Softly spoken, shy and retiring Microsoft CEO Steve Ballmer sent an email to staff yesterday to complain that the company is not as wealthy as everyone thinks. According to Mr Ballmer, stories have been getting out that he is sitting on a fathomless cash ocean of billions of dollars and does nothing more than swim in the mountains of loot. He wanted to tell staff that it is not true because Microsoft needed a lot of cash.
Ballmer Tightens Microsoft Belt
About The Author
Ex-programmer, ex-editor in chief at OSNews.com, now a visual artist/filmmaker.
Follow me on Twitter @EugeniaLoli
This whole argument is semi-ridiculous. There is no corporation in the world, NONE, that would have funded a business group for at least NINE YEARS while it remained unprofitable (msn.com was registered on Nov-10-1994). None except Microsoft.
To say that it is unreasonable to expect a profit is crazy. How did AOL start as a nobody then, and end by effectively buying Time Warner? Because they had losses the first nine out of ten years of their existence?
The whole point of this is that MS sees their core market being seriously threatened, and is willing to go to huge lengths to grab other peoples businesses. With the cash pile they have, they can try to do that, provided they don’t get slapped down by the government for predatory pricing.
Their biggest threat now is that people are beginning for the first time to really question their purchases from microsoft, and the necessity of those. Four years ago, people lined up for the latest, but today they are standing back and asking if it is necessary, and if there are better alternatives. Especially corporate customers when it comes to the subscription licensing scheme.
No one can predict the future, but I’m certain the next few years will be very interesting.
look at: http://management.itmanagersjournal.com/article.pl?sid=04/07/06/135… :
Yes, Microsoft has a ton of cash on the balance sheet. But it’s not balance sheet cash or market share that propels a stock price upward. It’s growth. And growth leveled off at Microsoft about 18 months ago, when the company went ex-growth and ex-cash.
In October/November 2002, MSFT stock was trading in the high $20s, and the S&P 500 Index was trading at around 990. Three months later, MSFT stock was quite heavily punished in January 2003 after the company reported earnings and missed revenue expectations. Starting in April after the Iraq war, the S&P 500 rallied around 40 percent through the end of 2003 from about 800 to around 1150. However MSFT stock did not participate in this upside and remained in a trading range between $24 to $28. Currently, MSFT stock is roughly at the same levels as it was in October 2002, and yet the broader market is still up around 30 percent since that time.
What is the savior for MS? Is there one?
MS faces an eroding monopoly which is second to none in terms of profits and certainly does okay with revenues.
How do you compensate for that loss? What do you take. Gaming? Cell phones? lots of things? A wireless carrier? The key here is how do you invest those billions.
MS’ core market has nowhere to go but down. that can’t make major shareholders happy. savior is in taking new markets which ms has the cash to do but has not done all that well.
Softly spoken, shy
GIVE IT UP FOR ME!!!!
I LOVE THIS COMPANY, YEEEEAH!
There are few things I’ve enjoyed watching so much as the video of Steve Ballmer jumping his way onto and around the stage at a gathering of the faithful. You shouldn’t have any trouble finding it if you google for Ballmer, Dance, Monkey boy.
The Inquirer.net article talks about the closing of a cafeteria, cutting back on employee prescriptions, and a reduction in the discount on purchases of M$ stock.
I’d be curious to see what other “efficiency improvements” he plans to implement – and if any of them will affect the upper brass. Don’t expect to find me holding my breath.
to complain that the company is not as wealthy as everyone thinks… because Microsoft needed a lot of cash.
… written from on his wireless notebook while sitting comfortably aloft his inner tube, sipping a margarita and floating on that vast ocean of cast in his golden cash wave pool…. Well, almost. Close enough.
I know they’ve had some recent layoffs in several departments as well.
I’m sure millions of dollars would be saved and thousands of employees wouldn’t have their benefits “tightened” if those at the top took some pay cuts.
I mean really, is Ballmer gonna take away any of his own perks?
the market expects improving results. Microsoft is rich beyond belief but, to impress investors, they need to keep on growing profits or revenues.
They won’t be growing revenues much so that leaves profits and the easiest way to grow profits is cutting costs (aka: layoffs).
If the executives make soo much money that they can finance private space flights:
“The project was funded by Microsoft co-founder Paul Allen, a billionaire who says he spent “in excess of $20 million” on SpaceShipOne.”
Unfortunately, $20m is pocket change to Allen and Gates.
Microsoft is F**&ing outsourcing.
Can you believe that ? They are doing it to improve their income statements. Fire your highes expenditure(employees) and that boosts your income. Therefore it raises your stock price and Bill and Steve make alot more $$$. Short and dirty way to make bucks.
