Posts Tagged ‘ibm’


Over the weekend the press were full of talk of Steve Ballmer, the CEO of Microsoft, who has announced his plan to retire next year. This begs the question: what next for the company? Should it revisit the idea of a merger with Yahoo?

Some focused on the somewhat less than gushing terms of the Microsoft release announcing Ballmer’s retirement. Some reckoned they saw hints of a rift between Ballmer and Bill Gates. The two men have been colleagues for decades. By the way, Ballmer was Microsoft’s 30th employee, joining the company in 1980. He became CEO in 2000.

It is not hard to point to what is wrong with Microsoft these days, and as the boss Ballmer will clearly receive most of the blame.

It is not so obvious that things would have been much different if Bill Gates had stayed at the helm. Gates famously failed to predict the rise of the internet, so it is doubtful whether he would have come up with a plan to counter the threat posed by Google, Apple and Facebook.

In fact, you may recall that back in the 1990s Microsoft, led by Bill Gates, and Apple began a joint venture. Some Apple aficionados saw a tie-in with Microsoft as akin to a pact with the devil. Few foresaw a day when Microsoft would be struggling, and living in Apple’s shadow.

But will Microsoft come back?

It is suffering from classic innovators’ dilemma with a little bit of recession to the mean thrown in for good measure. See: The UK’s export-led recovery

The market it has dominated for so long is changing – arguably disappearing – and Microsoft seems to be left plugging technology people no longer want.

It was not always this way. Back in the 1980s, Microsoft learnt how to experiment. To tell the story, we must rewind the clock to 1987. The company had a massive dilemma. It had enjoyed a good run, thanks to DOS, but the world was ready for change. The industry was alive with competitors – many much larger than Microsoft – wanting a slice of the action. Eric Beinhocker tells the story well in his book: ‘The Origin of Wealth’. These days we just assume Microsoft chose to ditch DOS and develop Windows. But it wasn’t as simple as that. It appears that Windows evolved, and a by-product of its development was the failure of most aspects of the Microsoft plan.

In fact, before Windows won through, Microsoft put more resources into beefing up DOS. It entered into a relationship with IBM for the development of OS/2; it held discussions with third parties for products aimed at the Unix market; it bought a big stake in a seller of Unix systems; created software for the Apple market; and, of course, invested in Windows.

By Ballmer’s own admission, Surface was a bet-the-company product, but there was never a need to take such a gamble.

What of the future?

Not so long ago Microsoft tried to buy Yahoo, but the price seemed to be the sticking point. Under  the dotcom seems to be staging something of a renaissance.  Maybe some kind of merger should come back on the agenda, but it’s difficult to see Mayer heading up Microsoft. If, however, she was to head up some kind of joint venture between Microsoft and Yahoo, now that might be more interesting.

© Investment & Business News 2013


Braille is a good idea, so are guide dogs. But that does not mean people are likely to choose to be blind. Yet economists seem to have chosen this very approach when it comes to practising their so-called science. It is a shame because in so doing, they are rendered pretty useless; their theories are about as relevant as an English/Elvish dictionary. The truth is that we are in the midst of a new revolution, one that may yet make the industrial revolution look like a dry rehearsal for what we about to witness. Make sure you are strapped in, and make sure you are au fait with what’s going on.

Maybe one of the interesting things about the great beef burger experiment that hit the headlines this week was the revelation of who was backing it. You probably heard about it. In a laboratory in Maastricht, Dr Mark Post has developed a way of growing beef in a petrie dish, and earlier this week he cooked a beef burger on live TV for critics to eat. It’s doubtful whether the ingredients provided by Dr Post, or indeed his cooking prowess will get an airing on Master Chef any time soon. Many find the whole idea of beef created from stem cell research a tad frightening. Not even Douglas Adams thought of this. In his book ‘The Restaurant at the End of the Universe’ a pig that wanted to be eaten was featured, but pork grown in a lab? Well that seems like an idea that is too farfetched for the man who thought of an infinite improbability spaceship.

