Excuse me, but in what way has the XBox successfully conquered a gaming segment? and which segment - the xbox segment..? Not to drag the rest of the article down or anything, but seriously Joe - this is the n-th time you refer to the Xbox as some brilliant success story...

I just can see how that is and hence must pull you up on it - is it units shipped? dollars lost / made? other people's games sold? coolness-of-ads? funkiest case shape?

seriously i just can't work it out and it's making my head hurt. please reply.

joe, i´ve been reading your blog for a long time and i´ve got to be honest with you, i almost gave up readins your posts, cause it was not microsoft "watch" anymore ..it was microsoft bash, microsoft "hate" or something like that.

glad to read a good one like this, with some good criticism, some faith in the company, you know...not all things are bad in microsoft land, and since i´m an enthusiast of the company (like many of your readers), sometimes is good to see a "watch" approach.

thanx for the post, and about the comment above, xbox 360 has conquered a LOT of people. forget wii and look how ps3 is struggling to beat xbox 360. if you say that is failure, i don´t know what success means

Ultimately, though all those factors you mention are summed up in the share price, and the share price hasn't moved. Therefore regardless of all those initiatives, Microsoft remains stuck.

Also, by making all the threatening noises against Yahoo and then having to back off, Ballmer has "lost face". Capping off a long series of missteps--the mistimed and mismanaged Vista introduction, the will-they-or-won't-they-kill-XP waffling, the ongoing saga with XP SP3 and Vista SP1, the MSN Music fiasco--somebody's head has to roll.

If the stockholders and the investors are really that concerned about MSFT, the best thing would be is for Steve to go. MSFT needs a leader that people can respect and yet listen to the public, look at trends and act accordingly. It seems that lately their agenda is "release it and the public be damned". No company can exist with that attitude for long.

"Software Assurance isn't in the best interests of most customers (mainly small and midsize businesses, of which there are many more than enterprises), but it greatly benefits Microsoft's shareholders by generating recurring revenue."

Aye, there's the rub. When you have a clear monopoly, that's a fine policy to Enhance Shareholder Value.

When you're not releasing products that anyone outside of IT (and sometimes not even IT) thinks is a productivity improvement, and budgets are getting tighter, then the incentive to pay excess monies declines. (Demand curves in non-monopolistic scenarios slope downward, remember?)

Server sales increased majorly. That's nice. From 0.1% of the market to 0.5% of the market? (Joke, but not far from truth in concept.) And, as with the Xbox, there was major money put into convincing businesses this was A Good Thing.

The problem with Ballmer as CEO is that it's not really what he wants to do--and it's not what he's best at. And that will hurt the company--just as (as you noted) not following Judge Jackson's decree hurt them as innovators.

If he stays--which I also assume he will--it will be the best news MSFT's competitors (including the much-maligned Jerry Yang) got this week. But, speaking as a VoV (Victim of Vista), I'd rather have Ballmer go back to being Ballmer, and have someone who really wants to run a company running MSFT.

whatever:

Im 99.9% sure that nothing anyone can say to you is going to get you off of your soapbox, but Ill give you one annecdote.

I donate a lot of free time talking to young kids about technology. When I talk to these kids, I take a pulse to see where their heads are at before I start rambling.

Most of them dont have any idea what "Microsoft" really does at all. ALL of them know exactly what XBox is and love it (or have an opinion on it that they will proudly share - positive or negative)

You seem to be someone who is deeply involved in caring about the specifics of the game industry. What you probably cant see is that there are larger forces at work.

People like you questioned Sony when they dove in (how DARE THEY!), but Playstation helped Sony stay alive and revitalized their brand. Now that their fortunes in gaming have fallen a bit, the core electronics biz is strong enough again that it can roll with it.

XBox is a success in that it connected MSFT with an emerging generation of young people in a positive way. And with $40+B in CASH reserves, thats all it really had to do.

If you dont "get that" then you really just dont "get it", sorry, but thats true.

"Although Ballmer is not much of a technology visionary, he's an absolute genius in terms maximizing the financial value of the Windows and Office cash cows as those markets have matured. This is what keeps the company funded, and why Gates and the board have ignored the critics."

