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Fri, Mar 19, 2010 - 07:21 AM EDT  —  AAPL: 224.65 (+0.53, +0.24%)  |  NASDAQ: 2391.28 (+2.19, +0.09%)

Microsoft’s pain is only just beginning
Thursday, January 22, 2009 - 06:00 PM EDT

"Microsoft cuts 5,000 jobs. That's the big news of the week. Not just because the layoffs will cut one in 20 of Microsoft's 91,000 employees. Not only because it signals just how hard Microsoft has been hurt by the failure of Vista and by shifts in the way big customers license and use software. Not even because of the grim sign it represents for the rest of the IT industry," Frank Hayes writes for Computerworld. "No, it's big because it means Microsoft has begun to hit bottom."

"And it's about time. For the past couple of decades, we've been referring to Microsoft as the new IBM. But Microsoft has never learned the lessons of the original IBM -- not even the ones that Microsoft forced Big Blue to learn,"Hayes writes.

"It's easy to understand why Microsoft hasn't learned that lesson from IBM. This is Microsoft, after all. It has a lock on its markets. It has customers over a barrel. It's the 800-pound gorilla of the IT world, and it has been for as long as anyone at the company can remember," Hayes writes. "Of course, all those things were true of IBM, too."

"Microsoft has been coasting for years on Windows and Office. Those have been the cash cows that enabled the company to fumble its way through years of halfhearted 'innovation' and watered-down imitation. Microsoft has lost ground (or never gained a footing) in search versus Google, music players versus Apple, Web browsers versus Firefox," Hayes writes. "Worse still, Microsoft has forgotten how to improve even those cash-cow products. Office 2007 is a mess for usability. Vista is a disaster in almost every way.

Hayes writes, "And now, Microsoft has begun to hit bottom financially, too. It's not all the way down yet. There's a lot more pain to come."

Full article here.

MacDailyNews Take: Karma is one seriously beautiful bitch.

As we have always said, even as many short-sightedly waved (and continue to wave) the white flag, the war is not over. And, yes, we shall prevail. For the naysayers: In 1929, Ford held just over 61% of the U.S. market for automobiles. GM's market share stood at just 12%. Ford was thought to be invincible, with GM regarded as a niche auto maker. Probably, some analyst at the time said, "The reality is, long term, GM will always be a niche player." But, in 1936, just seven years later, Ford held just 22% of the market for new automobiles while General Motors held a 43% share. No company is invincible. Not even Microsoft. - MacDailyNews Take, January 10, 2005

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Jan 22, 09 - 07:21 pm Comment from: Bob

I've been reading this site for far too long. I remember when that MDN take was written for the first time in 2005

Jan 22, 09 - 07:31 pm Comment from: Maconymous

Hmm, but GM is now in trouble because they were making crappy products. So:

If: "No company is invincible. Not even Microsoft." is true,
then: "No company is invincible. Not even Apple." must also be true,
since Apple is a company and NO company is invincible.

Jan 22, 09 - 07:39 pm Comment from: twilightmoon

Microsoft is going to be a very ugly Titanic watching it slowly break apart and sink to the bottom of the ocean.

The wreckage will go out for miles, and the waves created by the hull going underwater are going to knock over a few nearby boats as well.

Jan 22, 09 - 07:40 pm Comment from: twilightmoon

"since Apple is a company and NO company is invincible."

You forgot:

if Apple was run by S. Balmer, it would be in trouble too.

Jan 22, 09 - 07:43 pm Comment from: Shadow

@ Maconymous - I agree.

I think the real downfall of many large companies has usually been their inability to react to change. That said, I believe Apple's biggest asset is the fact that they build products that people need sometimes before they even realize they need them.

Put simply, Apple is building tomorrows products today while everyone else is punching out copies of yesterdays products.

If Apple every looses sight of the future they will be doomed to fail like all others before them.

Cheers

Jan 22, 09 - 07:46 pm Comment from: spyinthesky

Of course no company is invincible. Of course even Apple isn't. However there is a considerable difference between one that has pursued policies that have been heading in that direction for years without actually having the competence to recognise it, because of a few cash cows that are now under threat and one that is theoretically in danger solely because we know that theoretically no company is invincible.

Jan 22, 09 - 07:54 pm Comment from: Stephen

The problem for MS is not only are Vista and Office 2007 products no one really needed, but they are crappy products no one needed.

Jan 22, 09 - 08:07 pm Comment from: Gary

Captain Balmer has steered the ship onto a sand bar, the massive propellers are churning a great froth, but nothing is being realized for the great effort.

Captain, thy Captain, sacrifice thyself to the depths so that the ship might right itself and once again sail upon the deep blue sea!

