Microsoft's Midlife Crisis

pillageplunder writes "This article from Businessweek covers the recent memo sent to all Microsoft employees by Steve Ballmer. Interesting tidbits through-out: how Microsoft will try to cut a Billion dollars in expenses, and its cost per employee is about $300K"

$300k per employee?

[Sadiq]

$300k per employee? I wonder how much of that is in weed.... could explain alot of things...

Pretty high cost

[777333ddd]

Includes stock?

Re:Pretty high cost

[LostCluster]

$300k per employee is a high stat, but the typical office worker costs a company $100k-$150k a year when things beyond salary such as the cost of supplying that employee with the office space and supplies needed to do their job, insurance costs, administrative expenses, and other such costs are factored in.

Re:Pretty high cost

[EvilTwinSkippy]

That is high. They have to be including marketing into the mix. There is no way every Tom, Dick, And Harry at micrsoft is earning 6 figures.

Unless of course they are top-heavy in the VP of VP department. Overlycompensated execs do tend to skew stats.

Re:Pretty high cost

[N3WBI3]

You would be surpised, my last job I was making 52K a year, but the cost to my company was on the order of 80K per year (benefits and ss add quite a bit). Now my salary is still well below 100K but my cost to the company is a touch over that.

Re:Pretty high cost

[Bingo Foo]

In my company the average per head is $140.

So how are things in the Bangalore call center?

Re:Pretty high cost

[wideBlueSkies]

Very good. Thank you. We only think in Java here, and this is fine.

We are currently creating a critical banking application out of parts we're reusing from other customers products, and open source solutions. We decided to skip several key requirements because we don't understand why the users would need them, and implementing them would not allow us to meet our deadline.

The reused parts, don't exatly fit the remaining requirements, and thus we're modifying the requirments to fit the components.

Just as long as we get a good build on August 1 all will be well. Thank you.

Cheers.

------------
Not far from the truth over there.

wbs.

Re:Pretty high cost

[TopShelf]

The problem is the way they word the statistic, "$300,000 in annual expenses per employee." This could entail both fixed and variable costs, meaning that simply eliminating an average employee wouldn't shave $300,000 from the bottom line. If you're looking at employee-related expenses overall, SRC (Salary-related costs, such as benefits) would normally run something like 30-50% over and above the employee's salary. Of course, since they're in the Seattle area, who knows what their average salary is...

Re:Pretty high cost

[rmarll]

Not too high, don't forget they're temps.

Re:Pretty high cost

[tekunokurato]

Yeah--cost per employee is a common stat used to demonstrate the general average force an employee has in the business. Another common one is revenue per employee. High cost per employee frequently shows that a company is working hard to expand, spending a lot of money on something (whether it's R&D or plant infrastructure) to build capacity, technology, etc. It's good that ms is doing this--if they cut that much, the employees will, on average, not be as empowered to expand. Don't forget that microsofts market cap still assumes pretty high growth rates compared to the average (i.e. high P/E).

Simple math would answer your question, too: the article says 57,000 employees, so do 57k * 300k and you come out with $17bb in expenses.

Re:Pretty high cost

[Mongoose Disciple]

I can believe it. The working conditions for developers at Microsoft are incredibly beyond anything I've personally seen at a company of any size elsewhere.

I did an interview there back when I was in college. Mind you, I didn't like a one of the people on the team I'd have been working with, but beyond that I was just blown away. Developers in large, comfortable, well-furnished (and, importantly, to their wishes rather than a corporate mold) offices rather than cube farms. Employee cafeterias which blew away any cafeteria or buffet-like restaurant I've ever seen.

For me, the really painful thing to pass up was the free beverage package. Sure, some of the places I've worked have had something like that. The words don't really describe Microsoft's setup. Imagine a huge wall of soda fridges like you'd see at most gas stations, except on a grander scale -- imagine they have every brand or flavor you've ever heard of, including some you were previously pretty sure they didn't make anymore. Imagine there's one or two of those on every floor on every building.

You can say a lot about Microsoft's business strategy, ethics, products, etc. But as far as working environment goes, it's hard to beat. They mean to provide an environment that no competitor (as in for hiring their developers away, not as in for the marketplace) can match. I can believe the high price tag.

Re:Pretty high cost

[killjoe]

Free drinks are great but they don't pay all that well and make you work 60 hour weeks at a minimum.

I was interviewing there and when I heard that they expected at least 60 hours per week I said No thanks. It's just not worth it for me to spend 60 to 80 hours per week at work no matter how great the cafeteria.

It might be great for 18 year old kids though.

Not anymore

[Anonymous Coward]

We don't really work 60 hours per week anymore. Some chose to do so, and they do quite well for it. But many work 40 hours and do perfectly fine as well. I personally have done quite well in my first few years here, and I only work 40 hours a week. Like any software job, I have worked a couple of 50 or 60 hour weeks at deadlines, but by no means is this common.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Well, let's go through this..

[Mongoose Disciple]

Here I am feeding a troll...

My local 7-11 is ways better, so your "grander scale" description is also BS.

I've never seen a 7-11 that had more than 2/3 of what I saw in the fridges in the Redmond campus. Your mileage may vary.

The food was okay, but to say that it "blew away any cafeteria" is simply ridiculous -- that is, unless you live on snails out in the woods or something.

You'll notice I didn't say it blows away every restaurant, because it doesn't. Every college/corporate cafeteria or similar eatery I've seen? Absolutely.

I mean, come off it. Get out of your bedroom more often and see the real world out there. Or maybe save up some money and take a trip to the city some day...

I've lived and worked in three major cities. I've certainly visited others. I'm not a world traveller, but certainly beyond your asinine accusations.

And it looks like you missed it: the point of all their free drinks and the food court theme is to keep you THERE and WORKING, as much as possible. No need to go out for lunch (even if a brief change of scenery would be refreshing), nor even a stroll to the corner 7-11 for a soda or Starbucks for a coffee.

No, I quite got that. Point is, it's something Microsoft does right that the vast majority of companies that employ programmers do wrong. Yes, it absolutely is in a company's best economic interest if I just grab a handy soda and go back to work without losing my train of thought, rather than walk or drive to get one. They make up the $0.50 for the soda in my greater than $0.50 value of productivity. I wouldn't be disallowed the choice to go out for a drink or for lunch if I wanted -- but I have that choice, I don't have to if I don't want to.

All things being equal, why would you not rather work for a company that makes smart, rather than dumb, choices in managing you and your work environment?

Re:Pretty high cost

[AK Marc]

And it looks like you missed it: the point of all their free drinks and the food court theme is to keep you THERE and WORKING, as much as possible. No need to go out for lunch (even if a brief change of scenery would be refreshing), nor even a stroll to the corner 7-11 for a soda or Starbucks for a coffee.

