Posts Tagged ‘microsoft’


The deal between Vodafone and Verizon announced earlier this month is, in fact, the third largest corporate deal in history. In comparison the deal between Microsoft and Nokia is small beer, but it is still a massive arrangement by any normal yardstick. Interest rates are low, but they may not be low for much longer. Is now, and pretty much right now, the time for a new M&A boom?

Let’s look at some of the reasons why the two mega deals of this month have happened. Okay, there is good strategic fit. Verizon and Vodafone both see new opportunities, particularly thanks to 4G in their domestic markets. In the case of Microsoft and Nokia the rationale for the arrangement is pretty obvious and has been discussed to death elsewhere.

But consider two other factors less commonly discussed. In the case of Vodafone and Verizon the factor is low interest rates. Fears that rates may rise soon, was possibly the main rationale for the timing of their deal – indeed Verizon referred to this very point. In the case of Microsoft, the software giant is one of the companies with a massive cash pile. There are many of them. Corporate cash piles have been a particularly notable phenomenon of recent years. Market bulls have been predicting the release of this cash mountain for some time. In the case of Microsoft, its partial release has been triggered by desperation – fear of Google, Samsung, and Apple, even Amazon. Other companies may start spending because they see signs of an economic pick-up. The reason may not matter. It was surely inconceivable that companies were going to sit on all that cash for much longer, but a trigger was required to release it.

Look further down the corporate league and other evidence of new M&A activity emerges. David Lloyd Leisure has been bought by private equity firm TDR Capital – and its new owners have plans for expansion.

The ‘Telegraph’ recently quoted Greg Lemkau, who is the co-head of M&A at Goldman Sachs, as saying: “Within two or three years from now, people will be looking back on this time as a golden opportunity.”

But the overriding point is this. The economy both here and in the US seems to be improving, and pretty significantly too. M&A is always popular during an economic upturn. But because interest rates are set to rise, the ideal timing for such activity is now.

Not everyone in the corporate world has cottoned on to the recovery; they were likewise slow to spot the seriousness of the crisis five years ago, but as the recovery gatherers momentum, the penny will drop, and then we will see a rush for leveraged deals before rates rise much further.

What are the implications? AS M&A activities rise, so too will equities. The FTSE 100, the S&P 500 and the Dow will all pass new highs – probably.

Is it all a good thing in the long run? Well that will be the subject of another article.

© Investment & Business News 2013


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


If you are really nerdy, not unlike the author of this article, you may never have recovered from the death of Blake. He was the eponymous hero of the TV series ‘Blake’s Seven’, who was killed off halfway through the series, only to apparently reappear in the last episode, but this time as villain, who killed all the other main characters. So what has that got to do with the price of bread? Well, it turns out that Microsoft – that’s Microsoft a company better known for a product you may have heard of called Windows – is re-making Blake’s seven for Xbox Live service. It’s a part of a – sorry to use an overused word – revolution in the world of content. It is one that will affect us just as much as a sharp change in the price of bread.

Microsoft is not alone. Netflix has had a go at another old BBC series, ‘The House of Cards’, and it has been praised to the hills too. To misquote the rather nauseating fictitious politician Francis Urquhart, played by Ian Richardson in the original series: “You might say it is better than the original, I cannot possible confirm that.”

Amazon is making a TV series called ‘Alpha House’. They are at it because these companies realise something crucial: content really is king. They need content to promote their distribution channel.

Not all are going for unique content. Vodafone is licensing BSkyB sports content to appear on its 4G network. BT, as you will surely know, is taking on BSKYB in its own back yard. Virgin is in turn licensing content from BT.

But are the companies with real value the ones that create content, and why does their content have to be sold on an exclusive basis? So HBO or the BBC are examples of content producers – although in the case of HBO it has its own premium network, and in the case of BBC asking whether it is a distributor of content or a producer of content is akin to asking which was first: the chicken or the egg. But content producers also include producers of sports, football clubs, and cricket clubs and, well you can continue the list.

