Is Microsoft Finally Spread Too Thin?


Recommended Posts

Is Microsoft Finally Spread Too Thin?

By Jay Lyman

NewsFactor Network

July 26, 2002

http://www.newsfactor.com/perl/story/18528.html

When a company reaches the age and size of Microsoft, its biggest challenge is to grow without devaluing core areas.

There is little doubt that Microsoft (Nasdaq: MSFT) has its hands full these days as it fights antitrust battles with the government, strives to maintain dominance in software markets, rolls out a broad security and privacy initiative, and challenges Sony (NYSE: SNE) and Nintendo in the game-console market.

Analysts say that any company with the market share and size of the Redmond, Washington-based software giant -- at last count, the company had 47,600 employees -- should be expected to propel itself in several directions.

But is there a limit to what Microsoft can accomplish? And will more problems emerge as the company makes its way into new markets?

The Bigger Issue

The biggest issues might be Microsoft's increasing age and size, according to Giga Information Group research fellow Rob Enderle.

Enderle told NewsFactor that these two characteristics will likely encourage a tendency to focus on intra-department communication and management strategies, rather than on the real, external environment that is filled with government regulators, new technologies and competitors.

"They can't protect themselves against environmental factors," Enderle said, blaming Microsoft's lack of focus on the external world for its antitrust troubles and for the fact that the company largely missed the explosion of the Internet.

Company Introspection

But while Microsoft's entry into multiple markets to expand its core offerings might seem to imply that it eventually will be spread too thin, Gartner (NYSE: IT) analyst David Smith indicated that it is common, particularly in technology, for a company to focus its efforts and interests on an array of software, hardware and other products and services.

Enderle agreed, but he pointed out that when a company reaches the age and size of Microsoft, its biggest challenge is to grow into new markets without devaluing or losing focus on its core areas.

Practically speaking, when a company launches new products and services, there is always a need to ensure that everyone remains on the same page in terms of strategy and focus -- a kind of company-wide introspection that often requires additional resources.

Thinking Big

From one perspective, Microsoft's new .NET initiative extends the company's existing pursuit of the Internet development market. And while Microsoft's Xbox does represent the company's first entry into the game console market, Microsoft has been making game software and peripherals for years.

While Microsoft continues to leverage its OS advantage on the desktop and in enterprise markets, it also unveiled a broad initiative earlier this month to improve computer security through hardware known as Palladium.

Palladium group product manager Mario Juarez told NewsFactor that the secure platform -- to be based on a small chip for cryptography and a series of vaults that work with other Windows applications -- is an "ambitious project."

"We like to think big and aim high," Juarez said. Referring to the Palladium project and Microsoft's Trustworthy Computing campaign, Juarez said the company is trying to be more collaborative in all of its efforts going forward.

"The challenge is to do business in a new way," Juarez said. "It's not a philosophical change, but something that's been an evolution of thinking. There's a desire to be open and transparent."

Reaching Beyond

Giga's Enderle said Microsoft is not encountering the same problems that Intel (Nasdaq: INTC) experienced when the chipmaker reached beyond its core markets into such areas as Web hosting, which it has since abandoned.

"They don't appear to be defocusing on core areas at all or losing market share," Enderle said. "[Microsoft is] clearly running on the ragged edge, but they are not [having] the same problems Intel had with lack of synergy."

At a press conference Thursday, Microsoft chairman and chief software architect Bill Gates said the long-term outlook for the technology industry is bright. Gates also shared his optimism about the technology sector.

"We've always taken a long-term approach to our business, even in times of economic challenge and uncertainty," he said. "Our products deliver great value today, and our technology road map puts us in a strong position for the years ahead."

Countless Initiatives

Judging by the number of initiatives Microsoft launched recently, the company is showing few signs of running out of stamina.

Just in the past week, the software giant launched Windows XP Media Center; announced the signing of a US$9.1 million agreement with eDiets.com; shipped a beta version of MSN 8; enhanced its Great Plains business management systems; and unveiled a beta version of its new customer relationship management application.

Whether such a level of activity is sustainable is still in question. The company, for the most part, has been very effective in driving and defining markets, but it has fallen short in some areas that are important to it, such as .NET and general software security.

Gates pointed out at the press conference that "consumers, information workers, developers and business leaders will only be able to rely on technology in every aspect of their lives when they are certain that security, privacy , reliability and business integrity are engineered into the fabric of every computing system."

Whether Microsoft will be able to be all things tech to all customers, or whether it will collapse under the strain, remains to be seen.

Link to comment
Share on other sites

This topic is now closed to further replies.
  • Recently Browsing   0 members

    • No registered users viewing this page.