Comment Articles

Microsoft catches a chill when Windows wind down

Rupert Goodwins ZDNet.co.uk

Published: 20 Nov 2002 17:40 GMT

It is one of the great pleasures in life that a man such as I, whose fiscal incompetence verges on the criminal, can look at the books of the world's most successful software company and tell it where it's going wrong. Fortunately, Microsoft makes it easy.

Last week, I wrote about the strange business of Sendo ditching the Microsoft Smartphone platform. Readers wrote in, pointing out that it wasn't so much the inherent qualities of the phone that were the problem but that Symbian is an enormously better bet for operators, phone makers and third-party software writers to make money. Symbian is much more open, collaborative and flexible. In trying to repeat the Pocket PC model, Microsoft had comprehensively misread the market -- nobody wants to be tied to a control freak company that wants everything to run to its own plans. It's like the statism of Soviet Russia versus the capitalist anarchy of the US. The trouble for Microsoft is, it looks as if it doesn't know any other way.

That was made painfully clear in last week's disclosure that while the company is still raking in the dough, it's purely from the Windows operating system and Office. These star performers show 85 percent profit margins on multi-billion dollar sales, the sort of return on investment that defies any integration with normal economics. Eventually, Microsoft will have to return to the real world, and its attempts to establish base camp back on the ground have been miserable. Windows CE and its Smartphone offshoot lost $33m overall on revenues of $17m -- after six years on the market. MSN lost around $100m on $500m revenues after seven years. Home Entertainment -- that's Xbox -- lost nearly $180m on another $500m revenues. Would you invest in any of the above? Microsoft has, because it can't think of anything else to do. Is that a good reason?

The company has more cash than can be believed, some $45bn in the bank last time anyone looked, but is absolutely unable to spend it to good effect. In trying constantly to invent a new monopoly to replace Windows when it dies, it's comprehensively failed to build anything that can even survive on its own two feet, let alone take over the world. Even stuff that's building directly on the Windows base, such as the Microsoft Business Framework, is confused by this desire to own it all: the company is trying to keep all the old ideas going while generating new ones and embracing third parties. Do people trust Microsoft to produce stuff that's relevant, that works and doesn't lock them into expensive dependency?