Ozzie tries to justify Microsoft's consumer detours

Ozzie tries to justify Microsoft's consumer detours

Summary: Microsoft Chief Software Architect Ray Ozzie states the obvious when he notes that consumer technology is leading the industry these days. Shame he's just trying to justify the red ink spent on Microsoft's various consumer forays.

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TOPICS: IBM, Microsoft
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Microsoft Chief Software Architect Ray Ozzie states the obvious when he notes that consumer technology is leading the industry these days. Shame he's just trying to justify the red ink spent on Microsoft's various consumer forays.

It's hard to argue with Ozzie's premise. These days technology hits the consumer first and then migrates into the enterprise. Not all that long ago it was the other way around. Does anyone doubt that the iPhone will find its way into the enterprise? How about Web 2.0?

But Ozzie's comments, detailed by Mary Jo Foley, indicate that he believes technology companies need to have breadth by focusing on the consumer and enterprise markets.

Don't buy it. It's the rare company that can do both consumer and enterprise and Microsoft isn't exactly the poster multimarket company. How's that Zune doing? Sure, Xbox is a hit, but wake me up when the division is profitable. Was the Xbox really worth the billions of dollars Microsoft spent?

For fiscal 2007 ending June 30, Microsoft's entertainment and devices division lost $1.9 billion on revenue of $6 billion.

So what's Ozzie up to? He's trying to justify Microsoft's consumer business that hasn't shown financial returns. Ozzie is right when he says consumer electronics has the "most exciting things," but you can make a lot more money doing other things. Consumer electronics is a global scrum. Microsoft competes well against Sony with the Xbox only to get clubbed by Nintendo. Microsoft's Zune never got out of the corner before Apple iPod thumped it. Even if the Zune gets some momentum it runs into Sandisk. It's not a nice neighborhood.

What's truly comical this Ozzie statement:

“One of the things that I’m extremely happy about, about Microsoft, is the breadth. The fact that we have Robbie (Bach’s Entertainment and Devices) business all the way at the front edge lets us build things and work them into an enterprise in a way that matches the way that it’s working in the entire ecosystem. And I think IBM in general, or any IT company that lacks that consumer component, is going to be disadvantaged from the perspective of IT."

The big difference between IBM and Microsoft? IBM already knows the consumer business stinks (ask Lenovo if it has buyer's remorse). IBM knows services and software is the name of the game and is acting accordingly. And at last check Oracle and SAP, neither of which have consumer businesses, were doing pretty well. And does Salesforce.com really need consumers? Isn't software as a service fairly innovative? How about virtualization?

The bottom line: Microsoft has chased the consumer, which is fine when you have $23 billion lying around. But I seriously doubt IBM is at a disadvantage because it chooses not to lose money chasing consumers. Overall, the debate over whether consumer or enterprise is leading technology is a bit frivolous. The pendulum will swing both ways.

Topics: IBM, Microsoft

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6 comments
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  • And when Microsoft...

    ... uses its consumer experience to obtain enterprise sales while trendier companies are still losing money, you can observe that those other companies do what Microsoft is doing better than does Microsoft.

    The experience and reputation Microsoft gains can be useful in different markets at different times. That's what continuity and resources allow. Along with making instructive mistakes and the time to correct them.

    Bill Gates commented that Microsoft had not made single mistake in choosing products to be made available. Even though he's more conversant than we are with the number of products Microsoft has had to withdraw from the market or that the company has had to improve substantially or that are still not making money.

    The reason he identifies for product failure? They were ahead of their time.
    Anton Philidor
    • One word:

      [i]Bill Gates commented that Microsoft had not made single mistake in choosing products to be made available.[/i]

      Bob.
      Yagotta B. Kidding
  • Another way to look at it

    Microsoft has always depended on "leveraging the monopoly." Today, the business and government sectors have been showing signs of fraying loyalty around the edges, so it's hardly surprising that MS would concentrate on the consumer market where the MS ownership of the OEM computer channel still keeps them from having to compete directly.
    Yagotta B. Kidding
  • it's just a distraction from the real M$ blunders

    [For fiscal 2007 ending June 30, Microsoft?s entertainment and devices division lost $1.9 billion on revenue of $6 billion.]
    M$ is losing money hand over fist!
    The mumbo-jumbo with the consumer vs. business is trying to mask the lack of vision for not embracing the FOSS model.
    Linux Geek
    • Relevance

      Although Microsoft's position with respect to FOSS is an interesting subject for discussion, it certainly has nothing to do with the subject at hand, and I would suggest that those obsessed with Linux or open source and Microsofts support or non-support thereof vent their obsessions in a relevant forum. Not every news item about Microsoft can or should be stood on its head to prove or allege that MS's perspective on open vs. proprietary software is the cause of whatever ails it.

      If not, then lets just agree, for arguments sake, that anytime anything happens to MS or anyone associated with the company that it is due to their failure to embrace open source, and given that that isn't going to change in the near future, lets further agree that it is pointless to beat that horse. If we could all get past that, we might be able to engage in some useful dialog.
      greybeardtechie
  • Microsoft isn't "chasing the consumer"

    Just as they sacrificed big bucks to
    leverage the enterprise, so are they blowing
    big bucks to leverage the consumer, and what
    is available to the consumer.

    What do they care? It's only money, and
    there's plenty more where that came from (or
    so they think). They are right to a certain
    degree, in that there's a sucker born every
    minute, and every sucker is a prime target.
    As long as they can keep their share-holders
    off their backs, no worry. And they have
    always been experts at cooking the books.

    http://www.pbs.org/cringely/pulpit/1999/pulpit_19990527_000396.html


    http://www.theregister.co.uk/2000/10/09/accounting_masterclass_how_cisco/

    Accounting masterclass: how Cisco and MS
    avoid tax

    http://www.billparish.com/20000418microsoftnotax.html

    SOURCE: Parish & Company ?? Copyright April,
    18 2000. All Rights Reserved Microsoft Now
    Pays No Federal Income Tax Based Upon The
    Success of Its Financial Pyramid Scheme

    http://www.fool.com/portfolios/rulemaker/2000/rulemaker000217.htm

    Why Microsoft's Stock Options Scare Me


    http://pcworld.about.com/news/Sep222004id117876.htm
    Ole Man