EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS

10.05.08

Internal, Financial, Prospective Problems at Microsoft

Posted in Finance, Google, Hardware, Microsoft, Steve Ballmer at 5:08 pm by Dr. Roy Schestowitz

Man in money

The previous post focused on one particular problem with a product, combined or associated with a known corporate culture problem. The following accumulation of news from the past week will hopefully shed light on the problems Microsoft as a whole is facing. It is well deserved.

Scandalous Bonuses

The economy is slowing down, Microsoft’s financial reports have disappointed for two consecutive quarters, but this does not prevent people at the very pinnacle from rewarding only themselves.

Some days ago we wrote about the bonuses kerkuffle, which a prominent Microsoft blogger found outrageous.

Now it turns out that even departing executives are rewarded handsomely. Here’s the news about Johnson, whose departure we last mentioned a month ago.

Ex-Microsoft exec gets big bonus after joining Juniper

[...]

Johnson was set to receive a $5 million signing bonus when he arrived at Juniper earlier this month and a base salary of $800,000 a year.

More information is available here.

Johnson owned roughly 1.5 million Microsoft shares as of Sept. 5, according to the filing, which would currently be worth roughly $39.3 million.

They sure have a reason to buy back the stock then. Personal reasons, too. Steve Ballmer’s pay is now being revealed, specifically here and here.

According to Steve Ballmer, profitability is a priority in some areas of business where the company loses money.

Ballmer: Microsoft Is Up-Front About Its Money Motive

There, he said it. Microsoft is interested in making money. That’s what CEO Steve Ballmer said in reference to Microsoft’s motivation in the mobile space.

There are sour grapes and a continued desperate attempt to obtain stronger grip on market segments outside desktops. They now attack the iPhone, for example, through legal or verbal means. For Microsoft, the mobile unit performs badly (previously mentioned in [1, 2, 3]) and shipments of Windows Mobile have recently missed expectations.

Pay for Use

Rather than charge for use of its products, Microsoft seems to be paying out in search of greater market share (or just “in search”), i.e. it relies on deep pockets to compete. Moreover, as noted below, Microsoft uses its little “bribery” scheme also to ‘punish’ or to elbow aside competing Web browsers. Spying on the user (harvesting) is part of Microsoft’s ‘hidden’ income.

More Microsoft Live Search Bribery

[...]

Just using Microsoft online services isn’t enough to get your ticket punched, though. You must run Internet Explorer (6.0 or higher) when you use those services. Even visiting getsearchperks.com with Firefox or Opera is a futile exercise; you will have to start IE to see what goodies the site has to offer. Oh, and if you sign up you’ll have to install the Perk Counter toolbar to let Microsoft keep track of your tickets.

Here is another new example of Microsoft ‘incentives’ at play:

Microsoft Adds Incentives to Small-business Program

Microsoft has given small and mid-sized business customers more ways to earn cash to buy its software through partners by adding new products and product groups to its Big Easy program.

Legalised Bribery?

“Legalised bribery,” also known as “lobbying,” is a very serious issue. Large companies (mega-corporations) behave as though they own and run the country. Microsoft is among the very worst offenders/culprits in that respect.

As far as the bailout is concerned, Microsoft of course intervened in the name of its own interests (again pretending it’s “for the ‘little people’ or the public”).

The four representatives that Microsoft Corp. lobbied earlier in the week after the House of Representatives failed to pass a massive Wall Street bailout bill did not change their votes today as a revised bill sailed through Congress.

This is also covered here and here. Without delving into economics and politics, it’s worth emphasising that Microsoft promoted a scheme that defends ‘fat cats’ like itself while harming poor taxpayers the most. This gets more interesting when considering Microsoft's tax breaks.

Other risky or damaging sources of influence are actual employees, not just lobbyists, who may be hired just temporarily. A company called Lighthouse1 has just appointed as its CEO a former Microsoft executive.

Lighthouse1 has named former Microsoft executive Jeff Young as its president and CEO.

The company is unlikely to be GNU/Linux-friendly then. Why are Microsoft executives leaving anyway?

