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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

August 26, 2013 at 6:00 AM

Five challenges and five advantages facing Microsoft’s new CEO

[In case you missed it, this story ran Sunday in the print edition of The Seattle Times. Also, here is my colleague, Brier Dudley’s column on retiring Microsoft CEO Steve Ballmer’s legacy.]

There was Windows Vista, but then came Windows 7.

There was the Kin, but there was also the Xbox.

The company fell way behind on mobile, but it still plays a huge role in corporations.

Microsoft has had many stumbles and failings over the years, but it’s also had its successes and strengths.

That bad-news, good-news split is indicative of the challenges, and the advantages, facing any successor to Microsoft Chief Executive Officer Steve Ballmer.

Ballmer, who has been CEO for 13 years, announced Friday that he would be retiring once his successor has been chosen within the next 12 months.

Here are five challenges, and five advantages, his successor will face.


1. Mobile

Microsoft actually came out with a smartphone and a tablet before Apple came out with the iPhone or iPad.

But it was Apple that figured out how to make those devices wildly popular to consumers.

These days, Microsoft has only about a 3.3 percent worldwide market share in smartphones — although that’s slowly inching up — and Windows Phone has overtaken BlackBerry as the No. 3 smartphone operating system.

Similarly, Windows tablets’ market share went up from 1 percent to 4.5 percent over the past year, according to research firm IDC.

But if Microsoft doesn’t continue to make inroads on mobile devices, “They will start to see some market erosion in their other businesses,” said Norman Young, analyst with investment research firm Morningstar.

2. Post-PC era

We are in what some call the “post-PC era,” or, as Microsoft likes to call it, the “PC-plus era.”

Whatever the case, it means that people are turning less to their PCs and more to their mobile devices to accomplish much of what they used to do on their desktops or laptops.

And that’s a huge worry for Microsoft.

For many years, Microsoft has had a cash cow in Windows. But now that the PC market isn’t growing, while the markets for tablets and smartphones are, that source of revenue is slowing.

Another related problem: The margins for Microsoft on smartphones or tablets are lower than what it gets from PC manufacturers.

“Any time a PC is sold by Dell, HP or Lenovo, if it’s a consumer-oriented product, Microsoft sees about $40 to $50,” said Al Gillen, an analyst with research firm IDC. “If it’s enterprise (meaning corporations), it’s more like $100 for Microsoft.

“The license fee per unit for phones and tablets are not going to be in the same magnitudes,” Gillen said. “Which means Microsoft has to adjust its thinking to lower price, lower margin but much higher volume.”

The next CEO, said J.P. Gownder, an analyst with research firm Forrester, “really needs to come to terms with the relative decline of the PC as a computing tool.”

3. Consumers

Xbox aside, Microsoft has had a hard time connecting with consumers on a number of its products.

Its Surface tablet — particularly the Surface RT model — has not sold well. Windows 8 is getting a lukewarm reception. Windows tablets and smartphones have yet to break 5 percent worldwide market share.

And rightly or wrongly, Microsoft is still fighting the image left over from those old Apple Mac vs PC commercials: That it’s stodgy, corporate, boring.

The company has been battling that image with marketing efforts such as Surface commercials featuring dancing tablet users and product launches featuring sports stars and other celebrities.

[Continue reading the story here.]

Comments | More in Microsoft | Topics: ceo, cloud, office


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