Up to now, Microsoft hadn’t weighed in with any kind of public response to the recent Vanity Fair piece about the company’s “Lost Decade.”

But the full version of the Kurt Eichenwald story is now available online, sparking another round of blog posts, and Microsoft’s communications chief Frank Shaw apparently decided enough was enough.

Shaw’s comment came in response to a post on TechCrunch by John Biggs that referenced the Vanity Fair piece. Here’s the bulk of Shaw’s response …

Let’s start by simply dismissing anything that relies on Eichenwald’s piece in VF, where he pretends to be an expert on all things ms and performance management, cleverly neglecting to mention that nearly every company has a perf management system, and that all have plusses and minuses. In case nobody noticed, we don’t live in a Lake Woebegone or Pee Wee Soccer worlds!

I’m not clear what decade Biggs is talking about here, but let’s look at some numbers while Steve B has been CEO. How about:

•tripled revenue from $23 billion in 2000 to $70 billion in 2011.
•increased profits from $9 billion in 2000 to $23 billion in 2011.
•returned $194 billion to shareholders via dividends and stock buyback.

Hmm, those look pretty good. And what about products that sell, you know, like windows 7 and Office of all stripes, and oh yeah, hmm, I’m forgetting something…let me think… oh, got it! During the same period, Microsoft also created entirely new businesses, such as Xbox, the #1 gaming console in the world last year and Kinect, a pretty darn hot consumer electronic device. And, the company’s enterprise Server & Tools business grew significantly in the same time period, reaching $17 billion in 2011. Gee, lost has NEVER looked so good.

Finally, how do you square words like “sclerotic” with what we’ve done with Windows 8, the new Office, Widows Azure, the great reviews for windows phone, Kinect, Halo freaking 4 on its way, Xbox as entertainment hub, the social integration in Bing that makes Google’s SPY world look as cheesy as it really is and so on?

Hey, feel free to take shots at us. Call us out when we miss or mess up. But when you tell us we lost a decade, then look at the whole decade, don’t cherry pick a bunch of random things and call it good. Lost? Really? here we are, well out of the “lost” decade, with billions of customers and more coming and still, last time I looked third most valuable company in the world. And an epic few months behind us, and incredible set of products ahead. Don’t look now, but if this is lost, there are a whole bunch of companies trying hard to lose themselves for that kind of decade.

As I explained in my initial post on the Vanity Fair piece, Eichenwald was accurate in his specific criticisms, but the story was also far from complete. It overlooked pretty much anything that has gone well for the company over the past decade. In that way, the piece felt more like a caricature of Microsoft than a fair assessment.

Also see our earlier post in which former Microsoft employees weighed in on the Vanity Fair story.

Comments

  • http://twitter.com/akipekka Aki Antman
  • http://prosodic.com/ Leigh Fatzinger

    Todd – I agree, this article was way overhyped for what it delivered. I remember seeing the excerpts and thinking this was going to be some VF bombshell – it was far from it. That said, the ‘lost decade’ term was not coined by Eichenwald. In fact, I think I first heard it on CNBC a year or more ago – and it was related to stock price performance, not return on equity. If the premise of the article was to support or dispute the validity of a ‘lost decade’, then it was a long article covering old news.

    I thought the more interesting aspect of the article was Eichenwald’s theory that the tech crash in 1999/2000 split the culture from the ‘new blood’ and ‘old guard’, creating a unique (and probably unforeseeable) environment of deep rooted politics and infighting. Having not worked at Microsoft, I’d like to hear your reader’s opinion on the accuracy of that premise.

  • http://twitter.com/thesunbreakmvb Michael van Baker

    I would be tempted to fire any communications chief whose response to criticism began: “Let’s start by simply dismissing anything that relies on Eichenwald’s piece in VF…” Nothing wins hearts & minds like dismissiveness. Besides, if the world actually worked that way, who’d need to hire a communications chief? He goes on to make a good argument for Microsoft’s profits, but fails to deal with the central issue, which is why that’s not reflected in soaring stock prices–cementing the impression that Microsoft is the sort of echo chamber where cherry-picking gets shouted down with denial.

    • guest

      Very well put.

  • DenialAintJustARiverInEgypt

    Nearer, my God, to thee, nearer to thee!
    E’en though it be a cross that raiseth me,
    still all my song shall be,
    nearer, my God, to thee;
    nearer, my God, to thee, nearer to thee!

    Will the last person to leave Redmond please turn out the lights. That would be you Frank, Steve or Kevin.

    Thanks

  • Paul

    Shaw’s defense is laughable. Forget the revenue gain, because MS is fairly unique in its willingless to fund businesses that result in strong revenues but either low or no profits. They’ve increased profit by 2.5x (on revenue of 3X+). That’s about average for the peer group and doesn’t hold a candle to the two main competitors who have kicked MS’s butt all decade: Apple and Google. Apple, for example, has accomplished that in just the past three years, and that’s after doing it several times previously over the last decade. The “returned to shareholders” amount is also deceptive. At least half of that was effectively incinerated on buybacks which failed to increase the stock price. In fact, all it really did was soak up some of the dilution caused by the massive amount of insider selling by MS’s executives which has and continues to occur. The bottom line for shareholders is that they are much poorer for holding MS stock over that time frame, inclusive of dividends. Shaw may want to pretend differently for obvious reasons, but the facts are what they are.

    On the product side, that he has to highlight the same three businesses – Windows, Office, Servers – that powered MS’s earnings in 2000, sums up how little has been accomplished despite spending in excess of $100 billion trying to diversify the company and create new cash cows. MS was primarily a PC company then and its fortunes are still primarily PC-based today, which is why its growth is now low single digits.

    He touts Xbox, but fails to note that it’s still lifetime unprofitable despite more than decade of investment. The company will spend a massive amount in R&D this year, as it has every other since 2000, and yet all they can talk about is Kinect, a product whose base technology was acquired from an Israeli company after Apple passed on it. Azure is late to market, unprofitable, and a distant competitor to Amazon, a company MS let take over this market right under its nose in Washingston State. Windows Phone, while innovative, arrived far too late and has been a market failure so far. Bing as a business is a joke. It has lost $8 billion directly, and more than $14 billion if you include aQuantive, which you should. And despite all that money lost, it hasn’t gained even a single % of share against Google. Not one.
    And he ignores the fact that Ballmer’s employee approval ratings, as measured by sites like glassdoor, are among the lowest in the entire S&P. So even MS’s own employees don’t appear to share Shaw’s confidence in Ballmer’s leadership.
    MS didn’t just lose a decade (thirteen years now, actually). The way tablets are disrupting PCs (remember when Shaw denied that too, but now it’s formally listed as a threat in their 10K?), the margin pressure that’s resulting on Office, and the fact that MS has effectively no position in the two hottest markets for the future: tablets and smartphones (two segments they helped pioneed for a decade before losing to Apple and Google) and only a marginal position in the cloud, means they may well have lost the war. David (Apple) slayed Goliath (MS) on Ballmer’s watch, becoming twice the size of Goliath in the process. Sadly for Shaw, those are the facts and you can’t rewrite history.

  • Guest

    Only MS’s management and PR shills could be arrogant and stupid enough to argue that they’re right and the entire market has been wrong for THIRTEEN YEARS.

  • mony

Job Listings on GeekWork