Microsoft profit rises to $3 billion

Discussion in 'Apple, Inc and Tech Industry' started by IJ Reilly, Jul 20, 2007.

  1. IJ Reilly macrumors P6

    IJ Reilly

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    #1
    These numbers sound mammoth, but what's interesting are the forecasts for growth opportunities in the future, which appear to be dim, the number of unprofitable businesses Microsoft has taken on, and the erosion of their core business. Is it too soon to call Microsoft "beleaguered?"

    http://www.latimes.com/business/la-fi-microsoft20jul20,1,656625.story
     
  2. nbs2 macrumors 68030

    nbs2

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    #2
    The question is whether or not the unprofitable will become profitable. I think that this may be a smarter move - saturation and rampant piracy of their OS is going to limit growth in the future, but investing in hardware development and other industries that are more difficult to duplicate, that are losing them money now, should pay off down the road. I wouldn't call them beleagured, but I do think we will see a core shift to something more Apple-like with more vertical integration.
     
  3. IJ Reilly thread starter macrumors P6

    IJ Reilly

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    #3
    It hasn't happened yet, and they've been pursuing this strategy for 15 years, at least. There's only so much money even Microsoft can afford to throw down rat-holes. Just look at the year-over-year Xbox sales. Not exactly a triumph, is it?

    As a comparison we all can easily understand, look at how Apple has expanded their business beyond their core -- each time, profitably. This is how businesses grow, not by creating one money-losing initiative after another with hopes and plans that some day some way they will eventually become profitable.

    If not beleaguered, at the very least, Microsoft's best days appear to be behind them. They leveraged the OS for all it was worth, and are now left with few places to turn for growth.
     
  4. nbs2 macrumors 68030

    nbs2

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    #4
    As a software maker, yes, I have to agree with you.

    But, I can't see MS going down in flames to the dustbin of history. With the cash that they produce, even another 15 years of lost ventures may be survivable. But, I do expect that somewhere among the legions of MS supporters there is someone with basic leadership skills. I don't think that MS will ever be able to innovate, but they will become something of a omnipresent mainstay - something like 3M. 3M makes a lot of good products and has solid earnings, but what major products have they developed since Post-Its?
     
  5. IJ Reilly thread starter macrumors P6

    IJ Reilly

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    #5
    That's a good analogy. Maybe better yet is General Motors. Like GM, Microsoft can continue to generate cash and survive, but with limited growth. A contraction of their core business might even be ahead, which would make them even more like GM, struggling to figure out how to replace the cash flow with new products. The problem is, I don't think anyone at Microsoft has any comprehensive vision for the direction of the company. They've been too spoiled by the amount of cash they've historically be able to generate from their OS and software businesses to think long-term and strategically. Their new products seem reactive and all over the map, not to mention, unprofitable.
     
  6. nbs2 macrumors 68030

    nbs2

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    Your comparison to GM brings an interesting similarity to mind. During each company's heydey, you saw employees being treated almost royally. GM overextended with the UAW, and is paying for it now. I wonder it MS (along with Google, etc) will get burnt. Clearly GM made commitments that were based on future earnings while the techs are funding with current, but I wonder if the expectation of a certain level of treatment will cause issues. Anyway, sorry about wondering off.

    As much as I hate the people that constantly bring him up, I think that Steve Balmer is poorly placed. He seems to be a strong operator when given a vision and a command, but he doesn't seem to think outside of convention. That thinking will keep MS going forever - Office isn't going anywhere. But his reactionary nature may be to blame for what you point out is wrong with their product line. It's going to take some internal anger to cut down the poor performers and focus on strengths.

    I'm trying to figure out which pies MS is involved in:
    • OS
    • productivity software
    • gaming software
    • utility software
    • internet software (Live, Hotmail/MSN, etc)
    • direct PC accessories (mice, keyboards, etc)
    • indirect PC accessories (Zune, etc)
    • console hardware
    • what am I forgetting?
     
  7. TheBobcat macrumors 6502

    TheBobcat

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    #7
    While it might fall under OS, I think MS has been pushing Windows Mobile hard, as well as things like CE and XPE for other consumer devices. As more complex small specific devices emerge, having strong footholds in those areas will be key, as Apple has apparently recognized recently with its OSX-based devices.
     
