Poor Microsoft – How Good Decisions, Made Too Late, Bode Poorly for the Future

Poor Microsoft – How Good Decisions, Made Too Late, Bode Poorly for the Future

Microsoft recently announced it was offering Windows 10 on xBox, thus unifying all its hardware products on a single operating system – PCs, mobile devices, gaming devices and 3D devices.  This means that application developers can create solutions that can run on all devices, with extensions that can take advantage of inherent special capabilities of each device.  Given the enormous base of PCs and xBox machines, plus sales of mobile devices, this is a great move that expands the Windows 10 platform.

Only it is probably too late to make much difference.  PC sales continue falling – quickly. Q3 PC sales were down over 10% versus a year ago. Q2 saw an 11% decline vs year ago. The PC market has been steadily shrinking since 2012In Q2 there were 68M PCs sold, and 66M iPhones.  Hope springs eternal for a PC turnaround – but that would seem increasingly unrealistic.

BallmerThe big market shift to mobile devices started back in 2007 when the iPhone began challenging Blackberry.  By 2010 when the iPad launched, the shift was in full swing.  And that’s when Microsoft’s current problems really began.  Previous CEO Steve Ballmer went “all-in” on trying to defend and extend the PC platform with Windows 8 which began development in 2010.  But by October, 2012 it was clear the design had so many trade-offs that it was destined to be an Edsel-like flop – a compromised product unable to please anyone.

By January, 2013 sales results were showing the abysmal failure of Windows 8 to slow the wholesale shift into mobile devices.  Ballmer had played “bet the company” on Windows 8 and the returns were not good.  It was the failure of Windows 8, and the ill-fated Surface tablet which became a notorious billion dollar write-off, that set the stage for the rapid demise of PCs.

And that demise is clear in the ecosystem.  Microsoft has long depended on OEM manufacturers selling PCs as the driver of most sales.  But now Lenovo, formerly the #1 PC manufacturer, is losing money – lots of money – putting its future in jeopardy.  And Dell, one of the other top 3 manufacturers, recently pivoted from being a PC manufacturer into becoming a supplier of cloud storage by spending $67B to buy EMC. The other big PC manufacturer, HP, spun off its PC business so it could focus on non-PC growth markets.

Windows deadAnd, worse, the entire OEM market is collapsing.  For the largest 4 PC manufacturers sales last quarter were down 4.5%, while sales for the remaining smaller manufacturers dropped over 20%!  With fewer and fewer sales, consolidation is wiping out many companies, and leaving those remaining in margin killing to-the-death competition.

Which means for Microsoft to grow it desperately needs Windows 10 to succeed on devices other than PCs.  But here Microsoft struggles, because it long eschewed its “channel suppliers,” who create vertical market applications, as it relied on OEM box sales for revenue growth.  Microsoft did little to spur app development, and rather wanted its developers to focus on installing standard PC units with minor tweaks to fit vertical needs.

Today Apple and Google have both built very large, profitable developer networks.  Thus iOS offers 1.5M apps, and Google offers 1.6M. But Microsoft only has 500K apps largely because it entered the world of mobile too late, and without a commitment to success as it tried to defend and extend the PC.  Worse, Microsoft has quietly delayed Project Astoria which was to offer tools for easily porting Android apps into the Windows 10 market.

Microsoft realized it needed more developers all the way back in 2013 when it began offering bonuses of $100,000 and more to developers who would write for Windows.  But that had little success as developers were more keen to achieve long-term sales by building apps for all those iOS and Android devices now outselling PCs.  Today the situation is only exacerbated.

By summer of 2014 it was clear that leadership in the developer world was clearly not Microsoft.  Apple and IBM joined forces to build mobile enterprise apps on iOS, and eventually IBM shifted all its internal PCs from Windows to Macintosh.  Lacking a strong installed base of Windows mobile devices, Microsoft was without the cavalry to mount a strong fight for building a developer community.

In January, 2015 Microsoft started its release of Windows 10 – the product to unify all devices in one O/S.  But, largely, nobody cared.  Windows 10 is lots better than Win8, it has a great virtual assistant called Cortana, and it now links all those Microsoft devices.  But it is so incredibly late to market that there is little interest.

Although people keep talking about the huge installed base of PCs as some sort of valuable asset for Microsoft, it is clear that those are unlikely to be replaced by more PCs.  And in other devices, Microsoft’s decisions made years ago to put all its investment into Windows 8 are now showing up in complete apathy for Windows 10 – and the new hybrid devices being launched.