When the USS Microsoft slips beneath the waves, the wreckage will sink to the bottom and become a place for coral to grow. Apple, Linux, Open Office, and many other sea creatures will prosper amongst the coral and the (business) environment will be a better place for it.

Jan 22, 09 - 08:11 pm Comment from: ABQ Peter

the force reduction is a lot closer to 1 in 18 than 1 in 20.

Jan 22, 09 - 08:13 pm Comment from: Rainer

Hehe.
MSFT stock tanked.
Good that the execs recently decided that compensation in stock is so 20th-century and opted for cash-compensation wink
Employees in forums are outraged about the way the RIFs are managed (only 1400 heads rolling now, 3600 being dragged over the next 18 months).
Sounds like "Killing me softly with kisses" gone wrong...
But like IBM, MSFT will be around forever. They're the 21st century mainframes.

Jan 22, 09 - 08:25 pm Comment from: ken1w

At some point, I knew Microsoft would not be able to continue its "lose money initially for an indefinite period, fix the product over time, and eventual make a profit at some undefined point down the road" strategy forever. Looks like that time is NOW.

But Microsoft will continue to have a steady (if declining) source of revenue many years. At some point, it will become a lean and hungry company again. When MSFT really hits bottom, that may be a good time to buy shares. Perhaps that time will be after Microsoft inevitably announces Windows 7 being pushed to 2010.

Jan 22, 09 - 08:30 pm Comment from: bob

of course, Ford got hammered by the stock market crash starting in 1929. GM made the cheaper car at the time. Lets also not forget that Ford was like IBM, the first to reach mass production viablility of its product, which certainly helped both of them dominate the markets.

word is windows 7 sucks worse than vista and xp performance wise.

Jan 22, 09 - 08:59 pm Comment from: One more

One word: hubris.

Jan 22, 09 - 09:22 pm Comment from: PaKo

When your mission as a business is only money-making, eventually a competitor will come along with a bigger sense of what they are in business to accomplish and the quality of their products and services will reflect that.

Jan 22, 09 - 09:25 pm Comment from: twilightmoon

It's not the number of people being laid off that's at issue. It's that this is the first real mass layoff in Microsoft company history.

Gone is the aura of invincibility and total job security for working at Microsoft.

This will hurt them a lot more than they can imagine as it effects the morale of the whole company. Damage to morale is difficult to measure but it has a huge impact on how companies operate.

Jan 22, 09 - 09:47 pm Comment from: Mr. Reeee

Let's not all gloat TOO hard…

… though it's DAMN TEMPTING.

Jan 22, 09 - 09:52 pm Comment from: mike

since MS is the only client OS available to install on any old PC, their marketshare numbers aren't a surprise. Who cares about that marketshare number. Take a closer look and you'll see MS is in a BUNCH of money losing businesses because they fundamentally don't listen to consumers. That's what competition is supposed to do.

Eg. Apple iPod is the only player that has everything under one roof. By the time it took MS to realize the overall experience was so great, they ripped off the WRONG iPod.

Now everyone wants an iPod touch, and MS is standing there saying, "we got something better than the iPod Classic, bitches~~! Huh? Where'd everyone go.."

Dumbasses..

Jan 22, 09 - 09:52 pm Comment from: R

Their morale has been suffering for a long time. Just read mini-MSFT blog.

The issue raised by ken1w above is a real one. Microsoft has had hand over fist full of cash to throw after anything and everything since it struck it big in the 90s. Now, copying things may not be so easy. They will actually have to be smart about what they do-- and now that people actually have an expectation of what computing should be (unlike when they first struck it big)-- they will struggle a bit.

Too much for this post, but I believe Snow Leopard is a diversion and an update. The name, first off. Even the announced features seem to underplay OS X somehow. That is just not Apple's style. This is all setting the stage for a big change in OSes, I think. That is, Apple's OS. MS will have to copy a few years down the road. I think there's something big just over the horizon. Anyone remember when Shake (I think) was discontinued because Apple acknowledged some huge leap intended for some time down the road close to now? Anyway, there is a convergence of tech going on and MS does not seem entirely in the loop.

Jan 22, 09 - 09:56 pm Comment from: Another IT Guy...

When it comes to the demise of M$, hope always springs eternal here at the MacDefenseNetwork.

Morans.

Jan 22, 09 - 10:14 pm Comment from: Freddy

Don't get too cocky. If Microsoft is feeling the pinch, Apple is feeling it to. And Steve in poor shape at the moment is a double whammy for us Mac fans.

I say lay low, be happy with the Mac products you currently own, (though by all means buy more if you can/need/want to) and just wait for all this to blow over.

