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

01.25.09

Wrap-Up of Microsoft’s Demise; Units Shut Down

Posted in Finance, Microsoft, Office Suites, Vista, Vista 7, Windows at 5:49 pm by Dr. Roy Schestowitz

Oriskany ship sinks

MICROSOFT CORPORATION, a company that was accused of engaging in financial fraud with similar doubts still lingering and debt around the corner [1, 2, 3, 4, 5], is no longer able to hide its poor health. Since the announcement of the layoffs we have already published:

Today we take a closer look at the points that were not covered in previous posts.

It Hurts

MSN, which is Microsoft’s news Web site, put up a BizJournal article — one that’s titled “Gloom at Microsoft headquarters.”

The morning was appropriately foggy and dark as Microsoft employees came to work today, bracing for details of the unprecedented cutbacks announced by the company before dawn.

Google’s sales rose 18% compared to just 1% from Microsoft and Microsoft employees foresee what’s coming.

Microsoft’s announcement it will lay off 5,000 in its biggest-ever job-cut rippled through the Seattle area on Thursday, further unnerving residents of an already-bruised city of just over 3 million.

The Forbes article above may suggest that this is not over and another Forbes article is titled “Microsoft’s Massacre.” Microsoft’s business model, just like Novell's, is dying.

It’s Going to Get Worse

Analysts are saying that Microsoft’s layoffs are not sufficient and this assertion is consistent with previous words from several independent analysts [1, 2]. The scale of the layoffs is simply too low.

The unprecedented layoffs and other cutbacks announced yesterday by Microsoft haven’t appeased Wall Street. Microsoft shares are down more than 6 percent since the news came out, and some analysts assert that the company needed to go much further.

Here are some more details.

Microsoft Corp. (MSFT) announced the first significant layoffs in its 34-year history Thursday. Investors, analysts and even some employees say the cuts likely won’t be the software giant’s last.

The Redmond, Wash.-based company said it would eliminate 5,000 jobs, or 5% of its workforce, over the next 18 months, as well as cut some travel and other expenses. The cuts are needed to bring the company’s costs in line with the rapidly slowing sales of its flagship Windows software, which are dropping along with sales of PCs.

Which areas of the giant company’s operations will be affected – and how deeply – remains unclear. But investors and analysts say the company hasn’t moved dramatically enough to turn its fortunes around. And on Internet chat boards, some Microsoft staffers said they were concerned the day’s layoff announcement was the beginning of a drawn-out staff reduction.

Beginning of the End?

Microsoft’s fan press, the Motley Fool, has actually done the unimaginable by urging people to sell away Microsoft shares.

Vista: Microsoft lost nearly half its value in 2008 as it faced a tough year like many other tech companies. But it wasn’t all due to events outside the company — many argue that Vista did a spectacular job at lowering the company, as the unpopular operating system was shunned by many corporate users.

According to this column, “for Microsoft, the pain is just beginning.” The explanation is long.

And Microsoft’s stock? On Thursday, as Microsoft was announcing the layoffs, one cable-TV reporter commented that MSFT has “gone nowhere for years.” Actually, the stock has lost nearly half its value over the past year.

So now, for the first time, Microsoft — like IBM 16 years ago — is resorting to a major layoff.

It won’t be enough, any more than a layoff was enough for IBM.

Microsoft has been coasting for years on Windows and Office. Those have been the cash cows that enabled the company to fumble its way through years of halfhearted “innovation” and watered-down imitation. Microsoft has lost ground (or never gained a footing) in search versus Google, music players versus Apple, Web browsers versus Firefox.

Worse still, Microsoft has forgotten how to improve even those cash-cow products. Office 2007 is a mess for usability. Vista is a disaster in almost every way.

Mish Shedlock calls Microsoft “An Aging Gorilla”:

Microsoft is an aging Gorilla facing many battles. The first is declining PC sales as discussed above. A second more serious problem is that it’s products are too expensive and too buggy. A third problem of Microsoft is a shift to web-based services.