The point about meat is that it is not very efficient. So we get these beef processing factories, otherwise known as cows, or pigs, that eat lots of grass, drink lots of water – most of which comes out of the back end as waste – take up a lot of space, and then, after a long time interval, they are eaten, in a practise some people think is barbaric. Beef created the Dr Post way is kinder on the environment, uses less resources, is more humane, and it offers another benefit… what is it now, it is quite important. Oh yes that’s right, it may end world hunger.

And that brings us to the really interesting bit. The man who bankrolled Dr Post’s project was none other than a chap called Sergey Brin, a Russian-born immigrant to the USA, who – among other things – co-founded Google. When it comes to innovation Google is a rather interesting company. These days we have all heard of Google Glasses, and most of us have heard of its self-driving car. Did you know it has been looking at wind turbines that fly above the ground like kites? If it is the case that we are in the midst of a new industrial revolution, from an investment point of view picking the winners is a tad difficult.

But some companies – that’s companies with very substantial resources – are good at experimenting, and trying lots of ideas. Google and IBM are good examples. They may well be among the big winners from this revolution. Others, such as some of the giant pharmaceuticals, are like venture capital firms that specialise in an industry and in addition to money can offer distribution and marketing expertise. They are good firms to watch too.

Returning to recent innovations, there is also talk of a new ultra-thin integrated circuit, which may evolve to become a little bit like robotic skin that can monitor your health? This product was developed by Martin Kaltenbrunner at the University of Tokyo. It is perhaps the most interesting idea to emerge so far in this new brave world of wearable devices.

Then there is the world of medicine, and pharmaceuticals. Take, as an example, a company called Immunocore, which may have developed a cure for cancer. See: Exclusive: Cancer – A cure just got closer thanks to a tiny British company – and the result could change lives of millions

Immunocore, by the way, according to the ‘Independent’ article has attracted the attention of Genentech in California, which is owned by the Swiss giant Roche and Britain’s GlaxoSmithKline.

And finally, or finally for today, there is Hyperloop. We don’t know much about this product yet, other than it is an idea developed by Elon Musk, co-founder of PayPal, who says it will be able to transport people at 700 miles per hour, cannot crash, is immune to bad weather, and is self-powered, via the aid of solar energy – oh and, by the way, it is supposed to be much cheaper than other forms of transport. Mr Musk has this idea for Hyperloop to be able to transport people from Los Angeles to San Francisco in about 30 minutes. See: How does Elon Musk’s SF-to-LA-in-30-minutes Hyperloop work?

Who knows whether any of the products described here have traction, and indeed for that matter whether Hyperloop uses traction as the means of transporting people?

But they illustrate a point. There are some incredibly interesting radical ideas afoot at the moment.

Computers and the Internet must surely lie behind the new revolution. The latest generation of computers are now so fast they have made it possible to develop ideas in a way that was once impossible. The Internet enables the flow of ideas, and cross fertilisation as brains across the world communicate and share.

But economists still don’t get it. Some still deny that recent innovations have created wreath, and implicitly they are cynical about the next batch – that is assuming they know there is a next batch.

They make a catastrophic error.

Innovation can create wealth, and end poverty; it can lead to mass unemployment and inequality. How we ensure that innovations benefit all, is the big challenge of the 21st century.

Let’s finish by quoting Douglas Adams and drawing a parallel with economists. “The Hitch Hiker’s Guide to the Galaxy defines the marketing division of the Sirius Cybernetics Corporation as ‘a bunch of mindless jerks who’ll be first against the wall when the revolution comes’, with a footnote to the effect that the editors would welcome applications from anyone interested in taking over the post of robotics correspondent.”

