"It's time for Microsoft to face reality about search and the Internet," blogs Henry Blodget, CEO and editor in chief of The Business Insider, in a scathing critique of Microsoft Corp. (NASDAQ:MSFT) Friday morning.
Among many other bones to pick, Blodget blasts Ballmer for comments the Microsoft chief made to The New York Times, comparing the decade-plus development process of the company's Windows operating system with that of its search service:
"Steve needs to stop using Windows as the analogy. .. Microsoft had a monopoly in operating systems. When you have a monopoly, everyone buys your upgrades. They buy them because they're a bit better, yes, but mostly because they don't have a choice. In search, needless to say, Microsoft doesn't have a monopoly. It has 8% market share. It has a product that has a few cool features but is no better than the market leader's product and is easy to copy. And it has a vast, powerful, and talented competitor that has every incentive to make sure its foot stays firmly on Microsoft's throat. Windows analogies aren't just weak here. They're delusional."
Blodget goes beyond diagnosing the problem to offering his own remedy:
"So it is time for Microsoft to recognize that no company can do everything and that competing with everyone from IBM-and-Oracle to Sony-and-Nintendo to Apple-and-RIM to Google-and-Yahoo is just a recipe for failure. Microsoft should refocus on its enterprise business, defend itself against Apple's platform attack and Google's lame app incursions, and give up on its consumer Internet business.
"And what should it do with 'Bing' and MSN? Spin them into Yahoo, in exchange for a major share of the company. Importantly, Microsoft shareholders will benefit from this move. They'll get the same economies-of-scale advantage that they would get if Microsoft bought Yahoo's search business, and they'll get the upside in the stock. Unlike Microsoft's Internet division, Yahoo has a cohesive global brand and business that is still a credible alternative for advertisers, and adding Microsoft's Internet assets would make the company that much stronger. And given Yahoo's current share price, there could be several multiples of upside for Microsoft shareholders.
"Whatever Microsoft does, its senior executives and Board need to sit down and watch the presentations they gave about their glorious Internet future in the late 1990s and early 2000s and recent years. Microsoft's continual optimism about its chances contrasted with its 15 years of futility are the embodiment of the failure to face reality.This failure is now hurting the company's core business. And it's time the Board, if not Steve, acknowledged that."
Blodget's post adds insult to injury, as Microsoft's highly anticipated unveiling of its Bing search engine Thursday at the AllThingsDigital conference in San Diego was upstaged by a demonstration in San Francisco of Google Inc.'s (NASDAQ:GOOG) Wave, which its developers describe as "what e-mail would look like if it were invented today." - Mary Kathleen Flynn
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