As promised, here’s part three of my series on fixing Microsoft for the 21st century.  This assumes we’ve already spun-off the Internet properties to Yahoo as I suggested a few days ago and a Bank of America/Merrill-Lynch analyst quickly copied.  Does that copying qualify me for a Federal bailout?

The big Microsoft news this week, at least from the press it has received, is Redmond’s decision to open a chain of stores.  Nearly all the pundits think this is stupid, while I think it was merely inevitable, given the nature of current Microsoft management, which seems to be more and more from Bentonville, Arkansas, home of Wal-Mart.

See that guy in the picture?  That’s Microsoft Chief Operating Officer Kevin Turner, who spent his entire pre-Microsoft career rising through the ranks at Wal-Mart.  I’ve interviewed the guy and he’s smart and a lot tougher than he looks.

Microsoft has drawn heavily from Bentonville and for good reason: those Wal-Mart folks sure know how to make and manage money.  Wal-Mart and Microsoft make about the same amount of profit each year, though Wal-Mart has over four times the sales of Microsoft.  This makes them more similar than they are different, because each exists in a rarified financial atmosphere where the amounts of money involved dwarf the budgets of most nations.  When these companies hiccough, the world economy sneezes.

So it seems inevitable to me that as Microsoft is operated more and more by executives from a giant retailer, that Microsoft will try doing some giant retailing of its own.  And sure enough they are doing just that through this new plan to open Microsoft stores – a plan that could equally be laid at the feet of Apple as yet another Microsoft tactic copied from Cupertino.

Only Microsoft stores are different from Apple, stories, we’re told, and that’s true: Apple needed distribution while Microsoft HAS distribution, in spades.  In fact Microsoft has so much distribution that this chain of stores could be viewed very negatively by Microsoft resellers but probably won’t be because I doubt that Microsoft will be actually trying to sell much stuff, and what they do sell will be at full retail unlike everyone else.  It’s like buying wine at the winery: you never get a deal, but the samples are free.

So you can try out that cool game computer at Microsoft but actually BUY it at Best Buy, just as you would have before.

Why even do it, then?  Why have these stores? 


Phil Schiller of Apple made the point back in January when he explained that Apple stores had 400,000 visitors per day or the equivalent of 20 Macworld shows EVERY DAY.  Microsoft wants the same thing.  They want to bypass the press machine that they feel has tainted users against Windows Vista, making sure the same thing doesn’t happen to Windows 7.

If Microsoft can achieve that one goal – just that one – then the Microsoft stores will have been worth doing even if they never have a dollar of retail sales.

So Microsoft will build those darned stores and they’ll build them fast because they’ll want 100 or more to be open for business by the time Windows 7 officially launches, which we’re told is this year.

In this economy finding retail space is easy, Microsoft has lots of money, so of course this retail build-out will be simple.  AND I predict that Microsoft will achieve its goal of disintermediating pundits like me.

In my case I have long made it clear that for the right price I’ll simply go away, but Microsoft never takes me seriously. 

There was a time in the late 1990s when I had an interview scheduled with Bill Gates.  His net worth back then was growing at a calculated $34 million per day or more than $1 million per hour on a 24/7 basis.  So I offered to give the hour back to Bill for half price — $500,000 – but for some reason he didn’t see it as such a bargain.  Nor will they this time.

So look for the Windows 7 roll-out to go a lot smoother than any other Windows release, ever, simply because in every major media market there will be real people down at the mall in Microsoft shirts ready to explain how to do all the arcane crap required to keep running Windows – even Windows 7.

The Microsoft stores are a brilliant move.

But the impact on Microsoft of the Bentonville Mafia hasn’t been entirely positive.  They ran out of town Jeff Raikes, for example – one of the best Microsoft executives.  The Bentonville crowd, you see is brutal even in Microsoft eyes and Raikes just couldn’t take it any longer, which is why he “retired” and then un-retired a minute later to run the Bill and Melinda Gates Foundation.

Enough about the stores, already — now should be done with the rest of Microsoft?

Break it up.

This is not, by the way, a prescription for justice or vengeance or an attempt to get really good service the next time I visit Paris.  It’s a 1980’s “greed is good” style prescription for giving current Microsoft shareholders better value for their money.  Simply put, the parts of Microsoft are worth separately more than the whole, mainly because of all those anti-trust shenanigans but also just because Microsoft forced itself to get too fat simply to keep its earnings growth in line.  Well it is time to release some of those excess divisions and let them find their own values, which I guarantee will be uniformly higher,

Here are my quite specific – AMAZINGLY SPECIFIC – recommendations, then, for the restructuring of Microsoft.

1) Cut by job category.

Don’t simply cut products. Cut by job function. There are too many testers and Project Managers across the company. Probably too many developers, too, but it’s hard to imagine Microsoft ever conducting a mass layoff of developers, since they form the core of Microsoft’s corporate culture, and most are valuable employees.

There are scores of new job functions at Microsoft, many of dubious importance. For example, one of the latest buzzwords at Microsoft is “business intelligence.” As in, “We need to look at the BI for this project.” There are many new “BI analysts” who look at spreadsheets and analyze all sorts of business and customer data, looking for trends. There’s nothing wrong with this, but a lot of these people could be cut with little impact on the company, since they’ve clearly had little to no impact and left all this crap for me to clean up.

Total cuts by job function — 5,000 Project Managers, testers, business intelligence analysts, and other job categories with more people than Microsoft needs for its surviving products.

Microsoft should balance this with 1,000 new hires in the areas of usability, design, and Project Managers who actually want to create more usable software.

