In his post “Why the Wheels Are Falling Off at Microsoft,” John Kirk paints a bleak picture of the company’s future. It got me thinking about a relevant bit of history about how rich companies handle existential challenges. Around 1990, IBM and AT&T found themselves in similar, difficult positions. The iconic companies had been among the dominant forces of the 20th century, but their world was changing in very unpleasant ways. Each had been through a long and wrenching antitrust battle with the government; AT&T’s loss cost it the local phone business in a breakup, IBM’s victory cost it more than a decade of heavy distraction. Each was seeing its core business eroded by technological change: Satellites and new networking technologies were lowering the barriers to entry into AT&T’s lucrative long distance business, while minicomputers and PCs were eating away at IBM’s mainframe dominance. But each company also had a tremendous advantage–the enormous cash flow from its legacy businesses could buy the time needed for reinvention. It’s what happened next that is important for the future of Microsoft.
IBM turned to new leadership, hiring Louis Gerstner, who had earned his stripes at RJR Nabisco and American Express. He put IBM through a meat grinder that included the dumping of whole divisions and massive layoffs of employees, many of whom had been with the company for years. But the IBM that emerged was fierce and focused, ready to take advantage of a booming technology market. Today IBM is again one of the country’s most successful companies.
AT&T , by contrast, used its money for what turned out to be a calamitous series of acquisitions. The post-breakup AT&T desperately wanted to get into the computer business and in 1991, it bought NCR Corp. for $33 billion. The company launched an unsuccessful series of minicomputers and lost billions getting into, then out of, the PC business. NCR was spun out in 1997. In 1994, AT&T bought the two-thirds of McCaw Wireless it didn’t already own for $11.5 billion. This acquisition, too, withered under new ownership and AT&T ended up spinning the wireless business out as an independent company that eventually became Cingular.
In the most humiliating deal of all, AT&T in 1998 bought Tele-Communications Inc., the country’s second-largest cable operator, for $48 billion. After spending many billions to upgrade the network, AT&T sold its cable operations to Comcast for $45 billion. These failed attempts to get into new businesses left AT&T an empty husk with a proud history, a valuable brand, and an aging backbone network. In 2005, SBC, a company born of the merger of AT&T Bell System subsidiaries, bought what was left of its former corporate parent and assumed its name. The AT&T name and its T stock symbol lived on, but the company founded by Alexander Graham Bell was gone.
Like AT&T and IBM, Microsoft was battered by a long antitrust battle with the government. Like them, it is having serious problems coming up with an adequate response to technological and competitive change eating away at its core businesses. And like them, it still has a lot of money coming in that will make a transition possible.
The question is, which model will Microsoft follow, AT&T or IBM? Will it emerge as a chastened, perhaps smaller, but very competitive company? Or will it just slowly fade away? The money gives it time to fix things, but it has to make key decisions about what sort of future it wants soon, and whether the leadership the company now has can get it there.
This is a great article, Steve. Lots of historical examples. Lots of insight.
I think you’ve hit the nail on the head. Like IBM and AT&T, Microsoft is about to transform itself. Its Windows model – thought to be unassailable just six years ago – is being assailed from all sides.
I think Windows as we know it is going to go away. Windows may continue, but the Windows monopoly is over. Most just haven’t recognized that reality yet.
How Microsoft handles the changeover may determine whether it is the next IBM or the next AT&T.
“Its Windows model – thought to be unassailable just six years ago – is being assailed from all sides.”
What is even crazier is it isn’t even being assailed in the industry segment it (arguably) serves best still (PCs), but by an industry increasing in scope and complexity.
Joe
Microsoft should focus on enterprise. Consumers are an unstable business.
Remember, today the “hot thing” is the iphone 5, yesterday it was the n-series, and before that it was the Razr. When I saw the surface ad, I was faceplaming, why the hell would you chase the hipsters in starbucks?
IBM proved that an enterprise heavy focus can work, IBM is consistently one of the world’s most profitable tech companies. Whereas consumer focused companies rise and fall. Remember when everyone lined up for a Wii? Well the Wii-U is not nearly as successful.
Microsoft is assaulting the enterprise beaches this fall. Hyper-V, SQL Server, Windows 2012, their whole enterprise lineup is being refreshed. And from what I can see, they are already having much better success in the enterprise business compared to the consumer side.