It looks like you missed the point. I have never worked for or interviewed with (or applied to) Microsoft. However, I've been in the buildings as guests of employees and am long-term friends with employees. They provide (or provided, I've not been in for a while) those things to give people a choice. You could go out for your hour lunch, or you could stay in. If you are on a long support call (most of my friends were in premier support, where they only talked to people with really big contracts, not any pay-per-support), you could toss the caller on hold for a very short period and get anything you needed to keep you going to do what it takes.

It is unreasonable to tell a customer with a multinational network outage to wait an hour while you took lunch, or call back in to the queue and repeat everything to someone new. It is also unreasonable to have an employee work straight through without breaks. Microsoft found a happy medium.

Re:Pretty high cost

[Kickstart70]

Paper towels!?

Three jobs ago I work for a VP for complained rather bitterly about the amount of toilet paper we were using. While making sure to look directly at the two women in the office (out of about 15 guys), he warned quite seriously that "theft or overuse" of toilet paper would cause him to restrict what was made available.

Was very glad to leave that place.

KS

Re:Pretty high cost

[Vlad_the_Inhaler]

You are forgetting the cost of the software licences for all that stuff they have installed. Most of that software will be from Redmond, but some will be from SCO (hey, they paid a lot for those licenses so someone must be using something).

Re:Pretty high cost

[toopc]

> Overlycompensated execs do tend to skew stats

-nod- As is often said, I and Bill Gates make an average of 2 billion a year, each.

Bill Gates is paid no where near $2 billion a year from Microsoft though. No stock options either. He (and now Balmer) are actually some of the lowest paid CEOs.

C|Net: Gates, Ballmer get slight pay raises [com.com]

CEO Steve Ballmer and Chairman Bill Gates each received $551,667 in pay and $313,447 in bonus last year, up from $547,500 in salary and $205,810 in bonus a year ago.

While Gates and Ballmer received no stock options, other Microsoft executives did:

Re:Pretty high cost

[KilobyteKnight]

$300k per employee is a high stat, but the typical office worker costs a company $100k-$150k a year when things beyond salary such as the cost of supplying that employee with the office space and supplies needed to do their job, insurance costs, administrative expenses, and other such costs are factored in.

Often one department in a big company "charges" other departments for accounting purposes. Perhaps the additional cost is the inter-department cost of licensing only Microsoft software.

Pretty stupid solution

[passthecrackpipe]

The cost per employee at msft is high, partly due to some of the best working conditions in the industry - love 'em or hate em', msft is consistently voted as the best place to work, at least here in the UK, but i'm pretty sure the states is more or less the same. Ballmer (if he would have had hair) is a typical PHB , in that he thinks that cutting costs in some of these "extra's" will make the company "perform better", but usually, the opposite is true. Ballmer and his yes-men probably have not heard about some of the modern management techniques that disprove this single-minded vision [balancedscorecard.org] of manageing a company. The free Coke's are probably next to go. Along with a fair chunk of employee productivity, no doubt.

Don't forget about the $1B

[Flamesplash]

MS needs to make up for a $1B loss they will take over the next year. I forget the exact reason for it, but it's nothing special, they made some acquisitions and some such that gave them higher profits previously and those are now going away, it's natural and to be expected.

The problem is stock holders will see $1B less and think the company is going under and freak and sell, despite any amount of education MS tries. Companies that have had similar things happen and tried the education route found it didn't work out.

So MS is choosing to reduce the $1B as it showson paper, part of this is to not spend as much money, hence some of the cut backs.

And while there might be cut backs the benefits offered by Microsoft are pretty damn amazing. It's like saying a rich kid is going into poverty because there dad took back on of there 4 mansions from the kid. The employees are still pretty nice off.

treat employees like your customers

[twitter]

... Atlas Shrugged skewed my thinking, but I typically consider capable, motivated employees to be an investment, as opposed to a financial burden.

That's only true in a free market. Ask Steve Ballmer how motivating bullshit like this is [aaxnet.com]. That pales in comparison to memos about "accountability", which are big dumb company speak for, "we're going to fire people, work harder." When you are using government IP laws to squash your competition and purchases to prop up your bottom line, you might get big headed. The market, however, is much freer than M$ suspects.

you are kidding, right?

[twitter]

But they take their "fiduciary responsibility" to stockholders very very seriously, and until recently (last year, this year) were among the most consistent growth stocks in business history.

Until last year, they never paid a dividend. The only people who ever made money off M$'s greed were stock market speculators. Now that the "growth" is over, they pay a pathetic little dinkle to all those who had faith. At the same time, they rewarded their executives handsomely, though their treatment of "perma-temps" is infamous. You call that responsible? That's rape all around.

When the stock crashes down to it's worth, about $6 for their assets, "investors" will be left with nothing. Don't you worry, the lawyers will get the cash. I predict that long term investors, such as pension funds and "partner companies", would have been better off with government bonds.

Knew it was coming...

[Anonymous Coward]

Perhaps Gates knew exactly when the right time to leave was :)

Re:Knew it was coming...

[CodeWanker]

Bill Gates and a small boy were walking through the woods. "It sure is dark and scary in here!" the small boy said. "How do you think I feel?" replied the Bill Gates. "I have to walk back all alone."

mid-life crisis

[Coneasfast]

i think steve ballmer reached his mid-life crisis long [ntk.net] ago [ntk.net].

Re:mid-life crisis

[selderrr]

you're confusing midlife crisis with puberty :-)

Then again, midlife crisis is something associated with family life, which we nerds are ... um.. not hindered by ?

Re:mid-life crisis

[ReelOddeeo]

Mid life crisis is exactly the right term. Please look at the following template, and see if it fits Microsoft.

When a man reaches 40 or thereabouts, they suddenly realize their mortality. They suddenly realize that all those dreams they had and plans they made in their twenties are not going to happen. They aren't going to be able to build all of the software libraries they were imagining even in their early thirties. Furthermore, they find that the number of times per week that they have sex is less than the timer per DAY when they were ninteen.

Usually, this results in: the sudden need for a boyfriend/girlfriend that is half their age. The kind of toys that they wanted at age 20 (usually a certian kind of mp3 player, 3D graphics card, or sportscar). I remember a dear friend describing the waitress he was dating, and one of the plus points was "well, she's at least almost half my age!".



Different people have different views on what follows. I'll express my own view. This is highly personal. And not all people agree. I perceive that part of the issue is whether you have your eyes focused on this life or the next one. Since my real hope lies in what is to come, and not is what is present, I have not had, and don't expect to have a midlife crisis. Someone said something like: "where your stock options are, there your heart will be also.". Although I don't want to hasten the event, I'm ready to go, and frequently think about it.



