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Thank God. (Speaking as an ex-Microsoftie).

Hopefully MS will lose the "we need to put Windows on everything, including embedded systems" attitude. Windows is a horrible bloated mess barely capable of successfully running on a tablet PC, much less smaller things. (And if you've ever had to /build/ Windows . . . OMG. OMFG).

There are core bits of Windows that are great; the I/O system is incredibly well done. Then then are core pieces of Windows which are incredibly shitty -- in fact, there are registry entries that /nobody knows what they do/. No one has had the gumption to clean that stuff up. But until they do, folks like Apple (who seem to have a good handle on their technology /and/ consumer design) will continue to be fierce competitors.

If they pick the wrong CEO, this could go south pretty quickly. They're going to need someone tough, who has a good horse sense about consumers and can't be snowed by engineering management trying to cover up mistakes.

BillG isn't coming back, but they need someone like him.

But what could be the future of MS look like a strategic perspective? I am pondering a bit about that. They are somewhat squeezed in between closed system and open source. How can they position themselves for a solid path for the future in that middle-ground.

"... its transformation to a devices and services ..." doesn't seem to mention software.

I was thinking similar. Balmer's goodbye note mentions an organization based on functions and engineering. But not customers. :-)

A non-crappy enterprise mobile option alone (basically Blackberry 2013) would be a $100b business. Neither Android nor iOS is that out of the box, and the bolt-on ecosystem of crap doesn't turn either into as good a system as RIM was in its heyday.

Look what phone DIRNSA uses today: a Blackberry.

I'd sell non-core assets (Xbox, Bing, hotmail, consumer stuff in general, etc.), and focus on the core OS/mobile/Azure/Office/MSDN systems.

It does seem like the market is waiting for someone to replace Blackberry.

I'm with you on splitting the enterprise cash cow from the rest of the business.

Flag staff in DoD use blackberry because their IT goons are scared shitless of telling their dyed-in-the-wool-msft-fan bosses that a UNIX-like operating system is good business.

It's that Blackberry with BES has actually decent management and security, unlike a cobbled-on-Android MDM, and the Blackberry keyboard.

The underlying OS on the Exchange server doesn't matter. That DoD is (I'm pretty sure) the world's biggest MS deployment does matter, though -- even though I prefer UNIX, if I'm in an environment where 99% of systems are Windows based, I'd build my ancillary systems on Windows, too.

I think you might be underselling the enterprise features of iOS, particularly with all of the Exchange support built in, ability to manage profiles with OS X server, the remote wipe, encryption, etc. It's what I use for work, and a Blackberry 2013 wouldn't get me to switch.

I would grant that there are specialized markets that MS could serve well in the enterprise market, but what do you think the typical enterprise deployment needs out of the box that iOS can't provide right now?

iOS devices themselves offer most of the hardware security features Blackberry (old) offers (I actually know zero about BB X; it seemed unlikely to live to adulthood, so I've ignored it). I love iOS for that.

iOS is undeniably a better web browser experience than Blackberry. It also has a viable app ecosystem, but that mostly doesn't matter for enterprise.

The only large OS X Server-managed deployment I've heard of is Apple internally. In Silicon Valley, I'd probably go with iOS-only (I don't believe in BYOD, and crossplatform means LCD and pain) with either a third-party MDM or maybe try OS X server. No way I'd do that in a 100k seat enterprise with high security requirements -- 30-50 person shops aren't really "enterprise".

I am excited about iOS 7, but not at all excited about Apple's lack of any real focus on enterprise. The only reason Apple has stuff like Kerberos support in OSX is that Apple uses it internally.

Apple focuses on consumer (primarily), with iCloud, etc. as the main management tool. There is a little bit more for small businesses and some smaller education deployments, but aside from Apple.com, there isn't much attention given to the enterprise market.

(If I got to pick a job, I'd rather be HHIC of Apple Enterprise Products/Enterprise Security rather than CEO of Microsoft, personally. Either would be a turnaround.)

I'd second rdl's enterprise mobile option. MS have the right foothold there, and neither iOS nor Android are what big, slow business users expect.

