2011: Microsoft Has Run Out of Ideas

CES is typically a showcase of the creativity and innovation capability of a company as well as products we can expect to appear within 12 months. If this is true for Microsoft (Nasdaq: MSFT  ) , and if Steve Ballmer's CES opening keynote yesterday is any indication, then the company may be heading into one of its most boring years yet. It appears that Microsoft has surrendered its role as a trendsetter and has become a stale IT giant that is about to be replaced. Where is Bill Gates when you need him?

The Microsoft CES keynote has always been one of the events you were looking forward to. You stood in a line for yours, starving and possibly with a pounding headache from the annoying ringing of the slot machines surrounding you at the Las Vegas Hilton Casino floor for a chance to be among the first 5000 people to get a seat and admire Bill Gates envisioning the future of the PC -- and a show that often rivaled traditional Las Vegas performances. The Microsoft keynote always set the stage for the entire CES.

After Steve Ballmer's appearance yesterday, however, I am confused. Seriously, if this is what we can expect from Microsoft this year, then the company may be dead meat in two years.

Ballmer, who appeared to have aged at least ten years over the past year, looked tired and exhausted as he made his way through the most boring Microsoft CES keynote I can recall. No spectacular guests, no films, no entertainment and, most importantly, no significant new products for 2011. If there was a ever an example how not to open the doors to CES, this was it.

So, what was announced? The new products could have been packed within 10 minutes and not 90. Kinect gets a fee-based Avatar Kinect as well as Netflix and Hulu Plus support. Windows Phone 7 gets copy and paste as well as a performance update. There is an updated Windows Surface table, conceivably the most exciting product during the presentation, and Windows will support ARM architecture and can already print simple documents, run PowerPoint and playback HD videos. Thankfully, Microsoft did not fall for the tablet hype and did not focus on what it likes to call slate PCs.

I am not kidding. Those are Microsoft's big ideas for 2011. I am wondering which of these announcements could be called trendsetting or visionary? Avatar Kinect perhaps? It's a nice new feature, but the added detail recognition ability for Kinect should be part of the basic product and not be limited to people who are shelling out $60 a year for an individual Xbox Live Gold membership. Windows on ARM: Let's be serious. This is a move that has been overdue for a long time, and Microsoft isn't even close to releasing it. There was still the old Windows 7 surface on those prototype SoC systems, and if Microsoft can get excited about a working printer driver, you just know that this is work very much in the rough.

Ballmer proudly announced that Kinect sold 8 million units. But he danced around the topic of Windows Phone 7 (WP7) sales. Instead, he asked Liz Sloan from the Windows Phone 7 team to demo 7 features of the platform in 7 minutes. Liz was visibly excited about the software and her presentation was well rehearsed. But there was nothing new, nothing that particularly blew your socks off, and nothing that could get you buy a WP7 phone today. Sure there is a camera button in WP7 and there are 5500 apps and lots of games available for WP7 phones, but it seems that Microsoft is not quite capable of transporting excitement for a very competitive platform. Where were the game demos and the interaction between Xbox and WP7, if this is so important for Microsoft? It would have deserved much more time and more than a prepped demo movie. It appeared that Ballmer himself wasn't so excited about Sloan's presentation: He came back to the stage when Sloan was already gone and said in this very annoyed tone: "Well, thank you, Liz."

He moved on to Windows without even touching WP7 sales, which pretty much says it all. We got the message: So far, WP7 sales are nothing to talk about and a topic we ignore. WP7 sales may not get much better as the only improvement we can expect this year seem to be copy and paste as well as a performance update that is loading apps much faster. Is this how compete against the iPhone and Android? Come on, Steve, this can't be all.

A new version of Windows Surface, which is much thinner than previous versions and does not use cameras below the screen anymore, was by far the most impressive product, which, unfortunately, got only a few minutes of time. The Samsung-built demo product essentially uses every pixel as a camera (called Pixel Sense) and can react to many more objects and actually detect shapes and printed content. Microsoft demonstrated a bank application that recognizes letters that were mailed to customers. Surface is a fascinating product, and there was no other demo than flowing water and a bank demo. What a shame.

ARM on Windows is an idea that may be two years too late, but should get Intel concerned as the company will now have to deal not only with AMD, but also with ARM and very powerful hardware designers, including Qualcomm, Texas Instruments and Nvidia as competitors -- at least on those SoC platforms that appear to be multiplying by the thousands every day. In future, those three companies may be joined by others such as Samsung and Freescale. Intel's life has just become much more difficult and if forecasts of an increasingly mobile world in which more processors are integrated into TVs, entertainment devices and toys are somewhat accurate, then Intel's days of processor dominance may be counted as the importance of x86 will decline.

