Has Microsoft Jumped the Shark?
Posted by Richard Morochove on June 17th, 2006
How will the departure of Bill Gates from full-time involvement with Microsoft affect the software developer? Microsoft’s long-suffering shareholders may finally see a glimmer of hope for a better future.
Suffering shareholders? Gates, still the world’s wealthiest man, isn’t suffering. He remains a major shareholder of the company he co-founded. But for latter-day investors, the ticker tells a depressing tale.
The days of the big increases in Microsoft’s share prices are long gone. Microsoft stock peaked at nearly $60 per share (split adjusted) before the turn of the millennium. Yesterday, it closed at $22.10.
Why are investors so downbeat, despite the fact the software giant is much larger and profitable now than in 1999?
Investors look to the future when judging an investment. Microsoft’s prospects for future growth don’t look great.
Microsoft remains beset by legal challenges, particularly in Europe. More significantly, the company is overly dependent on the continued success of its two big cash cows: Windows and Office. Other aspects of its business are marginally profitable, at best.
New versions of Windows and Office, both due within a few months, haven’t re-ignited the passion of investors. Microsoft Windows has such a large share of the operating system market, there is little room to grow with Windows Vista, other than by tagging along with the slow growth in new PC purchases. Many users of Microsoft Office are largely satisfied with its current capabilities, so they have little interest in purchasing an upgrade.
Microsoft’s top management team reminds me of an aging group of rock superstars, out of touch with current trends, who keep re-packaging their past musical successes in a desperate attempt to milk more money from the public. Microsoft’s Biggest Hits has been followed by Gates’ Golden Greats. Who wants to buy The Very Best of Ballmer?
At some point fatigued buyers will say, “Microsoft, we liked what you did back then, but this is now. Don’t you have anything new?”
Unfortunately, Microsoft’s good products are not new and their new ones are not good. The company fumbled the baton of software innovation, which was picked up by others, such as Google.
I have a lot of respect for Ray Ozzie, the software veteran who will fill Gates’ shoes as Microsoft’s chief software architect. Ozzie was the key talent behind a number of software hits, including Lotus Notes, Lotus Symphony and Software Arts’ VisiCalc. Will new frontman Ray Ozzie play the sweet music that will rejuvenate Microsoft’s stagnating fortunes? He’ll need to pull together a winning creative team to ensure yesterday’s software company remains relevant tomorrow.
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