Ballmer just opened the Second Envelope | Hacker News Reader

Ballmer just opened the Second Envelope

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139 pointsjlhamilton65 comments

I just read this article and checked to see if someone had submitted it.

I think shaking the death-rattle for Microsoft is a bit premature, but I find it interesting that at some point in a company's growth, making a truck-load of revenue every quarter isn't sufficient.

Microsoft has a wonderfully lucrative cash cow that allows them to not be successful at their other endeavors (with success for this argument being defined as a similar market share as their primary business).

It reminds me of the starving artist dilemma, as in, if you live a comfortable life without the danger of starving, are you as motivated to make it.

I flip flop about whether I believe in that argument, although at the risk of using a statistically insufficient sample size (my own personal experience), it would seem to be true.

I guess the truck-load of revenue isn't sufficient because investors still expect Microsoft to push fresh and innovative products. They certainly have the people and the business units to do it (look at all the ideas that Microsoft Research goes through every year).

The question is, how do you get a really original and fresh idea at Microsoft to make it past the cannibalistic obstacle course we've all heard about? Surely MS has the spare cash to throw around to "test" ideas like Courier on the market, so why don't they? It seems like a much more sure thing than Zune. Then again, perhaps that experience has made them more risk-averse.

If you were Ballmer and wanted to promote stock growth, what would you do -- if you could try anything at this point?

I honestly don't know what they were thinking with the Zune. What's amusing is that by all accounts it's a really nice portable media player. Microsoft basically finally made a nice portable media player just after the point where growth stopped in portable media players.

Courier I find interesting. I was one of the people who thought the demo looked really interesting. It totally spoke to me as a device that if it operated the way it did in the video (which is a big if), I'd have had a real use for. But I don't know if that means it would have actually been successful as a product. I think if Microsoft thought they could build it, and that it would be successful, they'd have done so. The fact that they scrapped it (or did whatever it is you do with a product concept video that you never actually said was going to be a product) shows me that they don't understand that market, or don't think it exists sufficiently.

I think part of the problem is the way Microsoft Research is structured. According to Bill Buxton (who is kind of my dream "wish he was my uncle"), Microsoft Research is basically tasked with incubating long-term technologies.

In this video, he talks about how some of the stuff he's been working on over the past decade is now starting to get used in shipping projects: http://channel9.msdn.com/posts/LarryLarsen/CES-2010-NUI-with...

While I think that's awesome for Microsoft to be that forward-looking, I think they also need a more short-term skunkworks.

Maybe not as radical as Google's "20% time", but I think something that shortens the amount of time between "concept and prototype".

Windows Phone 7 seems like a pretty good idea. It's a fairly novel approach to interface design; but it didn't just spring up. Microsoft basically plodded through ten years of bad mobile strategy and pissed away their technology lead until even they couldn't pretend that they were headed in the right direction.

If you contrast that with Palm, who also developed and launched a completely new platform in a relatively short period of time, I think it's obvious that Microsoft works in glacial time. Then again, Palm's gamble hasn't really paid off either.

I think Microsoft couldn't possibly bet too big on mobile. I know it's trendy, and I'm certainly not being profound, but I don't think it's ludicrous to consider it the largest growth market in computing for the next decade. I think the problem (which the original article points out, is that Google has pretty much screwed their existing business model by giving away Android).

MS has started several labs groups that fit in between long-term academic research and product groups. For example, I work in Office Labs (www.officelabs.com). Our goals are something along what you describe in the Office / IW space.

I find this promising. Although, I can't honestly think of a Microsoft product with less of a need for radical new ideas than Office (Unless replacing PowerPoint is on the agenda).

Looking at the site you mentioned it definitely seems like you guys are working on cool stuff; I just hope this sort of thing is going on within other product groups.

Sidebar: I smiled when you described Bill Buxton as "wish he was my uncle," because amongst friends I call Paul Graham, Tim OReilly, and Kathy Sierra, "Uncle Paul," "Uncle Tim," And "Cousin Kathy."

It started because I was getting slightly made fun of for quoting them so often... like I knew them. So I kinda upped the joke ante by saying stuff like, "Uncle Paul always says ______."