“Curiously enough,” continued Adams in his book ‘The Hitch Hiker’s Guide to the Galaxy’, “an edition of the Encyclopaedia Galactica that had the good fortune to fall through a time warp from a thousand years in the future defined the marketing division of the Sirius Cybernetics Corporation as ‘a bunch of mindless jerks who were the first against the wall when the revolution came’.” Do you think economists will be the first against the wall come the new industrial revolution? Or will it be just some of them?

© Investment & Business News 2013

The PC is supposedly dying and the Windows 8 debacle is making things worse. But you wouldn’t have guessed that from the latest results at Microsoft. Google is up against it because per click revenue is much lower on mobile technology than on PCs. You wouldn’t have guessed it from the company’s latest results. IBM is back. It is a star of tech again, and growing like it used to in the good old days. Well, you wouldn’t have guessed it from the company’s latest results.

Google profits came in at $3.35 billion in the latest quarter, up 16 per cent from a year ago.

It was good stuff, but there was a whiff of something not quite so good, that creased investor’s foreheads. Per click revenue for Google fell 4 per cent. The explanation of the fall is not rocket science. The move to mobile is hurting, after all.

But CEO Larry Page didn’t want to talk about that when the company’s results were released. Instead he focused on the crazy. He said: “Companies tend to get comfortable doing what they’ve always done with a few minor tweaks…It’s only natural to work on what you know.” He said that Google, in contrast, does the things “no one else is crazy enough to try.” So what are these crazy ideas?

Well there are goggles, and fibre internet, and driverless cars, and bodiless human brains (maybe not the last one).

Microsoft isn’t quite so crazy. It does something rather sensible called selling software for money. Profits were up 17 per cent coming in at $6 billion.

The underlying challenge at Microsoft has not gone away, however. Its profit growth came from cost cutting and changes in its strategy with corporate clients. It is hard to see growth continuing from these areas for very long.

The snag is that innovators’ dilemma shows that really sensible strategies have a tendency to look dumb when we go through a phase of disruptive technology. The crazies can look quite smart.

Talking of smart, IBM – the company that suffered such a pasting from Microsoft all those years ago – embraced Linux, learnt the joys of open source software and engaging in tech communities, but didn’t have such a good quarter. Operating income was up 3.4 per cent to $3.4 billion but sales fell 5 per cent.

CEO Ginni Rometty blamed the disappointing performance on the company failing to close what she called “a number of software and mainframe transactions that have moved into the second quarter.”

©2013 Investment and Business News.

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The US Supreme Court does not have an easy decision, not least because the science is devilishly complex. Myriad Genetics holds patents on two human genes which – when mutated – are associated with breast cancer in women.

At the moment the company has a monopoly for testing mutations of these genes. The US court is set to decide whether such patents are legal.

If the Supreme Court decides against Myriad, then 30 years of patent laws relating to genetics will go out of the window – or maybe that is a bit extreme – but the court will certainly set a new precedent that will have profound implications for the genetics industry.

Those who support the continuation of such patents make a simple argument. “To advance our understanding and develop medical treatments, investment is required,” they say. And “what company will invest the required millions/billions without knowing its breakthroughs will be protected under patent law?”

Critics say that is crazy. How can you patent a gene? What next – a patent on exploiting the Sun?

The response from the likes of Myriad runs like this. For every new breakthrough in medical science, there were many ideas that came to nothing. Companies have to make enough money from their odd successes to fund all the failures. This is what critics of patents don’t understand, and this is why generic drugs are so unfair. But there is another point which often gets overlooked.

Innovations occur when researchers build upon the ideas of other researchers. The more researchers share ideas, the more they swap insights, the faster the rate of innovation. In today’s Internet world, thanks to the way innovations occur via building on the ideas of others, the rate of innovation should accelerate. This is not a new idea. Isaac Newton himself once said he innovated by standing on the shoulders of giants. It is just a more significant point in an era of such powerful communication technology. Patents may yet be the single biggest hurdle to innovation.