AM Multigraphics and ABDick once had printing presses in every company in America, and much of the world.  But when Xerox taught people how to “one click” print on a copier, the market for presses began to die.  Many people thought the installed base would keep these press companies profitable forever.  And it took 30 years for those machines to eventually disappear.  But by 2000 both companies went bankrupt and the market disappeared.

Those who focus on Windows 10 and “universal windows apps” are correct in their assessment of product features, functions and benefits.  But, it probably doesn’t matter.  When Microsoft’s leadership missed the mobile market a decade ago it set the stage for a long-term demise. Now that Apple dominates the platform space with its phones and tablets, followed by a group of manufacturers selling Android devices, developers see that future sales rely on having apps for those products.  And Windows 10 is not much more relevant than Blackberry.

CSC – When All Else Fails, Split!

CSC – When All Else Fails, Split!

Information technology (IT) services company Computer Sciences Corporation (CSC) recently announced it is splitting into two separate companies.  One will “focus” on commercial markets, the other will “focus” on government contracts.  Ostensibly, as we’ve heard before, leadership would like investors, employees and customers to believe this is the answer for a company that has incurred a number of high profile failed contracts, a turnover in leadership, vast losses and declining revenue.

Oh boy.

After years of poor performance, and an investigation by the UK parliament into a failed contract for the National Health Services, in 2012 CSC brought in a new CEO.  Like most new CEOs, his first action was to announce a massive cost-cutting program.  That primarily meant vast layoffs.  So out the door went thousands of people in order to hopefully improve the P&L.

Only a services company doesn’t have any hard assets.  The CSC business requires convincing companies, or government agencies, to let them take over their data centers, or PC deployment, or help desk, or IT development, or application implementation – in other words to outsource some part (or all) of the IT work that could be done internally.  Winning this work has been an effort to demonstrate you can hire better people, that are more productive, at lower cost than the potential client.

So when CSC undertook a massive layoff, service levels declined.  It was unavoidable.  Where before CSC had 10 people doing something (or 1,000) now they have 7 (or 700).  It’s not hard to imagine what happens next.  Morale declines as layoffs ensue, and the overworked remaining employees feel (and perhaps really are) overworked.  People leave for better jobs with higher pay and less stress.  Yet, the contract requirements remain, so clients often start complaining about performance, leading to more pressure on the remaining employees.  A vicious whirlpool of destruction starts, as things just keep getting worse.

Immediately after taking the CEO job in 2012 Mike Lawrie declared a massive $4.3B loss.  This allowed him to “bring forward” anticipated costs of the anticipated layoffs, cancelled contracts, etc.  Most importantly, it allowed him to “cost shift” future costs into his first year in the job – the year in which he would not be fired, regardless how much he wrote off.  This is a classic financial machination applied by “turnaround CEOs” in order to blame the last guy for not being truthful about how badly things were, while guaranteeing the end of the new guy’s first year would show a profit due to the huge cost shift.

True to expectations, after one year with Lawrie as CEO, CSC declared a $1B profit for fyscal 2013 (about 20% of the previous write-off.)  But then fyscal 2014 returned to the previous norm, as profits shrunk to just $674M on about $12B revenues (~5% net margin.) For 4th quarter of fyscal 2015 revenues dropped another 12.6% – not hard to imagine given the layoffs and ensuing customer dissatisfaction.  Most troubling, the commercial part of CSC, which represents 75% of revenue, saw all parts of the business decline between 15-20%, while the federal contracting (much harder to cancel) remained flat.  This is not the trajectory of a turnaround.

CEO Lawrie blames the deteriorating performance on execution missteps.  And he has promised to keep his eyes carefully on the numbers.  Although he has admitted that he doesn’t really know when, or if, CSC will return to any sort of growth.

No wonder that for more than a year prior to this split CSC was unable to sell itself.  Despite a lot of hard effort, no banker was able to put together a deal for CSC to be purchased by a competitor or a private banking (hedge fund) operation.

If none of the professionals in making splits and turnarounds were willing to take on this deal, why should individual investors?  In this case, watching people walk away should be a clear indicator of how bad things are, and how clueless leadership is regarding a fix for the problems.

