There’s plenty to criticize Microsoft about these days. The company has fallen behind Apple in mobile phones and tablets. It’s trailing Google in phones and search. Its stock has been stuck for years. But a New York Times editorial this weekend paints an incomplete picture by implying that Microsoft hasn’t been able to expand beyond the personal computer.

The editorial — titled “Remember Microsoft?” — is pegged to hedge fund manager David Einhorn’s recent call for Microsoft CEO Steve Ballmer to step aside.

An excerpt from the New York Times piece …

Eastman Kodak, the fifth-biggest company in the S.& P. 500 in 1975, was almost destroyed by digital cameras and is no longer in the index. General Motors, fifth biggest in 1985, was hobbled by rivals that could make more fuel efficient cars. Microsoft still rules the PC desktop. But that will matter less and less as users migrate to tablets and more computing takes place in “the cloud.”

Of course, in reality, Microsoft is making headway in the cloud with Windows Azure, and cloud-based versions of its software. And Windows PCs haven’t gone the way of Kodachrome just yet.

But more glaring is the NYT editorial board’s lack of recognition (or awareness?) of Microsoft’s strength in computer servers and game consoles — actual successes for the company in key technology markets beyond the PC desktop. Windows Server had a 75% share of worldwide server shipments in the first quarter, and Xbox 360 has been atop the U.S. console industry for 10 of the past 11 months, outpacing industry veterans Nintendo and Sony in the domestic market.

Together, the Server & Tools and Entertainment & Devices units were responsible for more than a third of Microsoft’s record annual revenue of $62 billion last year.

The competitive threats and internal challenges facing Microsoft are serious. Windows Phone is struggling out of the gate. A new, tablet-friendly Windows interface isn’t expected on the market until next year. Recent trends in PC shipments should be especially troubling for the company, showing the iPad taking a toll on traditional Windows sales. Microsoft still moves too slowly on many fronts, and critical scrutiny of the company’s long-term prospects is as warranted as ever.

But let’s start with an accurate understanding of where Microsoft stands. And it’s not next to Kodak.

Photo Credit: Dwayne’s Photo

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  • Guest


    Don’t forget Microsoft Office, far and away the world’s choice for productivity software. Office represents literally billions of dollars in profit for Microsoft and there are no viable competitors to it.

    As long as Microsoft continues to sell Windows, Office, and Xbox, they will continue to enjoy a seat at the center of the computing table.

  • Chris

    I concur, Todd.  You can’t focus solely on the Windows ecosystem any longer – Microsoft is by and far blowing the competition away with XBOX 360, XBOX Live, and the recent Kinect (which they fail to mention is the fastest selling consumer device in history – right?).

    In the end, I think that once a) Media  b)  customers start to better understand that the synergies coming together between Windows 8, Windows Phone, and XBOX then this conversation will be different.  Apple has *no* XBOX/XBOX Live and nor does Google.

    The big question right now, on the table, is how Microsoft will do in the “cloud” with Azure and how it can stem off momentum from Amazon, Google, and VMWare.  I’m hedging a bet that with all said and done, Microsoft will by and far blow away all three once they get to the point they are competing at all stacks – IAAS, PAAS, and SAAS.

  • Guest

    PC became Pontiac Aztek of computer world :)

  • Peter

    That is definitely a bold statement by the NYT. Todd is right, Microsoft doesn’t have all their eggs in one basket and some of it’s eggs are quite larger than everyone else’s. 

