Posts Tagged ‘windows 8’

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 http://www.investmentandbusinessnews.co.uk/directory/innovators-dilemma/4855 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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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

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