Pivotal point in its 40-year history
Microsoft is at a pivotal point in its 40-year history, as the landscape in computing is facing a massive shift toward mobile devices and cloud-based software and services. The company has significant challenges ahead of it, even though. Here are three reasons to sell Microsoft.
1. Microsoft is spread too thinWhile Apple is known for its intense focus on its core markets, Microsoft has built a reputation for the exact in contrast. The company has plunged billions of dollars into attempting to expand into new businesses but failed to succeed in any of them financially.
The Zune music player came five years afterwards the iPod, and it failed to move the needle in any meaningful way and was killed late last year. Microsoft's online services division, or OSD, which stood up to challenge Google in online search and advertising, has now lost $16.9 billion over the past seven fiscal years. Even the Xbox business, which is widely considered a consumer success as the most popular gaming console, is a financial failure.
The Windows Phone operating system as well has an embarrassingly small market share, even as it has a legitimately innovative interface. Even sadder is that Nielsen's second-quarter estimates peg Windows Mobile's market share higher than Windows Phone's. Windows Mobile is more than 10 years older than Windows Phone, and no longer ships.
2. The biggest cash cows are in accordance with attackMicrosoft's two biggest cash cows are Windows and Office, providing the operating income that foots the bills of the bleeding segments. Office is pursuant to this agreement direct attack from Google as the search giant pitches its Google Apps productivity suite, and Microsoft is in the middle of trying to transition to Office 365, its subscription-based move to the cloud.
Longer term, Windows is threatened by not only Mac adoption, however also tablets at large that are poised to disrupt the PC market. Clearly, there will always be a PC market, yet as tablets begin to eat into PC sales, Microsoft will need to replace that lost revenue somehow. Its big tablet push is riding on Windows 8, which I happen to be bullish on, but at the time again I was as well bullish on Windows Phone, and look how the market voted on that one.
Servers remain strong, however Windows and Office both have challenging transitions ahead of them as the markets migrate toward tablets and subscription cloud software for growth.
3. Steve BallmerWithout a doubt, CEO Steve Ballmer is the most poorly regarded CEO of any major tech company today. In accordance with his leadership over the past decade, Microsoft shares have stagnated. Even with the overall business at record highs, investors don't give the software giant the respect it deserves, and many attribute this discrepancy directly to Ballmer.
This was particularly evident when Greenlight Capital's David Einhorn called for him to step down last year, saying, "His continued presence is the biggest overhang on Microsoft stock." On Ballmer's watch, Microsoft badly missed the boat on mobile, brushing off the threat of the iPhone, during even now the company has but to make a meaningful push into tablets that have touch-optimized operating systems. The company is however trying to catch up in mobile.
The average company in the S&P in the past five years
"Microsoft's business has been much stronger than the average company in the S&P in the past five years," Einhorn had said. "Microsoft isn't getting credit for some of its achievements and prospects." Einhorn rightly believes that Ballmer is "stuck in the past," missing out or executing poorly in major computing trends like online search and social networking.
One of these days?The software giant's core businesses are being threatened by secular shifts in computing, during it lacks the focus to successfully tap growth profitably in its secondary businesses and is led by a CEO who's stuck in the past.
Microsoft should have been focusing on its forte: software. The company has never had a consistently successful hardware business. Entertainment and devices typically generate black ink in these times, nevertheless it's nevertheless digging out of a very deep hole. Focusing on online services and cloud software services is the right move, except that Microsoft is unfashionably late and everything considered hasn't figured out how to play profitably.
Until at that time, my personal money however rides on Apple, and here's why like as not some of yours should, too. The Motley Fool has just launched a brand-new premium innovation service, and it's all Apple, all the time.
Pivotal Points In History At Microsoft
Microsoft 40 Year History
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