In announcing a stock buyback of $ 40 billion, Steve Ballmer of Microsoft ignored Fortune's New rule number 3: "Old rule: Shareholders rule. New rule: The customer is king."
I complimented Microsoft when it announced it was going to invest a few billion in building a SaaS grid. But that is a pittance compared to what it is about to spend on buybacks. Granted that is better than a cash dividend (from a buyer's perspective of how cash they pay Microsoft is utilized) but it is a sad commentary that Microsoft cannot find good R&D areas which are better investments than its own stock. Or how about paying customers back an "innovation dividend" in the form of lower prices.
Buyers need to become smarter about funneling tech dollars through Microsoft. Not enough of that is going in to new or better product. Optimize current Windows infrastructure (James Governor thinks that's one reason Citrix recently reported 30% revenue growth as customers have given up on Vista). Start evaluating Office 2.0 alternatives. Look at Open Source options to SQL Server and MS tools. Look at SaaS alternatives like NetSuites and salesforce.com to MS Dynamics. Challenge its audits.
Microsoft recently unveiled "voluntary" development principles to guide it after major portions of the US anti-trust settlement expire in November 2007. Customers need to ensure Microsoft does not need to be so reprimanded again - by diversifying their dollars across many more vendors. That would make Microsoft agree with Fortune...
Update: Niall Kennedy leaves Microsoft after joining it 4 months ago and gives a glimpse of a company which appears paralyzed even in the SaaS initiative it has announced as strategic.
Noted the price cap? Interesting when you look at the timing...
Posted by: Dennis Howlett | July 22, 2006 at 10:43 AM
Vinnie,
All due respect, Microsoft has a responsibility to its shareholders as a public entity and this tender is a step in the right direction. Customers can speak with their wallets. If they have an issue with Microsoft's pricing or quality of product, they're free to go elsewhere.
As a MSFT shareholder, they're doing a disservice to everyone sitting idly on $40B in cash (more than some banks!). Their internal cash flows are MORE than enough to spend on other R&D projects you refer to.
This = Step in the right direction, but by no means does it finish the puzzle.
Posted by: Woodrow | July 24, 2006 at 06:07 PM
Jason, it is staggering how much Microsoft has paid out in dividends etc...good for you and me as investors, but as buyers I see all the bugs, the delays etc and then the big payouts to investors make me wonder where MS'a attention really is. Diversifying dollars away from MS is already happening...
Posted by: vinnie mirchandani | July 24, 2006 at 07:06 PM