Microsoft To Repeat International Business Machines’ History?

Microsoft To Repeat International Business Machines’ History?
efes / Pixabay

Microsoft Corporation (NASDAQ:MSFT) has retained its enterprise customers pretty well. Though Google Inc (NASDAQ:GOOG) has unveiled Docs, Drive and many other services, business executives still prefer Microsoft Corporation (NASDAQ:MSFT)’s Office suite. The Steve Ballmer-led company is currently in the same situation as International Business Machines Corp. (NYSE:IBM) was in early 1990s.

Microsoft To Repeat International Business Machines' History?

Interesting analogy between Microsoft and IBM

Todd Hixon of Forbes draws an interesting analogy between the two tech giants. Two decades ago, International Business Machines Corp. (NYSE:IBM)  established itself firmly in enterprise business, though it still had several other profitable businesses. Apple Inc. (NASDAQ:AAPL) was launching cutting edge tech products that customers loved. Other companies like Sun Microsystems, Novell and Microsoft Corporation (NASDAQ:MSFT) began to eat into International Business Machines Corp. (NYSE:IBM)’s businesses.

Baupost’s Seth Klarman Suggests That The U.S. Could Be Uninvestable One Day

Seth KlarmanIn his 2021 year-end letter, Baupost's Seth Klarman looked at the year in review and how COVID-19 swept through every part of our lives. He blamed much of the ills of the pandemic on those who choose not to get vaccinated while also expressing a dislike for the social division COVID-19 has caused. Q4 2021 Read More

Soon, International Business Machines Corp. (NYSE:IBM)’s earnings started declining. The company had to fire thousands of employees, including CEO John Akers. In 1993, newly appointed chief Lou Gerstner began to evaluate everything. He had two choices. One, to reestablish itself as a cutting-edge tech firm to thwart off competitors like Sun Microsystems, Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NYSE:ORCL), Compaq and Intel Corporation (NASDAQ:INTC). Two, to focus substantially on catering services to enterprises.

International Business Machines Corp. (NYSE:IBM) had tech products that were hot. But its core DNA was providing services to large businesses. So, Gerstner focused on the company’s core DNA and key customers. That turned out to be a great decision for the company’s financial future. But International Business Machines Corp. (NYSE:IBM) no longer decides the direction of technology future, says Hixon.

Microsoft ready to go the IBM way?

Two decades later, Microsoft Corporation (NASDAQ:MSFT) is in a similar position. It has built a strong position in the enterprise market. Apple Inc. (NASDAQ:AAPL) continues to hold the fantasy of customers with its products after the company’s revival. Google Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB) have started affecting Microsoft Corporation (NASDAQ:MSFT)’s key businesses. Google Inc (NASDAQ:GOOG) is gaining momentum in cloud computing, and its power in mobile OS is unmatched. And Google Inc (NASDAQ:GOOG) rules the most important network service: search. It has developed a solid ecosystem of related services like Voice, Maps, Drive, Docs, etc. All these factors make the search engine giant a value proposition for retail customers who also want cloud.

On the other hand, Facebook Inc (NASDAQ:FB) has carved out its niche in social cloud. Under its social umbrella, the Mark Zuckerberg-led company has built its own search product, ad service, storage service, cloud service and several other things. But Microsoft remains safe in its enterprise business. Neither Google Inc (NASDAQ:GOOG) nor Facebook Inc (NASDAQ:FB) have been making any significant progress into enterprise.

Todd Hixon says as far as Windows 8 numbers suggest, Microsoft Corporation (NASDAQ:MSFT) is unlikely to lose corporate desktop. And the company’s efforts to enter into the corporate tablet market is a way to secure its enterprise stable. Microsoft Corporation (NASDAQ:MSFT)’s cloud services are also mainly designed for corporate clients.

Now, let’s see if Microsoft Corporation (NASDAQ:MSFT) focuses completely on its strategic position in the enterprise business, or if it continues to run with the crowd. Todd Hixon believes that the software giant is most likely to make a similar choice as International Business Machines Corp. (NYSE:IBM).

Updated on

No posts to display