LOL - Ballmer's #1 job is to maximize shareholder value, not the "financial value of Windows and Office"! People invest in MSFT because they want to _earn friggin' returns_. You gear heads cannot or will not understand that simple fact.

For MSFT shareholders, Ballmer's reign as CEO has been a total bust, and the sooner he goes, the better.

@Ken

You casually write off "server sales" as not mattering and damn MSFT for "not producing products that IT feels are productive"

Ill charge that you are being deliberately myopic to force the facts to fit your agenda.

Sharepoint, Exchange, SQL Server, System Center... these are all billion dollar businesses. Their share in their spaces is a good site more then .5%

What "share" are you talking about??? Windows Server itself? What workload then? How are you figuring, snidely, that .5% is a share of anything MSFT produces?

Steve deserves kudos for diversifying powerfully in the server space. People who are OBJECTIVE get that.

People on an agenda driven crusade never "get" anything. They just find additional ways to be argue.

This piece was on point and well written.

Mark thanks for the reply; that's all i wanted to know - so in short you believe it to be successful on account of the mind share it has particularly with the young generation.

Personally i believe the mind-share award goes to the Wii, but that's simply immeasurable either way.

Either way, while that's a valuable thing to have - i don't believe this to be an accurate measure of success at all, but that's just me.

A few points here, one about the XBox360, as Joe just knows I have to comment about this. The Xbox series, I believe, is still in the red overall, although, making a modest profit this year. It has to be one of the worst products from a reliability standpoint, of any console, ever. 33% failure rate does not impress me Joe. As far as the Xbox360 being the number 2 console, yes, the figures are technically correct, but really don't show the who picture. Once you add in the PS2 to the mix with the PS3, then you once again see the Xbox360 as a distant third, in last place. Most of the Xbox360 sales are in the USA as well, which is going into a recession.

Another point about the Xbox360, besides the dismal engineering and construction by Microsoft, resulting in many problems, like overheating (red rings of death). Doing a search of "Xbox Linux" on Google (who else, god forbid anyone use MSN), will turn up hits from those who have done it. Because the simple fact is, that the Xbox series and the Sony Playstation series, are really computers. So is this the way that Microsoft gets into the OEM computer business and competes with OEM's, or prehaps Apple by making a non-PC type of computer? It certainly is possible, but unlikely.

About Steve Ballmer now, LOL. He is not going anywhere, people, get used to it. With 12 or 14 billion worth, mostly in MS voting stock, he has some pull. And guess what, Bill is his close personal college buddy from way back. They think alike, they have the same goals, the same lack of business ethics, the parts are interchangeable. And Bill has something like 56 billion, mostly in MS stock. Then add in their cronies, that started with them back in the early days, they too have lots of MS stock. Also Paul Allen, but not sure how much stock, if any he has left in MS.
There is simply no way to vote out Ballmer as CEO, the votes are not there to do so.

Ballmer performance is mediocre at best. I give him some plus's for doing some pre-empted work on Vista sales, more than once. The stock would have taken a bigger plunge without Ballmer's words. Why I say Ballmer's performance is mediocre, is even though Joe Willcox shows the increase in revenue at Microsoft during the Ballmer Years, this would have happened with anyone in charge, as the amount of computers sold during that time, increased at a faster rate than the revenue at Microsoft did. So that point you made Joe, is a bogus one, when you look at it closer.

Also, I believe Ballmer is correct that internet advertising should be Microsoft future, as the current two cash cows, Windows and Office, are in the start of a long decline, as they are now a commodity. Ballmer takes a lot of blame for Vista, and the Xbox360 failures, but the truth is both happened on Bill Gates watch.

The only real problem I see with Ballmer is that he has the fiery attitude of a struggling but growing start-up but he's actually a world-wide monopoly. The lists of those he sees as enemies and those that are his customers are nearly identical. This is not good.

Microsoft's stock value isn't growing because Microsoft has a near 100% monopoly and the Earth's population isn't growing fast enough to increase the value of that monopoly. Now, owning an entire world market is certainly a lucrative prospect, but that doesn't do anything for outside investors who happen to want want growth and not a steady return.

