Microsoft Returning to Roots, Sheds MSNBC

Microsoft's foray into the Internet content and media businesses, an era in which (intelligently) it threw everything it could think of at the wall to see what would stick, continues to wind down.  The NYT reports that the company has sold majority control of MSNBC to NBC, with the latter having an option to buy the whole thing in two years.

Although the press is feasting on the story that Microsoft and Google are at war with each other, I think this foray, too, will likely end up being more story than reality (more on this here).  As CNN and Fox have demonstrated on the news network side, and Google and Yahoo! have demonstrated on the Internet, focus helps, and although it is fun to worry about how all the world's eventually going to work for Redmond, the last few years have shown that this fear is greatly overblown. 

Microsoft's core business is and always has been PC software, and the odds are against its ever finding a way to generate as much power, profit, and dominance in related businesses.  The company still has a major opportunity in enterprise software--Oracle, IBM, and others still make major hay--and it is hard to imagine that Microsoft will be able to steamroll both these tenacious technology companies AND the Internet giants.  And it is equally hard to imagine that corporations that entrust their most mission-critical IT systems to the likes of Oracle, IBM, et al, today would choose to entrust them instead to a company that also makes video game consoles.

Microsoft can't do everything forever.  And if it is to remain a competitive, vibrant, and fantastically rich software company, it is probably going to have to make a tough strategic choice, one that will might mean spinning off the Internet businesses.  Because the days in which it could afford to throw stuff at the wall are gone.

       

Comments

[Stuart MacDonald]

As a former MSFT badge-owner, personally I could never figure out the "why" of MSNBC, either. And your "get focus, kids" comment certainly rings true. But... given the changing media landscape, I can't help but wonder if this might be a move they regret in 2-3 years. Like how portals became anathema to ISPs with the bust and they started farming them out to MSN or Yahoo! Now, hey, media is in mondo turmoil, online ad sales are screaming (and yes, depending on the commercial agreement between the parties, they are still benefitting greatly) and it looks like there's more goodness ahead. I for one have to wonder if some of them are wishing they hadn't punched out of running their own destinations.

Point is, what looks like a head-slapper today often isn't a few years down the road, especially when things are changing sooo quickly (which I certainly don't need to tell you, Henry...).

- Stuart

[sigma]

Henry,

For your

"Microsoft's core business is and always has been PC software, and the odds are against its ever finding a way to generate as much power, profit, and dominance in related businesses. The company still has a major opportunity in enterprise software--Oracle, IBM, and others still make major hay--and it is hard to imagine that Microsoft will be able to steamroll both these tenacious technology companies AND the Internet giants. And it is equally hard to imagine that corporations that entrust their most mission-critical IT systems to the likes of Oracle, IBM, et al, today would choose to entrust them instead to a company that also makes video game consoles."

no, that's not correct.

First, it is not at all clear just what the boundaries are of "PC software". One important reason is, there is one processor that dominates nearly all of computing from laptops, to servers and super computers -- the '86 family, from Intel, AMD, or whomever. That this processor is mostly sold for desktops doesn't mean that there can be a 'better' 32 bit processor for 'enterprise servers'. For a 64 bit processor, Intel and AMD are active. So, as the Intel processors become the processors for nearly all of computing, Microsoft has a corresponding opportunity in software.

Sure, 20 years ago, IBM sold 'water heater' processors and closely associated software; Oracle sold RDBMS software for Unix; and Microsoft sold desktop software that frequently ran for as long as an hour before crashing. But those days are long gone.

Really, there is no Rubicon for Microsoft to cross to invade the territories of IBM and Oracle.

Second, IBM and Oracle 'elephant hunter' marketing people can emphasize their 'enterprise-quality mission-critical bet-your-business' software and make remarks about the low quality of 'desktop' software, but such claims mean much less now then 10 years ago and very much stand to mean next to nothing in another 10 years -- if not now. Here is a simple bottom line bold blunt fact about 'reliability': We don't really 'trust' any of it very much anymore, nor do we need to! That is, we don't trust each pin on the PCI bus or the processor case, each line of code, each disk head movement, each solid state laser, etc. What we do, instead, is exploit various forms of redundancy to get reliability. That is, we fully expect that a single box will get sick or go 'poof' but design the 'application' so that such single box failures mean next to nothing for the real work of the 'enterprise'. Yes, there long was a big 'hangup' for using such redundancy with IBM's products due mostly to the relatively high prices. So, elaborate efforts were made to run highly responsive interactive transaction processing systems with over 90% of the CPU time used productively. Now, with PC-based hardware, 50% CPU utilization is quite acceptable; the elaborate efforts are gone; and the total cost per transaction is much lower. Ah, "quantity has a quality all its own"!

Third, there's no magic to designing and building high quality hardware and software. There is little or nothing that IBM or Oracle can do that Microsoft can't or shouldn't do or likely isn't doing. For IBM, as just anyone can observe, 20 years ago they dominated in microprocessor technology, processors, operating systems, hard disk drives, digital packet communications, laser printers, data base software, and PCs, and over time they lost (in each case, nearly all of) the processor business to Intel and AMD, the operating system business to Microsoft, Sun, and Linux, the hard disk drive business to Seagate, Western Digital, EMC, and Network Appliance, the packet communications business to Cisco and Juniper, laser printer business to HP, the data base business to Oracle and Microsoft, the PC business to Dell, etc. E.g., as a solid PC operating system, OS/2 was far ahead of Windows 3.11, 95, and 98 and, at least until Windows 2000, actually still viable as a competitor. But, somewhere in there an IBM executive was quoted "I'm not going to drop $2 billion into another PC operating system.". Well, Linux was developed for less than $2 billion. And, even if IBM did spend $2 billion, Microsoft makes that much from XP in pre-tax earnings in a few months.

Fourth, without any fear of contradiction, I say unto you: Civilization, technology, and economic efficiency will continue to move forward in the 21st Century; biological technology will be one source of progress but computing, where we get to design what we want much more directly and which has fewer fundamental material limitations, promises to be much better; by a large margin the main source of progress will be computing and, especially, software; and by a large margin the company best positioned to develop and sell this software is just Microsoft.

Will Microsoft do it? I'm not sure. They can; they should.