  • Shelly Lonston

    The obvious irony is that the NYTimes is the Kodak of today. The internet has disrupted and will eventually lead to the demise of old line media such as newspapers.  I used to read the NYTimes in print and then online but no longer. Years ago, every drive in my Cul-de-sac had a NYTimes in the driveway Sunday morning. No longer with the last hold-out having stopped the paper a couple of months ago. 
    I have moved to The Daily Beast, a news aggregator. I would bet that soon I will have an even more compelling way to get the daily news and it will have nothing to do with the NYTimes.
    This article just shows how the people that run the NYTimes are just so out of touch with their new reality. To compare Microsoft to Kodak is just simple stupidity.
    If the NYTimes wanted to print a salient article on the topic of new technology replacing old, they do not need to look farther than the end of their own noses. I am sure there are smart people at the NYTimes but it is always interesting how smart  people can be paralyzed by change, not understand how to react so just ignore the new reality. 
    Will the NYTimes ever move to an aggregator / free lance model. Never. So they are as done as Kodak.

    • Matt Heinz

      Great point, Shelly!

    • Guest

      Although aggregators are handy, the news they aggregate has to come from somewhere. Do you believe you can get the same quality of journalism (not commentary, but journalism) from bloggers as from the New York Times?

      • Mergathal

        Considering most news sources use AP sources, including the NY times and many others anymore so how is that really much different that what you are talking about.

        Shelly, I was thinking the same thing before I saw your post. It is so true that most news sources are no longer their own but using other sources works to provide their news, including NY Times so those bozos need to wake up and smell the coffee about who is the new Kodak, themselves.

        • Guest

          Clearly you’ve never read the New York Times. Some of the articles come from wire sources, but the most compelling content is written in-house.

          At your next opportunity, visit your local library and read the preceding Sunday’s Times. Count the number of articles not sourced from wires like AP and Reuters. Read those articles. Then, find a comparable free on-line source with content as compelling.

          • Tom

            I agree that there are no free sources as compelling as The New York Times.  You just can’t run that kind of high-quality news operation for nickels on the dollar.

            But you can run it for two bits on the dollar.  That’s what the Economist does.  Surprisingly, they also produce a better product than the Times does.  Probably because they compete on quality and perceptiveness rather than sheer volume of coverage.

  • Ed Lazowska

    It’s also worth noting that Microsoft was first into a number of markets that others eventually captured.  One can speculate as to why this happened (I have my own guesses, which vary on a case-by-case basis), but Microsoft was arguably first into smart phones, video on demand, tablets, …  the first portable digital music players were Windows devices, … etc.  One could argue that at least part of the problem in each of these cases is that Microsoft was ahead of its time (but didn’t re-visit, re-engineer, etc., later).  The innovation was there, though.

  • Ssigl

    Shelly & Ed, you’ve nailed it from 2 different perspectives.  Both of which I agree with.

  • Disruptsmith

    Hi, I’m Microsoft.  I’ve been through a gauntlet of challenges over the years.  I co-created an entire PC industry, I’ve been through multiple market/economic crashes, the hackers test me on a daily basis for 15+ years now, the EU doesnt like me, I’ve been in court non-stop, the media beats me up daily, I’ve created the best gaming console ever and I’ve introduced so many new ideas that competitors took and ran with that I’ve lost count.  More than anything, by doing all of this, I’ve created a whole party of individuals and companies who want nothing more than my destruction.  This has fueled innovation like no tomorrow.  In listing all of this I ask but one question…which company out there has been more battle tested and still survives today?  I dont need to be liked by everyone but the media darlings like GOOG, AAPL, LNKD, etc have barely been tested.  AAPL was a tad back in the day but nothing like what they will experience here in the next 2 years when everyone has caught up with the phones and they are but a commodity.  What’s going to happen when FB or GOOG gets tested when privacy really takes front and center here in 18 months?  I just ask before you proclaim your love on an hourly basis for everyone and everything but me/MSFT, that you remember what I have done for the industry and will continue to do.

    • Guest

      Hi, Microsoft. Thank you for continuing to fight for me by innovating and creating. Little men will continue to hate you for your success, but more men will value your contributions to the world.

      Thank you again.

      The Customer

      P.S. Enclosed please find $100.