And as mobile internet evolves from 3G to 4G to 5G, we will all have access to the means of distribution. Do we need the distributors, or can we go direct to the content producers?

© Investment & Business News 2013


‘Seven habits of highly successful people’ was the title of a book published in the late 1980s and seems to have sparked off a trend. Successful people behave in a certain way, so if you behave that way too, you will be successful. But here is something we don’t often consider. How many of these characteristics shared by successful people, are also shared by unsuccessful people?

It depends on what you mean by success of course. But for the sake of this article let’s assume success equates to making a great deal of money.

Maybe what successful people really need is an eighth ingredient, and that ingredient is called luck. You can’t do much about luck; it is after all down to sheer… well to sheer luck. But there is something you can do to ensure fortune favours you. Alas, this is a lesson few entrepreneurs have grasped.

Actually, some successful entrepreneurs seem to have grasped it. Maybe they are trying to appear humble, or likeable, or just plain modest, but many successful people in business admit to luck. They will quite honestly say that if the particular gamble they had taken had not come off, things would have been very different for them.

They might also admit to major mistakes they made in their carrier, or bad judgement calls, but supposing those bad judgment calls were made very early on in their career before they had, as it were, made it? Maybe the difference between a highly creative and hard-working entrepreneur who makes it and one who doesn’t is one of timing. The successful entrepreneurs made the good gambles early on, while the unsuccessful one didn’t.

Bill Gates famously failed to recognise the potential of the Internet. He also admitted to a degree of luck with Microsoft. Supposing his first big business decision was as hopelessly wrong as his judgment over the Internet. Would he still have become the world’s richest man?

Luck is not something to which we like to admit. It is also hard to accept that we are mortal. It is built into us, and for the young especially this is a very hard concept with which to come to terms. But here is something else it is hard to accept; not all our ideas are good, and if we are of an entrepreneurial leaning, not all our ideas will work.

But the narrative to which so many of us cling tells a different story. It tells us that successful people have seven characteristics in common. We hear of life stories, and how key decisions were made, and it is as if fate was working, making one person’s success inevitable. But if fate really does exist, why is it so hard to predict the future? If it was inevitable that someone was going to be successful, why is that so rarely predicted in advance?

The narrative of success only works in hindsight.

The European Flash Barometer once found that around 43 per cent of people in the UK (compared with 19 per cent in the US) believe that a new business should not be created if there is a risk it may fail. The implications of the findings of this survey are absurd. How can Brits really believe that a business should not be formed if there is a chance it might fail? A business that is guaranteed of success is a business that measures success by the most modest of ambitions.

Those 43 per cent of Brits who think a new business should not be created if there is a risk it may fail have fallen for the narrative that success is somehow predictable.

But while entrepreneurs may laugh at the findings of the European Flash Barometer, they themselves are just as guilty. They concede that risk surrounds us, except that they rarely acknowledge that their own business idea is risky; instead they say and appear to believe that it is guaranteed to succeed.

An entrepreneur might say don’t put money in other companies, on the stock market or in investment trusts, invest every penny you have in your own business. Business advisors may advise focus. A venture capital firm might say it is essential that entrepreneurs do not deviate from their core focus; from their business plan.

From the point of view of a venture capital firm, or VC, with diversified investments, it makes sense to urge entrepreneurs to remain focused. A VC may only need a small number of its investments to come off to stay in businesses. A VC with a portfolio of driven entrepreneurs, who put their heart and soul into their business idea, only need luck to smile on some of those entrepreneurs.

But for the individual, who can see the shortcomings in the narrative sold to them by the VC and public perception, will know that at least some diversification might make the difference between a comfortable old age and one spent in poverty.

© Investment & Business News 2013

Don’t write-off Microsoft yet. It has patented an application for incentivising people to watch more ads. It’s a clever idea, but may suffer from a fatal flaw. Erm….adverts. They are everywhere.

