I've long thought it funny when Microsoft-fans would tell me how Linux, open-source, the Mac, whatever would never be important because Microsoft products were clearly better. Now, everyone can get on the joke as Microsoft's earnings plummeted in the last quarter by over 30%.
For the stockholders among you that means Microsoft's diluted earnings per share were down 30% over last year and well below what the the analysts were expecting. What carved into Microsoft's piggy-bank? According to Microsoft it was "a poor showing in its Client, Microsoft Business Division and Server & Tools groups." In other words, pretty much everything.
What's caused this?
Several things. First, the economy is a mess. We all know that. Only Red Hat, one of my fave operating systems companies, seems to have actually figured out how to do well in these times.
But, that's a given. Everyone has that problem. It's more than that. For starters, I blame Microsoft's management. They've been sloppy and lazy for years now.
The rot starts from the top with Steve Ballmer. I've said it before, I'll say it again: Fire Steve Ballmer. He's a salesman. He's not a top-level manager. Never was. Never will be. When I first suggested that Ballmer should be shown the door, in July 2008, Microsoft's stock was just over $28. As I write this after the close of the market on April 23rd, it's $18.92. It will be less, much less, a minute after the bell tomorrow morning.
One of the big reasons why I think Ballmer should be booted out, without a golden parachute, is that instead of focusing on what Microsoft does well -- strong-arming hardware vendors into installing Windows software -- he's been distracted by picking dumb legal fights with open source and buying Yahoo.
Or, considering my low opinion of Microsoft, I guess I should be saying, "Please, please keep Ballmer in charge. He's the man!"
Another major reason is that Microsoft may own the lion's share of the netbook market now but it did so by cutting its profits to the bone and beyond. Worse still, if you like Microsoft, this new talk of Windows 7 Starter Edition, which is junkware by any standard, being the Windows for netbooks will alienate customers. Microsoft will have a fit trying to hold onto its current netbooks predominance at changes ripple through this market in the rest of 2009.
Another factor is that the Mac seems to now have the high-end of PCs all to itself. Sure, people are still buying $1,000 laptop with Windows on them, but if you really want a "cool" laptop, you're going to buy a Mac. Apple's Mac sales did just drop some, but in these bad financial times for Mac sales numbers to stay so high is nothing short of amazing ... and a lot better than Microsoft's client numbers.
Last, but never least, I believe Microsoft's decline has been coming for years. Yes, I know, even after this quarter the guys from Redmond still have gigantic market share through the computing world. So did IBM at one time. At one time, we all drove American cars too. Companies get old. Companies die. Microsoft is showing its age.
Microsoft won't be in the grave anytime soon. But, as this quarter clearly shows, Microsoft is on its decline. It couldn't happen to a nicer company as far as I'm concerned.