Facebook’s Surge, Apple’s Slide and Chipotle’s Stall – It’s All About Growth

Facebook’s Surge, Apple’s Slide and Chipotle’s Stall – It’s All About Growth

Growth fixes a multitude of sins.  If you grow revenues enough (you don’t even need profits, as Amazon has proven) investors will look past a lot of things.  With revenue growth high enough, companies can offer employees free meals and massages. Executives and senior managers can fly around in private jets.  Companies can build colossal buildings as testaments to their brand, or pay to have thier names on  public buildings.  R&D budgets can soar, and product launches can fail. Acquisitions are made with no concerns for price. Bonuses can be huge.  All is accepted if revenues grow enough.

Just look at Facebook.  Today Facebook announced today that for the quarter ended March, 2016 revenues jumped to $5.4B from $3.5B a year ago.  Net income tripled to $1.5B from $500M.  And the company is basically making all its revenue – 82% – from 1 product, mobile ads.  In the last few years Facebook paid enormous premiums to buy WhatsApp and Instagram – but who cares when revenues grow this fast.

Anticipating good news, Facebook’s stock was up a touch today. But once the news came out, after-hours traders pumped the stock to over $118//share, a new all time high. That’s a price/earnings (p/e) multiple of something like 84.  With growth like that Facebook’s leadership can do anything it wants.

But, when revenues slide it can become a veritable poop puddle. As Apple found out.

Rumors had swirled that Apple was going to say sales were down.  And the stock had struggled to make gains from lows earlier in 2016. When the company’s CEO announced Tuesday that sales were down 13% versus a year ago the stock cratered after-hours, and opened this morning down 10%.  Breaking a streak of 51 straight quarters of revenue growth (since 2003) really sent investors fleeing.  From trading around $105/share the last 4 days, Apple closed today at ~$97.  $40B of equity value was wiped out in 1 day, and the stock trades at a p/e multiple of 10.

The new iPhone 6se outsold projections, iPads beat expectations.  First year Apple Watch sales exceeded first year iPhone sales.  Mac sales remain much stronger than any other PC manufacturer. Apple iBeacons and Apple Pay continue their march as major technologies in the IoT (Internet of Things) market. And Apple TV keeps growing.  There are about 13M users of Apple’s iMusic.  There are 1.5M apps on the iTunes store.  And the installed base keeps the iTunes store growing.  Share buybacks will grow, and the dividend was increased yet again.  But, none of that mattered when people heard sales growth had stopped.  Now many investors don’t think Apple’s leadership can do anything right.

Growth StallYet, that was just one quarter.  Many companies bounce back from a bad quarter.  There is no statistical evidence that one bad quarter is predictive of the next.  But we do know that if sales decline versus a year ago for 2 consecutive quarters that is a Growth Stall.  And companies that hit a Growth Stall rarely (93% of the time) find a consistent growth path ever again.  Regardless of the explanations, Growth Stalls are remarkable predictors of companies that are developing a gap between their offerings, and the marketplace.

Which leads us to Chipotle.  Chipotle announced that same store sales fell almost 30% in Q1, 2016.  That was after a 15% decline in Q4, 2015. And profits turned to losses for the quarter.  That is a growth stall.  Chipotle shares were $750/share back in early October. Now they are $417 – a drop of over 44%.

Customer illnesses have pointed to a company that grew fast, but apparently didn’t have its act together for safe sourcing of local ingredients, and safe food handling by employees.  What seemed like a tactical problem has plagued the company, as more customers became ill in March.

Whether that is all that’s wrong at Chipotle is less clear, however.  There is a lot more competition in the fast casual segment than 2 years ago when Chipotle seemed unable to do anything wrong.  And although the company stresses healthy food, the calorie count on most portions would add pounds to anyone other than an athlete or construction worker – not exactly in line with current trends toward dieting.  What frequently looks like a single problem when a company’s sales dip often turns out to have multiple origins, and regaining growth is nearly always a lot more difficult than leadership expects.

Growth is magical.  It allows companies to invest in new products and services, and buoy’s a stock’s value enhancing acquisition ability.  It allows for experimentation into new markets, and discovering other growth avenues.  But lack of growth is a vital predictor of future performance.  Companies without growth find themselves cost cutting and taking actions which often cause valuations to decline.

Right now Facebook is in a wonderful position.  Apple has investors rightly concerned.  Will next quarter signal a return to growth, or a Growth Stall?  And Chipotle has investors heading for the exits, as there is now ample reason to question whether the company will recover its luster of yore.