Fund a thousand startups and make it clear that they can cannibalize whatever they want.

And make it easy for MS employees to get in on the action.

> I guess the truck-load of revenue isn't sufficient because investors still expect Microsoft to push fresh and innovative products.

This is the key, I think, to Microsoft's behaviour. and I think it's a mistake on the part of the investors. Microsoft is an /excellent/ cash cow, and not so great of an innovator.

If I was the majority shareholder of Microsoft, I'd demand that they make their first priority delivering me a giant dividend cheque.

Sure, Microsoft still has some good people, and they should keep those people busy moving windows forward, and maybe even doing some original research... but, at this point in their development, they are a cash cow. they need to realise this and start issuing nice fat dividends, rather than trying to 'buy' parts of the console gaming or internet search markets.

>I guess the truck-load of revenue isn't sufficient because investors still expect Microsoft to push fresh and innovative products.

I'm sorry, but when has MS ever done this? Office. I'm struggling to think of a single other example ever. Everything they've ever done, as far as I can tell, has been to take what others have done and make either a cheaper (as in, how much will it cost me to use it) copy of it or used their existing monopoly to force it in place.

One has to expect that when a companies model works like this that they won't be able to keep up at some point. I think the zune was the first incident of this happening. As someone mentioned elsewhere Zune showed up at the party years late, so even though it was decent and cheap everyone had moved on.

If you make a ton of revenue and pay it all out in dividends, that's fine.

If you make a ton of revenue, and then lose it, then people get unhappy.

No offense, but I don't think Gassée is someone that can be trusted to judge a company's life expectancy.

> Microsoft has a wonderfully lucrative cash cow that allows them to not be successful at their other endeavors (with success for this argument being defined as a similar market share as their primary business).

I disagree with this basic premise. Let's put our investor hats on. There are these businesses, Windows and Office. They throw off a certain cash flow. It doesn't last forever.

So what to do? First, we re-invest some of that cash flow into extending the life of the cash flow from the profits themselves. Advertising, new versions, and so forth.

Second, we can pay a dividend to investors. If the taxes are onerous, we can do magical things with trusts or some such to reduce taxes.

Third, we can invest the cash flow in new businesses, basically treating ourselves as a VC or startup lab. We hope to turn the new businesses into streams of cash flow.

WHy do we assume that options one and three are always on the table? If investors can get a better rate of return investing the cash flow from Office and Windows than Ballmer is delivering, why are we asking Ballmer to 1. Generate cash from Office and Windows and 2. Produce better returns than we can?

I think the time has come to stop expecting so much from SteveB. Get him to generate tons of cash from Office and Windows and give the money to investors. Let them decide whether to invest that into Google stock or Apple stock or the next YCombinator round or whatever they like.

I think Office can last a long, long time. The buy-in from business is huge. I don't think most businesses are going to trust the cloud. Maybe they should, but what they're doing now with Office works well enough, so they'll likely stay with it for quite a while.

There's still a lot of mainframe stuff out there in cobol, after all. And a crazy amount of DOS. Business moves sloooooow.

If Office doesn't innovate in the space of collaboration / versioning, they won't be around in a meaningful way in 5-10 years, I can almost guarantee it. And this is working in a place (a university) not known for fast change (just try getting faculty to start using a new ANYTHING). Right now, all collab suites I've seen, and I've been approached by more than I care to count (though undoubtedly not all), are kludge-y addons to move FILES around.

The beauty of what Google's doing (and a lot of their playing is creating a pointillist map) is in this space: they're making it so I can get (right now mostly) text from one place to another through multiple streams to a final display regardless of ANYTHING. There are still some places file metaphors exist (docs), but that's fading in their newer products. Add robust lines of demarcation (privacy/security via groups) and the 'features' of Word don't beat the 'killer app' of portable, trackable, malleable information that people can collaborate on without effort.

So: watch out, Office. (Though I love what you're doing in Excel)

Excel isn't going anywhere - it is the basis for so many business systems. Pretty much every other Office app (perhaps with the exception of Outlook) could be replaced without too many noticing, but Excel is the key business application for decision makers in most organizations.