Cash Cows Starve

Revenue extracted from Windows and Office already declined at the beginning of 2008, but it continues to get worse for these core products which are among the few that are actually profitable.

Job cuts call for Microsoft to rethink Windows client

[...]

[E]ven Microsoft acknowledged Thursday that a flat PC market could continue to affect the overall Office business, while the entertainment and devices unit’s performance had more to do with holiday sales of the Xbox 360 game console than overall growth in that market.

IDG is citing its bosses at IDC (Al Gillen in this case). They spin it in favour of Microsoft, as they very typically do. What can Microsoft do now other than engage in new viral marketing campaigns for Windows? At the moment, Microsoft markets a product that is not even on the market (Vista 7) while neglecting those which do exist. It’s consistent with the evangelism strategy which Microsoft adopted.

“My initial evaluation of Windows 7 shows that it’s really just Vista with a fresh coat of paint.”

Randall Kennedy, InfoWorld (IDG)

Vista 7

Need to Eliminate Products

Microsoft needs to eliminate products. The question is, “which ones?”

Well, Om Malik from the broadband arena believes that Microsoft should concede its main race on-line.

Should Microsoft Reconsider Its Search Efforts?

[...]

As the company tries to get its act together, one question comes to mind: Should it give up on its search and online advertising efforts? The division brought in $866 million in revenues but lost $471 million.

The Wall Street Journal mocks the Zune and asserts that it’s time for the Zune to just go.

At its much faster rate of decline, the Zune player looks like it’s headed from low to no market share — unless Microsoft jazzes up the product soon.

The Zune is doing very badly, according to the following new report:

Sales for the Microsoft Zune MP3 player tumbled by 54 percent during the last quarter while the Apple iPod grew more than 3 percent in market share. The battle of the multimedia players might have met its final match.

Microsoft Corp reported last week that sales on its Zune MP3 player tumbled by 54 percent during the last quarter. The Zune rival, Apple Inc’s iPod, grew more than 3 percent in market share and is seen as the dominate music player. While the software giant is cutting divisions that don’t have improved sales, some analysts wonder if Zune is on the way out.

This troubled Zune makes headlines only when disaster strikes.

Another site contends that Microsoft is not cutting down in the right departments.

Seriously, how is it that, when the ax comes down, you pick the people that make you look good? Why don’t you fire the people who get you sued? Because, I tell you, the people who really love Microsoft have no idea what the big deal is with Office 2007, don’t care about new calculators in 7, and surely wouldn’t pinch a loaf for a more-compliant IE8.

But go ahead, divest yourself from the Zune. I was going to buy a Cowon, anyway.

Microsoft put some other products in the firing line, though.

Eliminated Products, Divisions

There are various elements in Microsoft that are affected immediately. One of them is another game studio which is shut down. Ensemble, which we mentioned in [1, 2, 3, 4, 5, 6], is lonely no more.

[I]t does seem that tips that the company’s Entertainment & Devices (E&D) unit (Windows Mobile, Xbox, Zune) was impacted most heavily by the first round of layoffs. And it’s increasingly sounding like the games side of the house bore the brunt of the E&D cuts.

Microsoft has closed completely its Aces Studio, the game group that developed and maintained Flight Simulator, sources close to the company confirmed. Aces’ other franchises include Combat Flight Simulator and Train Simulator.

This is also covered here:

There are other dead services, a pile of which has been growing since last year.

According to this, Popfly, the .NET poison that we mentioned in [1, 2, 3, 4], might get the axe too.

Microsoft on Friday said that it may discontinue its free Popfly service that lets non-programmers build Web 2.0 apps.

Popfly “is in a transitional phase,” said a Microsoft spokeswoman on Friday. “We have no other details at the moment.”

Popfly is essentially poison on the Web, just like Silverlight [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12]. It’s designed to harm Web standards which make the Internet a commodity. It lumps proprietary elements onto it.

Another big setback is cancellation (Microsoft prefers saying “postponement”) of a massive datacentre in Iowa.

