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. Great News: While IBM et al Try to Undermine Patent Reform the Supreme Court Deepens the Reform in TC Heartland Case

    In a unanimous decision, with the court ruling 8-0 against TC Heartland, the monkey business in East Texas (beneficial to patent trolls and large businesses that leverage software patents) may have just come to an end



  2. Speculations About Battistelli's End of Term, Campinos at EUIPO, and Failed UPC Ambitions

    Rumours and speculations surrounding the fate of the EPO's leadership now that the UPC gravy train is stuck again and Battistelli's protector, Jesper Kongstad, is about to leave



  3. Martijn van Dam is Wrong to Believe That Battistelli's Abuses Are Somehow Acceptable or Tolerable Because His Term is Possibly Ending

    Coverage of Martijn van Dam’s stance (he is the Dutch State Secretary for Economic Affairs) reveals that economic gain trumps ethics and justice, irrespective of what the law says



  4. Media and Staff Association Elections at EPO and WIPO Are Compromised

    A campaign of abuse (legal bullying) and gifting to the media, combined with a wide-ranging assault on critics who represent the interests of staff, have led WIPO and EPO down the route to totality



  5. New Documents Help Demonstrate That ILO Delivers Institutional Injustice to EPO Employees and Cushions Team Battistelli

    The International Labour Organisation Administrative Tribunal (ILOAT) delivers not justice but merely the illusion of justice, probably in defiance of Article 6 of the European Convention on Human Rights (ECHR)



  6. Leaked: 2017 European Inventor Award Finalists, or Stooges Whom the Tyrant Battistelli Exploits for PR Purposes and Media Manipulation

    The stupidest ceremony in Europe (turning serious science into something sketchy such as Eurovision) is disliked among EPO staff and is exploited by the person who destroys the EPO (Benoît Battistelli) to pretend all is fine and dandy, at huge expense to the Office (as extraordinary as about 5 million Euros for a ~2-hour show)



  7. EPO: Can the Staff Union of the European Patent Office (SUEPO) Still Save It?

    Genuine concerns about the slow process at the European Court of Human Rights (ECHR) and the lack of progress at ILO, which coincide with weakening of the unions and threat to jobs of patent examiners (leaving ordinary Europeans more vulnerable to meritless patent lawsuits)



  8. Links 21/5/2017: Linux 3.18.53, Tizen 4.0

    Links for the day



  9. Cloudflare's Enemy is Software Patents, Not Just One Software Patent or One Patent Troll

    With a bounty of $50,000, which is likely less than the cost of legal defense, Cloudflare looks for help with its own case rather than the underlying issues that need tackling worldwide



  10. Patent Laws -- and Especially Eligibility of Software Patents -- Are Being Hijacked by Large Corporations and Their Front Groups

    Intervention by large multinational corporations and their lawyers, front groups, etc. (like the classic lobbying model) gives room for concern in multiple continents where most software development is done



  11. Links 18/5/2017: Catching Up With the Past Three Days

    Links for the day



  12. The US Supreme Court Consults USPTO Director Michelle Lee Regarding the Patent Trial and Appeal Board (PTAB) Which is Invalidating Software Patents With CAFC's Approval

    Software patents continue to get knocked out by the Leahy-Smith America Invents Act (AIA) whose introduction of PTAB gave a helping hand to companies that are susceptible to abusive litigation (with bogus patents)



  13. IBM and Its Revolving Doors Lobby Are Plotting to Undermine Supreme Court Rulings to Restore Patentability of Software

    IBM has become so evil that it is now trying to steal democracy, label programmers "thieves", and basically attack the rule of law by extra-judicially overturning a Supreme Court decision



  14. 3 Years After the Alice Case at the Supreme Court the Plague of Software Patents is Easier to Cope With

    Litigation figures are down, rejection rates of software patents remain high, and only spin (e.g. cherry-picking) or constant lobbying can save those who used to profit from software patents