  8. IJ Reilly thread starter macrumors P6

    IJ Reilly

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    #8
    Good points. By the 1950s GM was viewed as the most important company in the United States and hugely dominant within their industry. They were a virtual monopoly, and in large part responsible for the shakeout in the auto industry during the '50s and early '60s which resulted in the "big three" auto companies, of which GM was easily the biggest. They didn't need to do much innovating to compete, so they didn't much try.

    I think Microsoft today is historically where GM was during the late 1960s. They're coasting. Probably Microsoft isn't going to face the kind of sea-change crisis GM faced during the '70s with the gas shortages and the Japanese car invasion but in a way they already seem more desperate to find new markets.

    I agree, Ballmer doesn't cut it as a CEO. His main qualification for the job is being an old FOB. Inherited leadership is another sign of a failing corporate culture.
     
  9. Shadow macrumors 68000

    Shadow

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    #9
    They need to drop everything except Windows and Office (very profitable) and Xbox (its utter popularity, and I heard that the Xbox 360 just became profitable). Everything else is unneeded.
     
  10. zap2 macrumors 604

    zap2

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    #10
    MS is going to be around for a long time.....if they fall on hard times, they can drop anything not pulling in a profit....Zune, Xbox 360...and they will be fine.


    I doubt MS is going to get in over its head, with new products that don't bring in money. They can try something, and if it still is not working in a few years drop it.
     
  11. IJ Reilly thread starter macrumors P6

    IJ Reilly

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    #11
    They could drop Windows and Office and everything else tomorrow, and start manufacturing wood pulp and sausages, and still survive for decades. They've got that much cash.

    For years, Microsoft's strategy has been to place bets on every horse. About ten years ago, they were buying up products and companies left and right. They were already starting to look desperate. How many of them paid off?
     
  12. CalBoy macrumors 604

    CalBoy

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    #12
    At the moment, they can go on for quite some time without making much money, but it can't last long. All it takes is a few quarters of losses, and the stock will plummet. A loss of market cap can hurt a business as much as a loss in profits.

    Even if Microsoft stops making Zune and XBox tomorrow, there are still liabilities they have to be prepared for. In addition, what happens when the federal case reopens (once Bush is out of office)? Imagine if Microsoft was slapped with a 3-5 billion dollar fine.

    Microsoft is currently at its zenith (it may have even fallen from its zenith already). The thing about mighty empires is that it isn't obvious that they're falling until they've already fallen.
     
  13. sushi Moderator emeritus

    sushi

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    #13
    Back Office
    Exchange Server Software
    Server OS (Currently Windows Server 2003)
     
  14. IJ Reilly thread starter macrumors P6

    IJ Reilly

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    #14
    Not going to happen. The antitrust case is long since settled. The only way it could conceivably be reopened is if a competitor charged them with violations of the settlement, or some entirely new violations, which the DOJ decided to make into a new case. Not very likely, no matter who is in charge at the Justice Department. Now the EU is another story. I don't think Microsoft ever squared themselves entirely with the EU.
     
  15. CalBoy macrumors 604

    CalBoy

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    #15
    Ah well...I'm sure we can find something to charge Microsoft with;) Cheating their way out of justice...how American (writes an American). The Eu and China are going to be a very different case. I put faith in Chinese tacticts to tame Microsoft, esspecially since they were the only country to force Walmart to accept unionized employees.
     
  16. Maui macrumors 6502a

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    #16
    I think the real question for MS (and Apple and everyone else too) is what software is going to use all of the power of the 8-core cpu's that are going to be common in entry-level desktops within a few years. Email and Word hardly need to get much faster (unless someone figures out a new way to type). Virtualization? 3D? Voice recognition? "They" are going to need something or the PC upgrade cycle will to an even greater degree grind more slowly.
     
  17. IJ Reilly thread starter macrumors P6

    IJ Reilly

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    #17
    I charge them with a lack of imagination, bad management, and generally being as dull as paste. Is that a crime? :)

    Well it should be.
     
  18. CalBoy macrumors 604

    CalBoy

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    #18
    It's not a victimless crime. Microsoft gets away with charging high prices for poor products. I'd love to see Office seperated from Microsoft, and its price drop by about 50%.
     

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