Abstract

With a market capitalisation of $302 billion (on 14 October 2004), Microsoft is the world's second most valuable company after General Electric and the most profitable technology company in the world. However, it is facing increasing competition from IBM (International Business Machines Corporation), the largest player in the IT industry and Linux, the open source operating system, which is attracting both tech companies and corporations. In the face of this onslaught, Microsoft has announced its own strategy to make software more user-friendly. Its new product, 'Longhorn' is well integrated, with an array of useful features and works well 'out of the box'. Longhorn's launch has been delayed and it is expected to be available by 2006. To meet the launch target, Microsoft is cutting back on key features. Meanwhile, analysts are questioning Microsoft's ability to come up with new products. The company has spent a total of $32.6 billion on R&D since 1990, but has few breakthrough products to show. Microsoft is also moving into other businesses like the Xbox game console, web-surfing cell phones, software for wrist watches that could get news updates, and more recently into speech-recognition systems. But these businesses do not promise much, both in terms of revenues and profits in the medium term. With Microsoft's revenue growth slowing down to single figures for the first time in the last 29 years, analysts are wondering if Microsoft is becoming a large, unwieldy and slow moving giant.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

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Keywords

Microsoft Corporation, Steve Ballmer, Bill Gates, IT industry, Longhorn, Windows XP, General Electric, Xbox game console, Web-surfing cell phones, Software for wrist watches, IBM, International Business Machines Corporation, Linux, User friendly software