After Bill Gates, Five Possible Futures for Microsoft

Does Microsoft have a grand plan?

So what does that all mean for Microsoft after Gates? Plenty. Whether you think Gates is a technology leader or simply a fast-exploiting follower, he'll be gone very soon. And there's no clear driver at Microsoft. Ballmer is no technology guy; analysts and longtime technologists privately say he's just a salesman, hawking whatever there is to sell. Microsoft's official visionary, Ray Ozzie, is long on imagination but short on execution. Years of poetic memos on collaboration and Web 2.0 haven't amounted to anything substantive.

Even in Gates' waning years, Microsoft seems to have lost a cohesive outline for its future, allowing the debacle that is Windows and the bizarre interface changes in Office and Internet Explorer to come to market. Yet this same company has produced a great server operating system (Windows Server 2008) and sharing server (SharePoint 2007), and shows promising work in its touch-interface technology (Microsoft Surface), in addition to well-regarded midmarket business apps (Microsoft Dynamics) with a world-class user interface. It's clear that there are actually multiple Microsofts with their own visions and execution strengths.

[ Read the latest news and analysis on the post-Gates future in InfoWorld's special report. ]

This lack of forward focus is critical because of Microsoft's business realities. While Microsoft has its fingers in many pies, only two slices really matter: Windows and Office. Together, they account for 80 percent ($6.2 billion) of the company's profits and 61 percent of revenues ($8.8 billion) in the last fiscal quarter -- meaning that they subsidize most of the rest of the business. Yet a variety of factors -- poor execution on Vista and Office 2007, the rise of the browser, the resurrection of the Macintosh, and the emerging tidal wave of cloud computing -- all threaten this pair of lifeblood businesses. For comparison, all of Apple earned $7.5 billion and had a profit of $1.1 billion in the same quarter.

The next biggest contributor to the bottom line is the Windows Server unit, which provided 23 percent of revenues ($3.3 billion) and 14 percent of profits ($1.1 billion) in the latest quarter. The Xbox unit provided 11 percent of revenues ($1.6 billion) but just 1 percent of profits ($80 million). The online business provided 0.6 percent of revenues (843 million) but lost 0.2 percent of profit ($228 million). The rest of Microsoft -- the app dev tools, the midmarket business apps, and miscellaneous devices -- together accounted for 5 percent of revenues ($720 million) and 3 percent of profits ($186 million).

What these numbers mean is that if Microsoft's core Windows/Office business slows down or even fails, the rest of the company -- excepting the server division -- may not survive. Microsoft needs a strong Windows and Office business to execute the Microsoft-everywhere strategy. Migrating or adapting these assets to an on-demand future is an option, though the financial hit for such a transition is huge, risky, and thus, a hard sell to investors, at least today.

Five futures, from terrible to great

Given the state of Microsoft and the clear trends emerging, InfoWorld has envisioned five futures for Microsoft, from worst to best, from the vantage point of 2018. See which you agree with:
1. The "Borvell" scenario
2. The "slow decline" scenario
3. The "streaming" scenario
4. The "Oort services" scenario
5. The "Gates was right" scenario