There is more than one reason why it may pay a company to invest in R&D without the incentive of patent protection. For one thing, first mover advantage can make big bucks for a company with or without patents. For another thing, companies which are at the forefront of innovation can sell their expertise.

Take IBM. Once again Big Blue is one of the largest firms in the world by market cap. These days one of IBM’s key strengths is its expertise in Linux. It has acquired this expertise by contributing to the innovation process, without obvious financial reward.

Companies that sit at the forefront of human knowledge work in complex areas. Such companies must have expertise, or they will not survive. Such expertise can only be effectively increased by ensuring the company’s researchers cooperate with other researchers. As a rule, researchers will only cooperate with other researchers if they feel that these other researchers bring something worthwhile.

Companies that do not have sophisticated R&D will be shut out from the cooperative process. The reason why the Linux community is happy to share ideas with IBM is because IBM reciprocates. Patents can destroy that cooperative process.

The US Supreme Court must decide that companies cannot patent genes. The future of innovation in genetics depends on that decision.  For more on patents and the damage they do see: Miracle graphene product shows problems with patents 

©2013 Investment and Business News.

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It was the biggest fall since 1994 or 2001 or – to put it another way – it was the biggest fall since records began.

According to IDC, PC sales dropped 14 per cent in Q4 last year, the biggest fall it has ever recorded since it began collecting data in 1994. According to Gartner, PC sales dropped 11 per cent, which is the biggest fall it has reported since it began collecting data in 2001.

Considering the growth that common sense says dominated the PC industry in the 1980s and early 1990s, it may not be unreasonable to assume it was the biggest fall since the days when IBM first tied up with Microsoft.

Bob O’Donnell, vice President at IDC, focused on the disappointing uptake of Windows 8. He commented: “It seems clear that the Windows 8 launch not only didn’t provide a positive boost to the PC market, but appears to have slowed the market.” Part of the problem is that Windows 8 is designed to work with touch screen PCs, but such products are expensive – a lot more expensive than their tablet rivals. The BBC quoted Colin Gillis, financial analyst at BGC, who said: “This is horrific news for PCs.”

Hold on a second what the… ahhhhhhh.

One hour later…..Sorry about that, computer just crashed, and it took an hour to get running again, what with it trying to download the latest version of this piece of software and that piece. Where were we? That’s right, awful. Sorry it is not just the sales that are awful, it’s PCs. Microsoft launched a new version of Word with features most of us will never need. What we really want is a PC that is fast, won’t suddenly lock or crash on us, or suddenly take an age to process the simplest of tasks.

How can it be that PCs are so frustrating, when thanks to Moore’s Law they are so much more powerful?

Isn’t that the real problem with PCs?

Tablets and smart phones, in contrast, are so neat, easy, and reliable.

That’s the real change the PC industry must grapple with.

©2013 Investment and Business News.

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You can look at Moore’s law in more than one way. You can see it in its literal sense, applied to computers doubling in speed every 18 months or so. Or you can see it as a metaphor for any type of technology that sees regular increases in speed or power. The last few days have seen announcements of several new technologies, variously falling into one or even both of the camps. Strap yourself in for a new stage in the evolution of technology.

First there is solar power. Earlier this year economist Paul Krugman was slated by those in the know when he suggested that solar power was seeing its power increase at a rate that was commensurate with Moore’s Law. The mistake Krugman made was to not realise there is a theoretical limit to solar power. It is called the Shockley-Queisser limit named after William Shockley and Hans Queisser, who proposed that the theoretical maximum efficiency of a solar panel is 34 per cent. In short, there is a just a physical limit to how much energy solar power can generate, and we appear to be pretty close to that limit.

Enter stage right the Nano-Science Center at the Niels Bohr Institute in Denmark, which is connected to the University of Copenhagen. It has been working on nano-wires, or what some might call miracle technology.

A nanometre is a billionth of a metre. O.1 of a nanometre is the size of a helium atom. Nano technology is engineering at an incredibly small scale. Nano-wires is an exciting application of nanotechnology.