Internal and/or Financial Problems

There are a lot of headlines out there about a serious Microsoft leak claiming that its workforce is already affected negatively. This IDG report suggests that Microsoft’s pain is showing more than before.

Microsoft hiring freeze? From recession to depression

Confusion arises over Microsoft’s hiring plans. The company issued a memo that hinted at a freeze, one employee said, but a spokesperson denies a freeze.

Here is a more extensive report about this (also from IDG).

Microsoft has instituted a hiring freeze, likely spurred by the worsening economic conditions in the U.S., according to a source close to the company.

Microsoft denies it, but its denial is weak. It’s more like damage control. Here is a summary.

Yesterday, Microsoft (NASDAQ: MSFT), the world’s largest software company, said it was taking a look at hiring. That is probably code for the firm saying it plans to cut or level out expense growth.

According to Reuters, Microsoft said, “Given the current economic environment we are taking the prudent step of reviewing our hiring plans and will make some adjustments as appropriate.”

The Microsoft-adjunct press has had its own take, though it’s as biased as always. Spendings at Microsoft may be suspended too, according to some other reports.

The axing at Microsoft, which was mentioned recently on at least a couple of occasions [1, 2, 3], could have a wider effect, according to this op-ed that alludes to Ensemble Studios.

Is Microsoft’s Xbox 360 studio Rare next on the chopping block?

A couple of days ago I wrote a story about how Microsoft announced the closure of one of its first party studio, Ensemble Studios. The stated reason behind this decision to close one of its studios was due to lack of scalability. In other words, Microsoft execs felt that Ensemble as a venture could not grow profitably. This raises an interesting question; could the same fate fall upon Rare as well?

This was followed by this report from the same site.

Xbox 360 fans angry at Microsoft studio Rare for not listening to them

Microsoft’s first party studio Rare has been in the video game news recently due to some criticism it has received by Peter Moore, former head of Microsoft Game Studios.

The press still covers the Ensemble Studios shocker.

It’s hard to believe that any developer making a game based on Halo could be shut down for financial reasons, but that’s the fate awaiting Dallas-based Ensemble Studios.

Emphasis is to be put on “financial reasons.” Previous posts about this subject contained more examples of discontinued or shut-down Microsoft products and services.

Outages

Problems with XBox run deeper and there was a prolonged outage last week.

An unplanned outage hit Microsoft’s Xbox Live service starting Tuesday night, leaving online gamers unable to connect.

There was downtimes for Zune as well. This is not a way to market Microsoft products. It inspires no confidence as the LSE downtimes repeatedly show.

Iffy Outlook

According to the following report from India, Microsoft is poised to lose billions of dollars.

The cut in the IT budgets of the revered investment banks like Lehman Brothers and Merrill Lynch due to their failure may lead industry giants like U.S. based Microsoft and California based Cisco to lose $4.3 billion in orders next year. While Cisco earns about three percent to four percent of annual revenue from the U.S. financial industry, Microsoft accounted for 22 percent last year.

Even some analysts are not entirely optimistic, to say the very least.

Microsoft will be hurt by financial crisis, RBC analyst says

The devastating U.S. financial crisis will hurt software giant Microsoft Corp.’s bottom line this holiday season as shoppers tighten their purse strings, RBC Capital Markets says.

Cash Cow (Office) Under Fire

One of Microsoft’s few profitable products (and the most important one too) meets another challenge from Google.

Does Google Apps pose a threat to Microsoft? No way, said Microsoft CEO Steve Ballmer in April 2007. He made his point clear to attendees at the USA Today CEO Forum: “[Google has] come out with what I might call—what’s the politically correct way of saying it?—they’ve come out with some of the lowest functionality, lowest capability applications of all time.”

The room filled with laughter.

Ballmer—for one—is not laughing now. That hubris and short-sightedness is coming back to haunt him.

Microsoft is now taking the threat from Google quite seriously: In July 2008 COO Kevin Turner was dispatched to consumer-products giant Procter & Gamble to dissuade P&G from moving to Google Apps—and ditching Microsoft.

This further justifies Microsoft’s fear of Google, which it constantly attacks.

