Daily Archives: July 25, 2008

Rumors of Cisco Layoffs

As competitors, including Juniper Networks and Brocade Communications Systems (through its acquisition of Foundry Networks), gear up to chip away at Cisco’s long-held dominance in enterprise networking, there are unconfirmed reports that the networking giant is shedding staff across multiple business units.

We’ll look for corroboration and further details regarding these reports. If you have any information you’d like share, anonymously or otherwise, you know where to find me.

Dignan, Too, Wonders About Microsoft’s Focus

Maybe I was channeling Larry Dignan earlier today in my polemic against Microsoft’s profligate insistence on trying to crack the consumer space at the opportunity cost of focusing more on the enterprise.

In his ZDNet column, also available at Seeking Alpha, Dignan wonders about the sagacity of Microsoft’s insistence on trying to capture an unwilling Internet consumer market while the enterprise is beckoning for more attention.

Writes Dignan:

Instead of chasing Yahoo, plotting to be an advertising empire and pining for consumers with things like the Xbox and Zune perhaps what Microsoft really needs is an IBM moment of clarity. Remember IBM? Big Blue used to do everything too, but then it suddenly got it. IBM unloaded its PC business to Lenovo and started focusing on the two things that were insanely profitable: Software and services. Oh yeah, the hardware is still there too, but IBM is all about enterprise and helping business get stuff done.

IBM’s public persona may have taken a hit with the average consumer–it’s not like Tivoli, Rational and IT services are discussed at picnics–but there’s no question it made the right move. IBM is more profitable than ever. And it’s focused.

Microsoft could use some of that focus. It’s not that Microsoft is forgetting the enterprise business. In fact, Microsoft is hellbent on being the No. 1 enterprise software company. The problem: That enterprise windfall is funding things like Live Search and Xbox. I credit Microsoft for its willingness to invest and be tenacious, but you have to wonder about the returns here.

Dignan wonders about the returns, I wonder about the returns, and Microsoft investors should wonder about the returns.

Actually, they ought to do more than wonder. What they should do is pepper the Microsoft executive team with hard-hitting questions about the feasibility and viability of these consumer pipe dreams. They should demand to know why Microsoft believes the time and money spent on an aborted acquisition of Yahoo shouldn’t have been spent on furthering the company’s advantage in enterprise solutions, including business-oriented web services.

Essentially, Microsoft’s investors need to keep the company focused and accountable. The Ballmer-led Microsoft is in serious danger of heading off in too many directions for too little return on investment.

Of course, Microsoft’s executive team will argue that it can win in both the enterprise and consumer markets. It’s up to the company’s investors to temper that hubris by pointing to Microsoft’s past performance and its corporate DNA — which, as Dignan points out, doesn’t exactly augur well for success in the consumer realm.

Ballmer Intent on Throwing Good Money After Bad

I have said it before and I’ll say it now: Microsoft does not have the market mandate to aggressively pursue and capture consumer markets. In most cases, consumers only buy Microsoft products and services when they have no other choice.

Zune has been a nearly unmitigated failure, Xbox and Xbox 360 have been qualified failures, and Microsoft’s Internet services, with the exception of Microsoft Messenger, have been perennial also-rans.

Admittedly, consumers — most of whom also have jobs (except the the kids, of course) — also use Windows and Office, but those can hardly be defined as consumer offerings. For the most part, people have used Office not because they have any special fondness for it but because their work necessitated its adoption. All that might be changing, but that’s for another post at a later date.

In a textbook instance of throwing good money after bad, Microsoft profligately expends resources in pursuit of a consumer market it can never own, at least not a degree that would justify the overall investment.

At Microsoft’s annual meeting with analysts, as covered by the Wall Street Journal, the company’s CEO Steve Ballmer signaled that Microsoft will continue to fight the trend, irrespective of past performance and current capabilities.

From the Wall Street Journal coverage:

Investing in search is important, he said, because it is a foundation for creating other consumer Internet services.

“Search is one of the starting points on the Internet,” Mr. Ballmer said. “It’s the best place to distribute new Internet services to the consumer.”

What Ballmer says is true — search is a foundation for the distribution of new web services to consumers — but the consumer, generally speaking, has shown little inclination to patronize such services when they carry Microsoft’s brand. Ballmer, as is his wont, blithely ignores this reality, much as a captain of a doomed frigate might ignore an iceberg in his path.

I’m not saying Microsoft can’t be a player in web services. In the enterprise, where it has, after much trial and tribulation, finally developed products that put it on a favorable competitive footing against Linux and Unix, Microsoft has an excellent opportunity to prosper from web services.

I just don’t buy Microsoft as a consumer juggernaut. That train has left the station a long time ago. Ballmer missed it. Somebody at Microsoft should advise him to play to the company’s strengths rather than to its weaknesses.

Cringely Sees Through Ballmer’s Posturing

In wondering whether the Microsoft-Yahoo soap opera has reached its merciful end, especially for beleaguered Yahoo employees and shareholders, Robert X. Cringely sees through the transparent posturing of Microsoft CEO Steve Ballmer.

First, there’s Ballmer’s official response at Microsoft’s earnings call this week:

“It didn’t work out, fine, we’re done, we can move on. Does that mean nobody will ever talk to anybody again? I suspect the answer to that is also no. It’s a long time and a big world, but we are moving on.”

Quiz: How do you know Steve Ballmer is spreading more fear, uncertainty, and doubt? His vocal chords are engaged.

Ballmer, with corporate-raider Carl Icahn’s willing or inadvertent connivance, is attempting to generate enough fear, uncertainty, and doubt about Yahoo’s viability so as to engender further downward pressure on the company’s stock price and valuation. When Yahoo finally reaches its nadir, Ballmer hopes to pick up the remnants for a badly warbled song. (Hey, Steve loves to croon, as past videos make clear.)

Then again, it might not be necessary for Microsoft to pick Yahoo’s emaciated carcass .

Microsoft contends that search — and, by extension, search advertising — is a two-horse race, with Google currently playing the part of a Triple Crown winner and Microsoft plodding behind like a second-rate claiming nag. If Yahoo were to fall off the face of the planet, or to gradually fade off the charts as a result of attrition and customer defection, Microsoft would benefit, if only be taking some of the share left behind by an erstwhile rival.

Yes, Steve Balllmer is clever and shrewd. But he’s transparent enough that Yahoo and its shareholders should be able to see through the cynical act.