“It turns out,” or so suggests an announcement on the University of Copenhagen web site, “ that the nanowires naturally concentrate the sun’s rays into a very small area in the crystal by up to a factor 15. Because the diameter of a nanowire crystal is smaller than the wavelength of the light coming from the sun it can cause resonances in the intensity of light in and around nanowires. Thus, the resonances can give a concentrated sunlight, where the energy is converted, which can be used to give a higher conversion efficiency of the sun’s energy.”

The announcement continues: “The typical efficiency limit – the so-called ’Shockley-Queisser Limit’ – is a limit, which for many years has been a landmark for solar cells efficiency among researchers, but now it seems that it may be increased.” The new break-through”, continues the announcements “will have a major impact on the development of solar cells, exploitation of nanowire solar rays and perhaps the extraction of energy at international level. However, it will take some years before production of solar cells consisting of nanowires becomes a reality.”

So that’s Moore’s law at work in solar energy.

But the University of Copenhagen announcement also made reference to nanowires having potential use in quantum computers.

This brings us to Moore’s Law in its original meaning, relating to computers doubling in power every 18 months or so.

Enter stage left IBM. Big Blue has just picked up the Swiss Tell Award for investment in new nanotechnology. IBM stated recently: “Carbon nanotubes and scanning probes derived from the atomic force microscope – cousin of the scanning tunnelling microscope – show particular promise in enabling dramatically improved circuits and data storage devices.” So, in English, the words to note are improved circuits and data storage devices. In short, IBM is working on nano technology to make computers much faster. We may or may not be close to reaching some kind of limit to computer power based on traditional silicon type technology. But IBM is exploring alternatives.

Big Blue put it this way: “IBM’s research into nano-scale structures that self-assemble may one day obviate the need to ’hand-position’ atoms. Nanotechnology will allow the design and control of the structure of an object on all length scales, from the atomic to the macroscopic enabling more efficient and vastly less expensive manufacturing processes and providing the hardware foundation for future information technology.”

And finally there is a company called Hyperoptic which is set to offer broadband speeds of one gigabit a second to some locations in London. That’s ten times faster than the fastest services from Virgin Media and BT, which are themselves around ten times faster than the service most of us are used to.

Some economists are cynical about the effect technology is having on the economy. Their cynicism may or may not be justified up to now. But the point is that – thanks to Moore’s Law in the sense being used here – technology is set to have an ever more profound impact on our lives and the economy.  This is both exciting and frightening, with unpredictable consequences for jobs, and the way in which wealth is distributed. Economists, in making their forecast for the next few years, are totally failing to factor this in.

©2013 Investment and Business News.

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So what do you think will happen in 2013?

Setting aside Galbraith’s comment about the only redeemable benefit of economic forecasting being that it makes astrology look respectable, here are some thoughts for you to ponder.

Zombies may be in the news in the summer. A new film is coming out called World War Z, starring Brad Pitt. It is about zombies. In 2012 zombies were in the business pages too. There are households, many of whom are stuck in forbearance; around 5.8 per cent of home owners, according to the FSA. There are zombie businesses kept alive by rock bottom interest rates, and banks terrified to value their assets in accordance with what the markets think they are worth. If banks did revalue their assets in accordance with market values, and applied what’s called mark to market accounting, we could see another banking crisis. So either the markets are wrong, and banks are merely refusing to let their hysteria reflect valuations, or banks are pretty close to becoming zombies – if they are not already, that is.

Meanwhile, the poor old can is already starting to look very beaten up. Yesterday, US members of the House of Representatives kicked the can down the road. They voted to raise some taxes, but delayed deciding about spending cuts for two months. Next, they have to agree on the US debt ceiling. If they don’t, the US government will have to default. They probably will, and it probably won’t, but the wire will get a visit as the US economy goes down to it, and the can will get kicked some more.

