Microsoft – Hope springs external

Microsoft’s new CEO must be an outsider.

• I do not envy John Thompson.
• The fate of one of the worlds great companies rests on his shoulders and being on the inside makes it much harder to see the wood for the trees.
• The biggest choice to make is whether to pick and insider or an outsider to lead the company when Ballmer retires.
• There are some truly exceptional people at Microsoft but this is not about ability.
• I believe that the future of this company rests on the character, charisma and sheer willpower of its next leader.
• Microsoft has become a collection of separate businesses that exist in glorious isolation.
• They don’t talk. They don’t collaborate. They don’t share.
• They are almost totally independent from each other and, worst of all, they are proud of it.
• Historically, this has worked very well but now things have to change.
• If they do not, then Microsoft will continue to lose its grip on the PC market and revenues will begin a long, irreversible decline.
• Digital Life is a classic example. Microsoft has a fantastic collection of assets that together make up a comprehensive offering of services within which a user can live his Digital Life.
• For this offering to have the cohesion and appeal of Google, these services must be but together with a single sign on with a shared database of user data.
• Unfortunately at the moment all of these services are buried inside one of the ivory towers and the services are suffering from it.
• The strategy announced over the summer was exactly what I wanted to hear but it takes more than a bit of PR to get a leopard to change its spots.
• The ivory towers must be brought crashing down and the company rebuilt from the ground up.
• This is a task that I believe can only be achieved by an outsider, as someone who has been an employee will be too much a part of the system as it is today.
• Sony, has been struggling with similar issues and it took the very real possibility of ceasing to exist as a consumer electronics company to shake it from its slumbers.
• Having executives responsible for both a vertical and a horizontal part of the business is showing some progress but there is still a very long way to go.
• Microsoft will never feel this kind of pressure and it faces a much longer, slower decline if things do not change.
•  Change is difficult but not impossible. Never forget that Apple teetered on the edge of bankruptcy before returning as one of the most influential companies on the planet.
• What is needed is the character, charisma and willpower of a truly great leader to turn this company around and this must come from outside.
• I am confident that this can be achieved with the right person in charge but John Thompson and his crew have to find that person.
• At 11.3x 2014 PER, Microsoft is very undemanding and the stock is pricing in no real change to the current status quo.
• This is why I see opportunity in the stock but there is likely to be a little while to wait for a catalyst as the PC market is still steadily declining.
• Yahoo! and Microsoft remain my two favourite stocks to look at when choosing where to invest in the ecosystem theme.