The Continued Softening Of Microsoft

Microsoft.JPEG

Microsoft should not be acting old and grey.

Yet they are throwing away another $26.2 billion dollars in purchasing the relative revenue and profit weakling, LinkedIn, the professional networking social media site (where odds are you have your high-level resume-type information).

Have you ever paid a dime to LinkedIn or have you ever paid attention to  single advertisement on LinkedIn (I can’t even remember if there is advertising on there—see I pay it zero attention!)?

Unfortunately Microsoft is following suite with it’s worthless purchase of Nokia in September 2013 for $9.4 billion that was all written off and then some with yet another ridiculous, desperate move.

Microsoft has been living off their legacy product suites of Windows, Office, Outlook, and SharePoint for years…and apparently, aside from the regular forced upgrades, they seem to have virtually nothing in the innovation hopper.

Hence, loser acquisitions of things like Yammer in 2012 for $1.2 billion (anyone use that BS Facebook-like service for inside their organization—work is not social playtime folks!).

Anyway, I like Microsoft products–they are functional, which is what I want from email, creating and editing documents, spreadsheets and slides, as well as sharing files–it’s great for bread and butter tasks–nothing sexy.

But every attempt that Microsoft makes in desperation to expand beyond their core competencies comes up soft and a big money loser.

Innovation and success is not bred by acquiring virtually worthless properties in terms of high-technology with no synergy to who they fundamentally are.

It is almost heartbreaking to see a once great company like Microsoft continue to drown in its own excess cash and strategically hollow ideas.

Microsoft will only be successful by thinking beyond the boxed in windowed organization that they have imprisoned themselves in.

I hope they can break a few windows and escape to some new technological thinking again soon–but the big question is whether they currently have the talent to make it so. 😉

(Source Photo: Andy Blumenthal)

The Games Organizations Play

split
So HP, under Meg Whitman, is breaking up into a PC/printing
company and an enterprise products and services firm.

Um…well of course it’s the right thing to do to focus each and release the
great value of these two companies.
Only, just a few years ago, under Carly Fiorina, HP a
printer and enterprise products company combined with Compaq, a PC company, in
order to gain the size and clout to succeed in the ever-competitive technology
marketplace.
The B.S. of corporate America—everything and the opposite–to
try and do something, almost anything, to try and raise the share prices of those
strategically stalled companies.
From Meg Whitman, CEO of HP:
– October 2011–“Together we are stronger!”
– Then today, 3 years later–“Being nimble is the only path
to winning.”
Yeah, whatever.
Merge, split—wash, rinse, repeat…fool the fools.
HP is still HP—especially compared to Apple, Amazon, Google,
and even now Lenovo. 😉
 
(Source Photo: here with attribution to Angie Harms)

Microsoft + Nokia = HP + Palm

Microsoft + Nokia = HP + Palm

Microsoft buying Nokia is a desperate play at mobile computing.

Unfortunately, the purchase doesn’t add up in terms of common business sense.

Remember, in 2010, when HP bought Palm for $1.2B?

Palm once held 70% of the smartphone market to fall to only 4.9% share at the time that HP bought it and committed to “double down on WebOS.”

Now, fast forward to 2013 and Microsoft is buying Nokia for $7.2B, with a mobile software market share of about 4% combined (compared to their prior Windows desktop operating system market share of over 90%) and ZDNet reporting that it was “double down or quit.”

When HP bought Palm, it was a hardware maker buying software; now with Microsoft buying Nokia, it is the software maker buying the hardware vendor.

But in both cases, it’s the same losing proposition.

In 2010, at the time that HP bought Palm, Stephen Elop was leaving Microsoft to become CEO of Nokia (and in 2011 Nokia made the deal for a “strategic partnership” with Microsoft).

Now in 2013, when Microsoft is buying Nokia, HP has thrown in the towel and just sold off the remnants of Palm O/S to LG Electronics.

Ballmer is right that Apple and Google do not have a permanent monopoly on mobile computing, but purchasing Nokia is not the answer.

Microsoft’s stock is down more than 5% on the day of the merger announcement…and there is more pain to come from this acquisition and Microsoft’s hubris.