In Europe, politicians will do much the same thing – that is to say at the last minute agree to various rescue schemes, but only as temporary measures while they consider at their leisure what to do to fix underlying challenges. They will never decide of course, but they will have lots of late night emergency meetings.  The German Constitutional Court will have to decide whether various new schemes are legal under German law, and will finally announce provisional approval of the latest German backed rescue scheme, but say it needs more time to decide for sure.

So is there a word to describe US and EU governments that just delay the real decision making process, and apply sticking plasters? Well how about this word: zombies.

One prediction for the year ahead is that as World War Z is released we will see a barrage of media comment, and indeed cartoons, comparing the economy with that film.

Also in 2013, governments and central banks in the US, Japan and the UK will decide it is time to target nominal GDP rather than inflation. The result will be more QE. Sterling may come under pressure, especially against the euro, although the Bank of England may well say this is a good thing. Holiday makers won’t be too chuffed, however.

Many will forecast a return to double digit inflation, a or even hyperinflation, but in reality, QE will lead to modest rises in inflation, and by the end of 2013, despite more QE, UK inflation will be lower than at the end of 2012. (CPI Inflation was 2.7 per cent in November 2012).

On the back of QE, gold will probably do well, and oil will oscillate. But there are signs that China may be getting over its so-called soft landing, and growth may be higher in 2013. This may be enough to push up oil.

Finally, in the world of tech, LinkedIn will see profits double again as they did last year, Facebook will see its shares pick up and return to the IPO price, as the company begins to find ways to monetise its huge user base. Apple may take a knock in the smart phone business as the likes of Samsung and HTC see sales rise.  But it will announce its iTV player, and this will prove to be as big a deal as when the company revealed the iPhone. Shares will surge and Apple will be the world’s first company to be valued in excess of one trillion US dollars.

Sales at Amazon will rise, as new owners of its Kindle Fire start buying more from Amazon and less from traditional retailers. Amazon will appear to be on course to become the world’s largest retailer. And finally, IBM will see its best year in terms of share price growth, for many years.

©2012 Investment and Business News.

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HP has lashed out. When it paid $11billion for a UK software company that produced a search engine that no one really seemed to understand, some said they didn’t understand what HP was up to.

Back then the PC company was under the leadership of Leo Apotheker. A former boss at SAP, Mr Apotheker was a software man. His big idea for HP was to move it into software. Hence the purchase of British software company Autonomy.

If you want to know what Autonomy does, the best description may be search engine with knobs on. Is its product any good? Well HP thought so, so it must have been.

Except that a few months later Autonomy, under the HP banner, looked like a pale shadow of what it once was, and the company’s management team, including founder Mike Lynch, had been given their marching orders

Then HP decided it didn’t want to be in software; it was a PC company. Err no it wasn’t a PC company, it was a printer company. Err no it wanted to be a tablet company. Err no it was a consultancy like IBM. Errrr.

So Leo went, and in came Meg Whitman, who shined a light of certainty on the company. Now HP is absolutely certain it doesn’t know what it is.

But one thing it does seem to be certain about is that buying Autonomy was a mistake. Now it is alleging that the British company cooked the books, put certain costs down as marketing costs when they were unit costs, and booked sales to distributers as sales to end users. Mike Lynch denies it of course. He may be right, or HP may be right.

But what is for sure is that HP panicked, and still seems to be panicking.

Okay it still sells a lot of PCs, but its margin on each sale is tiny – around $22, according to IDC. Contrast that with the profits enjoyed by Apple, which is making money out of the fact that its brand name justifies a premium. Compare that with the profits enjoyed by Google, which rakes in the dollars from adverting when Androids are sold. Or contrast it with Amazon, which counts the dollars as it sells books and other goods from its stores on the back of the Amazon Fire.

The truth is that the PC market may not be dead like a dodo, but it is like the Siberian tiger – on the endangered list.

Chastened IBM saw the signs and got out, became a consultancy, and now Big Blue is back, and for a while this year enjoyed a higher market cap than Microsoft.

