By Marc Arbesman
Steve Ballmer’s apparent forced retirement after 13 years at Microsoft leaves many questioning the future direction of the software company.
Analysts have been concerned about the static price of Microsoft shares which have not gone above $38 in over a decade. This occurring while other firms like Apple have seen their shares skyrocket.
The company has been fixated on its Office and Server business offerings. Both are highly profitable but none are what analysts would call a game changer.
Ballmer tried to make changes and pursue new areas but ultimately failed. This included a flailing Internet strategy and of course Windows 8.
If the goal of Windows 8 was to gain mobile market share it did not work. Its operating system may have even contributed to the decline of PC sales.
According to research from IDC, tablet systems will out sell PC shipments in the fourth quarter of this year. As its Surface product has failed to gain a significant foothold, Microsoft will have a low percentage of the overall tablet market. It also has a very tiny segment of the fast-growing smart phone market.
Meantime, Microsoft has been bleeding money on its Bing search engine and Internet projects, a $3 billion loser according to estimates. The company also took a $6 billion write-off on its 2007 purchase of aQuantive, an online advertising agency.
So the question becomes, how does Microsoft regain momentum against growing rivals like Apple Amazon, and Google?
One solution is to move away from its comfort zone of high dollar software packages that generate huge royalties. This includes alternatives like Azure and Office 365, though they have yet to establish significance in the mobile market.
The company’s recent announcement that it wants to acquire Nokia’s handset business is a sign they wish to push harder with Windows Phone 8. But gaining a percentage of the market versus Apple and android offerings will not be easy.
Microsoft may also have to push a little harder in the hosted and cloud server space. It has left that space to open source alternatives and cloud developers to Amazon’s AWS.
The company must also decide if it really wants to be like Apple. Do they want to grow an empire of retail stores, develop premium system products for consumers with high profit margins, and commit to a regular flow of new sexy devices?
The launch of Xbox One may be an interesting way for the company to regain some consumer appeal. The device enables you to switch seamlessly as you play games, watch movies, listen to music, and even talk with friends on Skype.
Available in late November, the Xbox will not solve all of the company’s problems. However products like this can help generate some much needed excitement as the software giant retools for the future.