Mark Evans

Can the MSFT Titantic Change Directions?

Can a tiger change its stripes? Can you turn water into wine? Can Ray Ozzie and Steve Berkowitz transform Microsoft into an Internet company from its Windows/Office roots? This is a question highlighted by the New York Times, which looks at Microsoft efforts to beef up is online operations through initiatives such as Live. At the risk of under-playing the dominance of Internet Explorer and the popularity of MSN.com, Microsoft isn't an Internet company and, frankly, it will never be seen as anything else other than a giant software company with some interesting side projects (e.g. Xbox).

This isn't necessarily a bad thing but it is what it is even though Microsoft has been struggling to convince people otherwise for the past decade. If you take a step back, Microsoft's track record beyond Windows and Office has been, at best, mediocre. A good example is television where it has toiled for years and spent billions of dollars to establish a foothold in the living room. Microsoft has acquired stakes in cable companies, purchased start-ups (anyone remember WebTV?) and, most recently, tried to developed an IP-TV platform for carriers. But after all this time, money and effort, Microsoft only has a modest presence in the TV or video markets.

Microsoft's problem - and challenge - is the Internet isn't part of the corporate DNA so it's hard to really be a vibrant and innovative Internet player when it's not really who you are. A part of this reality is Microsoft continues to make billions of dollars from selling Windows and Office. It's the business so Microsoft's lack of success in diversifying into other businesses is no different than what many other companies have faced over the years. Microsoft, however, is fortunate its core business continues to rumble along as opposed to being forced to diversify because the core business is eroding.

What Microsoft and investors need to accept is Microsoft will continue to be a software company with a Web presence as long as its continue to operate in its present form. If, however, the company decided to break itself into independent operations (Windows/Office, Xbox, MSN/Internet) then it might be a different story because each entity would have its own core mission and raison d'etre. In the meantime, Microsoft will attempt to fight the good Internet fight while chasing after dyed-in-the-wool Internet rivals such as Google and Yahoo.

For more on Berkowitz, News.com recently did a Q&A with him. By the way, read what you will into this quote Berkowitz gave the NYT about life at Microsoft compared with his previous employer, Ask.com: “I’m used to being in companies where I am in a rowboat and I stick an oar in the water to change direction. Now I’m in a cruise ship and I have to call down, Hello, engine room!. Sometimes the connections to the engine room aren’t there.”

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