The real problem at CSC isn’t “execution.”  The real problem is that the market has shifted substantially.  For decades CSC’s outsourcing business was the norm.  But today companies don’t need a lot of what CSC outsources.  They are closing down those costly operations and replacing them with cloud services, cloud application development and implementation, mobile deployments and significant big data analytics.  Or looking for new services to solve problems like cybersecurity threats. CSC quite simply hasn’t done anything in those markets, and it is far, far behind.  It is a big dinosaur rapidly being overtaken by competitors moving more quickly to new solutions.

One of CSC’s biggest competitors is IBM, which itself has had a series of woes.  However, IBM has very publicly set up a partnership with Apple and is moving rapidly to develop industry-specific software as a service (SaaS) offerings that are mobile and operate in the cloud.  These targeted enterprise solutions in health care, finance and other industries are designed to make the services offered by CSC obsolete.

Although it may have had a huge client base of 1,000 customers.  And CSC brags that 175 of the Fortune 500 buy some services from it, exactly what does CSC bring to the table to keep these customers?  Years of cost cutting means the company has not invested in the kinds of solutions being offered by IBM and competitors such as Accenture, HP and Dell domestically – and WiPro, TCS (Tata Consulting Services,) Infosys and Cognizant offshore.  Not to mention dozens of up-and-coming small competiters who are right on the market for targeted solutions with the latest technology such as 6D Gobal Technologies.  CSC is still stuck in its 1980s consulting model, and skill set, in a world that is vastly different today.

csc_crime_against_humanityCSC has no idea how to “focus” on clients.  That would mean investing in modern solutions to rapidly changing client needs.  CSC failed to do that 15 years ago when most outsourcing involved heavy use of offshore resources.  And CSC has never caught up.  Leadership overly relied on selling old services, and discounting.  It’s model caused it to underbid projects, until the UK government almost shut the company down for its inability to deliver, and constantly hiding actual results.

Now CSC lacks any of the capabilities, people or skills to offer clients what they want. Its diffuse customer base is more a liability than a benefit, because these customers are “end of life” for the services CSC offers.  Years of declining revenues demonstrate that as value declines, contracts are either allowed to go to very cheap offshore providers, lapse completely or cancelled early in order to shift client resources to more important projects where CSC cannot compete.

This split is just an admission that leadership has no idea what to do next. Customers are leaving, and revenues are declining.  Margins, at 5%, are terrible and there is no money to invest in anything new.  Some of the world’s best investors have looked at CSC deeply and chosen to walk away.  For employees and individual investors it is time to admit that CSC has a limited future, and it is time to find far greener pastures.

 

Focus is Only Confusion at Failing HP

Focus is Only Confusion at Failing HP

Hewlett Packard yesterday announced second quarter results.  And they were undoubtedly terrible.  Revenue compared to a year ago is down 7%, net income is down 21% as the growth stall at HP continues.

Yet, CEO Meg Whitman remains upbeat.  She is pleased with “the continued success of our turnaround.”  Which is good, because nobody else is.  Rather than making new products and offering new solutions, HP has become a company that does little more than constantly restructure!

This latest effort, led by CEO Whitman, has been a split of the company into two corporations.  For “strategic” (red flag) reasons, HP is dividing into a software company and a hardware company so that each can “focus” (second red flag) on its “core market” (third red flag.)  But there seems to be absolutely no benefit to this other than creating confusion.

This latest restructuring is incredibly expensive. $1.8billion in restructuring charges, $1billion in incremental taxes, $400million annually in duplicated overhead services, then another $3billion in separation charges across the two new companies.  That’s over $5B – which is more than HP’s net income in 2014 and 2013.  There is no way this is a win for investors.

Additionally, HP has eliminated 48,000 jobs this this latest restructuring began in 2012.  And the total will reach 55,000.  So this is clearly not a win for employees.

The old HP will now be a hardware company, focused on PCs and printers.  Both of which are declining markets as the world goes mobile.  This is like the newspaper part of a media company during a split.  An old business in serious decline with no clear path to sustainable sales and profits – much less growth.  And in HP’s case it will be in a dog-eat-dog competitive battle to try and keep customers against Dell, Acer and Lenovo.  Prices will keep dropping, and profits eroding as the world goes mobile.  But despite spending $1.2billion to buy Palm (written off,) without any R&D, hard to see how this company returns profits to shareholders, generates new jobs, or launches new products for distributors and customers.

