On the day Nokia, Microsoft’s premier mobile partner, unveiled its most significant new smartphone, the Windows software maker decided to announce its restructuring.
The under-pressure Microsoft has restructured its business units from eight into four, or “one Microsoft” as CEO Steve Ballmer called it. Microsoft, which makes 80% of its income from selling Windows for what the industry still calls “the desktop” (read laptops too) is in a precarious position. The world is shifting to mobile devices, hence Microsoft is selling less desktop licences, down 20% in consumers sales, according to its most recent results.
For years, Microsoft’s business model has essentially protected this lucrative revenue; but at the expense of that over-used word innovation. Its Bing search engine is a distant second to Google – and like the Xbox gaming platform – will probably never pay back the initial investment costs to build them.
Windows 8 has had a mixed reception in the marketplace since its launch last year. A radical redesign from previous iterations, it is aimed at touchscreen interfaces like tablets and will run non-Intel processors (a radical departure from its decades-old duopoly with Intel).
However, Microsoft has created the impressive Windows Phone 8 for smartphones, a surprisingly fresh and effective operating system (OS) given how utterly bad the preceding Windows Mobile OS was. Nokia was forced to abandon its own mobile OS, called Symbian, when current CEO Stephen Elop was brought on board to right the slowly drowning Finnish cellphone giant.
Redmond-based Microsoft likes to call its hardware manufacturers “partners” – which makes Microsoft’s seemingly inexplicable sabotage of Nokia’s big day in New York all the more confusing.
Nokia launched its spectacular new 41-megapixel Lumia 1020 smartphone, which produces extraordinary pictures and video using a technique called “oversampling”. The camera saves two pictures, the smaller of which is packed with extra pixels for sharing on social media. It also allows for zooming in and out after the picture was taken. The picture quality is superb, better than anything current available.
In New York, the headlines were gushing and impressive (as befits the impressive 1020 that is in a class of its own in the all-important camera technology); while out of Seattle, the headlines were somewhat derisive.
Why, of all days, would Microsoft choose that one to dominate headlines when they should have been all about Nokia’s glorious new phone?
The mind boggles.
Much of the criticism about Microsoft’s sometimes strange behaviour is directed against Ballmer, who was employer number 30 and rated number 51 on Forbes’ billionaires list.
There have been calls for his head for years. Last year Forbes called Ballmer “the worst CEO of a large publicly traded American company today”.
An article titled “Five CEOs who should have already been fired” opined: “Not only has he singlehandedly steered Microsoft out of some of the fastest growing and most lucrative tech markets (mobile music, handsets and tablets) but in the process he has sacrificed the growth and profits of not only his company but ‘ecosystem’ companies such as Dell, Hewlett Packard and even Nokia”.
Microsoft’s share price has hovered around $30, plunging from $60 in 2000 just before Ballmer took over, said Forbes, adding: “And no wonder, since execution of new rollouts were constantly delayed, and ended up with products so lacking in any enhanced value that they left customers scrambling to find ways to avoid upgrades”.
Windows Phone was 18 month late, at least, and its prospects were seen as limited until Elop took the hard decision, calling Nokia’s own Symbian a “burning platform” and throwing its lot in with Redmond.
The first smartphones it released ran Windows Phone 7.5, but bizarrely could not be upgraded to version 8 when it was released. Nokia put a brave face on it, especially as Google’s Android and Apple’s iOS allowed such retro-fitting.
How the word “partner” must sting in the ears of the affable and avuncular Elop, who was poached from Microsoft, where he ran the division that included Office, which provides the other major revenue for the Redmond company.
Microsoft restructured itself to better compete in the mobile space, which is dominated by Android and Apple, but it doesn’t seem to have done its principal partners any favours with its horrid timing. Nor itself.
This column first appeared on Financial Mail