Appeasing shareholders is very important because that’s where Bill and Steve jobs get most of their revenue.
I read Steve takes 1 dollar in exec salary. (you can check that. not sure) . MOst of his income is stock(options)
Personally i think options is bizarre . I am glad the gov is trying to claim it as an expense in accounting practices. Alot of stockholders have been hurt by this .
Alot of companies use it to boost their execs pay.
Intel has been really vehement against the gov for accounting options as a cost.
Why, that’s the same amount IBM…
we get R&D, MS workers get their coffee stolen…
good post. I agree on all points.
I feel so sorry for M$. Honestly, I do. Allow me to explain my thinking.
They are like a pharmaceutical company. Their product is facing the devaluation of their product due to marketing dynamics. M$ has invested a large chunk, let me to rephrase that, an astronomical amount, of cash into selling their current “X-tra P-lump” product line during its operational cycle.
Their current developmental product codenamed “Long ‘Bull’ Horn” may not reach the masses until mid-to-late 2006. Until then, M$ need to sell their Rx to the masses at full price to meet operational expenses, positive cash flow, and a nice ROI. I have noticed that M$ is trying to sell an “over-the-counter”, a lite and lower dosed version of its product to Asia to keep the masses from purchasing or switching to a cheaper alternative like Linux or BSD brands.
One of the chief pharmacists at M$ sees that his and William’s “drug” company may not be able to maintain its current level of maitaining profitability now that other brands of medicine are on the free market for customers.
So, I’m thinking. The chief pharmacist is going to retire from the business. He’s “Gittin’ out while the Gettin’s Good!” Too bad some lower-level folk are layed off at the pill mill in the process.
It looks like in next 6 months they will have more problems that anybody is now talking about. The problem with high skilled people who will leave MS and join other companies. As far as I know stock given last year was a small portion what these people got few years ago. Morale is low, and attitute to work on the same is not keeping people interested. I can see that in some countries having friends at MS, so expecting more problems now when Steve anonunced cost cutting processes.
IDC today published a “BSA sponsored” investigation where they come with this number “36 percent” of the software in Europe is pirated. I was already waiting to see press releases related to that one. Here it is? OTOH, there are also the sells of complete computers which come with Windows while the customer doesn’t want it, or want that version.
The things with which they use their huge market adoption (Windows / x86-32) to get other products popular are for example:
* MSN. Which isn’t profitable.
* XBox. Which isn’t profitable.
This while their “crown jewel” is being attacked. My (though simple) take is that on the longer run Microsoft needs to either make these services profitable or start with new, unique services. I think they’re merely adopting to this, though the shareholder theory is in my eyes also plausible.
Steve Jobs, when he first came back to Apple, got a salary of 1$ for the first year, he is now the highest paid CEO in the country. Steve Balmer is someone completely different.
@ dpi: MSN turned there first proffit a few quarters back, actually.
Also, do you somehow think that these new services, as you say, they should start are going to be proffitable right away? This doesn’t happen at Microsoft, this doesn’t happen ANYWHERE. When offering something new, 99% of the time you will turn out a loss for quite some time.
whoops, that Anon is me.
“MSN turned there first proffit a few quarters back, actually.”
Ah, i didn’t knew that. Where are the numbers?
“Also, do you somehow think that these new services, as you say, they should start are going to be proffitable right away? This doesn’t happen at Microsoft, this doesn’t happen ANYWHERE. When offering something new, 99% of the time you will turn out a loss for quite some time.”
I disagree with that you say that that doesn’t happen anywhere. It depends on various factors, one being the model. Top-down model means first a high price, then lowering it down slowly to target all the customer segments. The other model is the one which starts the market penetration from cheap to expensive. With both, you can have an instant success if you play your cards well; there are many examples of companies which grown from nothing to huge quite fast (especially happened in the dotcom hype days). Normally it indeed takes quite a while… however MSN and XBox have been existing for quite some while now (MSN even existed before the home-user-Internet-hype started). My question to you: how would you turn the XBox segment in a profit? Maybe that isn’t even the goal on the short run? I doubt that was the goal when MS started to use MSN Messenger to compete with the other players in the IM market. Or with MSIE for that matter and i’m not convinced that strategy isn’t possible on the XBox segment.
eve Jobs, when he first came back to Apple, got a salary of 1$ for the first year, he is now the highest paid CEO in the country. Steve Balmer is someone completely different.
Pretty frickin’ amazing compensation, isn’t it?
If selling 50M shares got him just over $1B and he has more than 400M shares left, that means he’s only worth a bit more than another $8B. Why, he’s pratically broke!
