Why Microsoft Should Focus on Existing Products, Not New Developments

By Professor Pinch Much like IBM of yesteryear Microsoft has hit a plateau, and the way back to prominence lies in upgrading their current assets for a new, mobile world. Microsoft (MSFT) has definitely been in the news of late. From the recent Skype deal to rumors it was buying Nokia (NOK) to the Skype outage that it was getting blamed for, it seems like everywhere you look something the company does is getting panned. For the record, I never thought Microsoft was behind the Skype outage. I thought it was Skynet voicing its displeasure at the acquisition and quite possibly starting its war against the humans. (John Connor, you're presence is required in Redmond, WA.) (To read Keven Depew's thought on the limits of fiscal policy, click here.) I for one have leveled my own criticism at Microsoft of late (see A Cynical, Contrarian View on Microsoft). I can't help but see parallels between Microsoft's situation now and IBM's (IBM) then. Granted, Microsoft is far from insolvent but they do seem to be experiencing (in the immortal words of Ron Burgundy) “a spiritual and existential funk” much like IBM did in the past. Only back then it was Microsoft that was the young upstart that shook up IBM's world. Now, Google (GOOG) and Apple (AAPL), along with others like Facebook and Twitter, have taken computing away from desktop PCs and have allowed computing to be mobile and social -- to be something different than what Microsoft envisioned it to be. (To see Diane Bullock's piece on legalizing marijuana in Connecticut, click here.) So when Ed Harrison from Credit Writedowns tweeted out an old Forbes review of Lou Gerstner's 2002 book “Who Says Elephants Can't Dance?”, I took a stroll down memory lane. I, along with others, do see parallels between the IBM of yesteryear and the Microsoft of today even though “IBM's problems, challenges, complexity and culture are unique.” I agree with that sentiment, but only to a point. Once any company reaches a certain size and a certain complexity, things get unwieldy. Committees get formed to double and triple check decisions. Fiefdoms emerge. Innovation and creativity get stifled. In short, everything starts to grind to a halt. Stagnation sets in and the company atrophies from within. So what do you do? (To read Todd Harrison's piece on listening to the market, click here.) In IBM's case, they didn't break up the company. They learned to leverage what they had and developed a new business model. And with that new business model, they developed a new way to grow. This is exactly the opposite of the strategy Microsoft appears to be undertaking. Instead they're trying to acquire new products and technology, and with that they're taking on risk. Risk that the stuff they acquire won't interact well with the things they've developed in house. There are risks associated with talent retention as well because key people may leave if they don't feel like they have enough control over their area in the new enterprise. To read the rest, Market News and Data brought to you by Benzinga APIs

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