Microsoft en 2005
Microsoft in 2005
As their 2005 fiscal year came to a close, Bill Gates and Steve Ballmer could reflect on the last year as well as the previous five years-with mixed emotions. Microsoft had slowed down after two decades of spectacular growth in revenues, profits, and stock price (see Exhibits 1, 2, and 3).
Although Microsoft remained one of the most valuable and profitable companies in the world, its two core products, Windows and Office, had been experiencing anemic growth in revenues and profits. Moreover, competing software, such as the Linux operating system, and the rising popularity of-search engines like Google, were posing new threats to Microsoft's franchise.
On the positive side, Microsoft had the strongest balance sheet of any company_ in the world.
Management was committed to aggressive reinforcement of its core businesses, including significant investments in new operating systems and web services, as well as ongoing investments in new businesses, ranging from Xbox to Business Solutions. Perhaps most importantly, Microsoft had settled many of its public and private law suits on reasonably favorable terms by 2005 (see Exhibit 4).
One of the most daunting challenges was how to reposition Microsoft for modern times. When Gates started the company in 1975, he proclaimed that the mission of Microsoft was "to place a PC running Microsoft software on every desk and in every home." When Gates reflected on Microsoft strategy with the case writers in the mid-1990s, he further articulated this view:
We look for opportunities with network externalities-where there are advantages to the vast majority of consumers to share a common standard. We look for businesses where we can gamer large market shares, not just 30%-35%. But at the same time, we are not a software conglomerate. The key to our business is building annuities, by tapping into the broad revenue streams that will rely on our software expertise.
In 2005, 30 years after Microsoft was
As their 2005 fiscal year came to a close, Bill Gates and Steve Ballmer could reflect on the last year as well as the previous five years-with mixed emotions. Microsoft had slowed down after two decades of spectacular growth in revenues, profits, and stock price (see Exhibits 1, 2, and 3).
Although Microsoft remained one of the most valuable and profitable companies in the world, its two core products, Windows and Office, had been experiencing anemic growth in revenues and profits. Moreover, competing software, such as the Linux operating system, and the rising popularity of-search engines like Google, were posing new threats to Microsoft's franchise.
On the positive side, Microsoft had the strongest balance sheet of any company_ in the world.
Management was committed to aggressive reinforcement of its core businesses, including significant investments in new operating systems and web services, as well as ongoing investments in new businesses, ranging from Xbox to Business Solutions. Perhaps most importantly, Microsoft had settled many of its public and private law suits on reasonably favorable terms by 2005 (see Exhibit 4).
One of the most daunting challenges was how to reposition Microsoft for modern times. When Gates started the company in 1975, he proclaimed that the mission of Microsoft was "to place a PC running Microsoft software on every desk and in every home." When Gates reflected on Microsoft strategy with the case writers in the mid-1990s, he further articulated this view:
We look for opportunities with network externalities-where there are advantages to the vast majority of consumers to share a common standard. We look for businesses where we can gamer large market shares, not just 30%-35%. But at the same time, we are not a software conglomerate. The key to our business is building annuities, by tapping into the broad revenue streams that will rely on our software expertise.
In 2005, 30 years after Microsoft was