Buy more outdated technology, and you’ve bought nothing, but change the culture to innovate, design, and integrate, and you’ve changed your organization’s fortunes. 😉

(Source Photo: Andy Blumenthal)

Nokia and Microsoft, Desperate Bedfellows

Acquire

A couple of hours ago, Nokia’s debt was downgraded by Moody’s to Junk!

Nokia was once the world largest vendor for mobile phones with almost 130,000 employees, but since the iPhone and Android, they have since fallen on hard times–who would’ve thought?

Just 16 months ago, in February 2011, Nokia announced a strategic partnership with Microsoft to try and stem their losses by adopting Windows Mobile, but this was like a drowning victim grabbing on to whoever is nearby to try and save themselves but only ends up in a double drowning.

No, Microsoft is not drowning exactly, but their stock has been more or less flat from a decade ago and one of the worst large-tech stock performers for the last ten years!

Will the acquisition of Yammer for $1.2 billion this week change this trend–I doubt it.

Between Yammer for social networking and the acquisition of Skype for video-calling last year (May 2011) for yet another $8.5 billion, Microsoft is trying to fill some of it’s big holes in its technology portfolio, just like Nokia was trying to fill it’s gaping hole in mobile operating systems by partnering with Microsoft.

Unfortunately both Microsoft and Nokia have essentially missed the boat on the mobile revolution and the sentiment is flat to negative on their long-term prospects.

So the shidduch (match) of Nokia and Microsoft seems like just another case of misery loves company.

Desperation makes for lonely bedfellows, and thus the announcement this week by Nokia that they are going to layoff 10,000 and close 3 plants by end of 2013 was really no surprise.

Aside from the short-term stock pop from the news of the acquisition, what do you think is going to be in the cards for Microsoft if they don’t get their own innovative juices back in flow?

Can you just acquire innovation or at some point do you need to be that innovative company yourself once again?

Rhetorical question.

Hopefully for Microsoft they can get their mojo back on–meaning rediscover their own innovative talents from within and not just try to acquire from without.

(Source Photo: here with attribution to Kidmissile)
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>AOL DNR

Aside from the new digs, AOL has put a long-whiteboard along the hallway with the phase “AOL is cool.”

But as the article says “Nothing is less cool than professing one’s coolness, of course, especially if you’re an Internet dinosaur evoking a bygone era of dial-up modems.
AOL was one of the hottest tech stocks in the 1990s, only to go down in one of the worst mergers in history to Time Warner.
AOL’s market capitalization peaked in December 1999 at $222 billion and now is at $2 billion.
In 2002, AOL Time Warner was forced to write-off goodwill of $99 billion–at the time, the largest loss ever reported by a company.
Let’s face it, AOL is not the same company it once was–it has become a shadow of its former self.
And it is flailing, trying desperately to reinvent itself, most recently with its purchase of The Huffington Post.
In my mind, one of the big problems is that rather than recognize that AOL is over, dead, kaput, and that it taints whatever it touches, it just keeps reaching out to more and more victims.
AOL needs to shut down as its former self and restart under a new name with a new identity for the new technology world it is entering a decade later!
If it really wants to “expunge the ghosts and start fresh” then it needs to relinquish the past including the AOL moniker and become a new company for a new age.
Dial up modems are long gone and not missed, thank you.

(Source Graphic: Wikipedia)

Oracle – An Architecture Treasure-trove

Anyone following the strategic acquisitions by Oracle the last few years can see a very clear trend: Oracle is amassing a treasure-trove of business applications that are powerful, interoperable, and valuable to mission delivery.

Most recently, Oracle snapped up Sun for $7.38 billion, right from under the clutches of IBM!

Oracle with $22.4 billion in revenue in 2008 and 55% of license revenue generated overseas “is the world’s largest business software company, with more than 320,000 customers—including 100 of the Fortune 100—representing a variety of sizes and industries in more than 145 countries around the globe.”(www.oracle.com)

Oracle’s roots are as a premiere database company. However, since 2004, they made more than 50 acquisitions in calculated business areas.