Back to the subject. So does this sudden middle age realization of ones own mortality seem to fit Microsoft? In other words, they might have as many years still ahead, as they have behind them, but suddenly, there is the realization.

Re:mid-life crisis

[CaptainCarrot]

You don't seem to understand the syndrome very well here.

Young men know they're mortal. It's just that their hormone-addled brains don't allow them to care much about it.

I'm in my early 40s. When I was in my 20s, there were no 3D graphics cards for the consumer market, nor were there MP3 players. These were ipso facto not things I wanted. And I had a sports car back then. It was a tad beyond my income, but I determined, correctly as it turned out, that practical considerations would mean I'd never have another opportunity to own one.

The typical dream of most young men is not to build some kind of killer software library. It has more to do with changing the world in a meaningful way. This typically requires a hardware-based solution.

The difference between the sex you get when you're 40 and the sex you get when you're 19 is that when you're 40 it involved another person. This is way better even if it's (of necessity) less frequent. You're just going to have to take my word for it if you don't know this from personal experience.

Re:mid-life crisis

[chadjg]

So, does this mean that Win XP 2006 will get a Harley and start humping BeOS behind Ballmer's back?

going to hell now...

Re:mid-life crisis

[RobKow]

Since when was necrophillia associated with mid-life crises?

be careful

[krray]

...or you may just be holding microstock and the one left holding the bag...

My stock and desktop GUI is now in Apple. And who doesn't love a cute penguin?

Gotta innovate, not replace

[LostCluster]

Microsoft's major problem is that it's been a long time since they've released a totally new line of products that has been sucessful. Aside from Open Source, Microsoft also has to compete with its own prior versions... Why does somebody who has Windows 2000 need Windows XP? Why does somebody who has Office 2000 need Office XP?...

Re:Gotta innovate, not replace

[Pharmboy]

Why does somebody who has Windows 2000 need Windows XP?

Twice the eye candy, and its so much more powerful, you get to reboot twice as often.

Re:Gotta innovate, not replace

[pavon]

Exactly. And it is not just Microsoft - it is a general weakness in the shrink-wrapped software business model. In that model you depend on sales of the previous version to fund additional features for the next version which in turn drives sales, and the cycle continues. The problem is that at some point your product becomes mature, and you have already implemented 90% of the features that 90% of the people want. Now there is still alot of potential functionality to be added but, each feature will appeal to only a small audience. Therefore even though you may have done as much work between versions 5 and 6 as you did between 2 and 3, you have deminishing returns on the number of purchases. Lastly, ever since the dot-com boom ended the number of first-time purchases (as opposed to upgrades) has been going down dramatically as well, so you are much more dependent on upgrades sales, which we just determined will also go down with time.

So basically the shrinkwrapped software business model sucks for mature software. Unless you can keep improving the software in a way that appeals to a large number of people, you will not be able to generate enough money from sales to continue development at your current pace. Then your product will stagnate, and newcommers who focus on different niche features that you don't have will eat away at your market share.

Once your software becomes mature, you really need to move away from the shrinkwrapped business model to some type of service business model. Interestly enough, OSS kicks ass in just about any service business model. If you are being paid for the act of writing and deploying software, rather then selling it as a product, it doesn't matter if you control the software or not. It just matters that you have the experience and talent to improve an existing piece of software (ie helps alot if you wrote the software to begin with).

OSS has the opposite problem - it is easy to get paid to improve mature products, but getting a piece of software to maturity is harder (financially).

Re:Gotta innovate, not replace

[dasmegabyte]

So maybe, once products reach a certain maturity level and sales have dropped off to the point that support costs outweigh sales, they should be open sourced.

A development model that plans on handing over the keys to users at a certain point is an interesting twist on both the traditional model and OSS. You'll get a bunch of early adopters willing to pay for features. And you would attract those who will only use OSS because they want assurance against your company's collapse.

This model has already been used on such commercial cum open products as Netscape and RealPlayer. But it wasn't PLANNED. If I could call potential customers and tell them that, in five years or if my company goes under, they'd have a "trust" in place to give them the source and they could to hire someone else to maintatin and extend my software, they would be very interested -- turnover is a deadly problem in my industry.

Re:Gotta innovate, not replace

[rewt66]

No, it can be fine, if you realize that you are in a mature market. See, once you have almost all the features anyone will ever need, you can get rid of most of your developers. Just add a few new features every so often, port it to the next rev of the OS, fix a few bugs. That's all. You won't have that many sales, either, just sales at the rate the market is growing. But if the expenses are down, you'll do all right.

But companies don't recognize when they're at that point, or they don't accept it. "No, we have to have a rapidly growing market! Keep all the developers, have them develop something new!" And the "something new" never takes off in time to save the company...

Re:Longhorn

[robochan]

...The big thing is going to be Longhorn--that's why it's taking so long. WinFS, Avalon, whole new interface called Aero Glass, an entire .NET-based OS that replaces Win32, and so on...

I hear it's going ot come bundled with Duke Nukem Forever too.

Dear Microsoft

[arieswind]

Dear Microsoft,

Welcome to the real world, where your stock does not grow 10,000% in a matter of a few years, and companies have to *gasp* cut costs, or perhaps even *bigger gasp* innovate, to keep their companies from falling flat on their face.

With much love(sorta),

The World

Re:Dear Microsoft

[Daniel Dvorkin]

No shit.

I love this bit from the article:

Does Microsoft's midlife struggle signal that the glory days are over for tech? Not a bit. While industry revenue growth is slowing, there's still plenty of innovating to do. Microsoft just has to figure out a better way of going about it.

No, it means the rest of the tech world will go on innovating, and Microsoft will go on copying, and make money -- not insane shit-tons of money, maybe, but plenty of it -- just like always. They've never innovated anything; they've always made their money by being clever businessmen, not brilliant inventors. Nothing has to change.

Re:Dear Microsoft

[GoofyBoy]

Dear World,

You've been saying that for the last 10 years. Since then we've grown bigger, have more cash than the total worth of third world companies and are still own a huge percent of many software categories that others would die to have.

See you in 10 years from now,
Microsoft

Re:Dear Microsoft

[Mr_Huber]

Oh, dear. This just flashed into my head...

Bill, lying naked on a table: "Why do my dividinds hurt?"

Linus, looking down, sad and concerned: "You've never issued them before."

I'll go for $270K

[gr8_phk]

They can keep all thoses perks and crap.

Re:I'll go for $270K

[sploo22]

It has to be said...

$300K should be enough for anybody!

solution:

[blue_adept]

immediately discontinue the "one dollar for each reported bug" program.

Pit stains

[bujoojoo]

Maybe if Ballmer wouldn't charge his dry cleaning to his expense account, they wouldn't be in such dire straights...

