What Does $1.5 - $1.8 Billion Buy You These Days...if You're Microsoft?


Here’s an interesting story that isn’t often heard. Back in 1887-1988, I found myself in a very cool role as the founding technical editor of Microsoft System Journal (MSJ). At the time, Microsoft was in bed with IBM, working on the final release of their new jointly developed personal computer operating system, OS/2.

As it evolved, because of my role I happened to find myself privy to a number of very high level marketing discussions between IBM and Microsoft concerning the imminent launch of the new operating system. MSJ was an integral part of the entire introduction of OS/2, as it would be a key product within OS/2’s developer SDK.

At that time, IBM was considered the consummate technology marketing company (it hadn’t yet fallen to its early 1990s lows under John Akers). Microsoft was more or less considered then – especially by IBM – a fly by the seat of its pants marketing virgin.

The folks at Microsoft had been brainstorming on a musical act to participate in the launch, and the discussions had culminated in selecting Ray Charles to be that opening act. All was progressing quite well until the consummate marketing executives at IBM got wind of the Microsoft’s thinking and immediately killed the idea as being too risky. Too risky to bring on Ray Charles? Well, yes. As the thinking at IBM went, it would expose IBM to potential tech press opportunities to claim that IBM and Microsoft were essentially the blind leading the blind.

Even 25 years later the whole thing sounds so…well, we’ll leave it to you to pick the right word for it.

By 1995, IBM was truly down on its luck and Microsoft was flying high – clearly surviving in the tech world requires more than consummate tech marketing executives battling marketing virgins. By 1995, Microsoft had wiped the floor with IBM and was preparing to launch a then unheard of $200 million dollar advertising campaign to launch Windows 95 – which, as history now shows, has been the single biggest win ever for Microsoft on the Windows front and as a company.

Since then, Microsoft has gone through stages of being the world’s most valuable company, possibly among the world’s most hated companies (read that to mean most envied), and for the last 10 years, regardless of being a hugely successful company generating billions and billions of dollars in profit year after year, a mostly boring company (outside of relatively minor things such as X-Box and Kinect).

Back to our Headline

So what does $1.5 - $1.8 billion buy Microsoft these days? As hard as it may be to fathom that number, it buys Microsoft its Windows 8 launch marketing campaign. It’s a staggering amount of money to spend in one place, but it suggests just how staggering to Microsoft the success – or failure – of Windows 8 will be. We haven’t gleaned any details yet on where all those marketing dollars are going to go, but clearly it will be a sustained marketing blitz unlike any other the tech industry has ever seen.

There is a great deal at stake for the company. Even though the operating system software itself only contributes about 25 percent of Microsoft’s overall revenue, it is Windows and its reputation that is the entire foundation of everything Microsoft does.

With Windows 8, this becomes more real than it’s ever been.

There is “big” Windows 8 – the real enterprise product on which all other core Microsoft business tools are being moved to or will soon be moved to, as well as being the platform of choice for the enterprise workforce (or so Microsoft hopes). There is the desktop/laptop/Ultrabook/pro tablet Windows 8 that will go to consumers and prosumers. There’s Windows 8 RT, which will initially power lower end tablets. There are the two Windows 8 Surface tablets Microsoft will deliver.

And to round out the Windows 8 family overall, there is of course Windows Phone 8.

To say that Microsoft is betting the entire farm on Windows 8 is not an understatement! Many financial analysts are suggesting that since Windows OS only delivers that 25 percent of revenue it isn’t going to suddenly tank as a company or stop generating those billions of dollars in profits. That is certainly true – but it is an entirely short term point of view.

As the old saying goes – if you don’t drink, don’t dance and you go to bed early, it may be clean, but it certainly ain’t living. What is at stake is Microsoft’s entire reputation – but more importantly, it’s Microsoft’s reputation for the next 10 to 15 years we’re talking about. And Microsoft has to come across as truly living it up.

What Microsoft is fighting – and what Ballmer and his senior team finally woke up to is the threat of becoming an ossified giant. A very rich giant, but an ossified one none the less. Microsoft looks around and sees hugely declining PC shipments. It sees companies significantly ahead of it in the cloud continuum.

It sees, lastly, the threats that have been steadily building around it for a decade.

Google and Apple remind us now of Sauron sitting at Mordor with his vast armies about to take on whoever is left of middle Earth in the final chapters of the trilogy. We won’t go any further with that but consider the scale that was intended in both the book and the movie of Sauron’s armies as opposed to the rag tag army of middle Earth.

This is the uphill battle Microsoft now faces. The one thing truly at stake is the company’s reputation – its reputation for being at the forefront of technology, its reputation for delivering what the enterprise needs, its reputation for being ahead of the curve rather than behind it, and so on. Over the last decade, the reputation has become significantly frayed even as it continues to pocket hundreds of billions of dollars in profits.

Staying that old course will not work, regardless of what the financial analysts may think. The stock, already the subject of endless jokes for a decade now, would eventually diminish.

Microsoft needs a very real knockout punch and needs to move its reputation to where both Google and Apple now operate. Contrary to the stock lines of typical Microsoft haters, both the enterprise and consumer worlds need a vibrant and successful Microsoft to help maintain a global technology balance.

So with October 26, 2012 fast approaching, Microsoft has built up a vast marketing war chest. It knows what is now at stake. But will it know what to do?

As Apple has demonstrated time and time again, it isn’t the size of the war chest that matters; it’s what you actually do with it that counts. We very much fear that Ballmer is no longer the right general for the next Microsoft generation – but he is still with us. Ballmer, as we remember it, is the guy who once laughed that Android was “nothing more than a press release.” That same Ballmer is still with us!

When October 26, 2012 rolls around and that $1.5+ billion is unleashed, will the “new” Microsoft be the company that shows up?

Or will it be the blind leading the blind?

Edited by Braden Becker

TechZone360 Senior Editor

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