Imagine Excel with automatic cell-level revisions, with safe shared editing & control, with better automatic error checking. If someone does that, I'll guarantee you that 'decision-makers' will switch very very fast.

You know the main problem with Excel? Finding out what changes were made, keeping updates between multiple teams/people in sync, sending the correct version of the doc. once updated, etc.

If Google Docs Excel was as good as Excel today (it still lacks quite a bit, esp in UI), we'd never use Excel, simply to save a huge amount of time syncing everybody.

Oh I agree that Excel has problems.

However, there is a huge ecosystem around Excel - lots of enterprise apps have tight Excel integration and an amazing amount of complex stuff gets done in VBA in Excel.

As to your other point, I've actually persuaded quite a few (very bright) finance people how to use TortoiseSVN and they picked it up pretty easily and seems to work very well for them. Wire it up so that you use a sensible diff tool to show differences between revisions and it actually is pretty civilised. Almost like real code! ;-)

Hence why I say, literally, "Though I love what you're doing in Excel". And it goes beyond just network effect: some of the data manipulation and collaborative editing changes are encouraging. We'll see where things go.

But it's by no means the only option if they fall behind.

If Warren Buffett hung out on HN, this is the kind of comment he would write.

To me, the most striking part of this author's argument is that Microsoft isn't prevalent enough. They're still making plenty of money, but he wants them to be chasing the tech press a little more. It's pretty obvious to me: Microsoft isn't in the innovation business just like IBM and GE. They make money hand over fist, but they don't focus on the latest fad of social media or micro-blogging or mobile devices. If those any of those businesses show long term growth and profitability, one of the established leaders will acquire them and I would imagine Microsoft is constantly looking at such businesses for acquisition.

On a side note, I think he's reading into leadership departures in ways that suggest that he has more information regarding them, but he never shows it. An anecdote does not make a trend.

It's never ceases to shock me how bad the Microsoft commentary is on HN, not because I don't agree with the conclusions, but rather because it mostly operates on so little information.

For example:

Even though you say "cash cow" I'll give you the benefit of the doubt and assume you mean both Windows and Office. It's fine that you haven't heard of all of MS's other billion dollar businesses, but perhaps that should leave you feeling unqualified to make sweeping commentary?

Here are some products off the top of my head that you've clearly never heard of:

  * Business Productivity Online Suite (BPOS)
  * Exchange
  * SharePoint
  * Office Communications Server (OCS)
  * Dynamics CRM
  * SQL Server

Exchange's market share is comparable to that of Google's market share of search (~70%), so I'm assuming that meets your definition of success based on market share.

BPOS has 40 million paying customers compared to Google Apps' 25 million total customers (which presumably only a tiny fraction of which are paying).

SharePoint is part of the Office division but is an entirely new product driving billions of dollars of revenue.

Etc...

There's no reason for you to have heard of any of this. I only know all about MS because I work for MS. But there's also no reason for you to talk about how MS reminds you of the "starving artist dilemma."

Every online community has its biases. For HN, it's being anti-MS and pro-webapps, anti-desktop. Less than reddit, but still noticeable. Upmods are pretty worthless when it comes to these subjects.

Getting all your tech news from places like HN or reddit can be harmful, they distort reality significantly.

What other news sites would you recommend to a HN reader to help balance this out?

Metafilter might be a good place. Good news commenting sites with a great user base aren't exactly a dime a dozen.

The problem is with the comments, not necessarily with the news pieces.

I don't recommend any news sites in particular. I would look for the blogs / sites of competent people in the industry I'm interested in and watch those.

I do not get the impression that Hacker News readers are anti-Microsoft. It's more that Microsoft is mostly irrelevant for a community interested in startups and web applications.

Indeed, I don't see that much anti-Microsoft people these days. Microsoft is mostly out of the picture entirely.

Paul Graham wrote something similar about 3 years ago so it's not a new deduction: http://www.paulgraham.com/microsoft.html

"Every online community has its biases." Agree but I have yet to see a pro-MS online community. Maybe in gaming?