DEVELOPERS, DEVELOPERS, DEVELOPERS!!!!

process optimization

[rnd()]

Any business can benefit from optimizing its processes. Microsoft has been very good at making profits... it will be interesting to see if it will succeed at creating business processes that capture the imagination of its employees and make them feel like part of a well oiled machine.

$300K Not Unusual

[4of12]

If you've costed in the salary of a professional, fringe benefits, vacation, employer's contribution to social security, etc. and then add in a multiplier to account for the infrastructural overhead services (people in accounting, facilities maintenance, management, etc.) in a large corporation or university, this figure is not at all unusual.

That said, however, Microsoft enjoys a surfeit of talent that, like ATT Bell Labs in its day (when it, too, had a monopoly) could afford to do lots of interesting work.

Unfortunately, the need for innovative work to reinforce and expand the existing business model and never ever undermine it is constraining and prevents the company from releasing the full talent of its employees.

So what you see instead are people leaving Microsoft to start entirely new ventures.

Re:$300K Not Unusual

[happyfrogcow]

yes, we really needed an industry comparison for that number to mean anything at all. even not an industry comparison, just a comparison... tell me how much it costs Ford per person even.

MS has been trying to innovate for 13 years

[gosand]

Unfortunately, the need for innovative work to reinforce and expand the existing business model and never ever undermine it is constraining and prevents the company from releasing the full talent of its employees.

Unless over the last 13 years you have used your immense cash stockpiles to hire people for the sole purpose of research. [sciam.com]

Lets help these guys out...

[cOdEgUru]

Now..now..play nice.

Everyone look at poor M$ in the corner, dying a slow death for the lack of another Billion in the bank.. Lets not let that happen..shall we..being the good neighbours we are..

So here is what I recommend.. The slashdot community will, painful as it is, will map out the various product lines of Microsoft with their perceived value, which needs to be truncated or snuffed out completely. Once we are all in agreement as to the total worth is a Billion, Cmdrtaco, the chosen representative, will submit said list to the powers that be (read: Balmy Balmer) for review and acceptance.

So get your thinking caps out, check your emotions , pay no heed to the thousands of M$ programmers who will obviously hate you for nixing their much loved products, let reason run rampant..and lets choose what Microsoft needs to put another Billion in the bank!

Vision Thingy

[Shadow Wrought]

What the company needs is a new vision of itself

Those whom the Gods would destroy they first give a vision statement to.

Anti competitive == bitter distributers?

[oldosadmin]

My first thought about Microsoft is that the fact they are Anticompetitive HAS to make their distributers bitter. I mean, think about it. Dell, HP, and other manufactuerers are slowly moving to linux -- they, like many technical users, are tired of being pushed around (owned?) by Microsoft.

I think that when Microsoft got too cocky, and too intrusive, they sealed their own doom. They aren't going to be "destroyed"... but I feel they will be forced to remake themselves in a similar way to IBM.

Midlife crisis...

[Zorilla]

In other news, Microsoft is nearing the release of their two newest products: Microsoft Combover and Microsoft Penis Car

Sacrificing Innovation..

[kevin_conaway]

...for backwards compatibility. I think they use a lot of their manpower to maintain backwards compatibility for not only their own software, but other high profile apps that run on Windows. I dont really have a solution for them, just felt like pointing that out :)

Costs catching up?

[Dark Paladin]

I wonder if this is an example of Microsoft trying to be the "end all, be all" of everything, and it's finally catching up with them.

So far, they have 4 sources of real revenue:

Windows OS/Server
Office
Development Tool Sales
Some hardware (mice, keyboards, etc)

Everything else that MS is involved in has been money losing ventures. Cell phones, PDA, cable TV, "Ultimate TV" - heck, the "raging successful Xbox" has lost over $2 billion for the company (and if that's success, I'd hate to see what failure is).

MS has $56 billion in the bank (some cash, some investments), and so far, revenues are still outstripping costs. But I think Ballmer can look ahead and read the writing on the wall. Other than the MS tax on computers (yes, it exists, deal with it), people aren't rushing out to upgrade with every new OS release. Lots of folks are still on Windows 98/2000 Server and Office 95.

So what will be cut away? WIll they just reduce the number of employees? Shift more developers to India? Or cut on some projects and say "OK, so we're not going to take over the cable market."

The Xbox2, for example, is being retooled not to be "successful" (as in "Beat Sony!"), but "profitable", which should be their focus: making a game system that is cheaper to produce, harder to hack, and even if they aren't #1 in the game industry they can make money at it (wait - that sounds like another console company out there). Why be #1 in the home media player market when [nintendo.co] sometimes being #2 makes money too [apple.com]?

Odds are, MS is, as the article mentions, just going through a "mid-life crisis". They'll either recoup, tighten down, and keep chugging along - or just proceed with "business as usual" for all their talk, then wonder 5 years from now why all of the business are running Slinux (simple Linux - easy enough for Grandma to figure out how to change the screen resolution) or Apple OS X instead of Windows.

excerpts from the memo

[hoferbr]

excerpts [nwsource.com] from the memo (not included in the businessweek article):

On growth and costs: "We have as much opportunity to grow as any other company in the world. That's a big statement, but the opportunities we've scoped out are very big. Make no mistake -- we must grow our revenues to grow profits. We cannot just cut costs. At the same time, we must ensure a competitive cost structure, or competitors will offer prices, services or innovations that we cannot afford to match. Other companies have been severe in tightening costs the last few years -- layoffs, major benefit reductions, etc. We have not done those things and want to be prudent now so we avoid severe measures later."

On the need to innovate: "The key to our growth is innovation. Microsoft was built on innovation, has thrived on innovation, and its future depends on innovation. We are filing for over 2,000 patents a year for new technologies, and we see that number increasing. We lead in innovation in most areas where we compete, and where we do lag - like search and online music distribution - rest assured that the race to innovate has just begun and we will pull ahead."

On Microsoft's share price: "Obviously, we all want to increase the value of our stock, and we have the best opportunity to do that since the end of FY98. Our stock was around $25 then, as it is now, and we have more than doubled our operating profits since. Shareholders then were betting we would work hard for all these years to make the company worth that mid-98 stock price. We have done so."

On aiming products at various markets: "Our products must also be better segmented for different users with different needs. And we must evolve marketing to focus more squarely on the value proposition throughout the product lifecycle, not just at launch. So many customers have yet to deploy our most recent advances, so we must not only help them understand why to deploy, but also demonstrate the benefits of deploying before we reach the Longhorn generation."

On perceptions of Microsoft: "We must also work to change a number of customer perceptions, including the views that older versions of Office and Windows are good enough and that Microsoft is not sufficiently focused on security. We must emphasize key positive perceptions of the strong manageability, and developer and information-worker preference, for our platform."

