A rush of free advice for Microsoft...

A rush of free advice for Microsoft...

Summary: Ditch consumer markets is good advice.

TOPICS: Microsoft

There has been rush from people (journalists and bloggers) who have never run a lemonade stand or any business, to give copious free advice to Microsoft [$MSFT] in the wake of CEO Steve Ballmer's resignation. 

I read some of them, the best one so far is from John Gapper at the Financial Times. His advice is simple: 

Exit the consumer business because it is businesses that buy Microsoft products and not consumers. [To Microsoft’s new chief executive: stop chasing consumers.]

He reminds those with long memories of the struggle IBM had in responding to the challenge of cheap computing in the mid-1990s. It appointed Louis Gerstner CEO, the former head of American Express Travel Services group. Mr. Gerstner famously said: "The last thing IBM needs right now is vision."

Mr. Gapper writes:

The absolute last thing Microsoft needs is the last chief executive's vision for it to create "a family of devices band services for individuals and businesses.

It's not hard to make the point about exiting the consumer market because Microsoft's efforts have failed time after time, more recently with the Surface Tablet $900m fiasco.

There's also the Zune, the iPod challenger; the short-lived KIN social media phone OS (which was ahead of its time).  And the venerable Xbox gaming console, which barely makes any money for Microsoft. And some will remember "Clippy." Oh, and the consumer satellite communications business, TV news; magazines…

Foremski's Take: I've never run a lemonade stand but I did used to cover Microsoft, IBM, and other large enterprise IT businesses at The Financial Times, which means I won't resist giving some of my free advice to the embattled software giant.

- Mr. Gapper doesn't mention Microsoft's Bing search service but it is another good example of failing in the consumer market. If it shut down Bing Microsoft would save about $2 billion a year and create a big monopoly problem for Google since it couldn't claim that competition is always just a click away.

- It could spin-out its consumer businesses instead of shutting them down, and retain just its enterprise software business, which has been bankrolling the rest of the company's mis-ventures for decades. Wall Street would love that scenario and so would the bankers.

- A more focused Microsoft would be able to produce new ventures in the enterprise market where there's far more money than in consumer markets.

- Microsoft should follow IBM's example of appointing an outsider who has also been a large enterprise customer. As a former major customer of IBM Mr. Gerstner knew exactly where IBM's value lay and he spent ten years rebuilding IBM as a computer services company. [His "Who Says Elephant Can't Dance?" book is very good and explains the tough job he had in remaking IBM's culture.]

An outsider is most definitely needed because Microsoft's culture is stagnant; and a large customer knows where Microsoft's value lays and what could be done to build on it.

- Time to revive an old partnership: with Intel. It too, is unable to make its consumer market ventures succeed. The old CEO's consumer TV project should definitely be ditched.  And like Microsoft, Intel's tablet and smartphone efforts continue to fizzle as it strikes out in chasing the diminutive British chip company ARM.

- The rise of tablets and smartphones drives enormous demand for servers — that's where both companies make their fattest margins. It's a market rife with opportunities.  Such as: producing a range of embedded software and highly-tuned, secure hardware from these two companies would do very well in enterprise markets. Low maintenance and high throughput systems would hurt competitors Oracle and IBM while winning grateful data center customers. 

- It's time to bring back Bill Gates. I saw the recent 60 Minutes report by Charlie Rose on Bill Gates 2.0. He has more than 1,100 people working at his Foundation, including his wife. He showed-off bis huge bag of books, which demonstrates he has plenty of spare time on his hands.

His top projects are a solar-powered toilet without running water, a new condom, and the war on Malaria. There's absolutely no special expertise that Bill Gates brings to those projects.

Taking over at Microsoft again, he could turnaround the company, and turn heads in ways that no one else could. 

It's time to ditch the 2.0 and work on Bill Gates 3.0. It would make a killer chapter in his biography; and it would keep billionaire upstarts such as his neighbor Jeff Bezos from overtaking him in the "stuff that really matters beyond money" competition.

Let's face it: giving away billions of dollars is easy. Saving Microsoft is a challenge even Bill Gates would have to think thrice about. Which is why he should do it.


Topic: Microsoft

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  • Which is why blogger should blog.

    And leave the business of running companies to people who know what they are talking about.
    • I have to agree

      why is it that it is always those that have not been offered a position to head a Fortune 500 company the first ones to offer that Fortune 500 company "free advice to success"?

      Out of curiosity I wonder if the blogger offered that same advice to Apple all those many years ago?
      John Zern
    • Yeah this is classic "free advice that's worth every penny of it"

      It's taken them some time and trouble to get on the right path for the consumer market. If they'd have done their own hardware earlier ala the iphone/ipad they would have been much better off, not much worse. Apple's and google's and samsung's piles of cash and stock prices show there's plenty of money to be made in the consumer space. Walking away from it would be a long term disaster with swift ramifications on their enterprise sales as well.
      Johnny Vegas
      • With all due respect...Johnny....

