Saturday, October 5, 2013

Microsoft’s 603 g Budget

Last month, Microsoft announced the acquisition of Nokia’s devices and services business, securing the survival of Windows Phone for the remaining duration of Steve Ballmers tenure. Here’s a brief look at what is happening with Microsoft:

Microsoft is in a bit of a bind with parts of their software business. Competing free offerings, much slicker than Linux or LibreOffice, are making every future choice a bad one, a bit like Apple’s situation with the iPhone:

  • With Android, Google dialed the price of a mobile operating system to zero for an area where Microsoft had hopes and dreams.
  • Google recently repeated this trick by offering QuickOffice Android free, dialing the price of mobile office software to zero. Even if the Microsoft talk here is loud, we have yet to see a product.
Microsoft could still make a market of being more efficient to use or more capable, but it does look like a 90% revenue drop for every migrating user on the software side.

Turning themselves into a hardware company, the challenge is to be Samsung or Apple, since the rest of the market is barely turning a profit:
  1. Microsoft should absolutely aim to be #1 as in beating Samsung.
  2. Microsoft must get its mobile market share up immediately and can’t afford to wait for a shift where hardware, os or app availability could again be a game changer. They can’t buy themselves to #1 so they need to find new, Apple or Samsung customers.
  3. An alternative is to go crazy like T-Mobile since #1 means different: commercial terms of the kind Samsung or Apple don’t do yet or will not willingly respond to.
We thought we would see partnerships providing next-to-free phones, niche finding via Skype, Facebook and the Windows customer base and use of the enterprise angle that Samsung and Apple supposedly dont have. We still think that.


On the tablet side, Microsoft is presently trying to make a computer purported to be a tablet, which is somewhat at odds with the value proposition of tablets. You can see the group think and the underlying innovators dilemma caused by the looming software revenue drop, only slightly better than losing the full 100%.

The Surface was a pretty good offer had it launched when it was first announced. However, before it got to market, everybody elses tablets lost weight and halved their prices, and then there was everything the RT didnt do.

Microsoft perhaps should ask themselves: how much computer can we get for 603 g?” (the weight of the Nexus 10.)

That approach might compete more favorably along the lines of core tablet strengths:
  • Better Portability - half the weight of a light notebook
  • Easy of use (updates itself, tap to install, LTE Internet)
  • Half price or less of a notebook

If Microsoft wants to continue being a player in the consumer space hardware is key. The question is if the competency of the next leader succeeding Ballmer and tasked with making Microsoft a winner in three years, can be found within the company?

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