But neither is he likely to ever miss a meal.
Ballmer's Alaska-sized ego (Texas is too tiny for this metaphorical comparison) combined with a healthy fear of complacency-based stagnation or even collapse won't let him preside over a sleepy solid cash-cow blue-chip steady-return stock price. And I'd say that his ego part of this equation is pure stupidity, but his fear of complacency is real and well-justified.

Mix the desire for the rocket ship growth rates of the past, but also inheriting a near monopoly, attacks by governments who disdain the shady actions of a monopoly, a rise in alternatives such as Apple and Linux, and especially the poverty--both existing, and newly created by rises in oil and food prices--driving Linux solutions to those who can't afford to pay the Microsoft tax but feel deserving of being part of the IT landscape, and I'd say that Ballmer doesn't stand much of a chance even if he walks on water and whistles Beethoven's Fifth out of his rear end.

I agree that Microsoft is better off walking away from the huge investment in Yahoo. As I heard one analyst say, it�s the day two fools met; Yahoo for asking too much and Microsoft for wanting to buy them. Google should have been celebrating the cash drain on a competitor with no idea how to succeed in their market; not fighting it.

That aside, here is what I fault Ballmer and Microsoft for. I will try to be brief but it is difficult. So much of what Microsoft does is misdirected. Look at Vista; it was years in the making and for what.

The Windows operating system is seriously flawed. It has a poor application structure and Windows is a horrible real-time, multitasking operating system. I have been in this business since 1967 and grew up with Digital Equipment operating systems. I watched DEC use its past experience and knowledge to constantly improve its operating systems that ultimately culminated in VAX/VMS. VMS was a master of timesharing and multi-processing with a stellar device interrupt architecture. Windows, even today, is still very prone to hangs while waiting on I./O and is heavily impacted by any task that does not correctly follow cooperative time sharing protocol.

The user interface is horrible. Modal dialog boxes are used everywhere. This type of dialog box freezes all the application�s windows until the modal box is closed. This prevents moving the application�s underlying windows on the desktop often creating a real hardship. As Windows users, we are constantly subjected to windows that do not repaint in a timely manner and mess up the desktop.

The file open and save path protocol is left to every application with no plan. A user can go crazy when using several applications that open and save files in the same directories. You will click your way to corporal tunnel syndrome while traversing through each application�s file open/save dialog. In all the years of Windows development, this has never been addressed. Just look at Microsoft Office Applications. They cannot even remember what directory you were last in when restarted. It reminds me of Abbott and Costello�s �Who�s on First Base� but instead of Third base it is My Documents as the third baseman.

The user does not have the option to move an application window to the front. As a result, large windows always cover small windows when they receive focus. When I use Windows I begin to believe there is no coordination or overall quality control. It seems like every development group is doing their own thing.

Windows needs a release that improves the operating system and user interface badly. Just fix what is wrong and make necessary improvements. This is the area Windows CEOs have failed, not for the lack of purchasing Yahoo.

Its hard to understand or comprehend how Windows Vista is a failure. It was a difficult transition specifically for developers because of the fundamental changes in Security within the OS. Standard Administrator, UAC, Protected Mode, Patch Guard, Device Driver Signing.

Vista is certainly dramatically different from past releases, but they are for the better. The only mistake that ever happened was it took long to reach market and its not being properly communicated. Its also being miscommunicated by blogs like these and by individuals like Chips and Marco who have never used Vista.

Now this is more factual based article, even though I disagree with some of the assessments.

XBOX may be successful but has no conquered jack.

Vista is a mixed failure. it is not faught against like Millenium Edition was. It is just a pain to get around. Viva La XP!

Where MS is going to excell is in their new development like XAML, XNA, Linq, and the future versions of the OS'.

Personally I would like to see an official release of .NET that would run on Mac. And see the MS developers be able to corss platforms easily.

The big bomber that is to come, is IE8. Didn't MS do enough damage with IE7? Now IE8 re breaks everything again.

Still an MS proponent though. Cheers.