Obviously they buy RIM "for the good of the users" as part of it.

Given the number of business users using iPhones, I'm going to say it's exactly what they expect now.

I can't talk from a consumer perspective, but from a developer perspective, they need to open source everything .NET-related if they want to remain relevant.

With Ballmer gone, if people like Hanselman and ScottGu gain more influence within the company, I'm sure we'll see great things being open sourced.

It's hard to shift the company to open source with someone like Ballmer at the top, it would be like admitting defeat to the open source movement, and people in such positions of power never like to admit they were wrong in their strategy. It's human nature, I almost don't blame him.

"they need to open source everything .NET-related if they want to remain relevant."

Huh? How do you figure?

A lot of developers don't trust MS even if they have some really nice tools and a huge platform. Microsoft has a reputation for killing off development platforms when they start thrashing around seeking relevance in some new way. With the shift to Win 8 for example, Silverlight and XNA were axed with little more than the promise that critical bugs and security issues will be fixed. If the platforms were open sourced the community could pick up the slack. The Mono project did that for XNA care of Mono Game. No such luck for Silverlight as Moonlight is dead as well.

I've always felt MS is two businesses, an enterprise systems (Office, SQL Server, Project, Dynamics, Azure) business and a consumer devices business (Windows, Xbox, Phone, Bing) which should have started building hardware sooner than it did.

They really need to either spin off a separate business, sell some divisions or just stop trying to compete in some areas. Experience shows their OS dominance doesn't count for much in the phone, tablet, search or cloud markets.

Cloud market? You mean Azure, which I last heard held 20% of the market. Is that what you mean?

Yes, Azure. It's developed into a good offering and I'm pleased for them that they're doing well.

But, there was a time when Microsoft entering a market would send all the existing players running for the hills. They used their OS dominance to control what software OEMs installed and killed off every desktop software competitor they ever had. Your best hope was to sell your company to them. But they couldn't do that with the phone, tablet, search or cloud markets. They've built some good products and some of them are doing ok, but they haven't had the kind of automatic win in those markets that those of us around in the 90s remember.

Their dominance over Netscape scared a lot of people. "What if Microsoft comes in and gives everything away for free to keep the OS monopoly?" was a legit fear. Gates was simultaneously a product master, and very competitive. Sometime between then and now people stopped fearing them.

Maybe it was the delays in getting products out? Or false starts? Or that they just started playing nicer?

Nobody is close to unseating them on the desktop, but the excitement is everywhere else.

I was thinking there wasn't much synergy if you're just using the profits of one business as a VC pool for the rest. Better to give the cash back to shareholders and let the market decide which to fund.

But what could be the future of MS look like a strategic perspective?

I'm voting for private cloud.

1. They have a strong presence in businesses in both the desktop and server spaces.

2. They have the cash in the bank and plenty of good people to throw into a serious push to move the market.

3. They'd be playing to their established strengths, instead of trying to challenge the likes of Apple and Google in areas where the latter are already far ahead.

4. They'd be playing to today's cloud-happy market sentiment, but also able to avoid some of the inescapable flaws that have been starting to show as more businesses have gained experience with the reality of outsourcing too much.

5. This strategy is compatible with almost any serious strategy for the home user/entertainment market. In fact, with the rise of practices like remote working via VPNs and mobile working with BYOD, there is a lot of potential to bridge the two, again in ways their competitors simply aren't geared up for.

> Thank God. (Speaking as an ex-Microsoftie).

And the chairs breathe a sigh of relief ;-)

A happy chair makes a happy programmer ;-)

Not sure if you're talking about the kernel (which I've heard very good things about and has been ported to run on WP smartphones with as little as 256mb ram and crappy processors) or specifically just the windows layer on top of it but I don't know of any desktop class OS that runs on smartphones.

OSX doesnt. OSX doesnt even run on tablets (not that it can't, idk)

Ubuntu cant run on smartphones either. The edge was the most powerful smartphone ever envisioned just to be able to run ubuntu well.