Weakening Market Grip

Not many flattering reports have appeared in these difficult times. Tech Radar asks whether Microsoft has lost it and Salon, which is typically ultra-pro-Microsoft, writes to say that “Microsoft doesn’t matter anymore.”

Rejected by Yahoo!, outgunned by Google and humiliated by Apple, Microsoft is fighting for its very survival

 

Yes, Microsoft has made a truckload of money on smart business decisions in the past. But these days, it seems like its just pissing its future away by releasing products that no one is actually interested in. If this is the brilliant strategy that Steve Ballmer is planning on using to take on Apple and Google as Gates fades into the sunset, he might want to reconsider.

Another article says that Microsoft struggles to innovate or lead in the Web era. The Register presents an example of a new struggle.

Earlier this year, when Microsoft was making a play for Yahoo, I observed that the Internet is not in Microsoft’s DNA. Ballmer’s acknowledgement of Microsoft’s slow move into search, and Mundie’s demonstrations at EmTech indicate that it continues to struggle to establish itself as a true leader in Internet innovation

 

Microsoft’s Hotmail hybrid struggles to life

The long-awaited merger of Microsoft “classic” and “full” Hotmail services has got off to spotty and painful start.

Microsoft is not as invincible as it wants you to believe. The hype in the press can be hugely deceiving and possible financial fraud [1, 2] puts an eternal grey cloud over Microsoft’s extravagant claims.

“There is such an overvaluation of technology stocks that it is absurd. I would include our stock in that category. It is bad for the long-term worth of the economy.”

Steve Ballmer

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

17 Comments

  1. RyanT said,

    October 5, 2008 at 5:43 pm

    Gravatar

    Ballmer is wrong when he says GDocs isn’t a threat.

    A classic sign of disruption as I mentioned previously – a disruptive product can be epitomised by “crappy products for non consumers” – Google Docs might be low functionality now, but if Google plays its cards right and slowly increases functionality while still keep the web based appeal intact, they’ve got a sure fire way of taking out Word.

    Couple that with a failing games division, a lack of a Google competitor, and an OS that will become irrelevant going forward through diversification of devices and extra needed mobility and customisability, and they have a shaky future.

  2. RyanT said,

    October 5, 2008 at 6:01 pm

    Gravatar

    Also, try taking a look at this:

    http://www.guardian.co.uk/media/2008/oct/05/media.microsoft.ballmer

    http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=windows&articleId=9116258&taxonomyId=125&intsrc=kc_top

    http://machinist.salon.com/blog/2008/10/03/microsoft_search/

    The software worlds business models are changing, and Microsoft is stuck in the 90′s of OS and Office.

  3. Roy Schestowitz said,

    October 5, 2008 at 6:14 pm

    Gravatar

    The theory of disruption says that they absolutely must drop the existing model and adapt (not overnight) because they fight something that cannot be stopped. There are examples of inability to react on time (Microsoft is already many years late), e.g. the US steel industry.

  4. David Gerard said,

    October 6, 2008 at 10:17 am

    Gravatar

    The XBox 360 is an example of Microsoft snatching defeat from the jaws of victory. They made a good gaming console, with great games, that should have been profitable … then they cut so many corners in manufacturing that it’s stuck with an indelible reputation as a lemon. The red ring of death is as iconic amongst gamers as the blue screen. How on Earth did they flub this one?

  5. Roy Schestowitz said,

    October 6, 2008 at 11:14 am

    Gravatar

    The failure rate (2 in 3) is outrageous enough. What’s more bothersome, however, is the way Microsoft handled the truth:

    Microsoft Gags Own Employees to Put Customers’ Life at Risk
    http://boycottnovell.com/2008/09/15/microsoft-gags-own-employees/

  6. AlexH said,

    October 6, 2008 at 11:45 am

    Gravatar

    2 in 3 XBox 360s fail?

    Where does that figure come from?

  7. Roy Schestowitz said,

    October 6, 2008 at 12:06 pm

    Gravatar

    “Come from” or “leak”?

    I suppose you did not follow the URL above.

  8. AlexH said,

    October 6, 2008 at 12:10 pm

    Gravatar

    I did follow the URL above, but there were a couple of ~60% figures: one which seemed to refer to manufacturing faults, another which referred to the proportion of returned units having general hardware faults.