But for PC companies like HP and Dell, change is required but what change?

This is classic innovators’ dilemma, or what Clayton M Christensen called the “technology mudslide hypothesis.” In his model, established companies in a position of market dominance reinforce their position of strength through their specialisation, but when a new so-called disruptive technology emerges, they miss it. They get relegated to backwaters or go out of business.

Christensen himself took the disc drive industry as an example, and looked at every major change – for example from 14 inch disk drives used for mainframes to 8 inch disks for mini computers, 5.25 inches with the emergence of PCs and then 3.5 inch disks as laptops were developed. He showed that with the emergence of a new disc drive standard, there was a change in market leadership; previously dominant players started doing dodo impersonations.

What is especially interesting about the Christensen study is that the companies themselves were often aware of the danger, researched the new burgeoning technology, but their existing client base showed no interest, and urged them to stick to what they already knew.

Kodak fell victim to innovators’ dilemma. It even flirted with new technology before the rest of the field; it was, after all, a pioneer in digital photography. It still failed to change, however.

HP saw the changes coming too, which is why it bought PALM.  It didn’t know what do next, however, and actually cancelled its PALM based products about the same time as the Autonomy purchase.

Err, that was not a good move. Still, when all else fails, it can always blame the accountants.

©2012 Investment and Business News.

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Windows zzzz. Sorry, must have nodded off there.

Let’s try again. Windows (yes it is possible to say that word without falling asleep) looks a tad bit like yesterday’s news. Now tablets are a different matter; they can cure the headache of many an electronics company and its shareholders.

So Microsoft is now a tablet company. And indeed it’s a hardware company too. Its Windows RT operating system may well turn out to be rather good.

The snag relates to all that legacy. Windows may be a tad dull, but most of us would be just a bit stuck without Word and Excel.

So Windows 8 has backwards compatibility with all that old Microsoft stuff. Presumably, this means that the price you pay for Windows 8 and its backwards compatibility is a slower PC.

But RT, now that’s different. It’s a new operating system and is not being hamstrung by all that baggage.

The new Surface is Microsoft’s attempt to muscle in on the tablet market. It is too early to tell whether the product is any good, or whether it will fly or dive, but credit where it is due, it’s a bold move.

Microsoft’s partners are a little worried. Microsoft is all about producing operating software, and letting its partners worry about the hardware. Sure, the software company moved into games hardware, but that is different. In the world of PCs, Microsoft always has been software, while the likes of Dell and HP focus on hardware.

Now Microsoft has moved onto their turf, so that’s a risk. Of course Microsoft retorts that the Surface is a kind of shop window; it is just trying to trail-blaze a way forward for its partners.

Microsoft’s new operating system is new. One could even say it’s an attempt to start all over again – new hardware, new software. The old PC is not exactly going the way of the Dodo – not yet – but it is tempting to say it is going the way of the Siberian tiger.

The company’s CEO Steve Ballmer admits the new products are vital; that he is effectively risking the company on them.

Then again, Microsoft has been here before. Before there was Windows, there was DOS and that really was dull.

But when DOS appeared to be coming to an end, what did Microsoft do?

Conventional wisdom has it that it ditched DOS and hyped up Windows.

In reality the company experimented. It considered beefing up DOS; it considered working on a new joint venture with IBM or Apple in the Unix market, and even a company sale. Windows was just one of several ideas. The company was lambasted in the media for being too inconsistent, for not having a clear strategy.

Windows evolved in the true Darwinian sense. It was one of many experiments, but it happened to be the one that worked.

Private equity firms don’t like that kind of strategy. They like to see plans stretching into the future and companies that stick to them rigorously.

Luckily for Microsoft, Bill Gates didn’t see things that way and the company flourished.

The problem with these ‘bet the company’ moves is regression to the mean. In the long run companies don’t always perform better than rivals.

Microsoft seems to have forgotten its own lesson.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here