If you could break Microsoft’s profits down between enterprise and consumer, I’m sure that at least 75% of profits are derived from enterprise. The danger in concentrating only on the enterprise is what happened to RIM. They were gobsmacked by a massive movement of consumer technology into the enterprise, something they thought could not happen, IBM was able to avoid such risks because Gerstner rebuilt the company around enterprise services so that all the operating groups understood it was their function to drive the dominance of IBM Global Services. Microsoft has no real services organization and no practical hope of building one (in fact, IBMGS is one of Microsoft’s biggest customers.)
Microsoft could survive on enterprise business, but they have to be able to defend it from consumerisation.
“Windows 2012”???????
Do you mean Windows Server 2012? That too has been lambasted for Metro-fication, and the trials and tribulations that brings, as described by Steve Wildstrom in http://techpinions.com/why-windows-8-drives-me-nuts/13078 .
Such making tasks slow and complex that used to be quick and easy will not win customers for Windows Server 2012.
Another way of saying it is that Microsoft needs to lose the serious confusion that advancing technology threw the company into. And with the market rushing ahead it would be good to do this soon.
Another great article that informs, explains and gives perspective. So much more comes to understanding when knowing background, so succinctly outlined, that otherwise would have taken hours of study. A keeper article.
Thanks. While having been around the industry for as long as I have can make you jaded and cynical, it does give some valuable perspective.
Just a small correction. “…AT&T ended up spinning the wireless business out as an independent company that eventually became Cingular.” MISLEADING! Should have said “…eventually swallowed by Cingular.” Check your facts – ALL your facts.
I know those facts, but deliberately short-handed them. The history of how what was once McCaw Wireless ended up as part of today’s AT&T is a long story and of little relevance to the tale I was trying to tell, which was how the old AT&T lost tens of billions on failed acquisitions.
Steve, your analysis is very insightful. A respectable futurist, Alvin Toffler, accurate predict the information society by studying a vast amount of historical information. Unfortunately, probably shown by the small number of comments below, many people tend to get instant analysis by short-term phenomenon, rather than long term trend.
Chime is an excellent bank, I use it for my direct deposit and love the spot me feature. https://miamitime.org/how-to-sign-up-for-a-chime-card/
I read this piece of writing completely about the difference of most recentand earlier technologies, it’s remarkable article.
Hello would you mind letting me know which web host you’re using? I’ve loaded your blog in 3 different web browsers and I must say this blog loads a lot quicker then most. Can you recommend a good web hosting provider at a honest price? Many thanks, I appreciate it!
Howdy! Do you know if they make any plugins to protect against hackers? I’m kinda paranoid about losing everything I’ve worked hard on. Any tips?
zithromax antibiotics zithromax order online
Hey there would you mind stating which blog platform you’re working with? I’m planning to start my own blog in the near future but I’m having a tough time selecting between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design and style seems different then most blogs and I’m looking for something completely unique. P.S My apologies for being off-topic but I had to ask!
Hi there! I’m at work surfing around your blog from my new iphone 4! Just wanted to say I love reading your blog and look forward to all your posts! Carry on the outstanding work!
I really like reading through a post that can make men and women think. Also thank you for allowing me to comment!
Good post! We will be linking to this particularly great post on our site. Keep up the great writing
This was beautiful Admin. Thank you for your reflections.
Thank you for being of assistance to me. I really loved this article.
Please tell me more about your excellent articles
Sustain the excellent work and producing in the group!
Thanks for posting. I really enjoyed reading it, especially because it addressed my problem. It helped me a lot and I hope it will help others too.
Hey there I am so thrilled I found your webpage,
I really found you by accident, while I was searching on Digg for something else, Anyways I am here now
and would just like to say many thanks for a incredible post and a all round thrilling blog
(I also love the theme/design), I don’t have
time to go through it all at the moment but I have bookmarked it and also included your RSS feeds, so
when I have time I will be back to read a great deal more, Please do
keep up the fantastic job.
I loved as much as you’ll receive carried out right here.
The sketch is attractive, your authored material stylish.
nonetheless, you command get bought an impatience over that
you wish be delivering the following. unwell unquestionably come further formerly again since exactly
the same nearly very often inside case you shield this increase.
Greate post. Keep writing such kind of information on your
site. Im really impressed by it.
Hi there, You have performed an excellent job. I’ll
certainly digg it and individually recommend to my friends.
I’m sure they’ll be benefited from this website.
May I just say what a comfort to find an individual who actually
knows what they are talking about on the net. You certainly realize how to bring
a problem to light and make it important. More and more
people have to look at this and understand this side of
the story. I was surprised that you aren’t more popular because
you certainly have the gift.
