Posts filed under “Corporate Management”
This is hysterical: A graphic map depicting the epic struggle of Free and Open Source Software (FOSS) against the Empire of
click for much bigger graph
For our discussions about Mister Softee, see:
Microsoft Chasing Google (2004)
A few words about Microsoft (2006)
and just for giggles: FrankenSteve
Hat Tip on the MSFT Empire to Noah Blackstein!
Category: Corporate Management
File this one under “you’ve got to be kidding me.” > Some people are all excited that Dell Chairman Michael Dell, (who presumably knows his business better than anyone else), finally bought some shares recently. Specifically, Dell bought $70 million worth of stock at $23.99. Remarkably, this was Michael Dell’s first ever purchase of his…Read More
I frequently discuss Microsoft, and for many many reasons: They are a tech bellwether, a huge part of the S&P and Nasdaq 100 (and a smaller part of the Dow). They have also been a thorn in the side of new technology development and innovation, but now that so much of it has moved to the web, its gotten away from them.
This is a good thing.
One of the commenters said some time ago that I was "irrational in my hatred for Microsoft." That’s hardly the case; Microsoft has put a lot of cash in my pocket, so at worst, I should be grateful to them for the windfall.
However, I am still an objective observer, and I believe that Mister Softee is not what most investors think it is: They are hardly innovators; rather, they copy other people’s work relentlessly, until by default they own the standard. Their products are kludgy, bloated and anti-instinctive; They are hardly the elegant, easy to use software first dreampt up by science fiction writers decades ago.
From an investing standpoint, their fastest growth days are behind
them, yet they are hardly a value stock — yet. (Cody and I have disagreed about this for some time). The leaders of the last bull Market are rarely the leaders of the next. Despite this, Wall Street still loves
them, with 28 of
are widely owned by active mutual fund managers and closet Indexers.
Many people think of them as this well run money machine; In reality, they are very poorly managed by a group of techno-nerds with very little in the way of management skills. Even their vaunted money making abilities are profoundly misunderstood: Its primarily their monopolies in Operating Systems (Windows) and Productivity Software (Office) that generates the vast majority of their revenue and profits. Their Server software and SQL Database make money, but hardly the big bucks of Windows or Office. MSN is a loser, MSNBC is a dud, their Windows CE is hardly a barn burner — even X-Box has cost them billions more than it is likely to generate in profits over the next 5 years.
Lest you think its just me who thinks this way, consider no less an authority than Robert X. Cringely. He is the author of the best-selling book Accidental Empires (How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can’t Get a Date). He has starred in several PBS specials, including Triumph of the Nerds: A history of the PC industry.
After Gates resignation, Cringely wrote this:
"Microsoft is in crisis, and crises sometimes demand bold action. The company is demoralized, and most assuredly HAS seen its best days in terms of market
dominance. In short, being Microsoft isn’t fun anymore, which probably means that being Bill Gates isn’t fun anymore, either. But that, alone, is not reason enough for Gates to leave. Whether he instigated the change or someone else did, Gates had no choice but to take this action to support the value of his own Microsoft shares.
Let me explain through an illustration. Here’s how Jeff Angus described Microsoft in an earlier age in his brilliant business book, Managing by Baseball:
"When I worked for a few years at Microsoft Corporation in the early ’80s, the company had no decision-making rules whatsoever. Almost none of its managers had management training, and few had even a shred of management aptitude. When it came to what looked like less important decisions, most just guessed. When it came to the more important ones, they typically tried to model their choices on powerful people above them in the hierarchy. Almost nothing operational was written down…The tragedy wasn’t that so many poor decisions got made — as a functional monopoly, Microsoft had the cash flow to insulate itself from the most severe consequences — but that no one cared to track and codify past failures as a way to help managers create guidelines of paths to follow and avoid."
Fine, you say, but that was Microsoft more than 20 years ago. How about today?
Nothing has changed except that the company is 10 times bigger, which means it is 10 times more screwed-up.
