Scoble brainstorms about what ails Microsoft...

Robert Scoble lays out some rather free-spirited ideas on how Microsoft might fix what currently ails it...

How Microsoft Can Shut Down Mini-Microsoft (Scobleizer)

According to Robert, there's a lot of angst surrounding Microsoft...

And, generally, what I'm finding on my tours is angst. Angst over stock price (it's gone up about $3 since I've joined three years ago). Angst over marketing issues (why do we make cool names like "Sparkle" lame by changing that to "Expression Interactive Designer?") Angst over vision and direction. Angst over leadership. Angst over advertising like our "dinosaur" ads (which are loudly derided by customers whenever I go to conferences and talk about how we're being perceived).

Angst over stock price...as an investor and Microsoft shareholder, I certainly share his angst. But I'm also a patient man and believe that Microsoft is doing more "right" than "wrong", as long as they remember where their bread is buttered.

In his mind, it's about the bureaucracy...

See, employees tell me they hit too many policies. Bureacracy. Politics. Committeeisms. And too much centralization of power and decision making authority. They also tell me they don't feel like we're on a mission to improve the world, like Gates led in the 1980s with his cry "a computer should be on every desktop." That they don't feel pride in our advertising and marketing and naming. That they feel we aren't making the kind of "bet the company" bets that Microsoft had in the past, like when a strategic decision had been made to go with Windows over OS/2.

Interesting to hear this. The notion that Microsoft is too monolithic to facilitate material change is an oft decreed, particularly by my colleagues in the investment community. But to hear that this same issue resonates throughout Microsoft is somewhat surprising; although perhaps it shouldn't be. How does Microsoft break away from that? Would employees inside of Wal-Mart, ExxonMobil or Proctor & Gamble respond any differently?

Does that mean that Gate and Ozzie's doctrines are falling on deaf ears? Was Scoble speaking more of the past tense, and now slowly but surely Ozzie and the Live.com push is re-shaping this internal angst?

Scoble thinks Microsoft needs to make a bold move (a "moon shot" per Scoble), something unexpected and game-changing. His suggestion? Unlimited storage.

What's the moonshot? A guaranteed Terabyte of Internet-based storage space for EVERYTHING and for EVERYONE running Windows in the world.

A simple vision. Yes, Mr. Gates, it'll cost billions. We'll need dozens, maybe even hundreds, of data centers around the world. All with state-of-the-art connections. All with state-of-the-art 64-bit servers. All with state-of-the-art backup systems. All with state-of-the-art power and cooling systems. All with state-of-the-art load balancing and data serving technologies. That stuff isn't cheap. But I hear we have a few bucks we can use in such a "bet the company" effort.

In this terabyte, integrate all of the new Live services into one data store. A sort of "WinFS" for our server farms. Why shouldn't Live Mail share the same data store as Live Local or Live Expo? Think about the searching, and data presenting, features our developers could build quickly if we had a common data store with a common framework and a common set of APIs!

To this, more questions than answers come to mind...

1) Isn't Google already doing this (and spending hundreds of millions in capex each quarter as a result)? Does becoming more like Google obviate the overarching concern that Google is to this generation what Microsoft was to the last?

2) Yes, it would cost billions but not prohibitively so. Microsoft has $35b in cash on the books and as a Microsoft shareholder I would like to think that Microsoft could find ways to generate returns on that cash hoard that are better than rate it gets on the interest income. Basically companies can do four things with their net cash (ex-debt servicing)

A) Buy back shares
B) Pay a dividend
C) Make acquisitions
D) Spend on existing capital (human and otherwise)
E) Keep the cash and earn interest income

Microsoft is paying dividends (although I think a case could be made to pay a much higher ongoing divvy), is buying back shares, makes targeted acquisitions, spends boatloads on its existing infrastructure and yet still has $35b. There's room for an aggressive move like Scoble suggests.

3) Is Microsoft equipped for such a move? I know Scoble loathes talking about delivery dates for Microsoft products, but delivering on Vista will, in my view, far supersede anything else the company can do in terms of reinvigorating the cache of the company. The fact is, the bulls are counting on Vista and the bears are counting it out. In the meantime, does Microsoft have the bandwidth to pull off Scoble's proposal? Can you advocate becoming a leaner and more focused organization when, at the same time, you're talking about building a private, secure Internet data store along with all the other ongoing efforts?

In a less expensive, but perhaps more inspired notion, Scoble suggests investing in dual monitors for every Microsoft employee...

Want a morale boost? How about buying a new high-end computer, with dual monitors, running Vista for every employee? This would cost around $240 million, if my math is good. But wouldn't that be a great recruiting tool? Wouldn't it help us ship better products faster? Wouldn't it help us see the areas where Vista needs improvement (and, as good as it is, it does need improvements).

I profess to selfish reasons for liking this idea...our firm is embarking on a similar upgrade to dual monitors. There's no question (in my mind) that having dual monitors and top-of-the-line PCs is not simply a "nice to have" but a "must have" if your workers are going to optimize their time in today's information-driven economy.

Scoble adds a few more thoughts, and while you may agree or disagree with any of his individual assertions, you have to give him credit for acknowledging that Microsoft has to continue to push the envelope, regardless of its size and market dominance. Microsoft needs more hirings like Steve Berkowitz, Niall Kennedy & Ray Ozzie; bringing in big thinkers from outside the Redmond family who aren't afraid to push for change; no matter how glacial the process may seem.

Note: At the time of this writing I, and/or funds I maintain discretionary control over, maintained a long equity position in MSFT but did not maintain a position (long or short) in GOOG.

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Comments

[Jason Wood]

Thanks for responding Robert. I am heartened and have been a patient investor for several years now. I think, all things being equal, Microsoft has done a lot more for the good of its constituencies the last few years than not, but that doesn't mean they can't and/or shouldn't strive to do much more.

Keep up the good work, I look forward to meeting you one of these days.

Jason

[Robert Scoble]

Actually, if anything, my post is in support of the changes that Ray is making. He's pushing from the top, me and others are pushing from the bottom. It'll be interesting to see how things change. One thing that you should be heartened about is that we all care deeply about where Microsoft is going.

Good post! Appreciate it very much.