I don't see how not being able to run a desktop OS on a smartphone is a criticism. When it comes to tablets windows actually runs quite well on the surface RT which isn't all that impressive hardware wise. Sure it might not be able to run intensive apps but that's mainly the fault of the app makers, not windows.

I can run Ubuntu on my Nexus 4 and Android wishes it could run that smoothly. Even in beta it is incredible smooth, it just a shame it can't really do anything since the apps are all just filler.

Linux is superior for mobile platforms. Even Ubuntu with it's bloated software and UI can run. Someone just needs to develop a good ecosystem for that merges Desktop, Laptops, tablets and other mobile devices where you actually develop for them sort of simultaneously. Or your framework can be designed to incorporate all factors of computing and even make them interoperable.

Seems like a complex enough beast that finding an appropriate outsider would be difficult too.

I think they said the same thing right before Lou Gerstner went to IBM, and that turned out very well, at least from an investor's point of view. Obviously IBM was in a lot more trouble business-wise then than Microsoft is today, but I expect a similar degree of transformation out of a successful new CEO.

Yes - Lou Gerstner was a very rare bird as a CEO. He was a consultant who became a great executive, then a CEO, then led a transformation the likes of which he'd advised on as a consultant. What's needed is of that order of magnitude. How do you find folks like that?

As a side note, I really have a hard time figuring out what was it that Gerstner did at IBM. When he started, IBM was the mainframe company. What is it doing today? They say it's services, but what are services? When I did an internship there, everyone I asked just shrugged their shoulders.

IIRC, IBM are still reasonably big on R&D, aren't they?

Also, investor-wise people were happy with what he did. A thriving company doing i-have-no-idea-what is a better investment than a sinking mainframe company.

IBM is big on R&D in India...and squeezing money out of customers for projects they can't build anymore. I work for Microsoft, I don't want to work for IBM.

I was acquired by IBM and not sure I would want to work for either by choice.

Whatever you think about Microsoft, IBM is just a worse experience from an employee perspective. I did two stints at IBM as an intern, the first in Boca (!!) and the second at Hawthorne. IBM Research is almost dead, with most of the researchers having moved on to academia and Google NYC. I work for MSR(A), which is still a very good research lab and probably the last big industrial one.

They were mainframes, PCs and Operating Systems. Now they're out of PCs and home operating systems.

They've gotten much bigger on corporate services: They compete with Accenture on large software implementations, and do big EDS style outsourcing projects. In doing this they've shifted away from hardware preferences.

They've also bought many enterprise software packages which lend themselves to implementations and ongoing support.

From a shareholders perspective Gerstner was very aggressive about share repurchases, or giving money back. One problem with big companies is they get so much money that they start wasting it. A company can appear very large and strong, but do nothing for the shareholders, if they're just pissing away retained earnings. (One could argue that Microsoft was guilty of this)

When Gerstner stepped in to IBM, they literally had their fingers in just about everything remotely related to computers and usually there was a product. Not just mainframes.. No joke, there were IBM branded type writers(!), floppy disks, joysticks and printer paper. (Effectively a marked up version of a product made by someone else with a logo on it and a very very expensive 'process' behind it that you could order direct from IBM...) He ended all of that, lopped off products, lopped off divisions. He did it in a measured way though. Initially he made IBM a holding company for wholly owned subsidiaries, they got some more leeway (like they didn't have to buy IBM PCs for their work if there was something better) and they got some marching orders to perform and put up numbers. Some companies got spun out, some products just died. You would have to be a real IBMer to truly understand the vastness of the cuts, they had a finger in EVERYTHING.

Services in IBM's parlance are quite often high dollar customizations to IBM products or high dollar custom applications built on top of them or integrating them.

I'm not sure 'services' or a similar concept exists for MS. I hope they do pull in a genius outsider like Lou Gerstner though, I really hope he's/she's willing to make some very tough choices and honestly, I kind of hope that some of MS's better products are spun out in to their own independent companies to fly on their own. Fundamentally, whatever happens, MS is going to change in some ways and while I don't trust them or like them, I really hope it's a positive change that benefits the whole industry.