Over a year ago, I noted the decaying customer service quality in a few companies: In particular, Dell got named as a significant offender. (More recently, I complained about obnoxious Dell preinstalls).
I collected a ton of emails from readers about consumer complaints (mostly from January 2005).
I should have paid closer attention. Although I did not have a position in Dell, I missed the opportunity to short it.
Since that deluge of criticism in January 2005 the stock has underperformed dramatically, down 35% from over $41 to under $27. The stock was recently downgraded to a SELL at Citigroup — see that red bar down towards the far right on big volume? That’s the downgrade. The sell rating was due in part to customer service complaints.
The XM chart shows that I am already late to this kvetch-fest — it looks like XM may already have had their Dell moment — the stock is down even more — a 50% haircut from $40 to $20. Ouch!
There’s only so much any company can cut their "basic business concept" before they start causing a problem with their consumers. That obviously happened at Dell, via the degradation of their "vaunted customer service" and it appears to be going on at XMSR.
Quite bluntly, if your business model is based on a specific concept, you screw around with that at your own risk. For Dell, it was cheap and direct sales coupled with great customer service; Saving a few pennies by outsourcing/cutting back on support, and/or switching to cheaper components (as some readers have complained about with Dell) seems to be corporate suicide.
For XM, it may be that cutting the variety of their offerings will be their Waterloo. Their raison d’etre seems to be a broad and deep variety of eclectic channels. But as Chrissy Hyndes sang so long ago: But you mess with the goods doll, honey, you gotta pay. *
Here’s the post that started the calvalcade of complaints:
"I keep getting e-mail from disgruntled XM subscribers. That their favorite channel, #51, Music Lab, has bitten the dust. I’ll print one below.
This is totally fucked up. The promise of satellite radio was to go deep, to provide something for EVERYONE! But the new regime at XM, the Infinity assholes, are turning XM into the bullshit terrestrial radio that they came from. And this makes me CRAZY!
First came channel 49, Big Tracks. With the INANE tagline "Our Classic Rock". This is just the kind of b.s. unlistenable terrestrial classic rock stations use. And the station’s got no DEPTH! Just the same fucking tracks over and over again. With no surprises.
But now it’s worse. Music Lab was booted and what did we get? MORE HITS CHANNELS!!!
We’ve got XM 17, U.S. Country, Country Superstars of the 80s and 90s.
How about XM 26, Flight 26, Modern Hits 90s and Now.
Or XM 30. Hitlist. TODAY’S Hit Music.
Or 68, The Heat, RHYTHMIC HITS!
Or 91, Viva, Latin Pop Hits.
Oh, they brought back Liquid Metal, which had been banished before, but what we’ve now got is endless b.s. hits stations, replicating what is ALREADY AVAILABLE ON XM, their only saving grace being no commercials.
This is a big deal. This is like the death of free-format FM radio, but WORSE! The golden era is OVER!
And what about the people who subscribed to XM ONLY for Music Lab? People like Craig Anderton, the electronic music and instrument GURU! Who signed up for two years, EXPECTING he’d be able to listen to his kind of music. Which he could get nowhere else, which is why he subscribed to XM.
The lunatics have taken over the asylum. DO NOT SUBSCRIBE TO XM! They don’t have Howard, and the people now running the place have their heads up their ass."
Reader responses follow . . .
UPDATE: May 23, 2006 8:21am
Nice mention of this post in Wes Phillips’s Stereophile Column this week
All of XM’s Trials
Stereophile, May 21, 2006
UPDATE: May 24, 2006 5:21pm
Geesh! The stock got shellacked today on a downgrade on subscriber expectations:
XM, the nation’s largest satellite radio provider, lowered its subscriber forecast, citing unexpected weakness in demand for its satellite radio service as well as potential legal pitfalls from a recording industry lawsuit.
It now expects to reach 8.5 million subscribers by the end of 2006, lower than its previous guidance for nine million customers by year’s end. The company had 6.5 million subscribers at the end of the first quarter.
Shares tumbled on the news, losing 11%, or $1.76, to $13.75 at 4 p.m. on the Nasdaq Stock Market.