    I’ve seen estimates of the actual customer return rate between 15% and 40%, hence me asking where your figure comes from?

    I’m not a gamer, so I don’t really care what Microsoft widdles its money away on, I’m just interested.

  9. Roy Schestowitz said,

    October 6, 2008 at 12:20 pm

    Gravatar

    Xbox 360: 61 per cent failure rate
    http://www.360-gamer.com/news.asp?id=964

    Gamers Say Microsoft Understates Xbox Problems

    “Game Daily BIZ, a gaming industry publication, reported that the anonymous source tallied that of the 300 consoles EA has received, 30-50 percent of them have failed.

    http://www.consumeraffairs.com/news04/2006/08/xbox_gamers02.html

    HTH.

  10. AlexH said,

    October 6, 2008 at 12:36 pm

    Gravatar

    Well, it does help a bit, but it still seems a bit high – the 61% figure is from a survey which mostly got responses from angry owners. I think you might be being a bit credulous with that one.

    I think a failure rate of 20-30% – which seems more reasonable to me based on the facts – is disastrous enough without having to pump it up. YMMV.

  11. Roy Schestowitz said,

    October 6, 2008 at 2:24 pm

    Gravatar

    Published just in time (moments ago):

    http://www.itwire.com/content/view/21017/1063/

  12. AlexH said,

    October 6, 2008 at 2:33 pm

    Gravatar

    Given they’ve just dropped the price, I doubt they’re about to throw the towel in somehow.

  13. Roy Schestowitz said,

    October 6, 2008 at 2:37 pm

    Gravatar

    Wet towels made of cash, yes? :-)

    Sony loses lots of money too, I don’t doubt it. Earlier on I saw a report suggesting that both might quit this business at the end (after this ‘generation’).

  14. AlexH said,

    October 6, 2008 at 4:22 pm

    Gravatar

    To be honest, that wouldn’t surprise me at all.

    I think I’m right in saying that until Playstation 2 or Gamecube (I can’t remember which, but certainly pre-Xbox) it wasn’t at all common for manufacturers to sell consoles at a loss for any period of time. Now, it seems virtually de rigeur for them to be loss leaders.

    I wonder if Sony only care about Playstation because it’s pushing blu-ray, which is probably going to bring in as much revenue as the games do if not more.

    It’s somewhat amazing Nintendo are still in the game at all – I think they got slightly lucky with the Wii and I don’t think they can replicate that success. The current generation of consoles will probably be around with us for a little while, but then, I guess PS2 has been around for ages now.

  15. Roy Schestowitz said,

    October 6, 2008 at 4:29 pm

    Gravatar

    Sales of consoles (and games) shouldn’t so rosy this December. Microsoft has just shut down a studio for financial reasons.

    Investors sent the Redmond, Wash.-based company’s stock down $1.23, or 4.7 percent, to $25.09 in midday trading. The stock is still above its 52-week low of $23.50 set Sept. 19.

    http://www.businessweek.com/ap/financialnews/D93L3JGO0.htm

    it’s down about 7% now.

  16. AlexH said,

    October 6, 2008 at 4:38 pm

    Gravatar

    Everything is down at the moment, though.

    What remains to be seen is who is going to come through this Christmas in some of the toughest trading conditions in many years. Consoles will be down, but I doubt by a large amount – children’s gifts are the last to go in a recession.

  17. Roy Schestowitz said,

    October 6, 2008 at 4:48 pm

    Gravatar

    Yes, that’s what I’ve been reading too (and not from those with vested interest).

    Regarding Microsoft, the weakening of software megacorps in general can advance Free software and further weaken an already-dysfunctional patent regime.