 2) Microsoft Research  

This has long been a favorite pet area of Bill Gates, but Gates is gone now and Microsoft Research has ballooned during years of fat profits to thousands of PhDs scattered around the world. Hundreds of these highly paid people could go, and many others could be transferred to product teams.

 3) Product lines

Here’s where the bulk of the cuts should be – 15,000 to 30,000 jobs. When deciding what products to cut and keep, the devil is in the details.

Products to cut:

MSN — We’ve dealt with this already – MSN should go to Yahoo as I described recently, or absent Yahoo it should go somewhere else, just not in Redmond.  Why is Microsoft in this online business that keeps losing money year after year? Microsoft is not a content company. The cuts should include:

MSN Home Page — persuade MSN users to create a Windows Live home page instead.

MSN’s many individual websites — MSN Money, MSN Music, MSN Entertainment, MSN Video, MSN Celebrities, etc. Why is Microsoft creating a big new website for celebrity news? Is there anything more ridiculous for a software company to be focusing on?

Microsoft adCenter (online advertising system) and Display Ads Platform — Microsoft is not an advertising company. They should hire advertising companies to do this work, and sell this business to Yahoo.

MSNBC — Microsoft is not a news organization – sell to Yahoo or GE.

MSN Games


Microsoft Expression — Does anyone actually use Expression? This is a weak attempt to compete with Adobe in the graphics market.

Windows Live — This is a major future push for Microsoft, and Microsoft is doing a lot of experimenting by tossing out dozens of Windows Live programs and services to see which stick and people actually use. Microsoft could definitely do some cutting here, and focus on a core group of popular Windows Live services, such as Windows Live Mail, HotMail, Messenger, and Photo Gallery.

It is probably cheaper for Microsoft to ACQUIRE future Windows Live services than to create them.  That’s how Cisco does it.

Don’t know if Microsoft should keep or cut:

Live Search — This is a tough call. I don’t know if Microsoft should give up on search or keep trying to compete head-on with Google. But I think it’s sunk too much money hiring the right people to give up now before giving these smart new hires more time to try. And they have a big new launch planned this spring, with a new name, so what the heck.

Windows Embedded and Windows CE — I don’t know how successful these are. They seem like niche products.


Keep some, cut some:

Office — Obviously, Microsoft should not get rid of its most profitable Office products. But the product line has ballooned in recent years and could use trimming. SharePoint is successful, but Microsoft could cut:


Office Live Meeting

Office for Mac (does Microsoft really need to sell Mac software?)

Office Accounting (sell it – there are buyers)

Probably some other small Office products

Microsoft Dynamics — I don’t know much about Microsoft’s business solutions division. But they sell a whole line of products (Dynamics AX, CRM, Enterprise Reporting, GP, NAV, Retail Management, SL). Some should probably be cut.  Or better still just sell the whole darned group to some private equity firm.

Server products — Microsoft’s line of enterprise server software is huge and constantly growing. Many of the products are undoubtedly successful and Microsoft should keep them. But the product line appears to have ballooned out of control to more than 40 products.

Figuring out exactly what to cut and keep here would take some work. I’m no expert on this, but Microsoft should keep Exchange Server, SQL Server, and its other big server products.

But a lot of small products like these should probably go:

Forms Server

Groove Server (sorry, Ray)

Identity Lifecycle Manager

Keep and grow:

Windows client = Cash cow. ‘

Internet Explorer — Microsoft needs to offer a free web browser, despite the antitrust headaches this causes for the company in Europe.

Windows Server — Another big cash cow, and the basis of its server product line.

Office — Keep most Office products, but cut some (see above). Another cash cow.

Office Live — Microsoft needs to start pushing its successful Office apps onto the web.

Hardware — Microsoft has sold millions of mice and keyboards over the years. This seems like a successful and profitable business, but Microsoft should be careful not to let the product line grow out of control. It’s already expanding into presentation pointers and other dubious new hardware peripherals.

Microsoft Auto — Ford Sync seems to be successful, and other auto companies reportedly want Microsoft to create similar software for them. Although the auto industry has tanked recently, it should recover when the economy recovers.

Microsoft Surface — A small product with promise.

Xbox — Although Xbox lost a lot of money for years, it reportedly is profitable now. It seems too successful now to cut. But Microsoft should be careful how much it invests in Xbox and give up on casual games. Stop trying to compete against the Wii and position Xbox as a great family gaming system. It’s not and never will be. The Xbox is all about Halo and other violent shooting games and racing games played by teens and young men.

It would help, too, if Microsoft would respect its customers and support the Xbox better.  Look for a sad story about this from me soon.

 Zune — Many people say Microsoft should give up on Zune, but I think Microsoft should keep its Zune software and hardware and work to merge Zune with Windows Mobile, perhaps forcing Apple toward a music subscription model.

Windows Mobile — I think Windows Mobile is too promising to cut, even though Microsoft has screwed it up by being extremely late with its long-promised Windows Mobile 7 touch-screen update, now not due out until mid-2010. A lot of carriers still sell Windows Mobile phones, which are popular with business people.  Heck, the future of personal computing IS mobile.

Have you noticed I didn’t mention any of Microsoft’s languages?  I have long felt that these should be spun-off as a group.  This is controversial, I know, but if Microsoft was forced to use third-party languages we’d see a lot fewer undocumented APIs and other nasty surprises.  And I think it would get the Europeans off Microsoft’s back entirely.

And there you go – 30,000-50,000 heads later Microsoft would be smaller but stronger, more focused, agile, and better able to compete on a level playing field.  Call it the Cringely Plan.  Ballmer can implement it, drive Microsoft stock to $150 and then retire a gazillionaire, leaving the Bentonville Mafia to spend the next decade doing what they do best, optimizing processes.