Microsoft – The new realities!

How times have changed in our business?  Turn back the clock to ten plus years and remember how powerful Microsoft was. The largest tech company in valuation, growth and what not. However, see this comment by one of the largest hedge fund manager David Einhorn yesterday, asking Steve Ballmer to step down. The fund manager, who made his name warning about Lehman Brothers’ financial health before the investment bank’s collapse, accused Ballmer on Wednesday of being stuck in the past, launching the sharpest attack yet by a high-profile investor against the company’s leadership.

Today,  Apple (second most valued company in the world) and IBM have overtaken Microsoft in value. It is no longer  seen as a dominating force in technology after a failure to capitalize on Internet and mobile markets. It’s stock value has been static for last ten years.

The online services unit, which runs the Bing search engine and MSN Web portal, had a loss of $726 million last quarter and has now lost $7 billion in four years.

“What it boils down to is that Microsoft has had a load of initiatives which haven’t shown traction yet,” said one U.S. equity fund manager at an investment house featuring on the list of Microsoft’s top 40 largest shareholders. “The most recent one is to buy Skype, and the perception on that is that it is over-valued. We won’t know what revenue synergies are until 2,3 years down the road.”

The Skype acquisition is considered highly over-priced and a lot of doubts have been cast on its value-add. It is all about leadership and taking bold bets on a changing technology and market landscape. No one has shown this better than Steve Jobs at Apple, where he keeps creating brand new categories with each product, shaking up the market and bringing huge revenues and profit. Microsoft has to look forward in a non “Windows-Office-centric” lens to fight the forces of a new Apple, Google, and many new entrants.

Mr. John Chambers, are you listening also?


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