A day after reporting flat revenue for its online services business, Microsoft said it is postponing construction on a planned data center in Iowa.

It’s one of several other cost-cutting measures the software giant announced along with a disappointing financial report Thursday, including laying off around 5,000 people, reducing the use of vendors and lowering marketing spending.

There is also covered here and more news is likely to come regarding products and services that are taken off the shelves and called off, respectively. Withdrawals are urgently needed.

Monetary Problems

Hidden deep inside a stack of papers was this nugget of information.

Microsoft paid the federal government $3.1 billion between July and September of last year to settle a tax debt that was discovered during an Internal Revenue Service audit, the company disclosed in a regulatory filing.

We’ve already summarised Microsoft's tax evasion stories.

It’s very obvious that Microsoft is stressed for cash when it aggressively sues those who spread its software and it’s doing it again, along with its funded ally/pressure group, the BSA [1, 2, 3, 4].

Microsoft Gulf coordinates with Bahrain Ministry of Information on latest software piracy offensives in Manama

Microsoft GulfMicrosoft GulfLoading…, a member of the Business Software Alliance (BSA), the leading global organisation that is the voice of the world’s commercial software industry and its hardware partners before governments and in the international marketplace, has announced successful anti-piracy raids by the Bahrain Ministry of InformationBahrain Ministry of InformationLoading… (MoI) on two resellers operating in Manama. The offensives highlighted Bahrain’s comprehensive nationwide anti-piracy program and its thrust to make the capital city in particular a model of a piracy-free environment.

To summarise and to close off this tour through reports, regardless of the scale of future layoffs, one must remember to keep track of contractors and temporary workers, which is hard because Microsoft keeps it secret.

Microsoft says it plans deeper cutbacks in contract workers

[...]

Microsoft doesn’t report publicly the number of contractors who work for the company through job agencies. There have already been reports that the company hasn’t been renewing many contracts as they come due. Overall, Microsoft said it reduced operating expenses by $600 million in the recent quarter, and no doubt contractor cuts were part of that.

As we pointed out the other day, since not all staff is permanent, a lot of the layoffs (they don’t officially count or qualify as “layoffs”) are not visible to the public.

Remember the rule of thumb: things are much worse than Microsoft needs us to believe. It’s not unique to Microsoft, either (remember Enron?).

“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

10 Comments

  1. oiaohm said,

    January 25, 2009 at 6:09 pm

    Gravatar

    Apparently MS at long last it the penguin packed iceberg. Question can they patch the holes before its too late.

  2. The Mad Hatter said,

    January 25, 2009 at 6:39 pm

    Gravatar

    Good article by Frank. I like his writing style.

  3. The Mad Hatter said,

    January 25, 2009 at 8:26 pm

    Gravatar

    Just curious – where did you get the photo?

  4. Roy Schestowitz said,

    January 25, 2009 at 8:29 pm

    Gravatar

    Wikimedia.

  5. ZiggyFish said,

    January 26, 2009 at 2:15 am

    Gravatar

    Microsoft has forgotten how to improve even those cash-cow products. Office 2007 is a mess for usability

    This is interesting as Vista 7 will enforce such usability issues (Vista 7 will include more use of ribbon interfaces). Maybe we already know the outcome of Vista 7.

  6. Roy Schestowitz said,

    January 26, 2009 at 3:31 am

    Gravatar

    The assumption is that people will shell out money only for something that’s different (or looks different).

    It’s a bit like “New Coke”.

  7. ZiggyFish said,

    January 26, 2009 at 4:47 am

    Gravatar

    Roy,

    I see it as an anti-competitive move (under the radar). It then makes Linux’s (and also Mac’s) look old, and out of date. But the question is can Microsoft pull this off, can they make the change and have users conform with this new interface?

  8. Roy Schestowitz said,

    January 26, 2009 at 4:53 am

    Gravatar

    What’s anti-competitive here is the vapourware tactics, which can be a violation of the law.

