What's lost in the current furor about Apple (Nasdaq: AAPL) passing Microsoft (Nasdaq: MSFT) in terms of market cap is Mr. Softy's contribution to the momentous event. Sure, Apple is doing great -- but Microsoft is also in the process of silently imploding.
The latest symptom
Two longtime leaders are leaving Microsoft, according to announcements this week. The Entertainment & Devices division is losing its president, Robbie Bach, and CTO, J. Allard, at the same time. The double departure takes place with the Windows Mobile 7 smartphone system and the Project Natal controller-free gaming experience about to launch, and you have to wonder why the captains are leaving the ship at the supposed moment of great victories.
OK, so let's just take the charitable view and say that two rich men decided to leave the stresses of work behind in favor of family life and good books. Then you still have a glaring issue staring you in the face: CEO Steve Ballmer won't replace either man. Instead, two of Bach's direct reports will now report to Ballmer -- and the entire division is left floundering for effective leadership.
Good luck pushing that new mobile Windows platform past Google (Nasdaq: GOOG) Android and the Apple iPhone platform in the consumer space while battling Research In Motion (Nasdaq: RIMM) BlackBerry for corporate dominance … with no proven leader driving the car.
It's a feature, not a bug
If this was Microsoft's first act of random cluelessness, it would be forgivable. Even a second or a third major misstep would be OK -- accidents will happen when you're one of the biggest business ventures in the world. But that's far from the case. Instead, Microsoft has misfired on nearly every cylinder over the last decade.
Looking back at the 2000s, it's hard to find examples of Microsoft doing anything truly great. OK, Windows XP was a success that erased the bad old days of unstable and buggy Windows 98 and ME computers. Halo 3 broke sales records and extended a franchise -- but Microsoft played more the part of distributor than developer there. And ... sorry, but I'm coming up empty at this point.
The outright disasters are easier to spot:
- Windows Vista took everything that was good about XP, wrapped it in a clumsy user experience, and pushed it out the door five years after XP but also two years before Vista was really ready. Windows XP is still the most popular operating system in the world, though it's tripping over a long, graying beard.
- Apple's iPod created a market for portable media players, and Microsoft assumed that it would simply be a reprise of the PC versus Mac rivalry. But dozens of various-brand players using Microsoft's media formats failed to contain the symbiotic iPod and iTunes system; the workmanlike Zune HD was too little, too late, and it never got the marketing support it needed. Microsoft is less than a bit player in the media player market today.
- The iPhone repeated that trick in the cell phone market. The difference is that Windows already had a respectable market share before Apple changed the game. But Windows Mobile 6 and 6.5 never had the muscle to drive a true smartphone, and Apple will have its fourth-generation iPhone on the market by the time Windows Mobile 7 hits the proverbial fan. If the product is amazing, it's still way late to the game. And how often do you see the first release of anything make much of a splash in a maturing market?
- In a misguided effort to fight Google in the online search market, Microsoft failed to buy Yahoo! (Nasdaq: YHOO) and settled for a partnership instead. Windows Live couldn't hold a candle to Yahoo! as an online portal, or to Google as a search tool, and it lacks the advertising power that makes Google profitable. Bing certainly looks nicer, but Google still has to look really hard to find that distant speck in its rear view mirror.
I could go on, but you get the drift. Just about every big project at Microsoft has failed for a very long time. The company's share price has stagnated through the decade, and the world is turning away from the traditional computers that Redmond loves, instead relying more on mobile gadgets, where Microsoft is losing badly. Ballmer is good with numbers and is a Harvard-educated businessman, but have you ever seen him make a correct call on technology trends?
Where will it all end?
Microsoft has become its own bubble, and it looks just about ready to pop. Slow and steady doesn't win a race where the competition innovates at Internet speed, and even the age-old Office bastion doesn't look secure anymore. Microsoft is trying to be everything to everybody, like an IBM spanning a different set of markets, but fails to deliver on any of its own lofty promises.
And I see no end to the misery. Microsoft should learn from longtime brother-in-arms Intel (Nasdaq: INTC), whose CEO Paul Otellini has cut a complicated beast down to the operations that really matter. That's the kind of sugar-free medicine it would take to save Microsoft from itself, and of course, something that drastic will never happen.
What a shame.
Should Ballmer get up and leave, or has Anders finally gone insane? Maybe both? Discuss the finer points of this conundrum in the comments below.