        Tom Foremski has been writing tech and tech business articles for the last 30 years.

        I have read his articles in the 90s and 2000s and I think his opinions have some merit.

        If you write that Apple and Samsung have made tons of money from consumer businesses, then it is factually correct and your point about consumer market profits is valid. But you forget that both Samsung and Apple has long histories of hardware board design, display technology development, IC and other component supply chain management and more importantly hardware manufacturing and assembly relationships with other companies.

        Further there is the example of Google that has failed to convert itself into a successful money maker in the consumer device market. Google sells its Nexus and Motorola devices at cost and in some case below cost. They also are devoid of customer support relationships due to cost management and are relying entirely on Samsung, LG, Sony, HTC, Huawei, Micromax, Lava etc for Android OEM sales and OS marketshare. Google's problem is this - Android is a mindshare and marketshare success but a profitshare failure for itself.

        Though there is indeed a business strategic case for Microsoft to convert itself into a hardware device maker, the field of consumer hardware devices is already very crowded. And it does not need a business strategist or a microeconomist to point out that the average cost and the average profit (or margin) in such a market will eventually decline.

        Apple's profitshare as a number itself will eventually decline in the iPhone and iPad markets due to commoditization of the phone and tablet devices. And not even iPhone 5C can help them in this regard. They have hit a ceiling of $150 or $160 billion in annual revenue and it makes no business or economic sense anymore to think that this number will expand again. Apple has stagnated and its investors are being deceived that new devices will sell more. It just is not gonna happen.

        Microsoft will be advised to stay the heck out of the consumer device market.

        Surface at 1 million annual sales for 10" devices and 2-3 million or may be 4 million for 7" devices will make a great model reference for the rest of the Windows OEM industry. But other than that, the thinking that they can expand into the devices business is impossible.

        On the other hand, they showed that they can make money with Xbox. So both consumer Windows OS and Windows Phone OS development efforts and Xbox design still has places to go.

        But both Bing (and Bing Apps) and Surface are a massive hole in the dent for Microsoft. The markets are massively commoditizing in these two cases (internet ads, phones, tablets). Microsoft should just sit back and watch as the commoditization causes Android OEMs and Apple to implode in 3 to 4 years from now. They should not participate in that carnage.
        • agreed to few points

          Agreed with you for some points but as world is changing too fast. It the prospective MS should sell XBOX to some one. Where it has most innovative for years. And google and apple making more and more services to their services. Ms will not survive the future with just enterprise.
    • Are these the same people who said Apple should get out making hardware?

      These idiots are actually suggesting to create monopolies.

      Screw that. Bring on the competition between all the big tech companies. I don't care if each has some failures as long as they keep pushing out innovation, increasing features and driving down prices.

      I hope Apple and Google continue to press into the enterprise space and Microsoft and others into the consumer space.
  • Wow

    "Let's face it: giving away billions of dollars is easy. "

  • I Heard Ballmer's Take on Giving Up Consumer

    ...and I'm with Steve on that one.
  • Windows (and office) reminds people of work, not fun

    Plain and simple. Most non IT people out there equate Windows with work. Who wants to check office emails or run MS Office when they want some fun? MS keeps harping that their OS runs Office. Why would I want to run Office in my leisure time? If my boss wants me to run Office at home for work purposes, then he/she better get me a laptop paid for by the business. I am not going to invest in a Windows and Office computer, I want to have quality time with my computing device and do not want to be reminded of work.
    • And not just plain old vanilla work!

      We're talking !!!REAL!!! work here!
    • and XBOX?

      and XBOX?
      • XBOX

        Can't see a use for one. Or the Sony equivalent Playstation. Don't give a hard time about equivalency, I know they aren't exactly, but they serve the same purpose, to numb your mind. My almost thirty something son does use his as a Blue-Ray player, which I don't have at all.
        • Actually

          most videogames tend to involve more problem-solving than watching a blu-ray does.
    • You're kidding right?

      Why not have MsOffice and Windows at home, that is what we are used to from work or vice-versa. I have never used anything else, why should I change now? What benefit is there to using a non-windows machine, except for price of the OS? So fa, I haven't had to pay directly for th eOS and the computers today are so much cheaper than my old 386SX proceesor box, that is ludicrous to go anywhere else. I haven't had to pay much for Office either, the first few versions were free for attending the Microsoft rollout advertising gimmick, then for O '10 it was through the company Home use program for less than $10. I use Word and Excel at home sometimes Access, very rarely PowerPoint or Publisher, etc. I have a spreadsheet to keep track of my gas mileage on my Pickup, the biggest problem is typing in all of the data for 3 months! I am a wannabe woodworker so i am contantly downloading free plans and tips, copying the tips into a word document. Most already are in .pdf format, so I will probably convert the Word documents ot Adobe files using something like Cute Pdf writer.
      I don't do work at home for the office, what I do there is not available at home only on a government computer is it accessible (yes your taxes pay my salary).
      I don't play games except for an occasional Freecell or other Solitaire. Most of the PC games are more mindless than the card games, I am not into violent games (just movies). I was using my PC to record TV until something screwed up my Media Center. It came in handy to have another recorder. I may have to breakdown and buy a recorder with a hard disk. The DVDR we have keeps screwing up and locking itself up and recording when it feels like it.
    • Suuuuure

