Henry Blodget’s Business Insider is a guilty pleasure. From the tabloid headlines to the flashpoint content, carefully contrived to generate criticism and heated debate, Blodget gives you plenty of sizzle even when he forgets to put a steak on the grill.
Occasionally, though, he’ll provide some food for thought alongside the crowd-seeking sensationalism. In one of his latest pieces — portentously titled, “The Odds Are Increasing That Microsoft’s Business Will Collapse” — Blodget injects enough plausibility into his argument to evoke the image of an erstwhile software giant staggering incontinently toward an open grave.
To summarize, Blodget contends that Microsoft draws the vast majority of its profits from its Windows and Office franchises. He provides colorful charts to illustrate the point, which is indisputable. He then posits Microsoft’s predicament: the Internet, the rise of mobility (in which it has been abject), the ascent of cloud computing, and the determined competitive incursions of Apple and Google have put Microsoft’s cash cows in mortal peril.
As Blodget phrases it:
The desktop PC isn’t the center of anyone’s universe anymore. The Internet is. And the Internet doesn’t require Windows.
As for Office, he points to the rise of Google Apps, which Blodget perceives as a “classic disruptive technology” that is “cheaper, easier, and more convenient to use than Microsoft Office.”
At the end of the piece, Blodget presents three scenarios for Microsoft:
Right now, the investors are concluding that Microsoft will gradually become the equivalent of a technology utility–a boring but necessary provider of the software that runs the world’s business community. A smaller, more optimistic crowd is still arguing that, one day, Microsoft will be able to turn its fortunes around, and fight its way back into an industry leadership position.
What almost no one is talking about is a third possibility, one that becomes more likely by the day: The possibility that, a couple of years down the road, Microsoft’s business may just completely collapse.
Given enough time, anything is possible. Still, is there a strong likelihood that Microsoft’s business will “completely collapse” in two years? I doubt it. The primary reason for such doubt is that customers aren’t moving to the cloud fast enough to bring about Microsoft’s immediate demise.
Startup companies, free of established processes and prior IT investments, increasingly are adopting cloud models that tend to leave Microsoft out of the action (or with only a small piece of it). Even so, Microsoft has a Windows installed base of SME and enterprise customers that will think at least twice before abandoning the devil they know. That’s human nature, especially during a period of great and persistent economic uncertainty.
The situation is similar, though perhaps more tenuous, for Office. Google will win defections, starting in vertical markets where Microsoft’s Office pricing is most onerous and its high-end features less necessary. There’s no question that Microsoft will see erosion in its licensed and shrink-wrapped Office business, but that erosion is not likely to become a catastrophic landslide within two years.
Are Microsoft’s best days behind it? Yes, I think so. The company is extremely unlikely to reach anything approaching market leadership in mobile platforms and smartphones, its former hold on PC and mobile-device OEMs has slackened, and it’s at a perennial loss in areas such as web search and in most consumer markets. It needs to invest more in its SME and enterprise offerings, including its business-oriented cloud services, and less in consumerist boondoggles.
But the collapse of Microsoft in two years? All things considered, I’d bet against that outcome. I tend to think Blodget would, too. Then again, he’s drawn traffic with his provocatively headlined post, so he probably won’t mind the hedging strategy.