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Tuesday, October 07, 2008 6:21:46 PM
I understand that trying to make growth happen in a behemoth company is hard without quality management, and that Microsoft has had to muddle through with delayed product releases and consumer products that have either cost it money (XBox; multiplying per-unit losses by a bigger unit volume isn't exactly the way forward to greater profit, it's a symptom of illness) or are just not significant enough to move the needle on an entity like MSFT (Zune may actually have a fan base, but with a couple of percent of the market -- stolen from MSFT's former revenue-sharing partners -- MSFT isn't going to make a big advance in its balance sheet). It's hard to make progress even when you know what progress should look like.
http://jadedconsumer.blogspot.com/2008/06/knowing-path-isnt-walking-path.html
Can you explain why increased XBox volume in the States is something shareholders should be happy, rather than sad, to hear? The whole XBox venture -- if you add up all the quarterly losses and compare to the recently-gamed quarterly profits -- has been a boondoggle, and each version will make life harder again. As hardware becomes cheaper and more portable, the platform will become increasingly obsolete, so it's hard to imagine there's a terrifically long timeline in which to recoup the losses. Re-engineering the XBox at the bleeding edge of the technically feasible would definitely put it ahead of encroaching portable competition and the like, but it would also re-start the clock on lots of fixed costs and keep MSFT's XBox margins in a sad state.
Microsoft makes lots of money on applications and operating systems. High-dollar server operating systems have been a good growth platform for Microsoft, and get the benefit of leveraging the desktop operating system for cost containment. The long-term trend has been that Microsoft actually gains share against free competitors in the server space:
http://news.netcraft.com/archives/2008/09/30/september_2008_web_server_survey.html
... on the other hand, of the several million new sites that went live in September, three-quarters were running Apache.
I don't think Dell has a sustainable competitive advantage.
http://jadedconsumer.blogspot.com/2008/08/dell-wheres-competitive-advantage.html
What's MSFT's advantage? Not the momentum or the customer base that might leave when it buys new machines, the sustainable advantage?
The next ten years may not be quite like the next ten years, but if they are, I don't think my money is on Microsoft.
http://jadedconsumer.blogspot.com/2008/10/next-ten-years.html
Take care,
--Tex.
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