Microsoft diversification

[smoledman]

Back in 2000, Microsoft really was just a one-product company - Windows. Sure they had Office, but the Mac version was a tiny % of that revenue. Everything to that point depended on Windows.

Now fast forward to 2012 and let's see what independent platforms Microsoft has:

Windows(client, server)

XBox

Windows Phone(yes you need a Windows PC to develop apps, but you also need a Mac to develop iOS apps, so it's a wash I'm talking about users)

Online - Azure, Office 365, Hotmail, SkyDrive, Zune Pass, XBox Live, Bing, anything else?

The problem is only Windows, XBox bring in the profits. WP + Online are major money losers. Online is turning it around, but WP looks dead in the water. Kudos to Microsoft for trying to advance beyond a 1-trick pony. Google will be in real trouble unless they can figure out how to create a 2nd strong platform like MSFT did.

 

[AppleScruff1]

They don't turn a profit with Office?

 

[smoledman]

They don't turn a profit with Office?

There is Office for Mac, but I suspect it's a small portion of Office's EBITA. 90% of Office runs on Windows, so there is mostly that dependency. Whereas you can not own a Windows PC but have an XBox or Windows Phone or use Online services.

 

[danahn17]

I think you forgot about Windows CE, Windows Mobile, The Microsoft Network (later MSN), and MSN Messenger.

And a lot of your examples dont work... the Xbox came out closer to 2000 than 2011 (2001 I believe) and Hotmail has been around for forever too. Bing has its roots in MSN Search, which has been around since the late 1990s.

 

[smoledman]

I think you forgot about Windows CE, Windows Mobile, The Microsoft Network (later MSN), and MSN Messenger.

And a lot of your examples dont work... the Xbox came out closer to 2000 than 2011 (2001 I believe) and Hotmail has been around for forever too. Bing has its roots in MSN Search, which has been around since the late 1990s.

The point is Microsoft Online services are better now then they used to be. Online division only lost $450 million last quarter which shows a trend towards break even in 4-5 quarters!

 

[Tinyluph]

The Xbox was a colossal failure when it first came out. While I do wish Microsoft was more consistent/focused in its products, they can't just sit on their thumbs and not do something about the phone market.

 

[smoledman]

The Xbox was a colossal failure when it first came out. While I do wish Microsoft was more consistent/focused in its products, they can't just sit on their thumbs and not do something about the phone market.

Isn't partnering with Nokia the right move to doing something about the phone market?

 

[malman89]

The Xbox was a colossal failure when it first came out. While I do wish Microsoft was more consistent/focused in its products, they can't just sit on their thumbs and not do something about the phone market.

Pretty sure they've done a considerable amount in the past year or so. Considering it takes up to 18 months to push out a new phone, Microsoft has really forged ahead with Nokia to partner on some nice phones. HTC has a couple decent ones too.

The plans are steadily coming to fruition with WP.

 

[kdarling]

In 2000 they also had a thriving Windows CE business.

Nowadays, don't forget Sync for automobiles.

 

[smoledman]

In 2000 they also had a thriving Windows CE business.

Nowadays, don't forget Sync for automobiles.

The point is Microsoft is not a 1-trick pony like Google.

 

[Rodimus Prime]

The point is Microsoft is not a 1-trick pony like Google.

Google has a lot more than just search and if you notice they are expanding as well in more to just search.

 

[AppleScruff1]

There is Office for Mac, but I suspect it's a small portion of Office's EBITA. 90% of Office runs on Windows, so there is mostly that dependency. Whereas you can not own a Windows PC but have an XBox or Windows Phone or use Online services.

Now I understand what you meant.

 

[smoledman]

Google has a lot more than just search and if you notice they are expanding as well in more to just search.

97% of Google's EBITA is Adwords and Adsense.

 

[benzslrpee]

1. if you're going to compare product mix across both companies portfolio, use revenue as that is a purer indicator. EBITDA/EBITA is used to compare cash flows of entire companies by removing accrual accounting and capital structure differences... it's pretty much useless as a product benchmark.

2. EBITDA/EBITA could be used if MS runs Office to its own P&L. but in this sense, the metric would only be of use internally as MS and Google probably have different rules on opex allocations and cost capitalization.

