Quick, name a technology giant that dominated the 1990s and amassed 85 percent share (or more) in its core markets — only to face growth challenges, competitive pressures and a stagnant stock price in recent years. Alas, both Microsoft and Cisco Systems fit that distraction. Although they lead vastly different companies, Microsoft CEO Steve Ballmer (pictured, left) and Cisco CEO John Chambers (right) seem to be facing similar challenges. Here’s why.
First, the news hook: It’s been a particularly challenging week for Ballmer. Hedge fund manager David Einhorn wants Ballmer ousted. Einhorn accused Ballmer on Wednesday of “being stuck in the past” noted Reuters. But a source close to Microsoft’s board said the company remains committed to Ballmer, Reuters reported Thursday.
Meanwhile, Chambers has spent recent weeks shuttering businesses (Rest In Peace, Flip), introducing a voluntary early retirement plan for selected employees, confirming layoff plans, and refocusing the company on five core market opportunities.
It Ain’t All Bad
Both Microsoft and Cisco remain very profitable. Microsoft’s latest quarterly net income was $5.23 billion; Cisco’s was $1.5 billion. Not too shabby — plenty of companies would crave that type of income.
Still, Microsoft and Cisco are under pressure on Wall Street. Their share prices have been stagnant over the past decade amid heightened competition from new and emerging rivals.
At Microsoft, the company has continued to perform strongly in the server software market but…
- Windows 7 sales fell 4 percent in the latest quarter;
- Microsoft is getting trampled in tablet and smart phone markets;
- Microsoft is overhauling its cloud applications strategy — with Office 365 set to debut in June or July 2011; and
- rivals like Apple and Google are widely viewed as out-innovating Microsoft in emerging IT markets.
At Cisco, the company has jumped on the convergence of servers, storage and networking but…
- HP seems to be chipping away at Cisco’s low-end networking business;
- Cisco employees seem to have been tied up in “committees” that lacked budget authority and slowed decision making;
- a consumer push has pressured Cisco’s profitability; and
- CEO Chambers was slow to name a COO to assist with day-to-day management of the company.
A Common Solution: Do Less
Simple put, it’s time for Cisco and Microsoft to exit some markets. Potential moves worth mulling:
- Some pundits think Cisco should sell of its WebEx and home networking businesses. The VAR Guy is starting to agree. Once Cisco scales down it can resume a 1990s strategy that worked so darn well: Acquire emerging, disruptive networking companies before they gain critical mass.
- Over at Microsoft, perhaps it’s time to de-emphasize Windows Phone 7 and retreat to cloud servers. The idea: Make sure Office 365 and Windows Azure applications are incredibly easy to access and use from Google Android, Apple iPhone, iPad and other popular mobile devices. Simply put: Microsoft needs to re-inspire application developers.
- Both companies should emulate IBM’s selective business processes. As you’ll recall, IBM exited some markets (networking, PCs) and avoided the temptation to enter certain markets (enterprise applications) in order to double down on high-end hardware, software middleware and IT services.
Alas, The VAR Guy does not envy Ballmer and Chambers. Both are smart. Both made thousands of employees and investors millionaires in the 1990s. But Wall Street is starting to ask both executives: What have you done for me lately?
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The best move for Microsoft will be Windows for ARM and 100% multiplatform. But this scenario should be quickly. If not, the perception of the final user about Microsoft and Cisco could change forever. Who wins?.
Windows for ARM: Smart move but also a somewhat late move, The VAR Guy believes.
-TVG
Once upon a time 30 years ago, large centralized systems. Then came the PC network, all decentralized. Now repeat the first cycle, all centralized in the cloud. Microsoft and Cisco may not understand that if they do not contribute to the authentic values of know-how of its users, they will be complicated. Without reusable content (for example http://www.kwfoundation.org) to improve the application logic, but created without programming, technology becomes a mere object of consumption.
Gustavo: The VAR Guy appreciates your readership but he doesn’t quite understand what KW Foundation has to do with this discussion.
-TVG
KW Foundation is an initiative that represents the essence of this discussion. When Microsoft and Cisco defend their corporate interests, they forget that the End User becoming less interested in what type of technology used, while it allows the best way to enhance their value added and unique. In other words, if Microsoft, Cisco, Intel, IBM does not manufacture a unique environment to create and share content on any platform by the end user, without programming, will lose the market sooner or later.
That is more than e-volution. That is a re-volution.
Gustavo: The VAR Guy appreciates your additional insights. Thanks for taking the time to share them. So in other words: Customers need devices/software that can access any content from any system without requiring any complex steps. The any-to-any goal is an important one.
-TVG
Accessibility is only part of the problem. The end user needs tools to build and share reusable knowledge components. These components also add logic to the software. We work in bioinformatics and the fact that the software can learn is key to saving lives and resources. In conclusion, a single platform that allows to create, share and integrate content created by End User without programming. Reusability of knowledge is truly green computing. Developments tend very slowly to this platform, but it seems that Microsoft, IBM, Cisco, Intel and other corporations have bet on the captivity of the user.