The new HP will be a software company.  But it comes to market with almost no share against monster market leader Amazon, and competitors Microsoft and Cisco who are fighting to remain relevant.  Even though HP spent $10B to buy ERP company Autonomy (written off) everyone has newer products, more innovation, more customers and more resources than HP.

Together there was faint hope for HP.  The company could offer complete solutions.  It could work with its distributors and value added resellers to develop unique vertical market solutions.  By tweaking the various parts, hardware and software, HP had the possibility of building solutions that could justify premium prices and possibly create growth.  But separated, these are now 2 “focused” companies that lack any new innovations, sell commodity products and lack enough share to matter in markets where share leads to winning developers and enterprise customers.

HP-10C-MThis may be the last stop for investors, and employees, to escape HP before things get a lot worse.

HP was the company that founded silicon valley.  It was the tech place to work in the 1960s, 1970s and early 1980s.  It was the Google, Facebook or Apple of that earlier time.  When Carly Fiorina took over the dynamic and highly new product driven company in July, 1999 it was worth $45/share.  She bought Compaq and flung HP into the commodity PC business, cutting new products and R&D.  By the time the Board threw her out in 2005 the company was worth $35/share.

Mark Hurd took the CEO job, and he slashed and burned everything in sight.  R&D was almost eliminated, as was new product development.  If it could be outsourced, it was.  And he whacked thousands of jobs.  By killing any hope of growing the company, he improved the bottom line and got the stock back to $45.

Which is where it was 5 years ago today.  But now HP is worth $35/share, once again.  For investors, it’s been 25 years of up, down and sideways.  The last 5 years the DJIA went up 80%; HP down 24%.

Companies cannot add value unless they develop new products, new solutions, new markets and grow.  Restructuring after restructuring adds no value – as HP has demonstrated.  For long-term investors, this is a painful lesson to learn.  Let’s hope folks are getting the message loud and clear now.

How the trend to renting will kill the PC, and dramatically change IT

How the trend to renting will kill the PC, and dramatically change IT

Last week I gave 1,000 VHS video tapes to Goodwill Industries. These had been accumulated through 30 years of home movie watching, including tapes purchased for entertaining my 3 children.

VCR-VHS

It was startling to realize how many of these I had bought, and also surprising to learn they were basically valueless. Not because the content was outdated, because many are still popular titles. But rather because today the content someone wants can be obtained from a streaming download off Amazon or Netflix more conveniently than dealing with these tapes and a mechanical media player.

It isn’t just a shift in technology that made those tapes obsolete. Rather, a major trend has shifted. We don’t really seek to “own” things any more. We’ve become a world of “renters.”

The choice between owning and renting has long been an option. We could rent video tapes, and DVDs. But even though we often did this, most Boomers also ended up buying lots of them. Boomers wanted to own things. Owning was almost always considered better than renting.

Boomers wanted to own their cars, and often more than one. Auto renting was only for business trips. Boomers wanted to own their houses, and often more than one. Why rent a summer home, when, if you could afford it, you could own one. Rent a boat? Wouldn’t it be better to own your own boat (even if you only use it 10 times/year?)

Now we think very, very differently. I haven’t watched a movie on any hard media in several years. When I find time for video entertainment, I simply download what I want, enjoy it and never think about it again. A movie library seems – well – unnecessary.

As a Boomer, there’s all those CDs, cassette tapes (yes, I have them) and even hundreds of vinyl records I own. Yet, I haven’t listened to any of them in years. It’s far easier to simply turn on Pandora or Spotify – or listen to a channel I’ve constructed on YouTube. I really don’t know why I continue to own those old media players, or the media.

Since the big real estate meltdown many people are finding home ownership to be not as good as renting. Why take such a huge risk, paying that mortgage, if you don’t have to?

That this is a trend is even clearer generationally. Younger people really don’t see the benefit of home ownership, not when it means taking on so much additional debt.   Home ownership costs are so high that it means giving up a lot of other things. And what’s the benefit? Just to say you own your home?

Where Boomers couldn’t wait to own a car, young people are far less likely. Especially in, or near, urban areas. The cost of auto ownership, including maintenance, insurance and parking, becomes really expensive. Compared with renting a ZipCar for a few hours when you really need a car, ownership seems not only expensive, but a downright hassle.

And technology has followed this trend. Once we wanted to own a PC, and on that PC we wanted to own lots of data – including movies, pictures, books – anything that could be digitized. And we wanted to own software applications to capture, view, alter and display that data. The PC was something that fit the Boomer mindset of owning your technology.