  15. The Attacks of Patent Trolls as Outlined in the Media This Past Week

    An outline of some of the latest troll cases to be aware of and their consequences too (e.g. software patents being used to literally shut down entire programs)



  16. Links 14/5/2017: Linux 4.12 RC1 and KDE Frameworks 5.34.0

    Links for the day



  17. Industry Giants Challenge Qualcomm's Patent Practices While the Federal Trade Commission (FTC) Closely Examines Such Behavior

    Scrutiny of Qualcomm's patent aggression and coercion -- scrutiny that can profoundly change the way software patents, SEPs and FRAND are viewed -- as seen in various amicus briefs (amici) from industry giants that are affected



  18. Professor Lisa Larrimore Ouellette Questions Whether Patents Work When Patent Scope is Too Broad

    Citing MIT economist (and MacArthur “genius”) Heidi Williams, Professor Lisa Larrimore Ouellette from Stanford challenges old myths and quotes: “we still have essentially no credible empirical evidence on the seemingly simple question of whether stronger patent rights—either longer patent terms or broader patent rights—encourage research investments.”



  19. OIN is Still a Distraction Unless We Want GNU/Linux to Coexist With Software Patents (Rather Than Eliminate Those)

    Another wave of media coverage by/for the Open Invention Network (OIN) necessitates a reminder of what OIN stands for and why it is not tackling the biggest problems which Free/Open Source software (FOSS) faces



  20. Links 13/5/2017: Neptune Plasma 5 ISO, a Shift to Free (FOSS) Databases

    Links for the day



  21. Countries With a Dozen European Patents Are an Easy Photo-Op 'Sell' for Battistelli While the EPO's Demise is Largely Ignored by the Patent Microcosm

    Behind the façade of legitimacy, the EPO suffers from an incompetent, insecure and delusional boss, whose actions will almost certainly lead to the collapse of both the Office and the entire Organisation (whose founding document he routinely shreds to pieces)



  22. Our Assessment: Unitary Patent (UPC) Will Crumble Along With Battistelli's Regime at the EPO

    A reflection and an opinion on where the EPO stands and what it means for the UPC, which doesn't seem to be going anywhere (it's all talk and lobbying)



  23. The European Patent Office Has a Long History/Track Record of 'Screwing' Contractors

    The European Patent Office (EPO) appears to have quite an extensive track record/reputation for ‘screwing’ contractors and then misusing immunity to get away with it



  24. Links 12/5/2017: Wine 2.8, Kdenlive 17.04.1, NHS Windows Syndrome

    Links for the day



  25. Links 11/5/2017: New OpenShot, GIMP, and GNOME (3.24.2)

    Links for the day



  26. The Sickness of the EPO – Part IX: Using Confidential Medical Records as a Weapon Against Staff

    In defiance/violation of labour laws and medical oaths etc. the EPO is passing around medical information, either for dismissal pretexts or a sort of blackmail -- a serious abuse in its own right



  27. The EPO is in Disarray and Additional Complaints to the European Court of Human Rights (ECHR) May Be Imminent

    Team Battistelli reaps what it has sown, as complaints are being made to a court with “47 member states [that] are contracting parties to the Convention,” (European Convention on Human Rights) according to Wikipedia



  28. By Promoting the UPC, in Defiance of Public Will, the EPO Has Become Patent Trolls' Best Friend

    The patent–industrial complex, aided by the EPO under Battistelli's iron-fisted reign, is trying to convince us that the UPC is coming soon and that it is desirable (it's neither of those things)



  29. Links 10/5/2017: Mesa 17.1, Git 2.13, Qt Creator 4.3 RC1, MINIX 3.4 RC6

    Links for the day



  30. Team UPC Still Twists and Fabricates Statements to Make It Seem Like Unitary Patent is Happening Soon

    The Unified Patent Court (UPC), a terrible system which was envisioned and covertly constructed by those who stand to benefit/profit from injunctions and trolling, is not going anywhere, but media which is dominated by Team UPC would have us believe otherwise


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