Abstract

Microsoft seems to be slowing down in 2005. The company still depends heavily on Windows and Office products, released a decade ago, for 80% of its sales and 140% of profits. Newer products like the XBox videogame machine, the MSN on-line service, the wireless and small-business software, collectively have piled up losses of $7 billion. In Web-server software, Microsoft has 20% of the fast growing market, while the free Apache programme, a Linux variant, has 70%. In search engines, Google and Yahoo get 70% of the queries while MSN gets only 13%. Google has also started offering features (desktop search, photo archiving) that Microsoft has promised in its next upgrade of Windows, which is already two years late. Many feel that Microsoft has grown into a bureaucratic organisation. There are also reports that in-fighting among divisions has delayed product releases significantly. Meanwhile, Microsoft's compensation no longer looks as attractive as in the past. Despite all these concerns, most analysts agree Microsoft is hardly a spent force. With a net income of $12.3 billion on revenues of $39.8 billion, Microsoft's financial muscle remains unmatched. Even after paying a $32 billion dividend in 2004, Microsoft has $40 billion in its pocket. With annual net income of $12 billion-plus, it still earns more than any other technology company. Will Microsoft be able to revitalise itself as it has done on more than one occasion in the past?

Learning Objectives

The case is structured to achieve the following Learning Objectives:

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Keywords

Microsoft, Bill Gates, Windows, Microsoft Office, XBox, Google, Yahoo, Steve Ballmer, Employee disgruntlement at Microsoft, Product development at Microsoft, Revitalising Microsoft