I actually don't think there's a particularly strong anti-MS bias on HN. There's just a lot of uninformed commentary by people who haven't even heard of more than half of MS's businesses.

I don't think that's the case with any other company or subject.

Context chart break-down: http://www.businessinsider.com/chart-of-the-day-microsoft-op....

I don't think it's a stretch for him to say that Office and Windows are the cash cows---if that is what he meant.

That chart would make me sell/spin-off the Entertainment and Devices division and kill the online services division.

Look, MS is a powerful company for a lot of reasons. They have a lot of talented people and they have profitable divisions. But the fact is that the market buys stock in companies which they expect to expand into other markets. MS has tried hard to follow on markets it has experience with and so far has generally fallen behind. So when we're talking about MS' ability to enter into markets or to keep its stock prices high, they lose.

But that doesn't mean they're going to close their doors.

But at the same time it doesn't make Ballmer look very good to investors and the directors should be thinking about this since they are responsible to the investors (so is Ballmer).

And IBM does $100 billion a year in revenue and has competitors to all of those products listed. What's your point? HN has always had a startup focus - and MSFT/IBM are well out of that range.

And besides - most of those rely on one or both of Windows and Office.

Out of curiosity HN - who are the startups taking on Sharepoint? I don't think I ever hear anything good about it --- but it seems to be growing like a weed.

That is my point. How many times have you seen people offer their expert analysis of IBM on HN? Never? Once?

Box.net is taking on sharepoint. They had a billboard on 101 south that made a direct comparison, which is the only way I know that.

The only competitor that I have looked at was Alfresco - though I don't think they count as a startup anymore.

By "cash cow", I was referring to the Windows and Office business units as defined by how Microsoft releases their breakdown of finances. I'll cop to forgetting about the Server business unit, not because I'm not familiar, but because I genuinely just forgot about it in my statement.

Of the products you mentioned, the only one I've never heard of is Dynamics CRM. I use all of the others daily.

But you are correct in your general summation of my statement. I made a generalization about Microsoft based on public consensus; that their biggest success is in markets which they've already saturated.

That statement doesn't hold up as well when you actually start to break down all of their products and services.

The “device” people saw in the video isn’t going to ship, but that doesn’t mean we didn’t learn a bunch and innovate a bunch in the process.

So if a Microsoft team innovates in the Redmond forest and no one ever sees a product...

"In fact, the intention to mislead competitors is really the only effective reason for a commercial entity to publicly release concept products."

http://counternotions.com/2008/08/12/concept-products/

"Well, tablet is an area that will evolve going forward. Certainly it’s a focus for what we’re doing in the Windows space, and how they’re thinking that space. We’re going to have a bunch of netbooks and tablet stuff that’s in the works there. We’ll just see how that evolves."

Isn't that a lovely and inspiring statement from a tech visionary? Don't you get all tingly just reading that? (Oops, sorry, thats the circulation in my legs going out again...)

Whats wrong with most tech execs is they are waiting for something to evolve, and then hoping to jump on the band wagon. In the mean time, they are reacting by running around in circles and trying to turn the crank on the old machine faster and faster. Oh, and let's reorganize a bit. Yeah, that'll do it...

Embarrassing.

Jobs meanwhile, love him or hate him, is _making_ the next generation tech, one piece at a time. And he's making it well. And he's making it closed and proprietary.

I really wish our choices weren't between openness/freedom and quality/innovation, but that's how it sits right now.

I read your comment before I read the article. The quote comes from a recently released exec, not Ballmer.

I didn't say the quote was from Ballmer.

I think that Microsoft could become awesome if they'd just quit trying to be cool. They're very good at selling to enterprise customers, but they're terrible at marketing to consumers. It strikes me as odd that this reorganization is happening in the area where Microsoft has had the most success marketing to consumers. We are talking about the division that makes XBoxes correct?

They think (correctly) that what's popular among consumers will eventually infiltrate the enterprise ("the consumerization of IT") and vice versa.