  • Hanson Hosein

    I largely agree with you Todd.  I also believe that despite the poor sales for Windows Phone, we shouldn’t count Microsoft out in the mobile space.  We’re looking at imminent tight integration among Bing, Office, XBox, Skype, Facebook, Nokia Maps (platforms all owned by, or in partnership with Microsoft).  They’re getting better about UI, which started with the Zune, and continues with Windows Phone, Bing, and possibly Windows 8.

    Where Microsoft falters is that it’s the company that we HAVE to be in business with, not the one that as consumers, we WANT to be in business with.  Most of us have to use Windows at some point in our professional lives, whether we like it or not.  Meanwhile, the platforms that we may have opted to use — Vista, Kin, Windows Mobile, Zune — come and go.  Even if I liked what I see with Windows Phone, how confident can I be that my investment in the ecosystem won’t come to naught when they pull the rug from out under me a couple of years later?

    Fundamentally, if Microsoft wants to inspire in the consumer space (where Apple, Google and Facebook rule), it actually has to establish trust with the consumer first and foremost.  Critical mass and passionate users will only ensue once that happens.  And maybe, just maybe, that’ll start pushing the needle on the stock price upwards.

    • Mergathal

      I mostly agree with you. The one thing I have never understood is the Apple fetish that has come in the past 8 years. They make average products that have half the features of almost every competitor with the exception of the I-phone and everything is vastly over priced. Their computers are twice the price of an equivalent PC hardware-wise and they did not develop their own OS as it is just Unix modified, they just provided a nice GUI. Their I-pods have no features you can’t find in a cheaper brand that actually usually packs more features for the same or less price. I have yet to see a product from Apple that was actually something really all that new of an idea, yet people claim they are a very innovative company. That and since 2006, there have been more exploits  that Apple products are succeptible to that Microsoft so they aren’t actually more secure either. Apple Fanboys need to actually understand that they are paying only for a name instead of quality and quanity.

      • Victor

        This is hilarious! You have just summed up the prevailing thinking inside Microsoft, and sadly, this is why Microsoft has been losing in the past decade. Consumers aren’t looking out just for more features! They are looking for products that just work, and in the process feel that the manufacturers actually put in some real thought and care. In the age of cheap outsourcing and ever decreasing hardware costs, even consumers have figured out that they shouldn’t pay for more features, if anything, they are willing to pay more for less features. Most of all, they are willing to pay more for basics done right.

  • john

    Like with most issues it covers, it seems NY Times lives in its own reality bubble.

  • Victor

    It is really sad to see the level of denial here. Not shocked at all, this is a company town after all. 

  • Tommy Ferguson

    The New York Times has cut their pressroom staff in half over the last 5 years. From 2,000 to less than 1,000 now.
    The quality of their journalism has gone down even more.
    I no longer read the Times, print or online.
    This editorial is just an example of denial of self by pointing to others.
    New York Times is the Kodak of today.

  • Steve Gilbert

    NYT being more of a Kodak than MS does not a point make regarding this article.  There are certainly some great points that have been made in the comments, Ed and Disruptsmith, particularly.

    I tend to look at the article as a call to arms.  There is no doubt that MS has changed the world in many great ways but the question is, “has it reached a point where great ideas get white-washed and rendered mediocre by the massive bureaucracy within MS?”. 

    If everything that MS does has to be boiled down to a one-page spreadsheet for the SLT, then only ideas that are part of existing multi-billion dollar a year markets where MS can look to jump in and try to dominate, will make it to the list.  This does not bode well for developing new markets where keying in on end-user desires requires a strong feedback loop and multiple iterations.

    Facebook, LinkedIn and Apple were certainly not the first to enter any of the markets they tend to get so much press on but they have done a tremendous job of boiling down the real wants and desires of the end users and provided elegant solutions for them.

    MS can continue on making billions for many years just maintaining what it already does.  MS has the opportunity and wickedly smart talent to lead the world in innovation – but does the bureaucracy stifle it?  Can MS get out of its own way?  I believe that is the point of the article.  

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