On avoiding the trappings of size: "Nothing solves 'big company' ills quite like a strong focus on accountability for results with customers and shareholders. Innovating, growing share and profits, and serving customers all ensure that we have no time for wasted motion. To do this, we need to prioritize the things that matter the most with our customers and for the company, and then be accountable for executing on those choices."

They could save about $800 per employee

[Anonymous Coward]

By switching to Linux and OpenOffice/KOffice on their desktops. Not their development or testing machines, but just their accountants, security team, and call centers.

Dang! Wait a sec...Windows and Office are free to them, so it only saves on the cost of anti-virus + downtime/patch maintenance, so that's probably only $50 per user or so.

Re:They could save about $800 per employee

[happyfrogcow]

so this is where the SPA and BSA get their numbers! of course! MS probably has hundreds of thousands of copies of MS Outlook, WinXP, Win2k and everything else installed that they didn't pay for.

for shame, all along blaming p2p...

MS News?

[fiannaFailMan]

You hear about wonderful things in Microsoft's lab. One project, called News Junkie, sifts through articles on the Web and presents to you only the ones you haven't seen before.

I think the google news [google.com] service is pretty hard to beat.

Microsoft's Solution is simple

[Allen Zadr]

The article seems to imply that Microsoft needs to find a new and interesting way to innovate.

Seems to me that Sun led the way back in the early 1990s when they developed Java. Take 1 really talented software engineer, and give him something to work on. Allow him to pick 5 to 10 other talented people, and sequester them from the rest of the company for 1 year.

At Microsoft's level, they can probably afford to do this with 20 or 30 such groups in parallel working on the same or similar ideas.

After a year, dump the projects that are not going well, and refocus those groups on other ideas. Innovation is rarely done by large commitees.

Too early to talk about mid-life crisis

[bheer]

Companies don't mature until they go through a couple generations of management and product lines. This is one of the criteria used in Built to Last [amazon.com], one of the few biz books I can say were a *good* use of my time (the other IIRC was the ability to deal with failure and bounce back).

Basically, MS has been under the same management (Gates, and even Ballmer has been around since the beginning, pretty much) since its inception. Product lines -- well, in a way it has been through three: command line (DOS-era), early GUI (Win 3.x and Win9x) and modern OSes and platforms (NT, networking products), but it has shown considerable difficulty getting out of the "sell boxes of software" model.

Given all of these, I'd call MS a very immature company even now. Midlife crises will come the day Linux is just as good on the desktop as OSX is, and MS is forced to look in the mirror and ask, "what now?"

Offshoring my Boyos!

[gelfling]

Most of MS costs are labor - people. How you reduce labor costs is to pay less and pay fewer people.

Expect cuts. All this talk about how MS is no longer going to pay for shiatsu massages for your 'animal companion' is just their way of saying "Hey dickheads the 90's are really fucking over". Next stop - "Microsoft is just like everyone else, move to India or get fired!"

300k Per Employee?

[mattyohe]

Thats 17 Billion dollars right there!

Just cut it down to 282k per employee. There are 57,000 of them so that would apporoximate a 1 billion dollar cut right there.

Cut a billion dollars in expenses?

[mcc]

Well, the last time I checked, that was roughly how much they'd lost over the previous four quarters on the XBox venture... and roughly how much they'd lost onthe XBox venture over the four quarters before that...

In a company where pretty much everything except Windows and Office is the company just tossing money at an unprofitable venture for the privilige of having a product in that area, finding a billion dollars to cut shouldn't be that hard...

next big thing

[happyfrogcow]

a key focus now for Ballmer is "process excellence," which seems unlikely to inspire Microsoftees to stay up all night creating the Next Big Thing.

The Next Big Thing *is* process excellence and the goodies that come about through that, like secure software with minimal bugs. Ballmer atleast has that right. Now if he can have his developers find their idea of a Next Big Thing, while keeping true to the real Next Big Thing (process excellence) then you might see MS leave the doldrums of midlife crisis.

Re:next big thing

[asr_man]

What is this, a troll? We had this crap all through the 90s boom.

The Next Big Thing *is*

$MANAGEMENT_FAD and all the goodies that come with that, like $SOFTWARE_BUZZWORDS.

"Process excellence" in software is usually the wishful thinking of a management that believes dehumanized industrial optimization techniques apply to a creative craft practice. The "process" typically accelerates the exodus of the most knowledgeable and productive employees to less mind-numbing work environments. Show me one good process that produces excellent software despite being run by idiots. Focusing on process is what companies do when they've become so clueless they can't find their *ss with both hands. Of course, most companies enter such a phase in their evolution, perhaps it is Microsoft's turn.

"Just enough" process is the right amount. Just enough to keep release cycles sane. Just enough to keep the product evolution from becoming too unstable. But not enough to distract people from focusing on their real work, doubt their better judgement, or prevent their creative juices from flowing. Any more than that and the perpetrators should be smacked repeatedly on the head with a rolled-up gantt chart.

Rerelease of the classics

[thpdg]

Coming off the heels of Nintendo rereleasing Super Mario Bros 1, and Zelda, I think we need to see the same from Microsoft. Who here wouldn't lay out $19.99 for a copy of early DOS and Windows. And hey, no fair answering if you've still got the install floppies on your desk. Atari and Activision have those game controllers that hook to the TV and have like 10 classic games in them. How about a keyboard that has Word 5 in it? A USB port for a keychain on the side. I bet we could have it running Linux in no time. Imagine a beowulf cluster of THOSE!

Ok, ok, enough joking around. I hate to say it, but Microsoft needs to learn how to make a buck off of Linux. They could create their own distro and do their own API and app porting to it. For the same reason people love that OS X is built on *nix, people wouldn't mind a Windows built on it. The best of both worlds. Sign me up for that.
Thanks, you can have the podium back now.

Netcraft confirms...

[MoOsEb0y]

Microsoft is dying.

I have a solution!

[weeboo0104]

Quick! Someone send Steve Ballmer a TCO study that shows how much money they will save if Microsoft migrates to Linux!!!

Microsoft's Turning Circle

[MacDaffy]

Microsoft's strength has always been embrace and extend. Its weakness comes in the decisions on whether to "exploit" or "extinguish." It has killed a legion of technologies/business/competitors whose contributions to the world of computing have come to nothing or have been FUBARed--just because Microsoft feared the competition.

It has bowdlerized standards when it could for its own gain (e.g. Kerberos, SMB, etc.). Microsoft sees computing as a zero-sum game where it MUST win and everyone else must lose. Rather than compete by making itself look good (innovation, quality, service), it has been always willing to win by making others--including itself--look bad.

