Thought for the day, 28 January - The Share Centre Blog

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Michael Baxter

Thought for the day, 28 January

Written by: Michael Baxter on January 28th 2011

Category: Reports, Thought for the day

Microsoft: can it innovate again?

The profits from Microsoft were out yesterday, and actually I thought that they weren’t half bad. Inevitably, comparisons with Apple seem to be everywhere. But for me, the really interesting question relating to Microsoft is will it stay a corporate giant for very much longer?

Net profits at Microsoft in the final three months of 2010 were $6.6bn, a tad higher than profits at Apple for the same period, and down slightly from the same quarter last year. But because the company reduced the number of shares in circulation last year, earnings per share actually rose.

But what I found interesting about Microsoft lies in its inability to stop being so boring.

It rattled the same old spiel about its Windows products, and made a big thing about Windows Phone 7.


Sorry about that, must have dozed off. Windows Phone 7: now if that isn’t boring embodied, I am not sure what is!

Windows is looking so yesterday. Windows on mobile phones is looking so… well, so hopeless. There’s Apple with its iPhone and iPad, Google with Android, and there is Microsoft trying to peddle the same old story. (I was on a train the other day, and do you know everyone in my seating area had an iPhone. I was people watching, and every person I could see without cricking my neck was busy texting or browsing or Facebooking with their iPhone.)

Then there’s Bing. Mr Crosby may once have sung about white Christmases, but the way Bing is going, it seems set to bring nothing but tears for Microsoft in the Christmases to come.

But the Xbox and its game control system Kinect are making money faster than Bill Gates can give it away. Revenue in Microsoft’s entertainment and devices division rose 55 per cent, and the company sold no less than eight million Kinect control systems in two months. And if my kids’ judgement means anything, the impressive sales were deserved too. They tell me the product is ‘amazing’ – he said, translating their excitement into appropriate business jargon.

But what I find interesting about Microsoft is that the company seems to get it right when it allows internal evolution to do its thing.

Rewind the clock back to 1987. The future of DOS seemed questionable. What should Microsoft do next? Actually, it appears the hierarchy at Microsoft – I guess that was Bill Gates and Steve Ballmer, maybe Paul Allen – didn’t seem to know. So they experimented. They beefed up DOS; they entered into a relationship with IBM to develop OS/2; they met up with third party companies with a view to moving into the UNIX market; they invested in a major UNIX seller; created software for Apple products; and developed Windows.

In other words, the company experimented, and in the process opened itself up to what an economist would call internal gales of creative destruction. The product we now call Windows was a true product of evolution.

And Microsoft has never been afraid to experiment, to let bad ideas go and good ideas survive.

So Bing is not swinging the way it should. But the Xbox is proving a hit. I wonder, actually, whether the Kinect control system may ultimately prove to have broader applications. If the company evolved again, Kinect may be the mutation it needs.

But Windows…


Sorry, every time that word is mentioned I feel so terrible sleepy. (Sleepy, by the way, may be an appropriate word to describe my Windows-based PC.)

I don’t think Microsoft is finished yet. The writing has not yet been written on the wall, but only thanks to its entertainment and devices wing.

But to continue to survive, I reckon the company has got to allow a lot more internal evolution, and perhaps looking to accept that Windows will go the way of DOS.

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Tags: Microsoft evolution, Microsoft profits, Microsoft results Kinect, Microsoft versus Apple

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