      Tell that to anyone who has been into PC gaming for the past couple decades, or uses their PC as an entertainment centre. Really, the whole "all work and no play" image is one I more firmly associated with Macs (which I'm herein distinguishing explicitly from iphones, etc). The Mac's whole selling point for ages has been that they are better for things like film editing and graphic design. Even if that were true (which it isn't), those are things I hardly associate with fun times. Who really associates Macs with gaming and social media and web-surfing, let alone practical uses like word processing? Windows wins hand-down in perception on those fronts. Apple's commercials for their ipads and ipods and iphones, in contrast, ARE good at associating themselves with fun, but the fact remains that about 97% of the desktops / laptops operate on Windows, and I'd guess that the vast majority who use Windows manage to use Windows computers for liesure activities, and don't need that possibility pounded into them.
  • There are only 2 OSs in the world that work

    Windows and Linux. These are the only 2 OSs that have a chance of running all our consumer products.

    Please Microsoft, don't listen to anyone telling you to leave the consumer market. You currently make (or enable others to make) the world's very best consumer products. Consumers need GOOD options, not just more options, and Windows Phone, Xbox, and Windows 8 are at the absolute top of all the good options out there.
    • OS X more likely to succeed....

      OS X has a template in place where as Linux does not.

      OS X through the releases has had same desktop environment which appeals to the consumer.

      Linux has multiple desktop environments and therefore nothing uniform and unappealing to the consumer. Yes its open source but its development lacks focus.

      Windows has just been through the mill with Windows 8 and the controversial Modern UI.

      Windows 8.1 Preview is a massive improvement but much damage has been done to the credibility of the Windows platform. However it looks as though Microsoft could make a Windows 7 eleventh hour recovery with Windows 8.1 coupled with a new CEO a fresh approach must only be positive for the consumer.

      OS X is the constant stable platform without Windows 8 style disasters.
      • Free advice is worth about as much as you have to pay for it

        Bing is coming around and is starting to beat Google at its own game.

        The Zune was a failure but they learned and the Xbox has been a success.

        Not matter whose handheld device (smartphone or tablet) you have, the need for servers will continue to grow exponentially and Microsoft will continue to dominate in servers for the foreseeable future. Actually, though, corporate sales subsidize Windows OEMs on the consumer side so why should Microsoft abandon consumer sales.

        Microsoft cannot sell it's own products at commodity price points so they need their OEMs. Neither can Apple, for that matter. Vendors who do their own R&D never can tolerate commodity pricing.

        IBM had the same problem when PCs became commodities. Gerstner returned IBM to its roots as a services company. It was a good move.
        M Wagner
        • My world is not a Apple world and now Microsoft has crashed and burnt

          Bing is not even second rate to Google. No sale. Dominate in servers? On what planet? Consumer prices $200 Linux $0. This is now not then. Microsoft needs a new thing its ridden DOS all the way to 8 a failure due to hubris. I use Linux now a few years ago it was Windows. The cost ran me off. *My* cost not OEM's cost. I cant pay $200 for my OS. Bottom line. Windows is done here for me over with. I do not game so a X box is irrelevant office is not affordable. The truth is I am fed up with company's that offer Windows only wares. I am learning to use anything else but. The sheep don't know yet but some are catching on. Once they are gone don't expect to ride consumers that easy again. My bet is that Ubuntu and Red Hat will experience real good growth. For me Apple does not exist as a real alternative. Not at all. Android is a novelty in my opinion. Give me a distro that is real not just advertising like W8 or Android no jokers like Apple. Not even a selection. Not in the box.
          • I'm no huge defender of free market Capitalism

            ...but I'm not sure that an open source operating system will ever fully replace Windows, etc. While I love the idea of people getting together and contributing to something co-operatively for the general good for that motivation alone, I think that the central oversight, the drive to create something marketable, the ability to have people dedicating their whole livelihoods to creating this product, will always provide a powerful alternative to reliance upon the goodwill of volunteers. I can hold the people I pay money to accountable, and hold them to expectations. I cannot do that with open source. It seems that some people are more more willing to forgive open-source collectives for their lack of perfection, while failing to give credit to corporate innovation and service. I think the competition from open source is great, and a healthy thing, but I'm not certain we could fully rely upon open source, no more than we can rely upon monopolies. (Yes, I can be cynical about open source and corporations simultaneously.)