ValueAct Holdings LP President Mason Morfit, the investor set to join Microsoft Corp. (MSFT)’s board as it
prepares to make Satya Nadella chief executive officer, will
seek another break with tradition: how the company sells its
Morfit, 38, and ValueAct want the world’s largest software
maker to reduce its focus on Windows, the operating system that
underlies most of the company’s offerings, according to people
familiar with the matter who asked not to be identified because
the information is private. For two decades, Microsoft has
focused on selling applications and server software designed to
work specifically for Windows.
Now ValueAct wants Microsoft to accelerate efforts to
unchain products and services from Windows so that they can be
more widely adopted on smartphones and tablets. Microsoft
programs like Office, which typically run on Windows, could then
also be used on Apple Inc. (AAPL) and Samsung Electronics Co. gadgets
that have other operating systems, the people said. The moves
are intended to reinvigorate growth at a company that’s
struggled to adapt to the rise of mobile devices, away from the
shrinking personal computing arena.
Morfit also wants to emphasize enterprise and cloud
businesses and push Microsoft to look at jettisoning or scaling
back hardware and consumer products such as the Xbox game
console, which carry expensive marketing and manufacturing
costs, the people said.
I’m going to hazard a guess that if M$ trashes its consumer business, it won’t have much of an enterprise presence ten years down the road, either.
Consumers are also workers. Microsoft is so strong in enterprise because the vast majority of consumers use Windows and the gazillions of apps already existent for it in their daily lives away from work.
Apple is making inroads in enterprise because consumers who use it at home want to use it at work as well. That’s how Microsoft eventually achieved its enterprise dominance over CPM, OS2, and other competitors.
There are other ways to grow your mobile footprint besides destroying your consumer base. But doing that is probably a good way to make a quick buck for vultures like ValueAct.
Microsoft also announced that Bill Gates, previously Chairman of the Board of Directors, will assume a new role on the Board as Founder and Technology Advisor, and will devote more time to the company, supporting Nadella in shaping technology and product direction. John Thompson, lead independent director for the Board of Directors, will assume the role of Chairman of the Board of Directors and remain an independent director on the Board.
I find this heartening. This isn’t a coup of the sort that ousted Steve Jobs from his own company. Gates no longer has the desire to be the sort of day-to-day manager involved in acting as Microsoft’s CEO, but his technical skills and passion are probably still intact. This arrangement removes Gates from direct supervision of Nadella, but still gives him a critical role in the company he founded, and direct input into Nadella’s own vision.
Also, while there were rumors that Ballmer would be ousted from M$’s board, he is keeping that position. I suspect that a lot of those rumors came from old enemies within (and without) the company. I consider that a good thing, too. Whatever you think of Ballmer (and I fault him for his massive failure to capitalize on mobile) he made an enormous amount of money for a lot of people, including M$ itself. And he was the guy who gave Nadella a relatively free rein in the first place.
This is not to say it’s all clear sailing for M$. It continues to struggle in mobile, and integrating its various products and services to best take advantage of the ever-accelerating technological singularity will be massive challenges for it. It desperately needs to rebuild its developer base as well – and I don’t know what Nadella’s skill set might be in this area. Since his background is engineering, where Ballmer’s was sales, maybe he’s well-suited to do this as well.
And don’t count out Bill Gates. If he really does begin to take more of a direct interest in the tech aspects of Microsoft again, well: M$ has nobody else who’s ever created and built a tech company as big as Microsoft, does it?
That’s not to be sneered at.
I’d be interested to see what the other techies here think of all this, especially Billy Hollis, who maybe could address the developer issues. Or anything else, for that matter.