But that is rapidly becoming superfluous. With a mobile device you can keep all your data in a cloud. Data you want to access regularly, or data you want to rent. There’s no reason to keep the data on your own hard drive when you can access it 24×7 everywhere with a mobile device.

And the same is true for acting on the data. Software as a service (SaaS) apps allow you to obtain a user license for $10-$20/user, or $.99, or sometimes free. Why spend $200 (or a lot more) for an application when you can accomplish your task by simply downloading a mobile app?

So I no longer want to own a VCR player (or DVD player for that matter) to clutter up my family room. And I no longer want to fill a closet with tapes or cased DVDs. Likewise, I no longer want to carry around a PC with all my data and applications. Instead, a small, easy to use mobile device will allow me to do almost everything I want.

It is this mega trend away from owning, and toward a simpler lifestyle, that will end the once enormous PC industry. When I can do all I really want to do on my connected device – and in fact often do more things because of those hundreds of thousands of apps – why would I accept the size, weight, complexity, failure problems and costs of the PC?

And, why would I want to own something like Microsoft Office? It is a huge set of applications which contain dozens (hundreds?) of functions I never use.   Wouldn’t life be much simpler, easier and cheaper if I acquire the rights to use the functionality I need, when I need it?

There was a time I couldn’t imagine living without my media players, and those DVDs, CDs, tapes and records. But today, I’m giving lots of them away – basically for recycling. While we still use PCs for many things today, it is now easy to visualize a future where I use a PC about as often as I now use my DVD player.

In that world, what happens to Microsoft? Dell? Lenovo?

The implications of this are far-reaching for not only our personal lives, and personal technology suppliers, but for corporate IT. Once IT managed mainframes. Then server farms, networks and thousands of PCs. What will a company need an IT department to do if employees use their own mobile devices, across common networks, using apps that cost a few bucks and store files on secure clouds?

If corporate technology is reduced to just operating some “core” large functions like accounting, how big – or strategic – is IT? The “T” (technology) becomes irrelevant as people focus on gathering and analyzing information. But that’s not been the historical training for IT employees.

Further, if Salesforce.com showed us that even big corporations can manage something as critical as their customer information in a SaaS environment on mobile devices, is it not possible to imagine accounting and supply chain being handled the same way? If so, what role will IT have at all?

The trend toward renting rather than owning is monumental. It affects every business. But in an ironic twist of fate, it may dramatically reduce the focus on IT that has been so critical for the Boomer generation.

 

Microsoft’s Last Stand

Microsoft’s Last Stand

Over the last couple of weeks big announcements from Apple, IBM and Microsoft have set the stage for what is likely to be Microsoft’s last stand to maintain any sense of personal technology leadership.

Custer Tries Holding Off An Unstoppable Native American Force

Custer Tries Holding Off An Unstoppable Native American Force

To many consumers the IBM and Apple partnership probably sounded semi-interesting.  An app for airplane fuel management by commercial pilots is not something most people want.  But what this announcement really amounted to was a full assault on regaining dominance in the channel of Value Added Resellers (VARs) and Value Added Dealers (VADs) that still sell computer “solutions” to thousands of businesses.  Which is the last remaining historical Microsoft stronghold.

Think about all those businesses that use personal technology tools for things like retail point of purchase, inventory control, loan analysis in small banks, restaurant management, customer data collection, fluid control tracking, hotel check-in, truck routing and management, sales force management, production line control, project management — there is a never-ending list of business-to-business applications which drive the purchase of literally millions of devices and applications.  Used by companies as small as a mom-and-pop store to as large  as WalMart and JPMorganChase.  And these solutions are bundled, sold, delivered and serviced by what is collectively called “the channel” for personal technology.

This “channel” emerged after Apple introduced the Apple II running VisiCalc, and businesses wanted hundreds of these machines. Later, bundling educational software with the Apple II created a near-monopoly for Apple channel partners who bundled solutions for school systems.

But, as the PC emerged this channel shifted.  IBM pioneered the Microsoft-based PC, but IBM had long used a direct sales force. So its foray into personal computing did a very poor job of building a powerful sales channel.  Even though the IBM PC was Time magazine’s “Man of the Year” in 1982, IBM lost its premier position largely because Microsoft took advantage of the channel opportunity to move well beyond IBM as a supplier.