I’ve figured for quite some time that Microsoft was going to begin going downhill. The titans don’t last all that long. Before MS, there was IBM. Before IBM, someone else, of some technological wonder relevant to the age.
After Microsoft, there shall be someone else 😉
The torch gets passed along after awhile. Fare-thee-*cough**cough*, Microsoft.
“Finger to the status quo!”
It’s all being done for the share holders, of which the top management of Microsoft is of course a significant part.
Ballmer is right in bailing out. Microsoft will be going through a rough spot when Longhorn is only going to be released in 06 or 07 [or maybe 08?]. In the mean time the market is open for players who would not be in the picture if it had not been for this hiatus.
In the end, Ballmer sold for 1.2 billion worth. That does not make him the richest man on the planet, but he still has a huge stash of stock left. And besides, he’s still relatively young and unconsionably wealthy [and I’m certainly not going to whine about his good fortune]. Why would he try to emulate Warren Buffett, a man who is so afraid of dying that he keeps investing money to make even more money. Money he generates to do what?
Ballmer is right. He’ll get himself a huge boat, a nice cool spot in the shade. The right meal with the right drink. This guy is going to be in hog heaven.
And if his business nerve twitches again, he can still buy/start a little company to play with, like Allen buys toy rockets for fun. If you’re rich you do stuff like that.
I mean, how much money is enough, anyway?
If I had a billion dollars, I can’t imagine having to go through the hassle of running a company. No doubt that’s different when you have the experience of actually running a big company, but is there really anyone out there who runs a company for fun [except Richard Branson]? Really? If you had the chance and as near to unlimited resources as makes no difference, running a company would be the best thing you could come up with to spend your life? Seriously?
Not my reality.
Kudoz to you, Ballmer. Invite me on your boat one day. I love the sea.
And that is for Ballmer, not for Microsoft. I’m not a big fan of The Hive.
“MSN turned there first proffit a few quarters back, actually.”
Ah, i didn’t knew that. Where are the numbers?
The most obvious place is http://www.microsoft.com/msft/ or, specifically http://www.microsoft.com/msft/earnings/FY04/earn_rel_q3_04.mspx
The 5th paragraph begins: MSN® reported another profitable quarter on robust revenue growth of 16% over last year driven by continued success in growing its advertising business.
I disagree with that you say that that doesn’t happen anywhere. It depends on various factors, one being the model. Top-down model means first a high price, then lowering it down slowly to target all the customer segments. The other model is the one which starts the market penetration from cheap to expensive. With both, you can have an instant success if you play your cards well; there are many examples of companies which grown from nothing to huge quite fast (especially happened in the dotcom hype days). Normally it indeed takes quite a while… however MSN and XBox have been existing for quite some while now (MSN even existed before the home-user-Internet-hype started).
Still, in most cases your initial investment has to be figured into your statements before you can make any real profit. You can make a profit on something (i.e. XBox) and still lose money on the project because of the initial investment. The dotcom hype days showed what happens when you continue to grow your company without ever recovering your initial investments, as most of those companies never posted a profit that could recover initial investments.
My question to you: how would you turn the XBox segment in a profit? Maybe that isn’t even the goal on the short run? I doubt that was the goal when MS started to use MSN Messenger to compete with the other players in the IM market. Or with MSIE for that matter and i’m not convinced that strategy isn’t possible on the XBox segment.
The first thing to do if you want to pull a profit from the XBox division is to pull everything unrelated to the XBox from that division. The Home & Entertainment division at Microsoft is showing a continued improvement precisely because of sales of the XBox and related merchandise, as well as an occasional boost from a PC game (usually a port of an XBox title). Stop lumping in so many other losing products with the XBox and the losses will turn to profit fairly quickly.
However, Microsoft doesn’t work that way, as we can see with MSN. The division that bears the MSN name has just as many losing products lumped into it (if not more, and in many cases nearly infamous losers), but MSN has been able to pull the division into profits. The XBox, over time, should be able to do the same to the Home & Entertainment division, and this is why the MSN internet service and XBox tend to be the primary focuses in the income statements for these divisions, despite the large number of other products lumped into them. It allows MS a way to distribute it’s losing investments into new product areas, and to hide some of the successes in areas where they are competing with heavy-hitters (i.e. AOL & Sony). Sure, the XBox as a division on it’s own (holding only XBox-related products and services) may not be able to turn out pure profit right now, but it’s much closer to doing that than the numbers of the Home & Entertainment division might lead one to believe.
On the other hand, if they didn’t have piles of cash, they wouldn’t be able to float so many money-losing divisions long enough to make a profit. Even with the cash they’ll have to cut loose of some of the product in order to keep investors happy, even if it means they have no way of regaining the lost investments.