  9. coffee said,

    February 13, 2009 at 11:56 am

    Gravatar

    I know what Microsoft should do to improve their Zune sales: get someone besides the big, hairy guy with a Zune tattoo to be their marketing front man/woman

  10. Roy Schestowitz said,

    February 13, 2009 at 11:57 am

    Gravatar

    They apparently tried to make up Obama as “evidence”.

What Else is New


  1. Patrick Corcoran is Innocent, Yet Battistelli Will/May Have the Power to Sack Him Next Month (in DG1)

    The EPO's Administrative Council does not want to even mention Patrick Corcoran, as merely bringing that up might lead to the suggestion that Benoît Battistelli should be fired (yes, they can fire him), but to set the record straight, at the EPO truth-tellers are punished and those whom they expose are shielded by the Administrative Council



  2. Patent Trolls Are Going Bust in the United States (Along With the 'Protection' Racket Conglomerates)

    RPX continues its gradual collapse and patent trolls fail to find leverage now that software patents are kaput and patent opportunists struggle to access Texan courts



  3. IBM's Manny Schecter is Wrong Again and He is Attempting to Justify Patent Trolling

    In yet another dodgy effort to undermine the US Supreme Court and bring back software patents, IBM's "chief patent counsel" (his current job title) expresses views that are bunk or "alternative facts"



  4. EPO Administrative Council Disallows Discussion About Violations of the Law by Benoît Battistelli

    The EPO crisis is not ending for the Administrative Council does not want to tackle any of the obvious problems; Patrick Corcoran is a taboo subject and Ernst is coming across as another protector of Benoît Battistelli, based on today's meeting (the second meeting he chairs)



  5. Links 13/12/2017: GIMP 2.9.8, Fedora 25 End Of Life, AltOS 1.8.3

    Links for the day



  6. Judge Corcoran Got His User ID/Desk Back (as ILO Asked), But Cannot Perform Actual Work

    The latest update regarding Patrick Corcoran, whose 3-year ordeal is far from over in spite of ILO's unambiguous rulings in his favour



  7. The End of Software Patents and PTAB's Role in Enforcing That End

    Software patents are fast becoming a dying breed and the appeal board (PTAB) of the USPTO accelerates this trend, irrespective of patent immunity attempts



  8. No, China Isn't Most Innovative, It's Just Granting a Lot of Low-Quality Patents

    Patent extremists are trying to make China look like a role model or a success story because China grants far too many patents, spurring an explosion in litigation



  9. Battistelli-Campinos Transition Will Be a Smooth One as the Administrative Council Remains the Same and the Boards Still Besieged

    A rather pessimistic (albeit likely realistic) expectation from tomorrow's meeting of the Administrative Council, which continues to show that no lessons were learned and no strategy will be altered to avoid doom (low-quality patents and stocks running out)



  10. Links 12/12/2017: New BlackArch ISO and Stable Kernels

    Links for the day



  11. German Media Helps Cover Up -- Not Cover -- the Latest EPO Scandal

    EPO-Handelsblatt attention diversion tricks may be effective as German media barely shows interest in one of the EPO's biggest scandals to date



  12. PTAB Haters Fail to Guard Bogus Patents, But They Still Try

    Three Affiliated Tribes probably won't enjoy sovereign immunity from PTAB, Dennis Crouch won't manage to slow down PTAB, and patent litigation will stagnate as bad patents perish before they even land in a lawsuit



  13. Team UPC's Tilmann Defends Rogue Vote at 1 AM in the Morning With Just 5% of Politicians (Those With Vested Interests) Attending

    Just when German democracy is being stolen by a legislative coup (in the dead of night when 95% of politicians are absent/asleep) there's someone 'courageous' enough to rear his ugly head and attempt to justify that coup



  14. The Mask Falls: Lobbyist David Kappos Now Composes Pieces for the Patent Trolls' Lobby (IAM)

    David Kappos, a former USPTO Director who is now lobbying for large corporations that derive revenue from patent extortion, is writing for IAM even if his views are significantly biased by his aggressive paymasters (just like IAM's)