Jan 22, 09 - 10:54 pm Comment from: Chuch

Apple is not invincible.... Do you recall (Quick Mr. Peabody turn on the way-back machine) the dark, days of Apple? Apple living off of an old idea, not growing, just trying to make a new buck off of the same old ideas... Stock prices in the tank, no innovation, every pontificator calling them down and out for the count? I thought my beloved Apple would soon be gone. But Apple came back. Lean, Mean, full of new ideas and a plan.

I doubt that MS has a serious comeback in their future. They have never had the traits that made Apple great, but Apple will be less harmed by this downturn than the old-school fat cats. Apple has been there... done that. MS is probably in full tilt panic mode right now. Rightfully so.

Jan 22, 09 - 11:31 pm Comment from: Luc Landry

What's the difference between the actual situation at Apple and Microsoft?

None. For the next months to come, both companies are losing JOBS wink

Jan 22, 09 - 11:36 pm Comment from: Botvinnik

Chuch: "But Apple came back. Lean, Mean, full of new ideas and a plan."

Apple didn't come back, His Steveness did.

signed,
Mr. Peabody

Jan 22, 09 - 11:46 pm Comment from: Spark

Now if the U.S. Government would lay off a similar portion of its workforce... The Feds strike me as the Microsofts of world governments. Bloated, complacent and bereft of ideas.

Jan 22, 09 - 11:50 pm Comment from: Arnold Ziffel

@Another IT Guy,

What the hell is a 'Moran?'

Jan 23, 09 - 12:36 am Comment from: Buster

@Luc Landry

Heh heh good one!

Anyway screw MIcrosoft. At least there is one good thing coming from this recession.

Jan 23, 09 - 12:52 am Comment from: Slartibartfast

@ Luc Landry

where apple leads... microsoft follows!

apple is losing "Jobs" for a while ... microsoft tried to copy that, but wrongly as usual.

Jan 23, 09 - 12:55 am Comment from: DogGone

M$ still has a long way to go down. They are still making 14B revenue and 4B profit PER Quarter. Their monopoly will keep them going for a while unfortunately.

Jan 23, 09 - 01:25 am Comment from: JayRec

Where's ZuneTang?

Jan 23, 09 - 03:10 am Comment from: Microsoft, the Next GM

Then GM thought it was invincible. Now it is begging for money.

Jan 23, 09 - 03:45 am Comment from: HD Boy

I wonder if Zune Tang got a pick slip?

Jan 23, 09 - 03:46 am Comment from: HD Boy

Oops, make that "I wonder if Zune Tang got a PINK slip?"

Jan 23, 09 - 04:29 am Comment from: currentintrest

This is not good news. Anytime 5000 people lose their jobs with many of them concentrated in the Seattle area it has ripple. Many will be hurt. These are sad times.

Jan 23, 09 - 05:34 am Comment from: CourtJester

Microsoft have finally realised they that they are well past their peak and that its downhill from here. Competition is stronger, the monopoly is weaker, the OEM partners are no longer in full financial health and the EU is again investigating them.

These redundancies are a milestone that the employees will notice and a new less secure mindset will form. The King is not dead yet but he is feeling worn out.

Jan 23, 09 - 06:25 am Comment from: almux

As allready written many times: M$ is doooooooooooooooooooomed! Period!

Jan 23, 09 - 06:31 am Comment from: Macaday

Apple is not invincible. But, for now and for the next 7 years it is.

No one comes close. It is Rank Zerox Park and every other innovation business put together. The DNA is there to make it happen for years to come..

Great line from Gary above:

"Captain Balmer has steered the ship onto a sand bar, the massive propellers are churning a great froth, but nothing is being realized for the great effort."

LOL!

Jan 23, 09 - 09:14 am Comment from: chaz

@shadow

I don't agree, what you have to be able, willing and strong enough to do is to leave behind what works today and deliver a better product / method for tomorrow. IBM didn't do it, and MS isn't either.

Know your markets, know your competitors and get out there and compete.

Make a better browser, don't just add it to your OS to kill your competition. The M$ monopoly let M$ think they could make me too products, and package it with the monopoly OS or Office and continue to progress.

It might have worked too, except, they became hooked on cash spun off of those products and wasted it in a binge of R&D;spending, waste products like Zune, xBox, etc. and lost their way.

Jan 23, 09 - 09:35 am Comment from: Road Warrior (nli)

Well it is going to take a bit more, but yes, the MS fortress is starting to crumble.

Finally.

Jan 23, 09 - 09:43 am Comment from: Shadow

Good Morning Chaz

I think you may be misunderstanding my point. I agree with what you are saying. Apple has fought it's way to the top by providing products that people want. Sometimes even before they realize they want them.

If Apple looses sight of that, and becomes to large to react to changes, they could face the same future as other big companies.