Have you ever had the misfortune to watch a programme on the ITV player? If you are interrupted and put the programme on hold, and you lose connection, you may have to re-start the app. Each time, you have to sit through the ads before you start watching. If you are unlucky, and keep being interrupted, you have to watch ads over and over again, before you can start viewing the content.

That is an extreme example. But we have all had that frustration of channel surfing only to find ads on virtually every channel. And you must have noticed that on some shows the ads seem to appear every few minutes. Take the ‘X Factor’. In part one we are reminded of what happened last week and what is happening in part two. Then we have the ads. In part two we get the highlights of part one, a sneak preview of part two and then we get the ads. It continues.

So we look away. It’s like a battle between our ingenuity in avoiding ads, and advertisers’ ingenuity in putting their ads in front of us.
Now Microsoft has patented an app for its recently announced Xbox One, due out later this year, using the technology behind its Kinect product to incentivise us to watch ads.

So the technology knows when we are not watching ads, when our eyes are, as it were, averted, but gives us credits when we give the ads our full attention.

It is thought we will be able to trade the credits for free content. There is one snag. Advertisers want to target their ads as accurately as possible. And if people start viewing them because they are being paid to do so, is there not a chance they will be the wrong type of audience?

The advertising industry itself, talks about ads being more interactive; about us choosing to view them. Well, let’s wait and see.

© Investment & Business News 2013

The rumour mill has it that Microsoft is set for an embarrassing change in direction. When Windows 8 was announced, CEO Steve Ballmer called this a bet-the-company product. Well, the bet does not appear to have paid off.

The ‘FT’ drew a comparison with Coca Cola, when it announced Real Coke, only to reverse direction, after customers turned their noses up at the new drink.

Real Coke was a flop despite research showing that customers would prefer it.

But the analogy between Microsoft and Coca Cola is not precise. The drinks company changed because it thought it needed to progress, but it underestimated how unwilling customers are to change.

Microsoft, on the other hand, has to change. Innovation and potential disruptive technology demand it.

It is just that customers are conservative. Coca Cola found that they didn’t want to change drinks; Microsoft is finding that they don’t want to see such a dramatic change in their computer’s operating system.

This is classic innovators’ dilemma. See: Innovators’ dilemma Clayton M Christensen, who produced the study that we now credit with giving rise to the Innovators’ dilemma theory, found that most companies look to change their products, but it is their customers who stop them.

Take the disc drive industry, for example. The emergence of 5.25 inch disk drives for desktop computers changed everything. Many of the existing market leaders examined the new technology; some invested. However, they stopped short of embracing it; their customers used mini-computers and were not interested in “here today gone tomorrow” desktops.

By the time the desktop market was established, with 5.25 inch drives showing signs of dominance, it was too late. The new entrants, with their specialisation in the latest technology, held all the cards. The former heavyweights lost market share; many went out of business.

Microsoft is struggling to change because its customers won’t let it. As a result it is vulnerable to new disruptive technology. Microsoft has been here before, when DOS was heading towards the end of its natural life. But back then the company dealt with the challenge differently.

To tell the story, rewind the clock back 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.

At the time, the company was lambasted in the press for being inconsistent – for having no strategy. In reality, it was just opening itself up to internal gales of creative destruction.

And now back to 2013, it seems Microsoft has forgotten the lesson of DOS. Instead of experimenting, it bet the company.

Windows 8 was not a bad idea, but it was a mistake to rely so heavily on this one idea.

© 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 PC is dying or so say some. Its haters might start singing “Ding dong the witch is dead.” Is that why the record is doing so well in the charts at the moment, do you think?

Those who see Microsoft as the embodiment of evil empires, might be smiling. Yesterday saw data from IDC indicating that PC sales fell 14 per cent in Q4 last year, which was the biggest fall ever recorded. Data from Gartner was almost as bad.

On that news, shares in Microsoft fell 4.4 per cent yesterday. HP did even worse, however, with shares down 6.5 per cent. Dell lost 1.2 per cent and Intel 2 per cent.

