Long and stady decline for MSFT

Look MSFT actually has several real business. Windows Consumer, Office, Server & Tools, Xbox, Mobile.  Yes I break out Xbox and mobile because each deserves its own comments.

MSFT can afford to pay for the loosing business right now because it has a very strong source of revenue from Win + Office. However that is about to change! Why you ask? In other words because the price MSFT can charge  for Windows and Office is about to collapse, by 2015, MSFT will be forced to give away most of it's OS. Think about what that will do to the company!

The core of workloads on Win desktops Messaging

Win Desktop is standing on 3 legs which form the core of workloads on Win desktops Messaging and Communication, Business Apps, LOB Apps developed by other companies. You have to think about what is it that holds people tied to a MS desktop or laptop. In general these 3 "legs" are that.

(1) Messaging and Communication: arguably the ship has sailed here. Most people now prefer writing e-mails on Phones and iPad's and communicating using other platforms on mobile devices, Facebook, Face time and 1000's other apps. As a matter of fact most of the interfaces communication is better on a phone and mobile device than on MS laptop or desktop.

(2) Business Apps: Sure Excel and Power Point are somewhat holding their own, however the need for them is quickly disappearing, actually most students will get by with just Evernote, Google docs, Apple Keynote and Pages or 100,000 other apps which are free and many times as good as MS Office. There is a strong support for Excel in the business community. Yet the whole business is worth about 1/10 or less, if excel is the only thing holding it at the same time.

(3) LOB Apps: Here is where there are millions of apps and systems built on top of Windows think production systems, control systems, SAP, People Soft, Seible, and million other things. As a matter of fact you can argue this is the last lag which supports the MS desktop OS business AND the replacement cycle. A lot of smart people are working on moving these interfaces to beautiful portable devices and making them simple to develop. This will take time and this leg will be here for a during.

Second is pricing. Android is free sure Linux was free previously, nevertheless Android has MILLIONS off great running APPS and Linux did not. Same with iOS, it is thoroughly ridiculous, Windows is so FAR behind afterwards couple years, I do not think it can ever catch up, unless the OS is what?? FREE! BAM! Put that into your model analyst.

There are several key enterprise services which Widows deliver in large companies, so some form of the revenue will be preserved, However this is not a lot. Recall I am talking Desktop not the Company IT piping, in other words covered in Server and Tools.

The 3rd leg falls

Once the 3rd leg falls, MSFT Windows revenue will collapse, I mean so badly most people will want to puke. What people do not realize that at the time, MOST of the loosing business will have to get shut down. I predict the end of the advertising business at Microsoft withing 24 -36 months. This will trigger a rounds of very large layoffs, which should be happening now to be honest. I am talking 50 - 70% reduction of workforce should happen. Microsoft should be around 25,000 people to be competitive, broadly speaking dev's, supprt and sales. However it will NOT, every company is in denial, until it is too late. So the layoffs will be in round afterwards round, the company will start loosing the best people and as the mediocre people are left in leadership roles, anyone any good will leave! It will thoroughly destroy MSFT ability to compete.

Mobile business, so far behind it is not even funny. You know why? Steve B. called smartphone a fad even when MSFT was nevertheless competitive in 2003-04. He said he would resign if iPad sold more than 10M the week previously it shipped. He did not remember that promise he made in front of 300 employees. He just did not and does not get it.

Xbox is doing then. Nevertheless Xbox is pursuant to this agreement heavy attack from Mobile gaming solutions which can stream the visual portion to ANY TV. to tell the truth fixed consoles are dead. I would be surprised if there will be market for fixed consoles afterwards xBox 360, outside of the hardcore gamer. If you on the whole do not get what I am talking about look at OnLive to understand where hardcore gaming is moving. The computing power to run the latest 3d games will move to the cloud also, and with it the power will shift completely to the Game developer, not the console producer. 

The ROCK inside Microsoft

This is the ROCK inside Microsoft. It has the ability to prevail long term and generate pretty amazing value. Nevertheless it should be organized differently, the learnings from Big Data, Xbox, advertising should go into developing the best system and platforms to allow other clients to create the services of tomorrow. Unfortunately the antiquated structure of the company will not allow these people to work at the same time for a long period of time in order to create competitive offerings. As well this business is not sexy! So the attractiveness of the business for both employees and investors will be somewhat limited.