What Else is New


  1. Koch Brothers and Big Oil Could Not Buy the Decisions in Oil States, SAS

    In Oil States Energy Services v Greene’s Energy Group, a case which Koch-funded think tanks meddled in (including those whose panel guests send me threatening legal letters), ends up with dissent from a Koch-connected Justice citing or quoting those very same Koch-funded think tanks



  2. The European Patent Office (EPO) Wastes a Lot of Money on External PR Agencies for Battistelli's 'Heist'

    The EPO's management is once again scattering/throwing EPO budget at PR agencies and media companies (publishers/broadcasters) to disseminate a bunch of puff pieces and virtually ignore the very obvious conflict of interest, which should be a scandal on par with that of FIFA (resulting in the arrest of its boss, Mr. Blatter)



  3. Today's EPO is Not Compatible With the Law and It's Grossly Incompatible With Truth and Justice

    Today, once again, the EPO openly advocates software patents while media promotes loopholes (notably hype waves)



  4. Quick Mention: As Expected, the US Supreme Court Cements PTAB's Role With Trump-Appointed Gorsuch Dissenting

    Oil States has been decided and it's very good news for the Patent Trial and Appeal Board (PTAB); even Conservatives-leaning Justices support PTAB



  5. Links 24/4/2018: Preview of Crostini, Introducing Heptio Gimbal, OPNsense 18.1.6

    Links for the day



  6. Patent Maximalists Step Things Up With Director Andrei Iancu and It's Time for Scientists to Fight Back

    Science and technology don't seem to matter as much as the whims of the patent (litigation) 'industry', at least judging by recent actions taken by Andrei Iancu (following a hearing before the Senate Judiciary Committee)



  7. Mythology About Patents in the East

    Misconceptions (or deliberate propaganda) about patent policy in the east poison the debate and derail a serious, facts-based discussion about it



  8. Patent Trolls Watch: Red River Innovations, Bradium Technologies/General Patent, and Wordlogic

    A quick look at some patent trolls that made the news this Monday; we are still seeing a powerful response to such trolls, whose momentum is slipping owing to the good work of the Patent Trial and Appeal Board (PTAB)



  9. Holding Benoît Battistelli Accountable After the EPO

    The many abuses and offenses committed by Mr. Battistelli whilst he enjoyed diplomatic immunity can and should be brought up as that immunity expires in two months; a good start would be contacting his colleagues, who might not be aware of the full spectrum of his abuses



  10. Links 23/4/2018: Second RC of Linux 4.17 and First RC of Mesa 18.1

    Links for the day



  11. The Good Work of the Patent Trial and Appeal Board (PTAB) and the Latest Attempts to Undermine It

    A week's roundup of news about PTAB, which is eliminating many bad (wrongly-granted) patents and is therefore becoming "enemy number one" to those who got accustomed to blackmailing real (productive) firms with their questionable patents



  12. District Courts' Patent Cases, Including the Eastern District of Texas (EDTX/TXED), in a Nutshell

    A roundup of patent cases in 'low courts' of the United States, where patents are being reasoned about or objected to while patent law firms make a lot of money



  13. The Federal Circuit's (CAFC) Decisions Are Being Twisted by Patent Propaganda Sites Which Merely Cherry-Pick Cases With Outcomes That Suit Them

    The Court of Appeals for the Federal Circuit (CAFC) continues to reject the vast majority of software patents, citing Section 101 in many such cases, but the likes of Managing IP, Patently-O, IAM and Watchtroll only selectively cover such cases (instead they’re ‘pulling a Berkheimer’ or some similar name-dropping)



  14. Patents Roundup: Metaswitch, GENBAND, Susman, Cisco, Konami, High 5 Games, HTC, and Nintendo

    A look at existing legal actions, the application of 35 U.S.C. § 101, and questionable patents that are being pursued on software (algorithms or "software infrastructure")



  15. In Maxon v Funai the High 'Patent Court' (CAFC) Reaffirms Disdain for Software Patents, Which Are Nowadays Harder to Get and Then Defend

    With the wealth of decisions from the Court of Appeals for the Federal Circuit (CAFC) wherein software patents get discarded (Funai being the latest example), the public needs to ask itself whether patent law firms are honest when they make claims about resurgence of software patents by 'pulling a Berkheimer' or coming up with terms like “Berkheimer Effect”



