Welcome to Microsoft’s Nightmare: Weak Quarter and Still More Yahoo Questions!
by Kara Swisher
Posted on January 21, 2009 at 7:15 AM PT
Exactly what Microsoft CEO Steve Ballmer was talking to Yahoo Chairman Roy Bostock and Time Warner CEO Jeff Bewkes about last week in their mysterious New York tete-a-tete will likely be one of the many irksome questions execs at the software giant will be getting when it reports second-quarter earnings tomorrow afternoon.
Sources close to the situation said more intense chit-chatting has been going on among the trio about possible alliances and deals, but the outlook for something actually getting done is still unclear.
Oh, yes, there is also the expectation that Microsoft (MSFT) will show a missed target on its profits, as well as announce big job cuts to its 95,000-employee worldwide workforce.
Then, of course, all eyes will be on its forecast of what is to come as the econalypse continues.
There are less impressive outlooks for Microsoft’s Windows business, as well as revenue weakness, which goes right to the bottom line.
That means inevitable cutbacks in staff, as well as other cost-slashing all over the giant company in order for Microsoft to regain some momentum and revive its weak stock performance, which has been hit harder.
But what investors are actually looking for from the company–much as the nation is from newly installed President Barack Obama–is a big dose of hope and change.
In Microsoft’s case, that would still be: the articulation of a clear online strategy.
Microsoft mistakenly got everyone to focus intently on that for all of 2008 with its failed takeover attempt to buy Yahoo (YHOO), mostly for its search business, as it has turned out.
Ballmer has recently and frequently and publicly said he covets Yahoo’s search share in order to bolster his company’s distant third-place position.
Why has that been an error so far? Well, without a move at all after so much frantic and endless movement, Microsoft has only underscored its lack of strategy and its woeful position in relation to archrival Google (GOOG).
As my piano teacher used to say about me: A lot of activity, but very little productivity (and very bad music-making too).
Thus, whether Microsoft will actually produce anything more than dissonance with Yahoo or not–or Time Warner (TWX) online unit AOL either–should be the most pressing question from Wall Street.
Because, while the economic downturn will eventually pass, Microsoft will have to answer to what it has been doing all this time when it comes to Yahoo and the Internet at large.
Comments
The holdback on the MSFT-YHOO merger is simple. Roy is involved and Yang ( and the rest of the holdovers on the board) are inept and can not make a decision to save their lives. The lack of ability to make a decision at YHOO is why the stock is at $11, hopefully the “change” you speak of will take place with the new CEO, but we’ll wait and see.
Posted by michael kane at January 21st, 2009 at 8:17 amWhile “search” is a valuable market to be in, I continue to see no compelling reason why Microsoft should obsess over it to the exclusion of so many other things (including their core competencies). Well, there is one reason, namely that Ballmer pronounced Google to be public enemy number one a few years back and he hasn’t been able to think of anything else since.
Think back to the beginnings of the Internet. Microsfot didn’t even want it to exist. You had to ADD the TCP/IP components needed to access the Internet to early versions of Windows. Microsoft had visions of everyone connecting to Microsoft, and only Microsoft when they wanted to connect to the rest of the world. Fortunately that fantasy didn’t last too long, and when Netscape and others started producing the first graphical web browsers Microsoft decided they couldn’t be left out, that if they didn’t outright own the net they at least had to control it.
The rest, as they say, is history. But has Microsoft’s success with Internet Explorer really accomplished much for them? Quite the opposite. IE is free. Nobody buys either Windows or Office because of the compelling nature of Internet Explorer. It has cost them, what, hundreds of millions in legal troubles. Irony of ironies, the features they introduced to beat Netscape are the gateway for the security holes that have made both Windows and Office user’s lives miserable with regular reboots re-installs and mysteriously sluggish computers. Every Windows user on earth would be better off running any browser other than IE, and Microsoft wouldn’t lose a cent in the process.
So, now they want to do search. Doesn’t it sound like are-run to you? Does to me. They are after all a BIG company, no matter how you measure it. Why not tackle something BIG. Rather than toe dipping into hardware with the Xbox, produce Microsoft TVs, Toasters, Cell phones (now that Apple has shown how “easy” it is) or even cars?
Why in software, are they willing to have their operating system not be the primary choice for the major Internet providers? Does Google depend on Microsoft servers? Yahoo? Facebook? AOL? In fact the only major Internet company using Windows servers is Microsoft. And that’s true primarily due to a Bill Gates mandate, not a technical decision. What’s with that? Surely it’s not a cost issue right? MS Marketing tells us it’s all about TCO (Total Cost of Ownership). Am I missing something in their message?
How much more successful might Microsoft have been had Ballmer pronounced EBay or Amazon or Circuit City as the company they wanted to morph into? Or Dell for that matter? These companies have all suffered stumbles in their hi-tech ventures at one time or another. They have all at one time or another rested on their laurels and had to play catch-up, and in some cases failed. These would all be ideal areas for a company that has apparently exhausted their mental capital on existing products to swoop into and take over.
But search? Why?
Posted by Mac Beach at January 21st, 2009 at 11:37 am“are-run” -> “a re-run”
and probably others
Posted by Mac Beach at January 21st, 2009 at 11:41 am