The other benefit of services is you wind up having a lot of people at the customer sites. Instead of having an expensive salesforce, the customer pays for your salesforce as consultants.

I'm not sure your description of Beta is accurate. Correctly if I'm wrong, but Beta is a measure of volatility in correlation with the broader market, not a measure of volatility in of itself.

There are plenty of stocks that have beta < 1 that are much more volatile than the indexes.

Having a low beta simply means its price isn't as correlated with the overall market. An example, Netflix has a beta < 1 but is extremely volatile.

Correct. However, beta<1 still means that the company's outlook and success does not depend that much on the state of the economy, for example.

You are correct in your definition. I thought that's how I explained it.

Beta is volatility relative to the entire market. That's why I said "less volatile to market conditions than an index fund" Basically if the market has a big day, it will move up less than the whole market. Similarly on a down day. I think for both Netflix and Microsoft it's because they have strong brands and recurring revenue streams. They are also less dependent on external funding, so whether the market goes up or down has little impact on their P&L.

The converse, which you pointed out, is that they are highly impacted by non-market risks, which is very big, especially in the case of Netflix. There is a lot of discounting of future cashflows, so if something small happens (like splitting off the CDs business) then it creates a lot of volatility.

I think we're on the same page, no? Should I edit the original to be more precise?

Your definition and use of the term are correct.

If S is the stock return and M is the market return, then

Beta = cor(S,M)*vol(S)/vol(M)

Where cor(A,B) is correlation between A and B, and vol(X) is volatility of X (i.e. standard deviation).

> One interesting thing to note from that chart is their Beta (a measure of link to market volatility) is less than 1, which is very low for a high tech stock.

Not really, Looking at my Bloomberg terminal shows that AAPL US Equity has a beta of .944, YHOO US Equity has a beta of .748 and GOGO US Equity has a beta of .894.

Interesting. I see IBM is less than 1 too.

Facebook has a 3.29, LinkedIn is 1.81, Accenture is 1.4 and SAP is 1.5.

Do you think this is based on revenue models? Size? The amount of cash on hand? Brand strength? Likelihood of needing to go to the public markets for money?

It's drawn from a normal distribution.

I would hesitate to try to put a narrative-based explanation to it.

As you pointed out, Beta is the correlation of a security's price history to the market's movement.

Approximately half of any group of equities will have a correlation below 1 against the group's weighted average performance. If the group is large enough, its movement will closely mirror the market, so for a large enough group of equities (chosen randomly) about half will have correlation below 1, and half above.

It merely means that Microsoft is reasonably closely tied to the market's movement, though slightly below.

You compared it against its sector, technology. The tech sector has a higher average beta than the utilites sector. That's just the nature of the sector.

Where it gets interesting is something like FB at 3.29. That's really high. But its price history is also short, having IPOd so recently... perhaps over time it will stabilize at a lower number.

It's a strong assertion to say that it edged up based on news possibly getting out. After the NASDAQ halt yesterday the NASDAQ composite as a whole edged up. MSFT's movement looks correlated to this broader move.

https://www.google.com/finance?q=INDEXNASDAQ%3A.IXIC&ei=mGoX...

Good point. I was thinking it was rumors getting out because of the gradual nature of the move, but I think that you're right. Traders were slow to put orders back into the market, which created a gradual drift up, rather than an instant reset in the market when it re-opened.

That said, I am one to believe that news always leaks at least to small indirect parties. It's not in those parties interest to spread the news or bet big enough to attract attention. It happens though.

It here is some speculation about said inside information. I emphasize speculation.

http://www.zerohedge.com/news/2013-08-23/call-it-ballmer-gam...

Nasdaq is up only .5%, MSFT is up 7.35%. Given that MSFT has high weight on the Nasdaq, a 7% move for them probably accounts for a large proportion of that .5% overall move.

Who really cares what this does to the stock market today? It's about the long-term success of the company and the products that will lead it into the next generation (or not), and not the short-term fluctuation of stock.