"When Satya Nadella took Microsoft Corp.’s helm five years ago, the conventional wisdom was that the company’s glory days were behind it."
Have a look at this MS revenues [1] and consider why for a moment there is any 'conventional wisdom' like this?
MSFT stock price did languish during this time of amazing growth which I guess validates that 'conventional wisdom' was in fact sour, but it's hard to see why it was.
Robert Shiller, in a recent interview on the FT alphaville podcast [2] indicated how so much of valuation was based on 'narrative' and that a lot of this narrative is in fact fiction.
For whatever reason, the industry press never liked Ballmer, and I guess they like Satya. Surely, there have been some changes afoot, but in terms of fundamental business orientation, I don't see any reason why Satya is 'better than' Ballmer. At HN, we might see things like VS Code and open sourcing Chakra as 'important', and although they are relevant, those issues are small peanuts in the MS bigger picture.
Growing an already massive company company by 3x in revenue is the important thing, which is the 'bottom line' in which missteps have to be contextualized.
Any company in tech is going to make mistakes, this should be happening, so listing them off doesn't so much help - what matters is how all of this works out in the mix.
I worked in mobile during that time, it was vicious. Surely MS could have done better, but I view it more as lost opportunity than failure.
Remember that 80% of acquisitions fail. Google spent $3B on Nest. Apple spent $3 Billion on Beats, it remains to be seen if they'll make that up in profit.
Trying to compete in mobile and failing is a misstep. Microsoft missed out on smartphones, one of the fastest growing and most lucrative market segments in tech industry history.
Trying to compete in search and failing is also a misstep. Bing is just not as good as Google.
It's arguable that Azure would not have been successful under Ballmer either, because it's unlikely he would have embraced Linux to the extent that Nadella has.
The bottom line is that Ballmer was good at growing existing business but Microsoft was late to the game on a lot of industry trends under his watch, and when they did try to catch up they did not do a very good job -- Windows Phone is a perfect example.
It's impressive to grow existing business, but companies that do not successfully innovate eventually stagnate and that's not what investors want to see.
I agree that mobile and search were missteps, specifically putting themselves into a position of competing so poorly in those areas overall. It's also unrealistic to think that one company could own desktop, mobile, search, office, etc.
Microsoft was going to own desktop, mobile, search? $300-$400 billion in revenue? $130+ billion in profit?
No. That's absurd. Holding Ballmer to account for not conquering planet Earth is not a fair premise. Of course there were lots of 'missteps,' what's described is impossible. Their biggest mistake was attempting all of it in the first place.
Microsoft had mobile in its pocket - original win mobile that competed with Palm had the dominant market share, and it would've had more if they didn't nuke it with revamped win mobile.
> Growing an already massive company company by 3x in revenue is the important thing, which is the 'bottom line' in which missteps have to be contextualized.
Yes, he managed to creatively squeeze revenue out of existing markets. This is what he was known for.
But as far as finding new markets or growing existing markets, he failed and that's all Wall Street cares about.
> Surely MS could have done better, but I view it more as lost opportunity than failure.
> Remember that 80% of acquisitions fail. Google spent $3B on Nest. Apple spent $3 Billion on Beats, it remains to be seen if they'll make that up in profit
Ballmer's failure rate on major acquisitions may have been 100%. (I'm not even kidding)
> Apple spent $3 Billion on Beats, it remains to be seen if they'll make that up in profit.
Apple made $17.5B in revenue in FY18 in "Other Products". A sizable chunk of that is bound to be headphone revenue (and homepod may also have profited from the Beats acquisition).
Given the healthy margins that Apple tends to have across all its products, it seems plausible that even under quite conservative assumptions Apple easily made a billion or so in profit from that segment. And that's not even counting Apple Music.
Regarding Skype, it's acquisition has been argued to have been more in order to allow for NSA interception of VoIP traffic than it making business sense, though the truth behind that statement is highly debatable.
It's arguable that Ballmer would not have run Azure the way Nadella has, e.g. embracing Linux and open source, and it would not have been as successful.
The problem with Microsoft under Ballmer was execution. For example, they saw the potential of the iPod (eventually), but all they came up with was the Zune. They saw the potential of smartphones (eventually) but did not execute well on the OS, the app store, the hardware, and the marketing.
