Microsoft's struggles echo in Detroit's decline

A poor showing for Microsoft has analysts drawing parallels between the one-time tech leader and Detroit's fiscal troubles.

In recent years the fates of the declining U.S. auto industry and the eroding PC business have seemed increasingly intertwined. Despite a resurgence following its near collapse during the Great Recession, U.S. auto manufacturing has been shrinking for a years, and last week, Detroit - the seat of the industry in its heyday - became the largest American city to file for bankruptcy.

It came as little surprise to some that on the same day, Microsoft posted its weakest financial results in years. The parallels between Detroit's fiscal struggles and Microsoft's attempts to redefine itself for a post-PC era have become increasingly evident. Microsoft CEO Steve Ballmer hails from Detroit himself, and has sought management advice from Ford chief Alan Mulally, according to The New York Times.

Microsoft had showed promising signs earlier in the year that it was shifting successfully to mobile and cloud computing, and its shares were up 30 percent on the year before at the start of last week. But after its quarter-end results missed Wall Street forecasts, shares dipped 11 percent.

“It was discouraging to read down the table and see that every division was below expectations,” said Rick Sherlund, an analyst with Nomura Equity Research.

The disappointing results were partly attributed to poor sales of Microsoft's Surface RT tablet, the company's attempt to produce a tablet with its own hardware. Sluggish sales forced the company to cut prices by $150, to $349. Microsoft took a nearly $1 billion charge to cover the sales shortfall.

While no one expects Microsoft, with $77 billion in cash (and equivalents) to throw in the towel in the search for a profitable business model in the new consumer tech environment, the company seems to have its work cut out for it.

Photo: Microsoft

via [The New York Times]

This post was originally published on Smartplanet.com

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