for the new version. They love the rules, especially contract laws that enable them to intimidate competitors. You can curse them, insult them and the only thing you can’t do is get rid of them because they have a monopoly. And while some see sanity, we see arrogance, selfishness, poor craftsmanship. They are the ones who calculate and manipulate in order to rule the world and they do.”

  7. constantnormal says:

    Another chart issue might be the number vs image on the Technology Select Sector Fund … the image shows a loss, the legend shows a +41% gain …

  8. Bill Wilson says:

    The evolution of the smart phone could offer Microsoft an opportunity to remain relevant. It’s my belief that your smartphone will one day become powerful enough to be the only computer that you need. Just plug it into a bigger screen and keyboard if you want a desktop. I think a windows based platform would be very competitive in that environment.

  9. bigsteve says:

    I am an open source enthusiast. One you tried to keep a monopoly so as to be able to charge a rent everybody and their brother is going to try to find a way around the moat . The correct way to stay ahead is to innovate and become a target to catch not to go around.The new business models in the computing industries are to sale services giving away the software for free or a nominal sum. The other is to offer content that is copyrighted. Red Hat goes one way and Apple the other way.

  10. Crocodile Chuck says:

    If Microsoft was honest about its performance management system for employees, it would have applied it equally to company executives, as it did to its developers: so called, ‘stack ranking’

    Ballmer would have been long gone in 2007………

    ps and the MSFT board’s most important responsibility: maintaining a succession plan for company execs, most especially the CEO.

    They didn’t. Spill ‘em.

  11. Born Again says:

    Microsoft is still dominant. Windows is still the number one PC operating system. Microsoft registered over $77 billion in revenue last year and is likely to add more this year, especially with the release of a new XBox system.

    WordPress and Lotus are obscure applications while Word and Excel dominate. Access is a very useful, though often neglected, database program that can do lots of cool stuff. There is also Microsoft SQL Server, Bing and Skype. Outlook does kind of suck, I’ll admit that.

    Though, if history is any lesson, Microsoft does not need to be the first to the party. QDOS was written by 24-year old Tim Paterson at Seattle Computer Products (licensed to Microsoft), Microsoft’s first GUIs were based on Apple’s equivalent, and there were other word processors and spreadheet applications available when the company went public in 1986.

    Many aspects of Microsoft were slow to catch on but they eventually grew. Microsoft may need to spin-off its device unit in order to keep lean. It definitely needs to avoid the really bad decisions like Kodak and the digital camera or Xerox’s Parc GUI.

    • You arer looking at the absolute data without context — the snapshot — consider instead the trend, the direction things are heading, and what has happened and is likely to continue happenuing in terms of their dominance of technology

      What sectorn have they mioved into since 1997 that they now dominagte? Have substantial market share? Make real money in?

  12. Moss says:

    The tech sector is littered with similar stories. IBM was dominant, a monopoly in effect, almost failed and came back. Digital, Wang, Xerox, Kodak … Management becomes more interested in protecting some advantage they may have at the moment.

  13. BuildingCom says:

    If you think MSFT is going to evaporate or shrink, you’re delusional. They might be bureaucratic but they’re like an aircraft carrier…. once they set a course, you better get out of the way. They’re embedded at multiple facets. Think GE.

  14. reedsch says:

    Perhaps the more interesting question is whether any tech company can stay on top for long, and how they could do so. First tech was driven by defense, then by entertainment, now it’s being driven by fashion (no really substantial changes in iOS 7 except for look and feel), and fashion dictates that things change for the sake of change. The furry mammals can usually outmanuever the dinosaurs, however given the direction of the macro economy in general nowadays any promising mammalian technology can be swallowed up and its DNA spliced into the reptilian genome. Perhaps future battles will be dominated by competing dinosaurs, but it is impossible to rule out the emergence of a disruptive technology leading to a new King of the Hill.

    • reedsch says:

      Oh and thank you for reminding everyone that IBM gave Microsoft its ticket to the Big Leagues. The Bill and Paul show would have had a good run without it in their native domain of languages and development tools, which were worthy products on their own merits (Microsoft Basic was part of the Apple II if I’m not mistaken), but operating systems and applications were not their turf until IBM handed them over lock, stock, and barrel.

  15. rational2 says:

    BR, your article suggests that Microsoft is a late comer to web search (presumably you meant it jumped only after Google came on to the scene). Microsoft had a web search offering, MSN Search, as early as 1998, before Google was incorporated as a company. I realize that didn’t help, but it helps to have the facts right and put them in context. In this case, one could argue that Microsoft had a search offering but didn’t realize the importance of Search until Google demonstrated there is massive money to be made there.