Why Microsoft Windows 10 Really Doesn’t Matter

Yesterday Microsoft conducted a pre-launch of Windows 10, demonstrating its features in an effort to excite developers and create some buzz before consumer launch later in 2015.

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By and large, nobody cared.  Were you aware of the event? Did you try to watch the live stream, offered via the Microsoft web site?  Were you eager to read what people thought of the product?  Did you look for reviews in the Wall Street Journal, USA Today and other general news outlets?

Windows10_1

Microsoft really blew it with Windows 8 – which is the second most maligned Windows product ever, exceeded only by
Vista.  But that wasn’t hard to predict, in June, 2012.  Even then it was clear that Windows 8, and Surface tablets, were designed to defend and extend the installed Windows base, and as such the design precluded the opportunity to change the market and pull mobile users to Microsoft.

And, unfortunately, that is how Windows 10 has been developed.  At the event’s start Microsoft played a tape driving home how it interviewed dozens and dozens of loyal Windows customers, asking them what they didn’t like about 8, and what they wanted in a Windows upgrade.  That set the tone for the new product.

Microsoft didn’t seek out what would convert all those mobile users already on iOS or Android to throw away their devices and buy a Microsoft product.  Microsoft didn’t ask its defected customers what it would take to bring them back, nor did it ask the over 50% of the market using Windows 7 or older products what it would take to get them to go to Windows mobile rather than an iPad or Galaxy tablet.  Nope.  Microsoft went to its installed base and asked them what they would like.

Imagine it’s 1975 and for two decades you have successfully made and sold small offset printing presses.  Every single company of any size has one in their basement.  But customers have started buying really simple, easy to use Xerox machines.  Fewer admins are sending even fewer jobs to the print shop in the basement, as they choose to simply run off a bunch of copies on the Xerox machine.  Of course these copies are more expensive than the print shop, and the quality isn’t as good, but the users find the new Xerox machines good enough, and they are simple and convenient.

What are you to do if you make printing presses?  You probably need to find out how you can get into a new product that actually appeals to the users who no longer use the print shop.  But, instead, those companies went to the print shop operators and asked them what they wanted in a new, small print machine.  And then the companies upgraded their presses and other traditional printing products based upon what that installed base recommended.  And it wasn’t long before their share of printing eroded to a niche of high-volume, and often color, jobs.  And the commercial print market went to Xerox.

That’s what Microsoft did with Windows 10.  It asked its installed base what it wanted in an operating system.  When the problem isn’t the installed base, its the substitute product that is killing the company.  Microsoft didn’t need input from its installed base of loyal users, it needed input from people who have quit using HP laptops in favor of iPads.

There are a lot of great new features in Windows 10.  But it really doesn’t matter.

The well spoken presenters from Microsoft laid out how Windows 10 would be great for anyone who wants to go to an entirely committed Windows environment.  To achieve Microsoft’s vision of the future every one of us will throw away our iOS and Android products and go to Windows on every single device.  Really.  There wasn’t one demonstration of how Windows would integrate with anything other than Windows.  And there appeared on intention of making the future an interoperable environment.  Microsoft’s view was we would use Windows on EVERYTHING.

Microsoft’s insular view is that all of us have been craving a way to put Windows on all our devices.  We’ve been sitting around using our laptops (or desktops) and saying “I can’t wait for Microsoft to come out with a solution so I can throw away my iPhone and iPad.  I can’t wait to tell everyone in my organization that now, finally, we have an operating system that IT likes so much that we want everyone in the company to get  rid of all other technologies and use Windows on their tablets and phones – because then they can integrate with the laptops (that most of us don’t use hardly at all any longer.)”

Microsoft even went out of its way to demonstrate how well Win10 works on 2-in-1 devices, which are supposed to be both a tablet and a laptop.  But, these “hybrid” devices really don’t make any sense.  Why would you want something that is both a laptop and a tablet?  Who wants a hybrid car when you can have a Tesla?  Who wants a vehicle that is both a pick-up and a car (once called the El Camino?) Microsoft thinks these are good devices, because Microsoft can’t accept that most of us already quit using our laptop and are happy enough with a tablet (or smartphone) alone!

