Part of the long term problem with Microsoft was a tendency to silo the businesses in a way where they hurt each other rather than helped. For instance take the Xbox, it siphoned gaming away from Windows and weakened that platform. Office and Windows peaked in 1995 while Office was still the primary showcase of new operating system features but more recently it seemed to work equally well on older versions of Windows slowing new OS adoption and pissing off PC OEMs that wanted to sell more hardware.
Well at this week’s Microsoft partner conference there are indications that Microsoft is getting its groove back and that Steve Ballmer is starting to fight Microsoft as a company again and stopping the tendency for his divisions to hurt each other. Let’s talk what is coming out of the Microsoft Partner’s Conference this week.
No Mango Tablet – But Mango is Looking Tasty
I’m one of the folks that think Microsoft should have done a Windows Phone tablet as a stop gap against the iPad. That is, however, a tactical response which would have pulled developers off of Windows for what is becoming a PC like platform. It is clear that while the Tablet is a cell phone like consumption device now, it is evolving into a creation device and had Microsoft put their phone platform on it they would have significant infighting between the phone and PC groups for resources and talent. This infighting would likely have made it very difficult for the two platforms to work together long term. So rather than take the stop gap move they are keeping Windows Phone 7 and Mango off of tablets and focusing all of their resources on doing things right the first time.
This places WP7 in a support/peripheral role to Windows and less of a competitor. I’m in the process of testing the Mango build and it’s an impressive step forward. I don’t think they would have been able to make as much progress had they been trying to get this to work as a tablet at the same time. Google tried that with Honeycomb and it slowed down Android advancement and Honeycomb became the platform on tablets that couldn’t sell because it was too raw. In any case the Mango phones being shown at the conference are looking particularly tasty.
As an interesting side note, it increasingly looks like Microsoft is making more off of Android than Google is thanks to royalty fees. Given there is no cost (other than litigation) to Microsoft, wouldn’t that make Google one of Microsoft’s most profitable divisions?
Windows 8 + Xbox
It appears that the two platforms are being brought together and many are now speculating that Windows 8 will be able to play Xbox games. Much of this is speculative but what clearly isn’t is that rather than the Xbox being considered as if it was part of a separate company it is being looped in as a strategic part of Microsoft’s overall offering. If this happens it really makes Sony look bad. This is because Sony had the opportunity to play PlayStation games on Vaio PCs years ago and instead of promoting that effort Sony killed the company that made the hardware.
The game console industry operates on a razor blade model in that it subsidizes the consoles (loses money on them) and makes money on the games. So a PC being able to play a game is actually a cheaper way to get a game buyer than selling a console. By looping in PCs Microsoft would get the potential for a massive increase in royalty income for a marginal cost and immediately be able to count PCs as part of the user base. Sony and Nintendo couldn’t hope to catch up because neither has the breadth of PC OEM relationships to make a similar move. In one step Microsoft could pretty much eliminate much of their competition in the gaming space and have a massive game advantage against Google and Apple. That’s the benefit of fighting the company.
Wrapping Up: More to Come
I think we are just seeing the tip of the iceberg here. Steve Ballmer is apparently not focused on fighting Microsoft as a company and has finally stepped up to the full role of the CEO. On paper he was always formidable but he tended to focus excessively on putting out IT fires and lost track of his company for a while. Apparently that lack of focus is over and he intends to remind people that Microsoft is a force to be reckoned with based on what is coming out of Microsoft’s World Wide Partner conference. In short, someone woke up the sleeping bear and he’s pissed.
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President and Principal Analyst, Enderle Group
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