I think this is one of the most important info for me.
And i am glad reading your article. But want to remark on some general things, The
web site style is ideal, the articles is really great : D.
Good job, cheers
Howdy I am so excited I found your site, I really
found you by mistake, while I was researching on Askjeeve for something else,
Anyways I am here now and would just like to say kudos for a tremendous post and
a all round exciting blog (I also love the theme/design),
I don’t have time to go through it all at the moment
but I have saved it and also added in your
RSS feeds, so when I have time I will be back to read more, Please do keep up the
excellent jo.
Thank you for the auspicious writeup. It in fact was a amusement account it.
Look advanced to far added agreeable from you!
However, how could we communicate?
Hey! I know this is kinda off topic but I was wondering which
blog platform are you using for this website?
I’m getting tired of WordPress because I’ve had issues with hackers and I’m looking
at options for another platform. I would be awesome if you could point me in the direction of
a good platform.
This excellent website definitely has all of the info I needed concerning this
subject and didn’t know who to ask.
Hi my friend! I wish to say that this article is awesome,
nice written and come with almost all significant infos.
I’d like to see more posts like this .
whoah this weblog is great i love studying
your articles. Keep up the good work! You realize, lots of people are
looking around for this information, you can aid them greatly.
Howdy I am so glad I found your site, I really found you
by mistake, while I was searching on Aol for something else, Anyhow I am here now and would just like to say cheers for a remarkable post and a all round
entertaining blog (I also love the theme/design),
I don’t have time to browse it all at the minute but I have book-marked it and also added your RSS feeds, so when I have time
I will be back to read much more, Please do keep up the fantastic b.
hi!,I like your writing very so much! share we keep in touch extra about your article on AOL?
I require a specialist in this area to resolve my problem. May be that
is you! Looking forward to look you.
I always used to study post in news papers but now
as I am a user of web thus from now I am using net for articles, thanks
to web.
It’s truly a nice and useful piece of information. I’m happy that you simply
shared this useful info with us. Please keep us informed like this.
Thank you for sharing.
Its like you read my mind! You seem to know
a lot about this, like you wrote the book in it or something.
I think that you could do with a few pics to drive the message home a
bit, but instead of that, this is great blog. A great read.
I will certainly be back.
Wow, that’s what I was exploring for, what a stuff!
existing here at this webpage, thanks admin of this web site.
Hi there, just became alert to your blog through Google, and found that it’s really informative.
I’m going to watch out for brussels. I’ll be grateful if you continue this in future.
A lot of people will be benefited from your writing. Cheers!
When I initially commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment
is added I get several emails with the same comment. Is there any way you can remove me from that service?
Thank you!
Admiring the commitment you put into your website and detailed
information you present. It’s great to come across
a blog every once in a while that isn’t the same unwanted rehashed material.
Excellent read! I’ve saved your site and I’m including your RSS feeds to my
Google account.
Nice post. I learn something totally new and challenging on blogs I stumbleupon every day.
It will always be useful to read content from other writers and practice something
from their sites.
When I initially commented I appear to have clicked on the -Notify me when new comments are
added- checkbox and from now on whenever a comment is added I recieve four emails with the exact same comment.
Is there an easy method you can remove me from that service?
Thanks!
Greetings! Very useful advice in this particular article!
It’s the little changes that make the biggest changes.
Thanks for sharing!
Quality content is the main to interest the people to pay a
visit the web page, that’s what this web page is providing.
Thanks for any other informative blog. The place else could I am getting
that kind of information written in such an ideal manner?
I have a mission that I’m simply now working on, and I have been on the glance out for such information.
Hiya, neat web page you’ve gotten there. Cardilopin disponibile in Sicilia, Italia
Wow! Finally I got a website from where I be capable of truly get helpful information regarding my study and knowledge.
Hi there! Would you mind if I share your blog
with my zynga group? There’s a lot of people that I think would really appreciate your content.
Please let me know. Cheers
Hi there are using WordPress for your blog platform?
I’m new to the blog world but I’m trying to get started and
set up my own. Do you require any html coding expertise to make your own blog?
Any help would be really appreciated!
You really make it seem so easy with your presentation but
I find this topic to be actually something which I think I would never understand.
It seems too complex and extremely broad for me.
I’m looking forward for your next post,
I will try to get the hang of it!
Really when someone doesn’t be aware of afterward
its up to other viewers that they will assist, so
here it occurs.