  16. Today's European Patent Office Works for Patent Extremists and for Team UPC Rather Than for Europe or for Innovation

    The International Association for the Protection of Intellectual Property (AIPPI) and other patent maximalists who have nothing to do with Europe, helped by a malicious and rather clueless politician called Benoît Battistelli, are turning the EPO into a patent-printing machine rather than an examination office as envisioned by the EPC (founders) and member states



  17. The EPO is Dying and Those Who Have Killed It Are Becoming Very Rich in the Process

    Following the footsteps of Ron Hovsepian at Novell, Battistelli at the EPO (along with Team Battistelli) may mean the end of the EPO as we know it (or the end altogether); one manager and a cabal of confidants make themselves obscenely rich by basically sacrificing the very organisation they were entrusted to serve



  18. Short: Just Keep Repeating the Lie (“Quality”) Until People Might Believe It

    Battistelli’s patent-printing bureau (EPO without quality control) keeps lying about the quality of patents by repeating the word “quality” a lot of times, including no less than twice in the summary alone



  19. Shelston IP Keeps Pressuring IP Australia to Allow Software Patents and Harm Software Development

    Shelston IP wants exactly the opposite of what's good for Australia; it just wants what's good for itself, yet it habitually pretends to speak for a productive industry (nothing could be further from the truth)



  20. Is Andy Ramer's Departure the End of Cantor Fitzgerald's Patent Trolls-Feeding Operations and Ambitions?

    The managing director of the 'IP' group at Cantor Fitzgerald is leaving, but it does not yet mean that patent trolls will be starved/deprived access to patents



  21. EPO Hoards Billions of Euros (Taken From the Public), Decreases Quality to Get More Money, Reduces Payments to Staff

    The EPO continues to collect money from everyone, distributes bogus/dubious patents that usher patent trolls into Europe (to cost European businesses billions in the long run), and staff of the EPO faces more cuts while EPO management swims in cash and perks



  22. Short: Calling Battistelli's Town (Where He Works) “Force for Innovation” to Justify the Funneling of EPO Funds to It

    How the EPO‘s management ‘explained’ (or sought to rationalise) to staff its opaque decision to send a multi-million, one-day ceremony to Battistelli’s own theatre only weeks before he leaves



  23. Short: EPO Bribes the Media and Then Brags About the Paid-for Outcome to Staff

    The EPO‘s systematic corruption of the media at the expense of EPO stakeholders — not to mention hiring of lawyers to bully media which exposes EPO corruption — in the EPO’s own words (amended by us)



  24. Short: EPO's “Working Party for Quality” is to Quality What the “Democratic People's Republic of Korea” is to Democracy

    To maintain the perception (illusion) that the EPO still cares about patent quality — and in order to disseminate this lie to EPO staff — a puff piece with the above heading/photograph was distributed to thousands of examiners in glossy paper form



  25. Short: This Spring's Message From the EPO's President (Corrected)

    A corrected preface from the Liar in Chief, the EPO's notoriously crooked and dishonest President



  26. Short: Highly Misleading and Unscientific Graphics From the EPO for an Illusion of Growth

    A look at the brainwash that EPO management is distributing to staff and what's wrong with it



  27. Short: EPO Explains to Examiners Why They Should and Apparently Can Grant Software Patents (in Spite of EPC)

    Whether it calls it "CII" or "ICT" or "Industry 4.0" or "4IR", the EPO's management continues to grant software patents and attempts to justify this to itself (and to staff)



  28. Links 21/4/2018: Linux 4.9.95, FFmpeg 4.0, OpenBSD Foundation 2018 Fundraising Campaign

    Links for the day



  29. As USPTO Director, Andrei Iancu Gives Three Months for Public Comments on 35 U.S.C. § 101 (Software Patenting Impacted)

    Weeks after starting his job as head of the US patent office, to our regret but not to our surprise, Iancu asks whether to limit examiners' ability to reject abstract patent applications citing 35 U.S.C. § 101 (relates to Alice and Mayo)



  30. In Keith Raniere v Microsoft Both Sides Are Evil But for Different Reasons

    Billing for patent lawyers reveals an abusive strategy from Microsoft, which responded to abusive patent litigation (something which Microsoft too has done for well over a decade)


CoPilotCo

RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

CoPilotCo

Recent Posts