Wednesday, January 28, 2015

Directionless Microsoft is Out of Touch With Consumer Demand

What do you do when a product launch is so horrendous that it's not only completely rejected by the consumer, it also drives down the sales of other companies' hardware that would potentially use that product?  Well, if you're Microsoft (Nasdaq: MSFT) you repeat the error on an even bigger scale.

Windows 8, a complete makeover of Microsoft's operating system, was a complete failure in the PC market.  (Windows XP and Windows 7 were highly successful.  To capitalize on that success, Microsoft threw the entire OS out and redesigned it into something the consumer loathed.  You'd think they'd have learned from Windows/ME, wouldn't you?) While it had some success in the company's tiny portions of the phone and tablet worlds, PC users rejected the entire concept in droves.  Even in the laptop space, where you could argue that there was some chance of success, I continue to be stunned by the number of people that ask me how they could replace the Windows 8 that came with the box with Windows 7.  The message was loud and clear, or at least it should have been.  Not, apparently, for Microsoft.

Enter Windows 10.  Yet another new look for the OS, Windows 10 seeks to continue down the same path as Windows 8 by providing a single interface between the phone, the tablet, the laptop, and the PC.  At some point, we can only hope that someone in Redmond realizes that the demands of a user looking at a 5 inch screen are dramatically different from the user looking at two 29 inch screens.  Interaction with a screen 8 inches from my nose is dramatically different from my interaction with a screen 2 feet away.  On a phone, I'm looking for a simple interface with lettering large enough to read with rapidly aging eyes.  On a PC, I'm looking to maximize real estate on screens larger than the TV set I had in my living room as a kid.  The needs are different, the user behavior is different, the way you interact with the devices is different.  The concept of a one-sized-fits-all operating system is, and always will be, a failure.

Next we have the one component virtually every user touches almost constantly: the web browser.  Now, everyone has their favorite browser, for a variety of reasons, and the defense of their favorite browser frequently turns into a Holy War.  At present, there are really only four choices in the browser world - Internet Explorer, Firefox, Chrome, and Safari.  None of them are perfect, but with the exception of IE, the others are at least stable, and offer a bit of backward compatibility.  I'd be doing cartwheels over Firefox, in fact, if they'd only fix the memory issue that's plagued that browser for close to a decade.

Enter Cortana.  This is yet another attempt by Microsoft to prove they cannot distinguish between a phone and a desktop.  Basically, Microsoft is attempting to bring Apple's Siri to the desktop.  There's only one problem.  I don't need Siri on my desktop.  I don't need a hands-free desktop experience; in fact, I don't want a hands-free desktop experience.  There's nothing I've seen in any of the Cortana demos to date that leads me to conclude that this is the browser solution of the future.  Certainly, it's not about to make me run out and install Windows 10 - an operating system I intend to avoid with even more gusto than I avoided Windows 8.  A point Microsoft seems to be forgetting is that there is no revenue generated just from the browser.  Certainly, there's potential revenue from Bing - their search engine - however the competition with Google is fierce, and given the amount of data Google collects, they have the distinct advantage (except in China.)  Cortana isn't about to increase revenue for Microsoft, and after the Windows 8 and now Windows 10 fiascoes, that's precisely what Microsoft needs.

Finally, have you looked at the bundles attached to new laptops, lately?  Office 365, complete with a "free" one-year subscription, now seems to be the standard offering.  Office 365 is a subscription based software service, forcing users to make extensive use of Microsoft's cloud offering just to use basic functions like word processing, spreadsheets, etc.  While connectivity isn't necessarily an issue in the desktop space (although it's a bit presumptuous to assume that everyone using a spreadsheet has Internet connectivity all the time) it's definitely an issue in the laptop space.  The concept of a laptop is portability, and there are plenty of times I find myself with my laptop outside of a WiFi zone.  Not, mind you, that I'm willing to use a public WiFi for anything confidential, anyway.

Now, there may be plenty of people willing to enter into a subscription contract for software.  Adobe's had a bit of success with that in the photo editing space, but that's more of a function of the outrageous price of Photoshop, for anyone other than a student.  I'm not one of those people.  There may also be plenty of people willing to store their documents "in the cloud" - meaning, on servers in a data center over which you have zero control.  Sure, I'll let you store my grocery list in the cloud.  Financial and personal data?  Not a chance.  Google "Identity Theft" if you're curious as to why.

Microsoft has clearly lost their vision with regards to consumer requirements.  The only reason I now have to run a Windows based PC is for online gaming.  Everything else I do on a PC can be done for far less cost running a Linux OS, and using open source solutions like Open Office to do everything Microsoft Office can do without the high cost or a subscription charge for the latter.  (In fact, I have Ubuntu on a laptop that dates to 2004, is a single core processor running 1 GB of memory, and it outperforms this quad-core desktop with 6 GB of memory running Windows 7.)  With the exception of playing an online MMO, there's nothing I do today on a Windows box that cannot be done under Linux for a fraction of the cost and a fraction of the CPU and Memory requirements.

Microsoft's stock was absolutely crushed following their latest earnings announcement and their conference call.  Their earnings were in-line with expectations, and their revenue beat by $140 million.  So why were they crushed?  (They're down over 10% from their pre-announcement price.)  They were - and still are - getting crushed because they have lost sight of what the consumer wants.  The products they are delivering in 2015 are not products in demand by the consumer.  In fact, it's fair to say that the consumer is demanding the exact opposite of what's being delivered.  This is a company in turmoil, and until there are fundamental changes at the top of the house, it will be a stock to avoid.

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