The Fragility of Microsoft

January 30, 2010

I think Microsoft is a $70 or $80 billion a year outfit. What struck me as interesting was the write up called “Earnings Take Away: Microsoft Is Still Powered by Windows.” (This is one zippy url, so it may go dead at any time.)

The author is Mary Jo Foley, a Microsoft expert, a book about Microsoft, and a blogger with Microsoft ads on her Web column for ZDNet. In short, she is one of the go-to people about things Microsoft. She wrote:

Consumer sales of Windows 7 buoyed Microsoft to report record earnings, even after deferrals were figured in. Microsoft reported net income of $6.66 billion, or 74 cents a share, on revenue of $19.02 billion, which included $1.71 billion in Windows 7 deferred revenue for the quarter. As part of that announcement, Microsoft reported that it has sold more than 60 million Windows 7 licenses to date. The combined Windows and the Windows Live division had operating income of $5.39 billion on revenue of $6.9 billion, compared to the year-ago quarter’s operating income of $2.71 billion on revenue of $4.06 billion.

I am no Microsoft expert. Heck, I couldn’t get Fast Search to work without a cast of dozens and lots of money. What’s that tell you?

When I read this, I realized that Google doesn’t have to do much to put Microsoft in a reverse naked choke hold. If Google incrementally improves its word processing, spreadsheet, presentation, contacts, and email services, there is a big downside potential for Microsoft. Google, on the other hand, has little, if any, risk. If Google opens some tiny slits in Microsoft’s Windows 7 money supply with Android, Chrome, and any other consumer service, another tiny slit opens. Get enough of these tiny slits, and the water buffalo wading in the river to cool off can be consumed by tiny fish. The process is painful, takes a long time, and can result in the water buffalo becoming too weak to get out of the river. What do you do with a dead water buffalo? Have a feast? Make burgers?

That’s the fragility of Microsoft that Google in its Googley way may be banking on.

Stephen E Arnold, January 30, 2010

Nope, no one paid me to write this. Someone connected in a tenuous way to Microsoft sent me an email, but it did not contain any money. It wanted information for free. What a fool am I. I will report this to the folks at NIH who sometimes research fools.

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