What’s Up At Microsoft!

By Om Malik September 17, 2005 21 Comments

gates dynamoNearly a year ago, I wrote, Microsoft is not smart, its just that, its competitors are stupid. Well, in years that have passed, that theory has been proved right. Look at Palm, a company which had the monopoly of the hand held business, and well, now the software is owned by a Japanese firm. Perhaps, that is one of the main reasons why one has to be cautious in betting against the Barons of Redmond. Fred Wilson, in an excellent essay calls Microsoft a cat with nine lives! Brad Feld is predicting 2006 the year of Microsoft.

Paul Kedorsky, the ultimate contrarian looks at the Business Week and Forbes cover stories, and concludes that Microsoft is a buy.

In other words, Microsoft is the buzz of the moment, thanks in large part to Robert Scoble who has turned the beast from Redmond into cuddly and cute. I am not buying the Napoleon Dynamite act.

Blogs and the world at large has gotten into a habit of focusing on the near term, the here and now. Everyone misses the big picture. Vista and Office 12, the so called new engines of growth (admittedly with newer technologies) are looking to tap into the same wallets they have tapped before. For Microsoft PC has been the money machine, and that will always be the case. I had once said, Microsoft’s biggest problem was how to get bigger. That question hasn’t been answered. James Stoup, has an excellent piece on Microsoft’s future prospects. While it has been written by a Mac person, it does you a scorecard of why not all is well in the Gatesville.

Look at their non PC-efforts. It might as well be a scene from the popular video game of yesteryears, Street Fighter. They are fighting all the people, all the time. Open source is chipping away. They might think telecom is going to be easy, but only time will tell. Mobile phones are proving to be tough nut to crack. They have a spectacular product in LCS, but Cisco is not going to go away. They are in a street brawl with everyone from Sony, Nokia, Apple, and every tiny start-up that is coming up with new ideas. That is an energy sapping, tiresome battle on many fronts, especially at a time when the company is slowly becoming a collection of fiefdoms. Think of Microsoft as the European Union of technology!

Lee, who opened Microsoft’s research lab in China in 1998 and moved to headquarters in Redmond, Wash., two years later, fretted over what he saw as repeated missteps. In court he detailed how the more than 20 product-development centers in China tripped over one another, duplicating efforts and even fighting over the same job candidate. Lee called the company “incompetent.”

Despite all these problems, I am loathe to bet against Microsoft. They just have too much money. Like the Yankees, you can never count them out. Here is a good example that the wolf still lurks under sheep’s clothing. The AOL-MSN deal, harks back to the blatantly predatory days where company arm-twisted computer makers to bundle a sub-par browser. Take away 12% of Google’s Ad-revenues, and you have wounded the upstart. Clearly a business win, because on technology they can’t! I think Microsoft can use its “mountains of cash” to pose problems for any rival, without any chance of admonishment from the regulators.

But there is the bigger, more everlasting problem. Fred Wilson puts it best when he writes….

Its because software is becoming “organic”. I believe Google started this movement. They released a free web service that people responded to in an emotional way. That created a phenomenon that drew developers and users to the Google franchise. Google opened up their APIs so people could build businesses on top of them. Now they have a whole ecosystem. This has happened with other software platforms too – Craigslist, Flickr, Skype, etc.