For Microsoft, however, Windows on ARM is a reaction to Apple's iOS and Google's Android, and a way to get Windows into non-x86 devices such as smart TVs and other smart appliances. Given the fact that this Windows version may not be available until 2012, Microsoft may be late to the market -- especially if Google TV catches fire -- and Apple will figure out that it should not be selling an Apple TV set top box, but an Apple TV as an LCD TV.

There are pretty high expectations for the Microsoft CES opening keynote, and Steve Ballmer missed the mark in every possible way. He surely had stage presence, but it appeared that it was simply a job that needed to be done, while Bill Gates visibly enjoyed talking about his ideas for the future. Ballmer often looked uncomfortable, lost and exhausted. The entire presentation lacked passion and creative content; it was stale and forgettable. In some way, it was a reflection of the Microsoft we frequently see today -- with the exception of the Kinect team: Microsoft has become a company that does not set trends anymore and is afraid to be unique.

If you compete against Google and Apple, this could be dangerous. I hate to bring this up again, but it may be time for Steve Ballmer to step down and transition the leadership to a fresh face that is filled with enthusiasm for everything Microsoft could do. Bill Gates could be the interim CEO.

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Read/Post Comments (6) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 07, 2011, at 3:28 PM, n0rcal wrote:

    So let me get this straight. Apple putting a newer version of an Intel chip in its Macs, bumping up iPhone from 4 to 5, iPad from 1 to 2, iTunes from 10 to 11, Apple TV from 2 to 3 to 4, those are all great ideas. But Microsoft with Xbox/Kinect, WP7, all the enterprise stuff and cloud/Azure stuff, Windows 7/8 on ARM is out of ideas?

    This is the typical "pile-on" journalism and analysis so prevalent now. Be safe and just repeat the same commentary as everybody else.

    Ballmer may need to go, Microsoft may be idea-challenged, and Apple and Google may become serious threats to Microsoft’s core business at some point. But nothing you have said in this article shows that.

  • Report this Comment On January 07, 2011, at 3:36 PM, isasha wrote:

    That's one ignorant Article.

    "Microsoft out in 2 years"- is just stupid, Microsoft hold most of business market and finally has some intro to consumer market

    What did you expect from Microsoft there? Some Big promises without any dates so ppl can bitch that they they always do that?

    I think Windows on ARM is the most powerfull announcement they made.

    If I can run compatible applications on all my devices it would be great for me.

  • Report this Comment On January 07, 2011, at 3:55 PM, jcanuck66 wrote:

    Couldn't agree more with the two previous comments. Not necessarily huge on MSFT myself, but they announced some pretty impressive figures at CES, have a solid product in the Win 7 phone, and a very good cloud solution & overall enterprise growth strategy......Maybe if Steve Jobs had delivered the message for Balmer instead? And what's with the comments about Balmer's appearance. This was one of the worst articles I have ever seen on this site

  • Report this Comment On January 07, 2011, at 3:58 PM, RLLH wrote:

    Have to agree that it is naive to expect Microsoft to be out in 2 years. They be a long way from their glory days, but they are still among the more profitable companies in the country. I may be a bit biased because I just bought a bit of MFSTstock, but this article seemed to me to be a modern version of Chicken Little proclaiming "the sky is falling".

  • Report this Comment On January 07, 2011, at 4:34 PM, ByrneShill wrote:

    One of MSFT's big seller is SQL Server. If you want Ballmer to teach how to write stored procedures, now that's gonna be boring.

  • Report this Comment On January 08, 2011, at 1:27 AM, techy46 wrote:

    If you didn't get it, your an idiot. What Baller said was the Xbox would be the Home Media server and that all Microsoft products (Desktop, Laptop, Phone, Tablet, etc.), regardless of hardware gender, would integrate using Windows 8 OS and applications. You didn't need to worry about Android suckletree, IOS tweetie pie, Snapdragons or Turtledees. Microsoft is a very large software developer, like Oracle or SAP, and they don't car what color or shape of plastic and metal (hardware) you run their software on. Take soome time and add up all the hardware that runs MS software, it has to been 100s of billions. MS never sold any of that hardware and doesn't really care to sell, service or support any hardware unless it;s very, very special like Kinect or Xbox. Any Chinese fab can bbuild any phone form factor including the iPhone. Who cares? That's not technology, that's manufacturing. Quit comparing Apple's consumer gadgets with Microsoft's software applications. You don't understand sh1t about software.

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