Microsoft presenters repeatedly reminded us that Windows is evolving.  Which completely ignores the fact that the market has been disrupted.  It has moved from laptops to mobile devices.  Yes, Windows has a huge installed base on machines that we use less and less.  But Windows 10 pretends that there does not exist today an equally huge, and far more relevant, installed base of mobile devices that already has millions of apps people use every single day over and over.  Microsoft pretended as if there is no world other than Windows, and that a more robuts Windows is something people can’t wait to use!  We all can’t wait to go back to a exclusive Microsoft world, using Windows, Office, the new Spartan browser – and creating documents, spreadsheets and even presentations using Office, with those hundreds of complex features (anyone know how to make a pivot table?) on our phones!

Just like those printing press manufacturers were sure people really wanted documents printed on presses, and couldn’t wait to unplug those Xerox machines and return to the old way of doing things.  They just needed presses to have more features, more capabilities, more speed!

The best thing in Windows 10 is Cortana, which is a really cool, intelligent digital assistant.  But, rather than making Cortana a tool developers can buy to integrate into their iOS or Android app the only way a developer can use Cortana is if they go into this exclusive Windows-only world.  That’s a significant request.

Microsoft made this mistake before.  Kinect was a great tool.  But the only way to use it, initially, was on an xBox – and still is limited to Windows.  Despite its many superb features, Kinect didn’t develop anywhere near its potential.  Cortana now suffers from the same problem.  Rather than offering the tool so it can find its best use and markets, Microsoft requires developers and consumers buy into the Windows-exclusive world if you want to use Cortana.

Microsoft hasn’t yet figured out that it lost relevance years ago when it missed the move to mobile, and then launched Windows 8 and Surface to markets that didn’t really want those products.  Now the market has gone mobile, and the leader isn’t Microsoft.  Microsoft has to find a way to be relevant to the millions of people using alternative products, and the Windows 10 vision, which excludes all those competing devices, simply isn’t it.

There was lots of neat geeky stuff shown.  Surface tablets using Windows 10 with an xBox app can now do real gaming, which looks pretty cool and helps move Microsoft forward in mobile gaming.  That may be a product that sets Sony’s Playstation and Nintendo’s Wii on their heels.  But that’s gaming, and historically not where Microsoft makes any money (nor for that matter does Sony or Nintendo.)

There is a new interactive whiteboard that integrates Skype and Windows tablets for digital enhancement of brainstorming meetings.  But it is unclear how a company uses it when most employees already have iPhones or Samsung S5s or Notes.  And for the totally geeky there was a demo of a holographic headset.  But when it comes to disruptive products like this success requires finding really interesting applications that otherwise cannot be completed, and then the initial customers who have a really desperate need for that application who will become devoted users.

Launching such disruptive products has long been the bane of Microsoft’s existence.  Microsoft thinks in mass market terms, and selling to its base.  Not developing breakthrough applications and finding niche markets to launch new uses.  Nor has Microsoft created a developer community aligned with that kind of work.  They have long been taught to simply continue to do things that defend and extend the traditional base of product uses and customers.

The really big miss for this meeting was understanding developer needs.  Today developers have an enormous base of iOS and Android users to whom they can sell their products.  Windows has less than 3% share in mobile devices.  What developer would commit their resources to developing products for Windows 10, which has an installed base only in laptops and desktops?  In other words, yesterday’s technology base?  Especially when to obtain the biggest benefits of Windows 10 that developer has to find end use customers (companies or consumers) willing to commit 100% to Windows everywhere – even including their televisions, thermostats and other devices in our ever smarter buildings?

Windows 10 has a lot of cool features.  But Microsoft made a big miss by listening to the wrong people.  By assuming its installed base couldn’t wait for a Microsoft-exclusive solution, and by behaving as if the installed base of mobile devices either didn’t exist or didn’t matter, the company showed its hubris (once again.)  If all it took to succeed were great products, the market would never have shifted from Macintosh computers to Windows machines in the 1990s.  Microsoft simply doesn’t realize that it lacks the relevance to pull of its grand vision, and as such Windows 10 has almost no chance of stopping the Apple/Google/Samsung juggernaut.

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The Kindle Smartphone is a Game Changer – But Not As You Think

The Kindle Smartphone is a Game Changer – But Not As You Think

Yesterday Amazon launched its new Kindle Fire smartphone.

“Ho-hum” you, and a lot of other people, said.  “Why?”  “What’s so great about this phone?”

The market is dominated by Apple and Samsung, to the point we no longer care about Blackberry – and have pretty much forgotten about all the money spent by Microsoft to buy Nokia and launch Windows 8.  The world doesn’t much need a new smartphone maker – as we’ve seen with the lack of excitement around Google/Motorola’s product launches.  And, despite some gee-whiz 3D camera and screen effects, nobody thinks Amazon has any breakthrough technology here.