But also especially with Scott Guthrie, and his role as a leader for the future Micrsoosoft developer platform .
I don't know if Guthrie hired the likes of Scott Hanselman, Phil Haack, Mads Kristensen etc. But they have IMO made a huge impact, but internally and externally for the OSS push.
It's a big corporation and internally the fights had been big, becasue a lot of people don't understand how to sell free software.
They are small things, but they could also be good signals- a bit like canaries in the mine.
To say that differently, every story about Google or Facebook is usually some horrible thing. I would not touch their product with a 10 foot pole. A few years go, I uninstalled all facebook stuff and even whatsapps. Now I do not buy anything even remotely connected to google (such as android phones) because it gives me the creeps.
When I buy Microsoft hardware or software, I do not get this bad feeling. So I buy more of it.
You should not underestimate the power of a narrative or even impressions.
"You should not underestimate the power of a narrative or even impressions."
I'm not. I'm saying (from Shiller, world leading economist) - that narratives are usually wrong, and the MS case is evidence.
VS Code and 'open source' Chakra are very, small, things.
They are not even canaries.
(Caveat: Azure allowing linux is important strategically though)
I personally fall victim to this myself a lot, making undue correlations between some tech move or announcement, and actual business robustness. We vastly over estimate these things because we think and care about these issues all day. Most technology customers, and most Enterprises do not. If you have a look at where MSFT derives it's revenue and how consistent it is, that gives a clearer picture.
Second, that MS may appear to be more 'open' in these areas in no way implies any kind of success or revenue growth.
Apple is considerably more 'closed' and they do just fine, for example.
Satya in no way deserves a massive P/E ratio bump from analysts, there is no real basis for it.
MSFT stock price over the last 20 years should have been ballpark commensurate with it's revenues, fluctuating here and there. The 'big lift' after Satya had nothing to do with fundamentals really.
Ballmer took an already great company and massively grew it, launched XBox, moved into the cloud, grew enterprise services substantially, it's one of the most successful and robust evolutions of a company ever.
The 'misperceptions' that lead to 'false narratives' in this case are analyst's readings of pop culture tech trends, and we HN'ers overvaluing the importance of things like VS Code.
It's because the industry perspective and the business/wsj perspective are different.
I think the industry perspective tends to be ahead of the business/wsj perspective but sometimes incorrect. Tech people are the folks who build this stuff. It takes a long time for upfront investment to filter down through sales and into tangible business results. And then even longer for anyone to notice those results. Whereas the devs / product managers / salespeople are on the front lines seeing all of this firsthand.
A good, concrete example of how this has played out for me personally was that I bought stock in new relic a few years ago. In a nutshell, they were making a product it was obvious people needed, I worked at their competitor and realized they were kicking our asses product-wise, just totally out-executing us and it wasn't even close. I bought a bunch of stock on the theory that the product was getting great adoption and people loved it. Fast forward a few years and now it's tripled/quadrupled. I would've done the same thing with Stripe and lots of others, except they aren't public companies.
Stripe is sort of out of the bag at this point but you'd be surprised how few traditional "business" folks have even heard of it. There are tons of great developer tools, stuff like Sendgrid, Lob, Easypost, etc. that are going to be huge that are still mostly under-the-radar.
Have a look at this MS revenues [1] and consider why for a moment there is any 'conventional wisdom' like this?
MSFT stock price did languish during this time of amazing growth which I guess validates that 'conventional wisdom' was in fact sour, but it's hard to see why it was.
Robert Shiller, in a recent interview on the FT alphaville podcast [2] indicated how so much of valuation was based on 'narrative' and that a lot of this narrative is in fact fiction.
For whatever reason, the industry press never liked Ballmer, and I guess they like Satya. Surely, there have been some changes afoot, but in terms of fundamental business orientation, I don't see any reason why Satya is 'better than' Ballmer. At HN, we might see things like VS Code and open sourcing Chakra as 'important', and although they are relevant, those issues are small peanuts in the MS bigger picture.
[1] https://www.statista.com/statistics/267805/microsofts-global...
[2] https://itunes.apple.com/ca/podcast/robert-shiller-market-na...