Gen. Ballmer's Four-Prong Offensive
By Jim Seymour
Special to TheStreet.com
2/23/99 11:52 AM ET
While Microsoft (MSFT:Nasdaq) continues to snatch defeat from the jaws of victory in a Washington courtroom, I've been looking ahead a little, thinking about what the government will ask for, what Judge Thomas Penfield Jackson might grant as a remedy, what will happen with that remedy on appeal ... and, of course, how that might affect the stock price.
My fundamental thinking hasn't changed: Microsoft loses at trial and wins on appeal. I've certainly been dismayed by the ineptness of Microsoft's legal team and witnesses, who seem more like David Boies' stealth agents for the government's case than people trying to bolster Mister Softee's arguments. From MIT economist Richard Schmalensee to the Microsoft execs the company put on the stand once it got its turn at bat, their testimony has clearly worked to Big Red(mond)'s disadvantage.
That won't affect the outcome at trial, which was forecast from the beginning, and throughout the trial, by Judge Jackson's rulings and comments from the bench. This is a well-orchestrated operation, mounted by determined people of undoubted goodwill who are simply mistaken. But this inept defense by Microsoft diminishes that clean and highly arguable-on-appeal trial record Microsoft's counsel had to build.
I still think the facts -- less important at this trial than in any in recent memory, but of more than passing interest in an appeal -- argue for a finding of not guilty on the government's charges. That Microsoft is run with all the style, finesse and testosterone of a Texas high school football locker room at halftime -- with new Microsoft President Steve Ballmer now in a featured role as the raving head coach -- has absolutely nothing to do with what it's charged with in this proceeding. Bad table manners and petulance on the playground do not illegal monopolists make.
But Jackson's gonna hang 'em, a victorious Boies is going to ask for the sun, moon and stars as a penalty, and Jackson is going to give him at least some of what he asks for. What should that be?
The Justice Department didn't go to this extraordinary effort and expense just to ask for a cease-and-desist order. But the history of complex antitrust remedies that require ongoing monitoring -- such as the Federal Trade Commission's 1975 demand that Xerox (XRX:NYSE) license its copier-technology patents -- is dismal, so I don't think Justice will ask for open licensing of Windows to all comers.
Let's set aside for a moment that possibility and the rest of the penalties I outlined in two columns here in November. Instead, let's turn the telescope around for a minute and ask -- gasp! -- what changes Microsoft might itself put in place, for its own good.
This may be heresy in trial-angst-obsessed Washington right now. Is it even possible, wags will ask, that Microsoft might make changes on its own? But it's topic No. 1 these days on the Microsoft campuses east of Seattle.
In December, Ballmer held a tough, plain-spoken meeting with about 50 Microsoft senior managers. (Imagine the net worth gathered in that room!) He laid down the law about the company's increasingly evident problems away from the courtroom, and he made it clear that things would change ... or else. He suggested some fundamental changes and since then has quietly been preparing to put those changes in place.
Anyone worried that promoting the tough, intense Ballmer to his new job last July might have been a mistake can rest easy. In fact, this wasn't only a succession issue -- Ballmer has always been the anointed, now-and-forever No. 2 -- nor was it just, as widely reported, a chance to give Mr. Bill some quality thinking time on the Big Issues. Rather, it was a smart move to put an incredibly strong, tightly focused leader at the top of the company's day-to-day business. Ballmer's subsequent behind-the-scenes preparation of the management and corporate structure he wants -- with Mr. Bill's approval, of course -- is a measure of just how determined he is to shake off Microsoft's miasma.
These decisive, very un-Gatesian changes look smart, and they're likely to fix the ever-more-evident rips in the fabric of Microsoft's relationships with its customers and its public.
Microsoft has got to do something about its internal fumbling of product release schedules, about its alienation from customers of every size, about its sorry development tools, about its buggy products. In short, it's time for Microsoft to grow up.
Microsoft representatives have been leaking some details of Gen. Ballmer's proposed reorganization over the past couple of weeks. Look for a formal announcement very shortly, with details. Broadly, Ballmer is going to restructure the company into four divisions, each focused on a different class of customers. Call 'em Consumer Products, Enterprise (i.e., corporate) Products, Developer Products and Knowledge Workers' Needs.
This is a lot more forward-looking reorganization than just splitting into applications vs. operating-systems divisions, or online vs. nononline, or tools vs. apps, as the Justice Department might demand. With a focus on customers' needs across the board, rather than a navel-gazing segmentation by internal groups, Microsoft stands a good chance of addressing, and probably fixing, its major problems.
But note that this also dovetails nicely with what a Washington-savvy/PR-savvy Microsoft might do to bolster its arguments against a victorious David Boies' Solomonic arguments for cutting the baby in multiple parts. If Microsoft gets this plan on the table -- and does so before the conclusion of the trial -- it has a robust answer to Boies' inevitable demands. "We've already broken the company up ourselves," it will say, "in ways which really do respond to concerns about how we've operated in the past."
Sophistry? Sure. But effective, and one hell of an (apparent) show of good faith.
But this isn't just legal-defense-by-corporate-reorganization. This kind of healthy shake-up really is what Microsoft needs right now. Ballmer's legendary toughness -- and let me tell you, he is one of the toughest business leaders I have known, with the scars and well-earned bitter enemies to prove it -- is exactly right for getting Microsoft back on track.
And maybe for persuading certain judges that as inept as Microsoft's defense has been at trial, there is a new mood and attitude in Redmond that moots Boies' conjectures.
A risk, of course, is that Ballmer's history as an intensely, legendarily competitive manager might persuade Boies, Jackson and others in Washington that the company is actually going in the opposite direction, becoming even more predatory than they believe it has been in the past.
But some risks you've just gotta take.
Smart move, Gen. Ballmer. Mr. Boies, pay attention.
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At the time of publication, neither Seymour nor Seymour Group held positions in the companies discussed in this column, though positions can change at any time. While Seymour cannot provide investment advice or recommendations, he invites your feedback.
TOP
|
