Linked by Thom Holwerda on Tue 9th Oct 2012 22:01 UTC
Microsoft Steve Ballmer's annual letter to shareholders makes it very clear Microsoft is at a point of no return - and in the middle of a transition into a hardware company. "This is a significant shift, both in what we do and how we see ourselves - as a devices and services company. It impacts how we run the company, how we develop new experiences, and how we take products to market for both consumers and businesses." Line. Sand.
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RE: In plain English
by galvanash on Wed 10th Oct 2012 07:28 UTC in reply to "In plain English"
galvanash
Member since:
2006-01-25

"We want to be like Apple"


True enough, but who wouldn't want to be?

I'm not talking about the intellectual/tehnical/ethical stuff we usually discuss here - strictly financials. Apple makes more money than Microsoft - alot more. That is just ridiculous when you consider the vast difference in number of employees and product mix between the two companies. Its like seeing a local mom and pop brewery make more money than Budweiser...

If you look at a graph comparing MS and Apple financials over the last 5 years, in virtually any measurable metric (revenue, growth rate, market cap, profit margin) Apple's line looks like a fricken rocket ship compared to MS - and ironically that is during a 5 year period where MS has done pretty well for the most part, historically speaking.

Lots of people hate on Apple, but you cannot deny that what they are doing is working from a financial perspective...

I don't think Microsoft can NOT try to be more like Apple... Unless Apple implodes in the next few years (which I doubt), its just going to be more of the same. Microsoft's board is inevitably going to demand that the company start emulating the success of their competitor - any CEO not willing to try would get their hat handed to them.

Sure, lots of people think this is a mistake. It may well be in the long run, but that fact is that Microsoft (as it is now) might be winning battles here and there, but they already lost the war and they know it. Their future is either to beat Apple at their own game or settle in for a permanent future as number 2.

Apple IS going to start doing something with that ridiculous 100+ billion dollar war chest at some point. Think about that.

MS can't win if they don't start trying to beat Apple at their strengths...

Reply Parent Score: 5

RE[2]: In plain English
by tanzam75 on Wed 10th Oct 2012 19:25 in reply to "RE: In plain English"
tanzam75 Member since:
2011-05-19

Apple makes more money than Microsoft - alot more. That is just ridiculous when you consider the vast difference in number of employees and product mix between the two companies.


Indeed.

The iPhone has better (net) margins than Windows.

The world has truly turned upside down when a hardware device has better margins than a software package with a worldwide monopoly. That's why Microsoft has to move into hardware. It can't afford not to.

There are also some tangible financial benefits from bundling the software inside a device.

For example, China has a piracy rate of 77%. Every Surface tablet that it sells to Chinese consumers is equivalent to the profits that it normally would make from 4-5 Chinese Windows PCs.

In addition, Microsoft currently has over $50 billion of cash stuck overseas, because they do not want to pay the taxes to repatriate it. But it's free to import Surface tablets! In essence, Uncle Sam is subsidizing all US sales of the Surface by 10-15%, under the condition that the Surface be manufactured outside the US. (Talk about perverse incentives.)

Edited 2012-10-10 19:29 UTC

Reply Parent Score: 3

RE[2]: In plain English
by MollyC on Wed 10th Oct 2012 21:02 in reply to "RE: In plain English"
MollyC Member since:
2006-07-04

It's not so ridiculous that Apple makes more money despite having fewer employees when you stop to think about the average salary of Apple's direct AND indirect employees. The majority of Apple's employees (adding up both their direct and indirect workforce) work for just above slave wages. Only a very small percentage of Microsoft's total (direct and indirect) workforce work for such wages.

Besides that, look at companies like Sony, Yamaha, and the like. Sony makes consumer electronics, computers, movies, music CDs, life insurance, banks, magazines, and on and on and on. Yamaha is so diverse that they make everything from motorcycles to saxaphones. Those two companies have more direct and indierect employees than Apple and Microsoft combined, by far, yet make less money than either.

I'm also reminded of the AOL/TimeWarner deal, which was actually AOL buying Time Warner, despite AOL being a simple online service and Time Warner being involved in magazines, TV networks, movies, video games, etc. Time Warner had way more assets and employees than AOL, yet AOL made more profit and had way higher marketcap value at the time.

Which is to say that generally the whole system is out of whack, kind of. ;)

Reply Parent Score: 3

RE[3]: In plain English
by galvanash on Wed 10th Oct 2012 21:51 in reply to "RE[2]: In plain English"
galvanash Member since:
2006-01-25

It's not so ridiculous that Apple makes more money despite having fewer employees when you stop to think about the average salary of Apple's direct AND indirect employees.


I realize that it is not a completely uncommon phenomena. What I mean is that it is ridiculous to Microsoft's board - in the sense that a little over 15 years ago Apple was essentially roadkill that MS was throwing chump-change to in order to keep afloat. 7 years ago they start showing substantial signs of life and begin growing rapidly, and now they have essentially passed Microsoft up. The MS board is essentially asking themselves what the f*ck happened?

I just mean if you are Microsoft you have to be questioning your business strategy right about now... What they have been doing for the last 5 years may be considered by some to be "working", but it isn't, by any reasonable definition, working as well as what Apple is doing.

Microsoft could choose to stay the course, but if they do that they will not in any way affect Apple's trajectory- they simply have not, up to this point made any real effort to play in Apple's pool so to speak. They are both tech companies, but they hardly compete with each other because in most markets they are separated by a layer of ineffectual OEMs, and so far in the few examples where that hasn't been the case (Zune) Microsoft lost badly.

I think the reality is that Microsoft has to become a vertically integrated device maker in order to control their own destiny. As it is now they are putting their future in the hands of their OEMs - and they all have butter fingers. No matter how crazy and self destructive some people think it sounds, there really isn't another viable course for them.

When Apple introduced the original iPhone, Steve Jobs dropped a quote from Alan Kay during his presentation:

People who are really serious about software should make their own hardware.


I don't think many people took it seriously when he said it, but in hindsight that was a very prophetic statement. I think Microsoft has no choice but to take that advice.

Edited 2012-10-10 21:56 UTC

Reply Parent Score: 2