Andre Da La Costa, the M$ shill says;
"Its also being miscommunicated by blogs like these and by individuals like Chips and Marco who have never used Vista."
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Well, you are almost half right, or another half truth on your part. While I will never have Vista on my personal computer, I have spent more time fixing them than I care to think about. Which is why I will not run Vista on my own computers. Remember, I fix computers for people. The pointless renaming of things in control panel, the rearranging of items on the menu, for no purpose than perhaps to make people think Vista is new, causes time to be wasted. Then there is the defrag, without any bar to tell you when it will be done, these are not improvements, but regressions. Nice of you to mention the "protected path," as that is part of the Video DRM subsystem that is causing most of the extra cpu cycles, and general slowness of Vista. That and the polling of all devices and drives every 30 miliseconds or sooner, again due to DRM in Vista.

A good try to shift to attack mode Andre, I guess nothing will ever get you to explain why you are bought and paid for from Microsoft. Have you no shame at all? Guess not.

Everyone runs around screaming "maximize shareholder value".."maximize shareholder value"..like it's the holy grail. Seems like a no-brainer. But when companies gobble up other companies people loose their jobs. Product quality can also suffer. Once enough people loose their jobs there are fewer people who can buy the now crappy products. And so the entire market suffers. So much for the shareholder value. This will either diminish or further exacerbate the gulf between the haves (shareholders) and have-nots (everyone else). Instead of focusing on "shareholder values" they should be focusing on creating a vibrant economy and quality products through competition. The very reason for anti-monopolistic laws was to prevent exactly what is happening all too often. Microsoft would do better to keep it's focus on it's core products and keep it's hands off of the throats of other areas of the industry. It doesn't help anyone. I would challenge the economists to determine whether focus on shareholder value has helped or hurt the economy...I say hurt big time.

Have to agree with whatever on the whole Xbox fiasco. It has lost tremendous amounts of money for MS since it's release (both original and 360). It was in a distant second place (with the Gamecube) behind Sony in the last generation and is currently being outsold on a monthly basis in this country by both the PS2 AND PS3. Not cumulatively, by EACH console in actual individual unit sales. If you can't keep up with sales of a 9 year old console, you've got problems. It's pretty clear that the current gen consoles will probably finish with the Wii on top, PS3 in second place and Xbox 360 finishing a distant third. Mind you, this comes from someone who owns all three consoles so I've got no axe to grind. The Xbox/entertainment division has only had two profitable quarters between HUGE losses since the Xbox launched, and they both coincided with the release of Halo 2 and Halo 3. Don't bring Xbox into the equation as being a good thing for MS. A company without MS monopoly money would have given up on the endeavor long ago.

@Joemama:
Exactly right!

Tom Watson Jr. once said as much in an interview. I paraphrase here, but did watch the interview video many decades ago. And so while the exact words are fuzzy to me, the three profits and their prioritized order remains crystal clear:

There are three profits that you need to watch out for, and in the following prioritized order:

The first and most important profit is that of your customers. For if they cannot make a profit, they cannot afford to buy your products.

The second profit is that of your employees. For if they cannot afford to work for you, you will have no products to sell.

The third profit is that of the stockholders. But if you take care of the first two profits, the stockholder profit will take care of itself.

Personally i believe the mind-share award goes to the Wii, but that's simply immeasurable either way.

Either way, while that's a valuable thing to have - i don't believe this to be an accurate measure of success at all, but that's just me.

I've got no axe to grind. The Xbox/entertainment division has only had two profitable quarters between HUGE losses since the Xbox launched, and they both coincided with the release of Halo 2 and Halo 3. Don't bring Xbox into the equation as being a good thing for MS. A company without MS monopoly money would have given up

Perhaps MS should be doing something like Unilever do. The marketplace is commoditising, therefore rebrand and separate the products (apps) from MS.. Seperate the OS from the apps. Let the apps sink or swim as seperate companies in their own right, branded in their own right. let them target whatever platform suits, online or desktop or server, whatever. Let them swim out in the open market place, fighting on their own merits, targetting the customer wants and needs. The owner may be MS, but the branding won't be. That may maximise shareholder value long term; it's a risky strategy but I bet it would pay off long term, otherwise MS may just wither and become another IBM. Software is just soap powder now.