3. Google is diversified the same way Microsoft has done. every Microsoft product is meant to draw the customer deeper into the Windows ecosystem. every Google product is meant to draw the end user deeper into their advertising ecosystem.

97% of Google's EBITA is Adwords and Adsense.

 

[smoledman]

1. if you're going to compare product mix across both companies portfolio, use revenue as that is a purer indicator. EBITDA/EBITA is used to compare cash flows of entire companies by removing accrual accounting and capital structure differences... it's pretty much useless as a product benchmark.

2. EBITDA/EBITA could be used if MS runs Office to its own P&L. but in this sense, the metric would only be of use internally as MS and Google probably have different rules on opex allocations and cost capitalization.

3. Google is diversified the same way Microsoft has done. every Microsoft product is meant to draw the customer deeper into the Windows ecosystem. every Google product is meant to draw the end user deeper into their advertising ecosystem.

The real test is if you took their core product away, could they survive? Apple for sure, Microsoft yes, Google NO.

 

[neiltc13]

The real test is if you took their core product away, could they survive? Apple for sure, Microsoft yes, Google NO.

Their "core product" is not going to be taken away, so why even bother thinking about this?

 

[maflynn]

The problem is only Windows, XBox bring in the profits

Please provide some source material to substantiate your post that Xbox and windows are MicroSoft's only profitable products.

----------

Back in 2000, Microsoft really was just a one-product company - Windows. Sure they had Office, but the Mac version was a tiny % of that revenue. Everything to that point depended on Windows.

Clearly you have failed to do proper research as noted in the thread. MS had plenty of products in 2000 which you failed to mentioned;
developer products including visual basic, Hotmail, MSN, MSNBC venture, Office (which you discounted), Mac business Unit, You are also forgetting about the enterprise services and products that make MS a lot of money.

 

[roadbloc]

OP. I'd love to believe what you are saying but i see no sources backing up your claims.

 

[*LTD*]

Back in 2000, Microsoft really was just a one-product company - Windows. Sure they had Office, but the Mac version was a tiny % of that revenue. Everything to that point depended on Windows.

Now fast forward to 2012 and let's see what independent platforms Microsoft has:

Windows(client, server)

XBox

Windows Phone(yes you need a Windows PC to develop apps, but you also need a Mac to develop iOS apps, so it's a wash I'm talking about users)

Online - Azure, Office 365, Hotmail, SkyDrive, Zune Pass, XBox Live, Bing, anything else?

The problem is only Windows, XBox bring in the profits. WP + Online are major money losers. Online is turning it around, but WP looks dead in the water. Kudos to Microsoft for trying to advance beyond a 1-trick pony. Google will be in real trouble unless they can figure out how to create a 2nd strong platform like MSFT did.

Barry Ritholtz puts it best:

http://www.ritholtz.com/blog/2012/01...aradigm-shift/

During the past decade, MSFT has returned exactly zero to investors, including dividends. They are a bloated bureaucracy run by a bloated bureaucrat. The paradigm has shifted, and they have failed to make the turn. They missed literally every major new technology, every innovation, every great idea from search to social to handhelds to tablets over that period.”

The Kinect is certainly a hit, but it's not the sort of product that moves the needle for a $234 billion company. XBox is also a consumer winner, but the firm spent billions to grab the franchise from Sony — with far less ROI than such a massive investment would or should ever warrant. Everything else from Online to Search to Social to portable music to even their well reviewed but 5 years too late cell phone — has been a bust. Their bread and butter franchises — Office, Windows and even SQL — are under assault from completely new product categories to which they have no response.

Sobering, to say the least. But this is obvious, And has been obvious for years now.

The day Ballmer is handed his pink-slip, is the day we'll begin to see the first few cracks of light at the end of the tunnel. But the MS board is either asleep, drugged, or having a grand old time getting fat off licensing fees (this last part is the real danger, and seems to be the big reason to maintain the status quo.)

Microsoft is a fat, sick company making money from all the wrong things, and re-investing exactly zero of that into doing all the right things, for the right reasons, according to the right strategy. And part of that also involves the absolute necessity of doing it in a timely fashion. MS is slower than molasses in January. They still think it's 15 years ago and consumers are willing to wait for them (for something that's probably been done before, and done better) until they're old and grey.