But that would be completely missing the point.  Amazon probably isn’t even thinking of competing heads-up with the 2 big guns in the smartphone market.  Instead, Amazon’s target is everyone in retail.  And they should be scared to death.  As well as a lot of consumer products companies.

Amazon's new Kindle Fire smartphone

Amazon’s new Kindle Fire smartphone

Apple’s iPod and iPhones have some 400,000 apps.  But most people don’t use over a dozen or so daily.  Think about what you do on your phone:

  • Talk, texting and email
  • Check the weather, road conditions, traffic
  • Listen to music, or watch videos
  • Shopping (look for products, prices, locations, specs, availability, buy)

Now, you may do several other things.  But (maybe not in priority,) these are probably the top 4 for 90% of people.

If you’re Amazon, you want people to have a great shopping experience.  A GREAT experience.  You’ve given folks terrific interfaces, across multiple platforms.  But everything you do with an app on iPhones or Samsung phones involves negotiating with Apple or Google to be in their store – and giving them revenue.  If you could bypass Apple and Google – a form of retail “middleman” in Amazon’s eyes – wouldn’t you?

Amazon has already changed retail markedly.  Twenty years ago a retailer would say success relied on 2 things:

  1. Store location and layout.  Be in the right place, and be easy to shop.
  2. Merchandise the goods well in the store, and have them available.

Amazon has killed both those tenets of retail.  With Amazon there is no store – there is no location.  There are no aisles to walk, and no shelves to stock.  There is no merchandising of products on end caps, within aisles or by tagging the product for better eye appeal.  And in 40%+ cases, Amazon doesn’t even stock the inventory.  Availability is based upon a supplier for whom Amazon provides the storefront and interface to the customer, sending the order to the supplier for a percentage of the sale.

And, on top of this, the database at Amazon can make your life even easier, and less time consuming, than a traditional store.  When you indicate you want item “A” Amazon is able to show you similar products, show you variations (such as color or size,) show you “what goes with” that product to make sure you buy everything you need, and give you different prices and delivery options.

Many retailers have spent considerably training employees to help customers in the store.  But it is rare that any retail employee can offer you the insight, advice and detail of Amazon.  For complex products, like electronics, Amazon can provide  detail on all competitive products that no traditional store could support. For home fix-ups Amazon can provide detailed information on installation, and the suite of necessary ancillary products, that surpasses what a trained Home Depot employee often can do.  And for simple products Amazon simply never runs out of stock – so no asking an aisle clerk “is there more in the back?”

And it is impossible for any brick-and-mortar retailer to match the cost structure of Amazon.  No stores, no store employees, no cashiers, 50% of the inventory, 5-10x the turns, no “obsolete inventory,” no inventory loss – there is no way any retailer can match this low cost structure. Thus we see the imminent failure of Radio Shack and Sears, and the chronic decline in mall rents as stores go empty.

Some retailers have tried to catch up with Amazon offering goods on-line.  But the inventory is less, and delivery is still often problematic.  Meanwhile, as they struggle to become more digital these retailers are competing on ground they know precious little about.  It is becoming commonplace to read about hackers stealing customer data and wreaking havoc at Michaels Stores and Target.  Thus on-line customers have far more faith in Amazon, which has 2 decades of offering secure transactions and even offers cloud services secure enough to support major corporations and parts of the U.S. government.

And Amazon, so far, hasn’t even had to make a profit.  It’s lofty price/earnings multiple of 500 indicates just how little “e” there is in its p/e.  Amazon keeps pouring money into new ways to succeed, rather than returning money to shareholders via stock buybacks or dividends.  Or dumping it into chronic store remodels, or new store construction.

Today, you could shop at Amazon from your browser on any laptop, tablet or phone.  Or, if you really enjoy shopping on-line you can now obtain a new tablet or phone from Amazon which makes your experience even better.  You can simply take a picture of something you want, and your new Amazon smartphone will tell you how to buy it on-line, including price and delivery.  No need to leave the house.  Want to see the product in full 360 degrees? You have it on your 3D phone.  And all your buying experience, customer reviews, and shopping information is right at your fingertips.

Amazon is THE game changer in retail.  Kindle was a seminal product that has almost killed book publishers, who clung way too long to old print-based business models.  Kindle Fire took direct aim at traditional retailers, from Macy’s to Wal-Mart, in an effort to push the envelope of on-line shopping.  And now the Kindle Fire smartphone puts all that shopping power in your palm, convenient with your other most commonplace uses such as messaging, fact finding, listening or viewing.

