Is Steve Ballmer the Sole Reason for Microsoft's Decline?

Saturday, April 29, 2006
On Thursday Microsoft announced its quarterly results. It missed expectations by 2 cents per share. To those who don't follow the stock market closely this seems like nothing, but there has been a game played on Wall Street for years called "managing expectations". In this game the company always passed information to analysts in such a way as to ensure that when the actual numbers came in they were above what the analysts predicted. Consistently. Microsoft, during the boom, was the acknowledged master--if not the inventor--of this game, and its stock repeatedly shot up as a result. For Microsoft to miss expectations, knowing full well that this is the game they are playing, was completely catastrophic. For the shareholders that is, the widows and orphans. $32 billion dollars in shareholder value evaporated yesterday, never to be seen again. The CEO will undoubtedly get the usual golden parachute. When they finally get around to canning him. Don't hold your breath.

There was also the small matter of the $2.4 billion that was "missing", or as one analyst said, "the numbers didn't add up". Evidently Microsoft elected to hide this money, money that it plans to use as a war chest to attack Google, within the profitable Windows division's budget. Why does Microsoft always have the passion to "kill" its competitors (Steve Ballmer's term) rather than to build great products? In principle, I favor the idea that Microsoft is going to use the money to build greatness; in practice the market believes that Microsoft will spend its way into further losses like the X-Box and stockholders are voting with their feet. Ominously, Friday's stupendous drop in shareholder value was accomplished with the highest one-day volume recorded in years. Old stockmarket hands will always tell you to "follow the volume". Rising volume on a declining price is the worst thing that can happen. Stockholders beware.

You might think that this would cause a shakeup within Microsoft, as Steve Ballmer and his team have just lost more money in one day for stockholders than Enron managed during its entire crooked fiasco. A shakeup, one might think, should be the least he should expect. Would jailtime be too good for him? But no, according to the Mini-Msft blog, it's business as usual, and Steve's only comment was "The reaction to yesterday’s news is a lesson that the entire leadership team at Microsoft will learn from." I'm sure he's learning it real hard. The employees meanwhile are dispirited and discouraged. Read the blog. The investors are probably right to jump ship.

So, after the ongoing Vista saga, with its continually missed shipping dates, its several rewrites, and its missing features, and with the X-Box continuing to lose $100 per box sold, isn't it time to ask just exactly what it is that Steve Ballmer has added to Microsoft?

People assert that Microsoft has become as toothless and hidebound as IBM. I fear something considerably worse. Has Microsoft under Steve Ballmer become GM?

9 comments:

s said...

I just bought a Windows product in February. The last time I did was in August of 2000.

"The stock had its biggest single-day decline since November 2000, ..."

Sorry, MSFT. I'll try not to do it again.

chuck said...

Microsoft is, what, 100 years old in internet years? They're a bit long in the tooth these days. I think their best times were back in the 80's when every year they could offer a DOS upgrade that had incremental improvements. What a scam *that* was. Now they have to deal with the mess Windows has become.

Since the early 90's Apple has managed to change hardware twice and operating systems once, now that's agility. Meanwhile Microsoft has become mired in a slough of despond. I wonder how much of that despond is just plain boredom? Working on the same damn stuff year after year has got to get old for young techies. Where is the adventure?

David Thomson said...

The MAC remains the best choice for families with modest needs. I don't see any reason to switch.

Microsoft damaged itself by its predatory business practices. It focussed on seeing what it could legally get away with. The company would have been better off focussing on new product development.

s said...

"They're a bit long in the tooth these days."

So are the executives.

I wonder why Gates doesn't take a billion or two and move to a tropical paradise.

How much money would you need before you decide you don't want to work anymore? A million or two?

MeaninglessHotAir said...

jrh,

How much money would you need before you decide you don't want to work anymore?

Well, I work with several people who are in that position or will be soon so I've been giving this some thought. I've decided that for me there will never be enough money to convince me that I don't want to work anymore. If you don't work, what do you do all day?

Rick Ballard said...

"If you don't work, what do you do all day?"

Whatever you damn well please.

Which reminds me - what basic programming language do you see as having the highest general utility?

MeaninglessHotAir said...

Rick,

It depends. What do you mean by "basic" programming language, and what do you mean by "general utility"? It also depends on where you want to deploy your software (which "platform"--WindowsXP?) and whether you need a GUI or not. Also, do you want to pay for tools to facilitate the software creation or do you just want to do it for free?

Without knowing any of those answers, my guess would be that your best bet is IronPython when Microsoft releases it in a month or two.

As for working, I was laid off three times during the tech crash and didn't enjoy it for a minute, though I had few constraints on me or my time. There are two things about working that appeal to me which cannot be replicated by not working.

First, there is the social aspect. This is easy to underestimate but shouldn't be underestimated. In our society--mobile, rootless, suburban--there are very few ways to meet other compatible souls. It's fun for extraverts like me to do things together with other people. Hanging out in a club, bar, or even a church isn't the same experience at all.

Second, there's the sense of doing something that matters, that has a real impact on the world. I can go for a hike up some mountain, and I like that, but in the final analysis that's just for me and it has no impact on anybody else. By contrast, some of the projects I'm working on now have a good chance of having very high visibility for everybody in the world who has access to the Internet.

Rick Ballard said...

MHA,

Thanks. I just want to learn a programing language as a mental sharpening tool - and to have something to chat about with my grandchildren as they start to move into high school.

If you are rewarded by working then why would you quit? I was answering 'what would I do?' not 'should I hang it up?'. I was a boss too long and the pyschological rewards never compensated for the pressure. The money did, though. I enjoy light consulting but I don't enjoy it enough to actually chase contracts.

Paul Dietz said...

Which reminds me - what basic programming language do you see as having the highest general utility?

I don't know about 'general utility' (it's hard to avoid choosing the most popular languages for that, since utility increases with the availability of libraries), but the language nearest and dearest to my heart is Common Lisp. As a mental sharpening tool, it's excellent.