Then comes Open Source--a game where they either play fair or they don't play at all. Now, Microsoft is stuck with having to REALLY innovate. Linux and Mac OS X are running rings around Redmond and Ballmer's only answer is to exhort the troops. That won't work.

Microsoft needs to adopt open source, retool its operating system and--for once--put all that money toward excellence rather than bullying the market, ripping off innovators and/or buying ascendancy via restrictive contracts with manufacturers. If Apple announces Mac OS X for x86 or some other innovation comes along, the good ship Microsoft is going to have a BIG hole below its water line and not enough buckets to bail with.

The history of personal computing is comprised of sea changes. Ballmer's memo acknowledges that. He remembers the position he was in ten years ago.

MicroSoft Counts Options as an Expense

[kallistiblue]

Or at least they did.
That's one of the reason that MicroSoft doesn't pay any corporate tax.

Alternative Fuel [alternativ...odesel.com]

Mod parent down

[kylef]

This is a completely misleading statement. The fact that Microsoft expenses options is a *Good Thing* and is something that all corporations should be doing in the wake of recent accounting scandals.

And by saying "MS doesn't pay any corporate tax" you are insinuating that it somehow is hiding revenue, which is ludicrous. Recently, MS stock options have been "underwater" so they have not been popular to exercise. But any money that *is* spent on exercised option discounts is written off as additional employee salary expenses, which it is (the number of options purchased times the difference between the option strike price and the cost basis is added to the employee's W-2 taxable income total). MS should certainly not have to pay taxes on employee salaries: the employees already pay taxes on their salaries! Making the company pay taxes on the same money would amount to double-taxation. This is how all companies handle their options plans, assuming they are expensed on their books. If not, then investors beware...

Now, whether this deduction alone can wipe out the total taxable corporate net income of Microsoft is a different story entirely. There would have to be a LOT of options exercised to amount to that kind of money, and in recent years it just hasn't happened. Back in the late 90's, it's possible. MS net profit was much smaller back then. Today, with MS stock price stagnant for 5 years and profits stronger than ever, there is no way that options deductions could come close to offsetting their tax burden.

Dear Steve: It's Time to Split the Company

[MagikSlinger]

Dear Steve,

If you had really paid attention in your Harvard business classes, you would have learned the story of Standard Oil. A big monopolistic oil company that was finally forced to break up into pieces. Mr. Rockerfeller was sad until he suddenly discovered his stock portfolio went through the roof. Apparently, when Standard Oil became a bunch of smaller companies [wikipedia.org], they grew the market and their collective market capitlization was far, far greater than they were in one company.

You've had the opportunity several times now, and the last time had the feds suggested it too. But maybe it's not too late. It's time to knife the baby [com.com] and split Microsoft into two or more companies. Split applications from OS. Create an Internet technology group separate from the others that encompases IE as a pluggible component for Windows or any OTHER Operating System, and provides search, MSN, Instant Messaging, VOIP, etc.. Move the Entertainment group into its own company and let it succede or fail on its own, and more importantly, let them have the freedom to chose the technologies involved. XBox has fans now, and it has a bright future. But only if the XBox division is no longer distracted by trying to save the OS group.

Come on, Steve. You know the time is right, and this is so the right thing to do.

The problem with Microsoft

[c0d3h4x0r]

DISCLAIMER: I work at Microsoft as a developer. Nothing I say here is official company stance. This is just my personal opinion based on my time both before and after joining Microsoft.

Microsoft's main problem is a refusal to take quick action by trusting in common sense and instinct.

For example, it took upper management over a decade to finally see that users didn't trust Microsoft products. The rest of the world knew it all along, but management had to wait for mountains of hard data to come pouring in before taking any action. The Trustworthy Computing effort is genuine, sincere, and effective, but it's also about fifteen years overdue.

Do you think Bill Gates wrote BASIC for the Altair, or pulled off his buy-an-OS-and-name-it-MS-DOS move, based on mountains of official market research and hard data telling him that it's what people wanted? I'm betting he didn't. I'm betting he did it because he was smart and trusted his own instincts -- just like a professional chess player who doesn't realistically have the time to scientifically evaluate every possible move at every turn.

Microsoft isn't a bad company. People here really do care about satisfying customers and making the best stuff in the world. I really hate the false accusations so many people make about this company. But I also have to say that this company has grown timid and too slow to act, and that is our real challenge.

Re:The problem with Microsoft

[dbarclay10]

Microsoft isn't a bad company. People here really do care about satisfying customers and making the best stuff in the world. I really hate the false accusations so many people make about this company. But I also have to say that this company has grown timid and too slow to act, and that is our real challenge.

You work in a big company, so you're going to have to get used to it. Parts of your company engage in dirty, despicable "business" tactics to get on top, at which point they ignore the user base and move onto the next hill. These actions directly harm people. If you can't take that, then maybe you shouldn't be working for them.

(P.S.: Next time an MS representative tries to go over my head [I'm head IT guy at a mid-sized company] by going directly to the executives who now *willingly* admit that they don't have the expertise necessary to make good IT decisions, we begin our full migration to Linux. The execs have told MS representatives twice already that they are *not* interested in buying some widget so they can get their business done, and when it comes to IT, I'm the guy. Of all the needlessly harmful and destructive things MS can do, marketing directly to executives by taking them out for ski-weekends and fancy lunches is the worst. You guys nearly ruined the company I work for because of these tactics, and we're not the only ones. If their last IT guy hadn't quit [he didn't have the skill required to get the executives on "his" - aka the company's - side], they'd be out of business by now. I'm not exaggerating, it's a genetics company and their entire revenue stream is based on their data warehouse. When your company finally gets their act in gear by making realistically decent products, *and* stop preying on professionals like myself by going over their head to make the sale, maybe you'll get a modicum of respect. Expect it to take at least a decade for it to become a healthy amount of respect.)

Re:The problem with Microsoft

[scrytch]

Microsoft took their sales upstairs. Welcome to the world of sales, any good salesman will go to the person making decisions as far up as they can go. The sales tactics you outlined sure as hell are NOT limited to Microsoft, it's just that MS can afford the sort of potlach that selling to the top execs takes. As head IT guy, you have to wade in to some of those politics yourself, or at least get the CIO on your side. Ultimately either your execs respect your technical acumen, or they don't and it's time to find another shop.

I would submit however, that "threatening" to move to Linux as a defensive move against a sales tactic does nothing to sell a Linux solution within your company.

Re:The problem with Microsoft

[dbarclay10]

Microsoft took their sales upstairs. Welcome to the world of sales, any good salesman will go to the person making decisions as far up as they can go. The sales tactics you outlined sure as hell are NOT limited to Microsoft, it's just that MS can afford the sort of potlach that selling to the top execs takes. As head IT guy, you have to wade in to some of those politics yourself, or at least get the CIO on your side. Ultimately either your execs respect your technical acumen, or they don't and it's time to find another shop.