This is not a game changing smartphone in comparison with iPhone 5 or Galaxy S 5.  But, as another salvo in the ongoing war for controlling the retail marketplace this is another game changer.  It continues to help everyone think about how they shop today, and in the future.  For anyone in retail, this may well be seen as another important step toward changing the industry forever, and making “every day low prices” an obsolete (and irrelevant) retail phrase.  And for consumer goods companies this means the need to distribute products on-line will forever change the way marketing and selling is done – including who makes how much profit.

 

Why Apple Investors Are Deservedly Worried

Apple announced the new iPhones recently.  And mostly, nobody cared.

Remember when users waited anxiously for new products from Apple?  Even the media became addicted to a new round of Apple products every few months.  Apple announcements seemed a sure-fire way to excite folks with new possibilities for getting things done in a fast changing world. 

But the new iPhones, and the underlying new iPhone software called iOS7, has almost nobody excited. 

Instead of the product launches speaking for themselves, the CEO (Tim Cook) and his top product development lieutenants (Jony Ive and Craig Federighi) have been making the media rounds at BloombergBusinessWeek and USAToday telling us that Apple is still a really innovative place.  Unfortunately, their words aren't that convincing.  Not nearly as convincing as former product launches.

CEO Cook is trying to convince us that Apple's big loss of market share should not be troubling. iPhone owners still use their smartphones more than Android owners, and that's all we should care about.  Unfortunately, Apple profits come from unit sales (and app sales) rather than minutes used.  So the chronic share loss is quite concerning. 

Especially since unit sales are now growing barely in single digits, and revenue growth quarter-over-quarter, which sailed through 2012 in the 50-75% range, have suddenly gone completely flat (less than 1% last quarter.)  And margins have plunged from nearly 50% to about 35% – more like 2009 (and briefly in 2010) than what investors had grown accustomed to during Apple's great value rise.  The numbers do not align with executive optimism.

For industry aficianados iOS7 is a big deal.  Forbes Haydn Shaughnessy does a great job of laying out why Apple will benefit from giving its ecosystem of suppliers a new operating system on which to build enhanced features and functionality.  Such product updates will keep many developers writing for the iOS devices, and keep the battle tight with Samsung and others using Google's Android OS while making it ever more difficult for Microsoft to gain Windows8 traction in mobile. 

And that is good for Apple.  It insures ongoing sales, and ongoing profits.  In the slog-through-the-tech-trench-warfare Apple is continuing to bring new guns to the battle, making sure it doesn't get blown up.

But that isn't why Apple became the most valuable publicly traded company in America. 

We became addicted to a company that brought us things which were great, even when we didn't know we wanted them – much less think we needed them.  We were happy with CDs and Walkmen until we discovered much smaller, lighter iPods and 99cent iTunes.  We were happy with our Blackberries until we learned the great benefits of apps, and all the things we could do with a simple smartphone.  We were happy working on laptops until we discovered smaller, lighter tablets could accomplish almost everything we couldn't do on our iPhone, while keeping us 24×7 connected to the cloud (that we didn't even know or care about before,) allowing us to leave the laptop at the office.

Now we hear about upgrades.  A better operating system (sort of sounds like Microsoft talking, to be honest.)  Great for hard core techies, but what do users care?  A better Siri; which we aren't yet sure we really like, or trust.  A new fingerprint reader which may be better security, but leaves us wondering if it will have Siri-like problems actually working.  New cheaper color cases – which don't matter at all unless you are trying to downgrade your product (sounds sort of like P&G trying to convince us that cheaper, less good "Basic" Bounty was an innovation.) 

More (upgrades) Better (voice interface, camera capability, security) and Cheaper (plastic cases) is not innovation.  It is defending and extending your past success.  There's nothing wrong with that, but it doesn't excite us.  And it doesn't make your brand something people can't live without.  And, while it keeps the battle for sales going, it doesn't grow your margin, or dramatically grow your sales (it has declining marginal returns, in fact.)

And it won't get your stock price from $450-$475/share back to $700.

We all know what we want from Apple.  We long for the days when the old CEO would have said "You like Google Glass?  Look at this…….  This will change the way you work forever!!" 

We've been waiting for an Apple TV that let's us bypass clunky remote controls, rapidly find favorite shows and helps us avoid unwanted ads and clutter.  But we've been getting a tease of Dick Tracy-esque smart watches. 

