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Microsoft finds itself in a fight for its life to stay relevant

If your company hangs around long enough, and gets big and successful enough, then it is likely to go through cycles which have nothing to do with the economy.

Companies that one moment are admired, loved, envied, respected or feared are the next moment criticized and mocked for being clueless, mismanaged, slow to change and doomed to obsolescence and failure.

Companies as famous and well-established as IBM, General Motors and Sony have gone through this cycle. Locally, Boeing has been through a few rounds. Starbucks has experienced the phenomenon.

Hello, Microsoft – it’s your turn to ride the roller coaster.

Microsoft has enjoyed the heights – if not admiration and love then certainly envy over its financial success and a market position seemingly so impregnable that governments debated whether to order a break-up of the company.

As often happens, these days if Microsoft isn’t the subject of bad news it doesn’t get talked about at all. Investors call for the ouster of its chief executive and the breakup of the company into more nimble entities. Skeptics question whether Microsoft’s hegemony over the desktop will matter with the rise of tablet computers and other mobile devices (an area in which Microsoft is a laggard), as well as cloud- computing services for both applications and data storage.

Meanwhile, critics cite failures of such products as Zune and the Kin phone as evidence Microsoft doesn’t get it and is irrelevant in the consumer-products space. That was a point Google’s Eric Schmidt helpfully drove home with a recent remark about the four companies driving the consumer revolution – Apple, Amazon, Facebook and, not surprisingly, his own. Note what Redmond-based company was missing from the list.

And in the latest, but not likely the last, insult, a New York Times editorial compared Microsoft to GM and ... Kodak.

To be called obsolescent by a leading name in an industry not exactly known for innovation or astute management might be dismissed as idle carping. But shareholders – the ones with actual money at stake – are not happy about a stock that trades about 10 bucks a share less than it did a decade ago. And when your own co-founder is moved to notice your predicament and the need to “somehow return to its cutting edge roots,” as Paul Allen did in his recent book “Idea Man,” maybe the problems aren’t just the figments of the media’s whims and short-lived infatuations.

Microsoft is not without strengths, often in corners of the technology world the consumer doesn’t see. Todd Bishop, longtime Microsoft watcher and co-founder of two local technology news sites (most recently GeekWire) noted last year that Microsoft has 11 business lines that generate a billion dollars of revenue a year or more. Only a handful of those are in consumer products.

One that is: Xbox, a game platform with a spinoff product, the Kinect (a motion-sensing controller) that may prove to be a huge hit as third-party developers come up with applications far beyond gaming. Microsoft, however, has huge ground to make up in tablets and mobile (the latter it is trying to address with a link-up with Nokia, another former media darling), and it’s attempting to snare its own piece of the cloud trend.

Revival is not impossible. Throughout the Boeing-Airbus saga, both have been periodically written off as hopelessly behind their competitors. Apple was buried deeper than Microsoft is. But renewal does require doing something, and doing the right something, which means Microsoft is under pressure to produce short-term hits and long-term strategic successes. The company may feel publicly put upon now, but there is a worse place to be: When the only reference to it comes in the form of “whatever happened to those guys?”

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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