The Wall Street Journal, 21 April 2009, identifies some of these notable buys:

2004—PeopleSoft for human resources and financial management.

2005—Siebel for customer relationship management.

2007—Hyperion Solutions for business intelligence.

2008—BEA Systems for infrastructure management.

2009—Sun Microsystems for software, servers, and storage devices.

Oracle has been able to acquire companies with operating-profit margins of 10% and within six months expand those margins to 40%.”

With the recent purchase of Sun, Oracle is gaining control of critical open-source software such as Java programming technology, Solaris operating system, and MySQL database.

According to Forrester Research, “Forty-six percent of businesses plan to deploy open-source software in 2009.” Oracle can now provide an important service in product support and updates for this. (Wall Street Journal, 22 April 2009)

In addition, Oracle also provides various middleware to integrate business applications and automate processes.

From databases to end-user applications, from service-oriented architecture to infrastructure management, from content management to business intelligence, Oracle has put together a broad impressive lineup. Of course, this is NOT an endorsement for Oracle (as other companies may have as good or even better solutions), but rather an acknowledgement of Mr. Ellison’s keen architecture strategy that is building his company competitively and his product offering compellingly. Ellison is transforming the company from a successful single brand that was at risk of becoming commoditized to a multi-faceted brand with synergies among its various lines of business and products.

Some lessons for enterprise architects and CIOs: Build your product lineup, create synergies, uniformly brand it, and be number one or number two in every product category that you’re in (as Jack Welch famously advised) and grow, grow, grow!

Microsoft, Yahoo, and Enterprise Architecture

Microsoft offers to buy Yahoo for $44 billion—brilliant play or stupid move?

Some say it’s a brilliant move:

According to techcrunch.com, a combined Microsoft/Yahoo would be a technology behemoth and have $65 billion in revenue, $17.6 billion in profit, 90,000 employees, and 32.7% of the U.S. search market share.

Yahoo owns semi-valuable assets like Flickr, a photo sharing site and del.icio.us, a social bookmark site.

Others say it’s a stupid move:

  1. Microsoft/Yahoo would still seriously trail Google’s U.S. search market share of 58.4%!
  2. Other corporate acquirers, like Oracle, generally profess acquisitions only if it enables a clear #1 market position like it is with data warehouse management, business analytics, human capital management, customer relationship management, and contract lifecycle management.
  3. Fortune Magazine, 18 February, 2008, says “Microsoft is paying too dearly for Yahoo.” Fortune asks “What exactly is Microsoft buying here? Technology? Yahoo has been managing a declining asset since Google invented a better way to do search…Technologists? Talent has been fleeing Yahoo Central since Terry Semel got there…a let’s not even talk about the clash of cultures that such a merger will create.”
  4. Yahoo has made serious management missteps, such as backing out of a deal to buy Facebook in 2006 at a $1 billion bargain (Facebook was recently valued at $15 billion) and botching the acquisition of YouTube and losing out to Google.

Fortune concludes:

  1. “Microsoft is buying an empty bag.”
  2. Yahoo will be Microsoft’s AOL” (comparing a Microsoft/Yahoo acquisition to the failed AOL/Time Warner one).
  3. Microsoft should abandon the acquisition, unbundle itself from search, Xbox, and Zune, and instead focus on improving its core competency, the operating system.

From a User-centric Enterprise Architecture perspective, it’s an interesting dilemma: should companies (like Microsoft) diversify their products and services, similar to the way an individual is supposed to responsibly manage their financial investments through broad diversification in order to manage risk and earn a better overall long-run return. Or should companies do what they do best and focus on improving their core offering and be #1 in that field.

Historically, I understand that most mergers and acquisitions fail miserably (like AOL/Time Warner) and only a few really succeed (like HP/Compaq). Yet, companies must diversify in order to mitigate risk and to seek new avenues to grow. As the old saying goes, “don’t put all your eggs in one basket.” The key to successfully diversify is to architect a #1 market share strategy, like Oracle, acquire truly strategic assets like Compaq, and not overpay like with Yahoo and AOL.