From the world's #1 tech brand (in market cap – and probably user opinion) we want something disruptive!  Something that changes the game on old companies we less than love like Comcast and DirecTV.  Something that helps us get rid of annoying problems like expensive and bad electric service, or routers in our basements and bedrooms, or navigation devices in our cars, or thumb drives hooked up to our flat screen TVs —- or doctor visits.  We want something Game Changing!

Apple's new CEO seems to be great at the Sustaining Innovation game.  And that pretty much assures Apple of at least a few more years of nicely profitable sales.  But it won't keep Apple on top of the tech, or market cap, heap.  For that Apple needs to bring the market something big.  We've waited 2 years, which is an eternity in tech and financial markets.  If something doesn't happen soon, Apple investors deserve to be worried, and wary.

Microsoft’s $7.2B Nokia Mistake

Just over a week after Microsoft announces plans to replace CEO Steve Ballmer the company announced it will spend $7.2B to buy the Nokia phone/tablet business.  For those looking forward to big changes at Microsoft this was like sticking a pin in the big party balloon!

Everyone knows that Microsoft's future is at risk now that PC sales are declining globally at nearly 10% – with developing markets shifting even faster to mobile devices than the USA.  And Microsoft has been the perpetual loser in mobile devices; late to market and with a product that is not a game changer and has only 3% share in the USA

But, despite this grim reality, Microsoft has doubled-down (that's doubled its bet for non-gamblers) on its Windows 8 OS strategy, and continues to play "bet the company".  Nokia's global market share has shriveled to 15% (from 40%) since former Microsoft exec-turned-Nokia-CEO Stephen Elop committed the company to Windows 8.  Because other Microsoft ecosystem companies like HP, Acer and HP have been slow to bring out Win 8 devices, Nokia has 90% of the miniscule market that is Win 8 phones.  So this acquisition brings in-house a much deeper commitment to spending on an effort to defend & extend Microsoft's declining O/S products.

As I predicted in January, the #1 action we could expect from a Ballmer-led Microsoft is pouring more resources into fighting market leaders iOS and Android – an unwinnable war.  Previously there was the $8.5B Skype and the $400M Nook, and now a $7.2B Nokia.  And as 32,000 Nokia employees join Microsoft losses will surely continue to rise.  While Microsoft has a lot of cash – spending it at this rate, it won't last long!

Some folks think this acquisition will make Microsoft more like Apple, because it now will have both hardware and software which in some ways is like Apple's iPhone.  The hope is for Apple-like sales and margins soon.  But, unfortunately, Google bought Motorola months ago and we've seen that such revenue and profit growth are much harder to achieve than simply making an acquisition.  And Android products are much more popular than Win8.  Simply combining Microsoft and Nokia does not change the fact that Win8 products are very late to market, and not very desirable.

Some have postulated that buying Nokia was a way to solve the Microsoft CEO succession question, positioning Mr. Elop for Mr. Ballmer's job.  While that outcome does seem likely, it would be one of the most expensive recruiting efforts of all time.  The only reason for Mr. Elop to be made Microsoft CEO is his historical company relationship, not performance.  And that makes Mr. Elop is exactly the wrong person for the Microsoft CEO job! 

In October, 2010 when Mr. Elop took over Nokia I pointed out that he was the wrong person for that job – and he would destroy Nokia by making it a "Microsoft shop" with a Microsoft strategy.  Since then sales are down, profits have evaporated, shareholders are in revolt and the only good news has been selling the dying company to Microsoft!  That's not exactly the best CEO legacy. 

Mr. Elop's job today is to sell more Win8 mobile devices.  Were he to be made Microsoft CEO it is likely he would continue to think that is his primary job – just as Mr. Ballmer has believed.  Neither CEO has shown any ability to realize that the market has already shifted, that there are two leaders far, far in front with brand image, products, apps, developers, partners, distribution, market share, sales and profits. And it is impossible for Microsoft to now catch up.

It is for good reason that short-term traders pushed down Microsoft's share value after the acquisition was announced.  It is clear that current CEO Ballmer and Microsoft's Board are still stuck fighting the last war.  Still trying to resurrect the Windows and Office businesses to previous glory.  Many market anallysts see this as the last great effort to make Ballmer's bet-the-company on Windows 8 pay off.  But that's a bet which every month is showing longer and longer odds.

Microsoft is not dead.  And Microsoft is not without the ability to turn around.  But it won't happen unless the Board recognizes it needs to steer Microsoft in a vastly different direction, reduce (rather than increase) investments in Win8 (and its devices,) and create a vision for 2020 where Microsoft is highly relevant to customers.  So far, we're seeing all the wrong moves.