  15. The EPO Protest Tomorrow Isn't Just About Judge Corcoran But About the EPO as a Whole

    PO staff is about to protest against the employer, pointing out that "Battistelli is still showing a total and utter lack of respect not only for his staff and their rights but also for the Administrative Council and for the Tribunal"



  16. Claim: Judge Corcoran to Be Put Under Benoît Battistelli's Control in DG1

    Benoît Battistelli, who openly disregards and refuses to obey judges (while intervening in trials and delivering 'royal decrees' whenever it suits him), may soon gain direct control over the judge he hates most



  17. The European Patent Organisation Refrains (For Nearly a Week) From Speaking About Battistelli's Abuses as Judged by ILO Tribunal

    The EPO's silence on the matter of Patrick Corcoran is deafening; to make matters worse, the EPO continues to pollute media and academia with money of stakeholders, with the sole intention of lobbying and misleading news coverage (clearly a disservice to these stakeholders)



  18. Carl Josefsson Lets Judge Patrick Corcoran Come Back to Work at the EPO

    After initial reluctance to obey/respect the rulings from the ILO (security staff declining access) there is official permission for Patrick Corcoran to enter and resume work (following 3 years of injustice against him)



  19. Bristows is Being Hammered With Negative Comments For Its Unitary Patent (UPC) Lies

    The Unified Patent Court (UPC) is practically dead in the UK and Ireland; Bristows, nevertheless, continues with its desperate spin



  20. Links 11/12/2017: Linux 4.15 RC3, Debian 8.10 and Debian 9.3

    Links for the day



  21. Judge Corcoran Turns to His Government for Help and EPO 'House Ban' is Finally Lifted

    Sources that are very reliable say that Patrick Corcoran is coming back to work, however it's now clear when and how long for



  22. Raw: Battistelli's Control/Domination Over the Boards of Appeal

    An old EPO document internally voicing concerns about the lack of independence at the Boards of Appeal



  23. Raw: Conflicts of Interest of EPO Vice-President

    An old EPO concern regarding structural collisions and mixed loyalties



  24. Microsoft-Connected Patent Trolls Are Increasingly Active and Microsoft is Selling 'Protection' (Azure Subscriptions)

    There are several indications that Microsoft-connected shells, which produce no products and are threatening a large number of companies, are inadvertently if not intentionally helping Microsoft sell "indemnification" ("Azure IP Advantage," which echoes the Microsoft/Novell strategy for collecting what they called "patent royalties" one decade ago)



  25. Yes, RPost is Definitely a Patent Troll and Its Software Patents Are at Risk Thanks to Alice

    The latest whitewashing (or reputation-laundering) pieces from Watchtroll, which tries to justify patent-trolling activities with software patents, typically in the Eastern District of Texas



  26. The Latest Scams in the Patent World

    Examples of 'dirty laundry' of the patent microcosm, which it understandably does not like covering (as it harms confidence in their services/advice)



  27. Patents Are Becoming a Welfare System for the Rich and Powerful

    A culture of litigation and more recently the patenting of broad industry standards may mean that multi-billion dollar corporations are cashing in without lifting a finger



  28. Unlike the Mobile Domain, When it Comes to Cars Patent Lawsuits Remain Rare

    An optimistic note regarding the relatively low-temperature legal landscape surrounding advanced automobiles, even though patents are being amassed on software in that domain



  29. The Federal Circuit Rules (Again) in Favour of Section 101/Alice, Koch-Funded CPIP Tries to Overturn Alice at the Supreme Court

    The US Supreme Court's decision on Alice continues to have a profoundly positive impact (except for trolls) and Koch-funded academics try hard to compel the US Supreme Court to reverse/override Alice (so far to no avail)



  30. Next Director of the USPTO Parrots Talking Points of Patent Extremists and Their Lobbyists

    The next USPTO boss (still subject to official confirmation) may be little more than a power grab by the litigation and patenting 'industry', which prioritises not science and technology but its own bottom line


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