Cheers

Jan 23, 09 - 09:57 am Comment from: MacRaven

@Maconymous
Said:
"If: "No company is invincible. Not even Microsoft." is true,
then: "No company is invincible. Not even Apple." must also be true, since Apple is a company and NO company is invincible."

Well yeah, duh! Any Apple Fanatic admits that.
If Apple screws up it will go the same way, just as it almost did when Scully was CEO 1983 to 93. He took Apple for a nose dive to a near death experience.

Jan 23, 09 - 10:01 am Comment from: dh

No company is invincible. As Tim Cook said during the analysts conference call “ We welcome competition ”. All good companies do because they know it will force them to be better in the products and services they offer to customers. MS got bloated and took their customers for granted. Took them 5 years to out out a bloated, crappy new OS called Vista and then had the nerve to convince people it wasn't so bad by using focus groups and calling it a different name. A pig with lipstick on is still a pig. They deserve a kick in the ass.

Jan 23, 09 - 10:03 am Comment from: jocknerd

@chuch

Apple didn't make a comeback. Apple died in 1996. The new Apple is actually what became of NeXT.

Jan 23, 09 - 10:07 am Comment from: Demon

Microsoft is not hit bottom just yet. Bottom will be later this year when they start to kill and jettison unprofitable products and services.
I would suspect the Board will also be wanting spending on Ballmer's pet obsession scaled way back to keep from being in the red ink zone. Google will have to wait till Microsoft gets it crap lined up. Too bad tossing money at beating (Catching nay make bend in the slide away from Microsoft Live search) Google.
Microsoft can keep tossing millions (or even Billions) at Live Search for the next 20 (plus) years the bent they'll make in Google will be minor.
Microsoft lacks fundamental key ingredients to ever make Live Search anything more then a very minor player in the world of on-line Advertising.

Why Microsoft will never break out of it's small niche search ad Small third/forth place player.

1) The vast majority of Internet users do not trust Microsoft
2) Microsoft and anything associated Microsoft is uncool on the Web.
3) Linux and Mac users avoid Microsoft Web Properties at all cost, and all the cool site trends are set by Mac and Linux users and not Windows Users.
4) Microsoft equals proprietary control, boring user interface, lackluster performance, poor usability, never quite a polished finish no matter how many updates have occurred and evil monopoly mongers.
5) Kids know Microsoft is so far from being kewl that they stay away.

Jan 23, 09 - 10:08 am Comment from: Demon

Get Ballmer a Truck load of Office Furniture because the truth hurts!

Jan 23, 09 - 10:24 am Comment from: JoshtheiMacGuy

Such immaturity. One would think Apple is a loser of a company, run by incompetent idiots since you all imply that Microsoft must fail for Apple to succeed. This is the losers way of thinking.

Can you say Windows 7? If not, then try again. Microsoft is finally doing something right and it will pay big dividends later this year. Apple? I am sure they have more great things up their sleeves, so I do not worry about them.

Jan 23, 09 - 10:54 am Comment from: MacAdvocate

Continued change at a sometimes uncomfortable pace is thing that separates Apple from its competition. Remember that the next time you're bitching about DisplayPort or FireWire.

Jan 23, 09 - 11:29 am Comment from: Berrylium

Thank you, MDN, for this delicious dose of schadenfreude.

MW: Hell. Microsoft has hell to pay.

Jan 23, 09 - 12:02 pm Comment from: jackspratt

i have no love for Microsoft but i'm truly sorry to hear 5000 employees are losing their jobs.

Jan 23, 09 - 12:56 pm Comment from: Predrag

Josh (the iMac Guy):

I'm sure we all can say Windows 7. And Windows 8. and nine. However, the track record so far makes a lot of people skeptical (to say the least). Most recent experience with Longhorn/Vista, which took YEARS to brew, indicates that the Beta looks better than what ends up in the final product. A lot of features were yanked from Longhorn betas because they broke some legacy support/applications/systems. With such heavy investment in the enterprise, there is no doubt in my mind that this beta will morph into something much less exciting and more like Vista by the time all those legacy-breaking features are removed again.

We can wait and see, and many are holding out hope against hope. As a Mac user (and a fan), I'm hoping MS remains consistent and true to itself (and consequently, fails miserably again, with Windows 7). I have absolutely no reason to believe there has been a 180-degree change in the corporate philosophy there.

Jan 23, 09 - 02:51 pm Comment from: The Other Steve

Firefox?

Jan 23, 09 - 04:26 pm Comment from: Kit-N

Macro Marco

"ZuneTang was the creation of Ampar, and he doesn't come to this site anymore. Along with TowerTone, Chrissy1, and Jim-TIV"

Yeah, Oh No My Shorts bailed on us too.

C1 does pop in once in a while.

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