Microsoft focused on building a very large network of developers creating an enormous variety of business-to-business applications on the Windows+Intel (Wintel) platform.  Microsoft created training programs for developers to use its operating system and tools, while simultaneously cultivating manufacturers (such as Dell and Compaq) to build low cost machines to run the software.  “Solution selling” was where VARs bundled what small businesses – and even many large businesses – needed by bringing together developer applications with manufacturer hardware.

It only took a few years for Microsoft to overtake Apple and IBM by dominating and growing the VAR channel.  Apple did a poor job of creating a powerful developer network, preferring to develop everything users should want itself, so quickly it lacked a sufficient application base.  IBM constantly tried to maintain its direct sales model (and upsell clients from PCs to more expensive hardware) rather than support the channel for developing applications or selling solutions based on PCs.

But, over the last several years Microsoft played “bet the company” on its launch of Windows 8.  As mobile grew in hardware sales exponentially, and PC sales flattened (then declined,) Microsoft was tepid regarding any mobile offering.  Under former CEO Steve Ballmer, Microsoft preferred creating an “all-in-one” solution via Win8 that it hoped would keep PC sales moving forward while slowly allowing its legions of Microsoft developers to build Win8 apps for mobile Surface devices — and what it further hoped would be other manufacturer’s tablets and phones running Win8.

This flopped.  Horribly. Apple already had the “installed base” of users and mobile developers, working diligently to create new apps which could be released via its iTunes distribution platform.  As a competitive offering, Google had several years previously launched the Android operating system, and companies such as HTC and Samsung had already begun building devices. Developers who wanted to move beyond Apple were already committed to Android.  Microsoft was simply far too late to market with a Win8 product which gave developers and manufacturers little reason to invest.

Now Microsoft is in a very weak position.  Despite much fanfare at launch, Microsoft was forced to take a nearly $1B write-off on its unsellable Surface devices.  In an effort to gain a position in mobile, Microsoft previously bought phone maker Nokia, but it was simply far too late and without a good plan for how to change the Apple juggernaut.

Apple is now the dominant player in mobile, with the most users, developers and the most apps.  Apple has upended the former Microsoft channel leadership position, as solution sellers are now offering Apple solutions to their mobile-hungry business customers.  The merger with IBM brings even greater skill, and huge resources, to augmenting the base of business apps running on iOS and its devices (presently and in the future.)  It provides encouragement to the VARs that a future stream of great products will be coming for them to sell to small, medium and even large businesses.

Caught in a situation of diminishing resources, after betting the company’s future on Windows 8 development and launch, and then seeing PC sales falter, Microsoft has now been forced to announce it is laying off 18,000 employees.  Representing 14% of total staff, this is Microsoft’s largest reduction ever. Costs for the downsizing will be a massive loss of $1.1-$1.6B – just one year (almost to the day) after the huge Surface write-off.

Recognizing its extraordinarily weak market position, and that it’s acquisition of Nokia did little to build strength with developers while putting it at odds with manufacturers of other mobile devices, the company is taking some 12,000 jobs out of its Nokia division – ostensibly the acquisition made at a cost of $7.2B to blunt iPhone sales.  Every other division is also suffering headcount reductions as Microsoft is forced to “circle the wagons” in an effort to find some way to “hold its ground” with historical business customers.

Today Apple is very strong in the developer community, already has a distribution capability with iTunes to which it is adding mobile payments, and is building a strong channel of VARs seeking mobile solutions.  The IBM partnership strengthens this position, adds to Apple’s iOS developers, guarantees a string of new solutions for business customers and positions iOS as the platform of choice for VARs and VADs who will use iBeacon and other devices to help businesses become more capable by utilizing mobile/cloud technology.

Meanwhile, Microsoft is looking like the 7th Cavalry at the Little Bighorn.  Microsoft is surrounded by competitors augmenting iOS and Android (and serious cloud service suppliers like Amazon,) resources are depleting as sales of “core” products stagnate and decline and write-offs mount, and watching as its “supply line” developer channel abandons Windows 8 for the competitive alternatives.

CEO Nadella keeps saying that that cloud solutions are Microsoft’s future, but how it will effectively compete at this late date is as unclear as the email announcement on layoffs Nokia’s head Stephen Elop sent to employees.  Keeping its channel, long the source of market success for Microsoft, from leaving is Microsoft’s last stand.  Unfortunately, Nadella’s challenge puts him in a position that looks a lot like General Custer.