Despite that, the Dow and S&P 500 closed at a new all-time high. Apologies for cracking a joke from the 1980s, but as chips inside PCs suffered, chips inside burgers did well.

Burger King saw its share price rise 4 per cent, as investors – rather rudely – celebrated news that CEO Bernardo Hees is stepping down.

Shares in Apple fell 0.3 per cent, although frankly it is hard to understand why its shares should fall at all; after all, the IDC data also showed that tablet sales are soaring.

In the UK the FTSE closed at 6416, up on the day before but just shy of 100 points less than the year high set in early March.

In Japan, investors continue to celebrate Abenomics – and all the bullishness and dovishness from the country’s central bank – with the Nikkei 250 closing at a new high for this decade, and at 13549, 30 per cent up so far this year.

©2013 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

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.

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

Microsoft’s latest idea could be used to force us. Google’s plan is for us to want to. To do what, you may ask? Answer: view advertisements. The advertising industry is set to change and fortunes will be won and lost.

Consider the difference between the way Google makes money and the way Amazon does. Amazon is a store, an online retailer. Online retailers use online advertising as one of the main drivers of their sales. Actually when you think about it, the difference between Google and Amazon is quite subtle. In traditional retail position is everything. Rent for a premium spot on the High Street is a major overhead. For online retailers, position on Google or Facebook is the key.

This is the change that accountants are struggling to keep up with. There are ways to value a company’s assets based on real estate. But what about virtual space?

Microsoft, or so says the rumour mill, is planning to use its next Xbox, to try to gain control of the living room. And its Kinect technology may be the key. One of the ideas being suggested is that the Microsoft device will be able to detect when a viewer is not watching the TV, so that it can pause automatically.

Its sounds exciting, except of course the reason why the viewers has averted his or her gaze may be because they are bored with the programme. The implications for advertising are more interesting. Maybe the technology can be used to ensure we watch the ads. Similar ideas have already been mooted for smart phone’s. Powerful stuff, if a tad intrusive.

That’s not to say that Microsoft has advertising in mind with its product, as a general rule of thumb the company is not big on generating revenue from advertising. But is that not a possible consequence of its technology?

Google, on the other hand, has a more deliberate advertising-centric plan.

Have you seen that Pepsi ad yet? It’s pretty compulsive viewing. It shows a stunt car driver test-driving a new car, and giving the car salesmen the fright of his life. The ad has secured 33 million hits on YouTube. The other interesting thing about the ad is that that the joke underpinning it fits in well with the message Pepsi is trying to convey.

Susan Wojcicki, vice president of advertising at Google, has been making lots of noises in the press of late trying to express the Google vision of the future of advertising. She cites the Pepsi ad as an example of where she sees the medium going. She says that in the future digital advertising will be voluntary; that is to say customers will choose to watch an ad; that ads will be more relevant to viewers, more interactive and beautiful, and the effectiveness of the ads will be easier to measure. She cites another idea which is a little harder to explain. Essentially she says ads will run across platforms and devices, and will be targeted at people rather than specific mediums. See: Here’s The future of advertising, according To Google. 

Here is an alternative idea; the future of Internet advertising is video. One expert in the industry predicts that video advertising will double every two years until it dominates the industry. See: Soon all online advertising will be video

To be honest the Google idea is more appealing. Don’t you like concept of ads being fun, and watched out of choice, rather than kind of forced upon us. And don’t the ads on TV drive you potty?

The mistake some analysts make when considering online advertising, is to compare it with traditional advertising. Online advertising is more. It’s virtual real estate too, it as much overlaps with commercial property and related fields as it does offline advertising.
The big challenge is privacy. How can the online companies match their commercial interests with the natural desire for privacy? It is the unanswered question.

PS Here’s a dichotomy for you. According to the Institute of Practitioners in Advertising’s quarterly Bellwether survey, total advertising spend – that’s off line and online – fell in 2012, and it forecast a 0.3 per cent contraction this year.

©2013 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