It’s Time For Microsoft To Turn Itself Upside-Down | Hacker News Reader

It’s Time For Microsoft To Turn Itself Upside-Down

techcrunch.com

13 pointsedw51922 comments

I'm personally tired of these armchair "experts" that know exactly how to fix one of the biggest market cap companies.

But it's so cute when people post their perfect little solutions on Dear/Open Letter To Jobs/Balmer/etc blog posts.

Why does the answer have to be invest in tech?

Microsoft throws off something like $14B in free cash flow. They could use their toll booth-like cash flow to acquire good businesses that offer nice, steady returns, in areas outside of tech. There is some logic in the conglomerate model after all. Go buy a big insurance company.

That then begs the question, 'Why should they do it?'

If you want shares in a holding company, you buy Berkshire Hathoway shares or something similar. You want Buffet on that job, not Ballmer. MSFT should (and do) give this money back to shareholders to invest in 'businesses that offer nice, steady returns, in areas outside of tech' themselves. They don't need Microsoft for that.

Yeah, if you want to put MSFT into runoff, then this would be the appropriate approach.

But, if shareholders would rather MSFT survive, they should look into hiring a savvy CIO to handle that end of the business.

Either can work, it just depends.

or they could just keep doing software, the business that makes them huge profits.

Buying stable businesses would signal to the market they don't intend to innovate and so it's overinflated stock price would plummet.

But Microsoft's not really trading at an inflated price.

On an EV/EBITDA basis the company is around 10x.

Conversely, Apple is around 15x and Google is about 16x. Both multiples imply some pretty rich growth prospects whereas MSFT's 10x does not.

i'd say that it's 10x because the future does not look very promising for MSFT. their margins are going to take a hit when businesses start to Go Google, consumers start buying home computers with ChromeOS/MacOS, and WinMo gets completely driven out of the market by Android.

also,

It’s not a failure when something like Orkut doesn’t take off: it’s a successful risk assessment.

i can't understand why folks think Orkut is not doing well. i'm Punjabi and nearly everyone who is my age group, that i know in India, has an Orkut account.

The new IBM follows the business model you just mentioned though they do not venture outside technology. They no longer invest in building anything ground up. They buy a reasonably successful technologies ( Lotus, Rational, etc) and use an army of salespeople to upsell the new technologies.

http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...

The reason IBM does not get outside the technology sector is because the profit margins are one of the highest when it comes to software. They have sold most of their non-software business's in recent years: They dumped the loss making Thinkpad for a hefty sum to Lenovo, got rid of most of their semiconductor business and are a software sales company today. I guess the same reason will apply to MS for not getting into any non technology sector.

The trick though is paying the right price for acquisitions. Studies have shown that acquirers tend to overpay on acquisitions, so it is important to have someone in place that has the discipline necessary.

IBM might have someone like that in place, but I'd imagine Microsoft does not.

> "So the solution is simple: start building garages."

This is about as insightful and helpful as someone telling a smoker, "well, just STOP smoking!". I've seen the sentiment expressed a lot as of late that MS needs to be overhauled - I agree, but I don't see anyone with any ideas.

That is an idea - start building garages - allow internal teams to release whatever they want regardless of whether they step on each other's toes.

Microsoft actually has started a garage concept with a real garage inside one of the MS buildings... Some of the things that have come out of there: http://www.officelabs.com/Pages/ConceptTests.aspx

The ideas are not very good. I can't see what "problem" they are trying to solve. The innovation that we see here is very superficial.

Microsoft's real problem is its top-down hierarchy and performance-ranking driven DNA, which fouls up whatever they step into. Superficial solutions like a garage or an officelabs are irrelevant to their bottom line. These are mostly costmetic and PR efforts.

I get the feeling the best thing for the execs at Microsoft to do would be go on eBay and buy an iPod mini, put it in your office, and think that it was your competitors best selling devices and they replaced it anyway.

Perhaps they should go on eBay and buy a copy of Visual Basic 6, put it in their office, and think that it was one of their best selling development platforms and they replaced it anyway.

I don't see how MS can truly be innovative as long as you are bound to deploy your garage projects only on Windows (you have to be huge to be allowed to run on Mac, and never ever EVAR on Linux).

They should federate -- let apps run anywhere regardless of the mothership, let the OS live/die on its own steam.

They just launched apps for Android and they have had apps for iPhone for quite sometime. Also, isn't Office for Mac one of the top selling Mac software.

The narration about the relationship between Microsoft's "garages" and its entrenched corporate structure reminds me of the Xerox PARC story. All this invention and innovation which is orthogonal to the established corporate bread and butter.

I dunno, I think it's time for Microsoft to turn itself back right-side-up.

Interesting to recall that MSFT spends billions annually on R&D -- more than any other large tech firm (according to a recent article).

Reply on news.ycombinator.com