I don't necessarily disagree with you but can you give some examples? I can think of counter examples, all things that went from commercial business tool to consumer not the other way around:

- computers - internet - email - blackberry - unix (consumers now find mac os x more dependable and durable than windows and prefer it aside from cost)

And if you're a startup CEO, you keep a really big stack of envelopes for continual reorganization and starting-again :D

Microsoft has some amazing enterprise products. Excel is absolutely amazing. Access is a great development tool for paperwork personnel. SQL Server is so so simple to get up and running, and scale up to tremendous volume.

Agree re: Excel. Great product. Competitors don't even come close.

>Over the last decade, Wall Street has declined to reward Microsoft for its superior profit. The explanation is simple: Professional investors don’t believe Ballmer, and they don’t see bigger profits in Microsoft’s future.

This seems to suggest Wall Street has been wrong about Microsoft for the past decade.

Likewise, I started seriously worrying about - and predicting - a housing bubble-based recession in 2004. [1] I was wrong about it every year between 2004 and 2009.

[1] http://www3.sympatico.ca/taylormcgreal/thecomingcrash.html

My guess: in 5-10 years Microsoft will be a service company.

We've seen this movie before and it's not just Microsoft that's shape shifting. Google is becoming the new Microsoft, Microsoft is becoming the new IBM, Facebook is becoming the new Google. Twitter is becoming the new Facebook.

EDIT: why downvoted? Would it be so strange if Microsoft followed its former arch enemy IBMs footsteps?

And FourSquare is becoming the new Twitter?

Can't wait for 2040, when the cycle is complete and Twitter is the new IBM. My bank statement will be much more convenient to read when it's limited to 140 characters.

This month you spent $100 on food, $300 on utilities including Internet access, and $60 on gas. Then we charged you $19.

Given that it's a cycle, does that mean IBM will be the new Twitter at some point?

Either that or IBM becomes the new Sun.

With regard to microsoft I think these days that Project Natal is going to be huge.

If they play their patent cards right then that might very well push them back to the top of the list.

I'm not sure how much of Natal is patentable by Microsoft, as the tech isn't theirs (at least according to Wikipedia here: http://en.wikipedia.org/wiki/Project_Natal#cite_note-MsPress...).

I'd also be willing to bet that the sales won't be that breathtaking (a $150 device that'll need some time for titles to take advantage of it).

If it were launching as a part of their next console, maybe it would be enough of a differentiator to move units (which isn't something the 360 has had trouble doing).

I'm less interested in the gaming part but more in the ways this will invade our daily lives.

If it works as advertised then it might soon be built into TV sets, PC monitors and all sorts of public infrastructure that we can't even imagine, yet.

If microsoft can hold a big piece of that cake then that should be huge.

I mean, obsoleting TV remote controls alone is big, but only the tip of the iceberg. How about interactive advertising (stand in front of a shop-window, interacting with a bigscreen), touch-free car dashboard, the whole "home automation" area, and so on.

This is ofcourse all under the assumption that it really works as well as shown in those videos.

The guy who originally headed it up (I don't know if he's still directly in charge of it) is absolutely brilliant, driven and highly market-focused. I remarked to him several years ago that I wished I could buy stock in him, personally. If he's not tapped as one of the next 'Baby Bills' sometime in the next couple years, then it's time to worry.

Their Xbox division still runs with big deficits if I am not mistaken. I don't have any recent data on it, but a while ago, it wasn't profitable. Their market share is great, but I don't know how they convert it to profits.

The XBox division finally started turning a profit mid-2008 (to the tune of 9 figures). The division may still be in the red overall though, as many years as it was losing money.

I see. Must have interpreted their net deficits as gross deficits per year instead. Thanks for clearing it up.

With ramifications lined up with this decision, I would still put my money on their Xbox division. I hope they put more capex on that.

I was going to ask about it: to me the Xbox division seems pretty successful, especially if you consider that ten years ago microsoft was not in the console market at all.

Acccording to wikipedia, they have sold 40M units of the latest incarnation (iphones total at 50), they have probably the best online services (according to my hardcore gamers friends), the most open marketplace, and at least they seem to be trying to innovate.

Is there a reason for never taking this division into account when talking about how MS is going to die horribly because of only milking the cash cows?

It will be interesting what the revenue / profits of this division are reported as, since they finally moved the Mac BU out of it.

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