I would submit however, that "threatening" to move to Linux as a defensive move against a sales tactic does nothing to sell a Linux solution within your company.

Read both of the rants in their entirety - most of what I'll say below I already said.

First, just because selling to idiots is the "world of sales" doesn't make it right. Microsoft's products are either used or maintained by *professionals*. Maybe it doesn't matter when you're trying to sell a glass figurine, but it sure as hell matters when you're trying to sell surgical instruments. You can be damned sure that the executives in a hospital are made up largely of people who are medical experts, who used to be, or who know to delegate such decisions to the experts. In the case of IT, the products are no less important, and maybe MS could get away with selling crap to senior execs ten years ago, but those days are numbered.

Second, I know these tactics aren't limited to Microsoft. Duh. In fact, the worst boondogle(sp?) I've seen in an IT rollout was using products from a vendor other than MS. I actually give them credit where credit is due here; their products may be sub-standard, but they're better than some of the *real* crap that people buy.

Third, I don't like the word "politics". There's a negative connotation to that. As I said in my last rant, the last head IT guy at this company here wasn't able to communicate as effectively as MS' salespeople, to the point where the executives trusted the MS reps more than their own employee. He left, and now I'm here, and my first job (took at least three months) was getting the executives to realise the mistakes which had been made in the past, and getting the gears in motion on correcting them. It wasn't an easy job, so don't bother trying to tell me that it's hard ;) The last IT guy was decent, but not great. He had too much attitude.

Lastly, I've already sold the "Linux solution" within my company. We're already using it extensively. After six months, two different MS representatives have been kicked out of executives' offices and told to talk to me. The executives have made it clear in no uncertain terms that if MS tries to take advantage of them again, MS will not be getting any new business from them. Right now we've got a good amount of Microsoft software, and we plan on upgrading them as time goes. If, however, MS tries its bullshit sales tactics again (trying to sell them high-margin software which MS *knows* is unsuitable for the task [or software they *should* know is unsuitable for the task]), we'll instead begin migration plans. Don't mistake a plan of action for a baseless threat. There's only so many times a merchant can knowingly perform actions which would be of great harm to the customer before the customer says "okay, enough of this, you guys just can't be trusted for even the most basic things."

In short: don't teach your grandmother to suck eggs :)

Another microsoftie here

[melted]

The problem with this company is that you have to make a lot of random people feel good about themselves before you get a go ahead on anything. You want a permission to fart in your office? Ask a dozen other teams what their policy is, schedule two dozen meetings, negotiate, negotiate, negotiate and only then will you get a go-ahead.

You know why this is? This is because of lousy management. A lot of people have become managers at MS simply because they wanted to become managers, not because they have necessary skills or are particularly fit for the job. A repercussion from this is that there's certain lack of leadership and vision from the very bottom to the very top.

This is unfortunate, because as a company Microsoft can kick everybody else's ass. We have SIXTY BILLION bucks and the best talent in the world, yet we still sit on our butts and wait until somebody else invents something to buy the company outright.

Switch to Linux...

[mrscott]

Microsoft could save a lot in licensing fees if they just switched to Linux and OpenOffice.

Re:Switch to Linux...

[geeklawyer]

Microsoft could save a lot in licensing fees if they just switched to Linux and OpenOffice

Not really. SCO would sue them.

With their own money...

Dear Mr. Ballmer

[Pan T. Hose]

My open letter to Steve Ballmer:

Dear Mr. Ballmer,

As a scientist and developer developer developer developer, I believe I can answer some of your concerns [nwsource.com]:

We must also work to change a number of customer perceptions, including the views that older versions of Office and Windows are good enough [...]

I can sincerely assure you that I, for one, have never considered older (or newer, for that matter) versions of Microsoft Office and Windows good enough. Not even once. You can stop worrying about that.

On the need to innovate: The key to our growth is innovation. Microsoft was built on innovation, has thrived on innovation, and its future depends on innovation. [...] We lead in innovation in most areas where we compete, and where we do lag [...] rest assured that the race to innovate has just begun and we will pull ahead. [emphasis added]

Now, no matter how much you believe your developers developers developers developers to innovate innovate innovate innovate, saying the above as a company which, in fact, has never contributed a single notable innovation to any computer-related field [harvard.edu]... Well... What can I say? You are not only doomed. You are already dead.

Sincerely,
Pan Tarhei Hosé, PhD.

Re:duh!

[bigman2003]

Microsoft's problem is not competition. In most markets, they own a huge share. So Mac's ~5% and Linux's small share are not the problem.

The problem is that innovation (?) is getting more and more expensive. And in order to keep revenues up, they need to spend huge amounts of money on advertising, etc.

The low-hanging fruit has been picked, and now they need to go after new markets, new products, and the more difficult dollars.

Re:duh!

[One Louder]

One of the problems they face is that Microsoft's primary source of "innovation" (other companies) has dried up because of the "chilling effect" of their dominance.

It's increasingly tough to get funding for anything truly innovative because the investment community understands that Microsoft will "innovate" the idea into their operating system franchise if it has the potential to be successful.

Re:duh!

[bigman2003]

In the past 6 years I've worked on 2 projects that were halted, because the product we were creating was added in to Windows. It's hard to sell a product that duplicates what comes in the OS itself.

In both cases, our primary competitors sold out to Microsoft. Afterward we all sat around like igits, thinking "why didn't we sell out sooner?"

Re:duh!

[Scarblac]

Microsoft's problem is not competition. In most markets, they own a huge share.

Their problem is competition, in a way. Has been for years. Competition of older versions of their own product, that is. Windows XP isn't selling as well as they want to, because of the Windows 2000 that people already have and that does what they want.

Re:duh!

[lucabrasi999]

Their only real market success has been in Windows and Office. Everything else they've tried has essentially flopped.

That's sort of like saying Henry Ford's only success story was the Model T.

Re:duh!

[jmorris42]

> Oh. I understand now. Microsoft, as a company, is a failure.

Exactly. Luck gave them a monopoly on DOS, they were clever and ruthless enough to keep that going through the transition to NT. Office was their other big idea that lead to monopoly #2. But examine their products that they didn't get a monopoly on, none are profitable. Their early success in gaining a monopoly on DOS has twisted their corporate culture such that they don't know how to compete. That is why I call them a failure, because failure is their future unless they can reinvent themselves.

Lets look at that future a bit shall we? Let us start with their present situation.

Assets:

One metric assload of cash.
Monopoly rents on Windows & Office

Liabilities:

Zero friends & allies in their industry, only enemies and slaves.
Zero prospects for growth at greater than growth in PC sales in a world where PC sales are flat.
Zero prospects for innovation, having NEVER innovated in the past and a corporate culture built around NOT innovating so as to prevent accidental damage to their monopolies by changing the rules of the game.
Several money losing divisions that can't be eliminated without scaring Wall Street.