 

[neiltc13]

Barry Ritholtz puts it best:

http://www.ritholtz.com/blog/2012/01...aradigm-shift/




Sobering, to say the least. But this is obvious, And has been obvious for years now.

The day Ballmer is handed his pink-slip, is the day we'll begin to see the first few cracks of light at the end of the tunnel. But the MS board is either asleep, drugged, or having a grand old time getting fat off licensing fees (this last part is the real danger, and seems to be the big reason to maintain the status quo.)

Microsoft is a fat, sick company making money from all the wrong things, and re-investing exactly zero of that into doing all the right things, for the right reasons, according to the right strategy. And part of that also involves the absolute necessity of doing it in a timely fashion. MS is slower than molasses in January. They still think it's 15 years ago and consumers are willing to wait for them (for something that's probably been done before, and done better) until they're old and grey.

If Ballmer did get his "pink slip" and Microsoft carried on making products to the same high standards it has been recently, would you still post this sort of thing?

I think you must be a Microsoft shareholder, because they are the only people who care about dividends and the share price. The rest of us just carry on enjoying the awesome products Microsoft has been releasing in the past few years (Xbox 360, Windows Phone 7, Windows 7, Office 2010 etc)

 

[boss.king]

Smoledman, are you MutualCore from The Verge forums?

http://www.theverge.com/2012/1/23/2728834/microsoft-diversification

 

[Rodimus Prime]

The Xbox was a colossal failure when it first came out. While I do wish Microsoft was more consistent/focused in its products, they can't just sit on their thumbs and not do something about the phone market.

I am still working on how the Xbox was a colossal failure.

MS flat out publicly stated that they never expected to break even must less turn a profit on the original Xbox. That was publicly stated before it even went on sale.

The original Xbox was cost of entry into the market but guess what the number 1 set top box is in the US now. The 360. MS got linking the computer and the TV right. The Apple TV is still kind of a joke and very limited. It plays very few file type and pretty limited. Compare that to the 360 which can be a media extender for windows which means I can and do on my computer say play this file on the 360 and boom it playing. Heck I can and have set up a play list and told it to just play them.Often time when I am doing Homework I will choose a season of some TV show and just tell it play the list. It finishes one and moves right on to the next one. All controlled by my computer. Heck I have even controlled it from my Android Phone as well. This includes seeking and what not.


Great little system. It all links together really well.

 

[roadbloc]

If Ballmer did get his "pink slip" and Microsoft carried on making products to the same high standards it has been recently, would you still post this sort of thing?

I think you must be a Microsoft shareholder, because they are the only people who care about dividends and the share price. The rest of us just carry on enjoying the awesome products Microsoft has been releasing in the past few years (Xbox 360, Windows Phone 7, Windows 7, Office 2010 etc)

This. Microsoft had a few bad years which hit them hard. With Vista, several terrible IE versions, Office 2007 and Windows Mobile gave them a bad reputation, just what Apple needed really. Making a loss on the first Xbox probably didn't help either.

The Microsoft of 2006 is now long gone. These past 3-4 years they've released some solid products. Windows 7 has proven much more stable then both Snow Leopard and Lion for me (despite not being as simple to use and 'intuitive' lets say), Office 2010 and 2011 are great releases, WP7 is great although I've only briefly used it once and I just love my Xbox 360.

I really don't understand why people on here assume that any Microsoft product is trash. I'm not saying Apple products are bad at all, I think there are some truly brilliant Apple products out there, my iPhone 4 is great and my MBA was a real nipper of a machine. But an amazing product isn't exclusive to Apple. Microsoft can release some great ones too.

I'm looking forward to Windows 8.

 

[smoledman]

With Apple's latest crushing EBITA # that pretty signifies the beginning of the end of Microsoft/Intel. Nobody will buy a Windows 8 tablet on ARM/x86 or anything. People want iPads and ONLY iPads.

 

[roadbloc]

People want iPads and ONLY iPads.

I guess that explains why the Kindle Fire has been a rather huge success for Amazon. Seriously, with your constant over-exaggerated pro-Apple claims without sufficient proof to back them up, I'm beginning to think you're a troll. At least other seriously pro-Apple posters try to find some sort of evidence for their claims.