Foley on Microsoft

Has Microsoft Become a Leaner, Meaner Fighting Machine?

Mary Jo Foley looks at Microsoft's product line changes over the last year and wonders if it's indicative of a larger shift.

Over the past year, Microsoft tweaked its structure and product lineup, which -- taken separately -- didn't seem that significant. Taken together, it's that CEO Steve Ballmer and his advisors are retrenching and refocusing on core businesses.

A few years ago, Ballmer every spring would tell Wall Street that Microsoft was hedging its bets, boasting of all his new businesses hoping they might turn a profit in a decade or so. There was a "let's see what sticks" feel to his annual Wall Street talks. (And a stock drop after each, which might be why Ballmer stopped giving this spring guidance.)

But during Microsoft's fiscal year 2012, which ended June 30, the 'Softies seemed to take steps to circle the wagons, rather than fan them out. Some examples:

December 2011: Microsoft offloaded almost its entire Health Solutions Group -- both products and people -- to a joint venture with General Electric now called "Caradigm."

The Health Solutions Group included several Microsoft acquisitions, including the Amalga data aggregation system for hospitals, and the Sentillion health-care identity-management products. (One remnant Microsoft kept was its HealthVault personal health-information cloud service.)

February 2012: Microsoft moved some of its 400 or so Tellme employees, along with certain Tellme speech technologies, to 24/7 Inc. As part of the deal, Microsoft also took an unspecified equity stake in 24/7.

Microsoft bought Tellme Networks in 2007 for between $800 million and $1 billion. Tellme provided both a "speech cloud service" and an interactive speech self-service platform with interactive voice response (IVR). It was those IVR assets that Microsoft shifted to 24/7. The speech platform part of Tellme is part of Bing these days. The combined entities are key to Microsoft's evolving natural-user-interface (NUI) speech service.

February 2012: OfficeLabs, one of Microsoft's showcase incubators, was acknowledged as being basically on life support -- as are most of the once- celebrated cocoons of innovation.

Since their founding a few years ago, many of the Microsoft Labs (not to be confused with the Microsoft Research labs) have quietly -- or sometimes not so quietly -- fallen by the wayside. Some were morphed into other, newer labs or, occasionally, a product team. A few of the original groups of Microsoft Labs remain, shells of their former selves, with almost no active projects left.

Office Labs, which used to be one of the more active and closely followed of the Microsoft Labs, isn't completely dead. The official position is Office Labs is continuing to innovate, but the fruits of its work are now all internal-facing.

April 2012: Microsoft moved its Interoperability Strategy team into a new, wholly-owned subsidiary.

The new group, known as Microsoft Open Technologies Inc., has some 50 to 75 full-time and part-time employees and contractors. Microsoft said the new structure would make the team more agile in working with the open source community. Another benefit of a subsidiary structure could be a level of isolation, autonomy and legal protection.

July 2012: Microsoft wrote off $6 billion in "goodwill" connected with its $6 billion purchase in 2007 of digital-advertising agency aQuantive.

Yep, the one-time highly touted buy meant to give Microsoft more of a play against Google-DoubleClick turned out to be a wash.

Microsoft isn't throwing in the towel on digital advertising or search -- unless it decides to dump Bing, something that once seemed implausible to me, given how thoroughly Microsoft is integrating Bing technology across its product portfolio. But given the 'Softies supposedly shopped Bing to Facebook not so long ago, maybe it's not so far-fetched ...

The end result of these far-flung moves: As Hal Berenson, a former Microsoft Distinguished Engineer put it, it's not Bill Gates' Microsoft any more. It's Ballmer's baby now.



About the Author

Mary Jo Foley is editor of the ZDNet "All About Microsoft" blog and has been covering Microsoft for about two decades. She has a new book out, Microsoft 2.0 (John Wiley & Sons, May 2008), about what's next for Microsoft in the post-Gates era.

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