Now we look to the future. If there is one certainty, it is that OpenOffice.org is going to destroy the revenue stream from MS Office. Whether Microsoft cuts the price on Office or bundles it into Windows to maintain their monopoly, the revenue stream from Office is going to decline faster than most analysts yet realize. Windows on desktops is probably a safe stream for 3-5 years, then it could be at risk as well. With both monopolies at risk where is the upside when assessing future earnings? Today's stock price is Wall Streets best estimate of what earnings will be in the future. For the past couple of years that estimate from the hardest assed green eyeshades money people (Wall Street investors) has been one consistent verdict: FLAT.

Publicly traded corporations are all about the share price, nothing else matters except dividends and with so many shares in circulation they simply don't have enough revenue now to pay meaningful dividends and revenue isn't going to growing much anymore, and will probably be declining 5 years out. So their future is one of pain. They are way past the size where actual failure is a possibility, yet success and growth is also out of reach so their future is a long drawn out pain until something changes the equation. See IBM in the 80s and 90s.

Re:duh!

[hondo77]

Um, and the iPod is competing against what current Microsoft product, exactly?

That was part of the article's point. Microsoft missed that boat.

Re:But why?

[lucabrasi999]

I know, I know, it's big business and stock price, but still, it's not like they're running out of money.

You are correct. Even if your company makes money, Wall Street look at the rate of revenue and income increase. Wall Street also sees the $50 or $60 Billion in cash that Microsoft has and asks "Hey, where are our dividends on the stock?" A $0.16 per share dividend isn't much when you have $60 Billion in the bank.

Re:But why?

[johnnyb]

This is the point where Microsoft investors figure out just how diluted Microsoft stock has really become. If I read the numbers right, they have 11 Billion shares outstanding. Which means that, after 30 years of doing business, they have only made about $6 per share (which costs $27.89).

This is the problem with companies not giving dividends - it really distorts the amount of money they are making, and distorts the purpose of the company. Microsoft wants to hoard the money so it looks better on paper, rather than give the owners of the company their profits, which will reveal that wild investing in disparate projects which make no money but undermine competitors does not do much to shareholder value.

This is part of the problem with option-granting programs - it dilutes the stock significantly. When companies give dividends this is more obvious (hey! my dividend went down this year!). When they don't, the stock price is a lot less attached to reality.

It's kind of interesting how much of Microsoft's quarterly revenue comes from investments rather than direct earnings.

I'm not saying they aren't a strong company - they are. However, their stock price is WAY over what it should be, and their performance-per-overpriced share isn't what it should be, either. Their large bank account has helped justify their stock price while spending rediculous amounts of money keeping the competition away.

Re:But why?

[I8TheWorm]

after 30 years of doing business, they have only made about $6 per share (which costs $27.89).

Actually, you don't read it right. Microsoft's stock has split [microsoft.com] 9 times, and 1 share in 1987 would give you 288 today. The value of one share on Sept 18, 1987 was $114.50, and the value of one share on Feb 14, 2003 was $24.96. Given that you would have 288 shares, your beginning value of $114.50 would have ended up at $7,188.48.

A quick trip to CNNMoney's Financial Calculator [cnn.com] will tell you that's an annualized rate of return of 44%. The historical average of the DOW Jones is about 10%, the S&P 500 12%, and the NASDAQ about 14%. I'd say MSFT would have been a worthwhile investment until February of 2003.

MSFT's P/E is 40.76 [yahoo.com], while the S&P 500 is 19.4 [investopedia.com], definitely a much higher price to earnings. However, Microsoft was traditionally a growth stock, not a dividend payer.

Conclusion - MSFT may not be a great stock to own now, but it was a great stock to own for 16 years or more.

Re:But why?

[johnnyb]

"Actually, you don't read it right. Microsoft's stock has split 9 times, and 1 share in 1987 would give you 288 today. The value of one share on Sept 18, 1987 was $114.50, and the value of one share on Feb 14, 2003 was $24.96. Given that you would have 288 shares, your beginning value of $114.50 would have ended up at $7,188.48."

I agree with you that Microsoft used to be a great stock to own. I would also agree that, if Microsoft could persue the same growth that it has over the past 30 years, it would also be a great stock.

My contention is simply that Microsoft will not see the growth it had in the past, and therefore its _current_ stock price is unjustifiable.

"Conclusion - MSFT may not be a great stock to own now, but it was a great stock to own for 16 years or more."

I agree with that wholeheartedly.

Re:But why?

[johnnyb]

You're missing the point. They've NEVER issued a dividend, and after 30 years they have only made, TOTAL, $6 per share.

Let's assume, just for a moment, that Microsoft has the potential in the future to make as much as it has in the past (I doubt this highly, but let's go with it). Let's also say that they spent their first 15 years in "growth mode", so they really made their $6 per share in the last 15 years. That means it will take at least 60 years for it to earn it's share price.

If you think that Microsoft is going to take off again and all-of-a-sudden go back into boom mode, by all means, it would be a great stock. But the fact that after 30 years it has only netted $6 per share for a $27/share stock, I think you're putting your money in the wrong place. Microsoft is way over-diluted, which is one of the ways they made such a large cash position.

Re:But why?

[daveo0331]

Microsoft made almost $10 billion [yahoo.com] in profits last year. If they can cut $1 billion in expenses, they will be making 10% more profits assuming they don't hurt their revenues in the process. Since investors tend to look at price/earnings ratios when deciding what a stock is worth, we might expect a 10% increase in profits to translate into a 10% increase in stock price. If you own large quantities of Microsoft stock options (as I'm sure everyone in Microsoft senior management does), you'll make a lot of money if the stock price goes up 10%.

Re:But why?

[afabbro]

Because wasting money is never a good idea, no matter how rich you are.

Re:troll fest

[tatsu69]

You suck at trolling and even starting a troll... You have to do it right.

I use Microsoft everyday and love it. I want Bill Gates to have my baby and Linux sucks.

Re:Was Bill Gates and the rest considered?

[arieswind]

if you paid attention, you would notice that it in fact says it costs MS 300k for each employee, and only part of that cost is their wage. Other things are factors, e.g. their computers, company cars, lunches, all the toilet paper they steal from the bathrooms, etc

Re:It just goes to show you.

[hoggoth]

> Linux and open source will never beat Microsoft. Microsoft will crumble from within, and beat itself.

Just like the USSR collapsed from within.
But it wouldn't have happened without the economic pressure of competing against the US (military spending).
Likewise, it won't happen to Microsoft without the pressure of competition from Linux (and Open Source, and Apple, etc).