Free Newsletters for the Channel
Register for Your Free Newsletter Now
Steve Ballmer and John Chambers: Similar Challenges, Different Companies
Quick, name a technology giant that dominated the 1990s and amassed 85 percent share (or more) in its core markets -- only to face growth challenges, competitive pressures and a stagnant stock price in recent years. Alas, both Microsoft and Cisco Systems fit that distraction.
The VAR Guy
May 27, 2011
3 Min Read
Steve Ballmer John Chambers
Quick, name a technology giant that dominated the 1990s and amassed 85 percent share (or more) in its core markets — only to face growth challenges, competitive pressures and a stagnant stock price in recent years. Alas, both Microsoft and Cisco Systems fit that distraction. Although they lead vastly different companies, Microsoft CEO Steve Ballmer (pictured, left) and Cisco CEO John Chambers (right) seem to be facing similar challenges. Here’s why.First, the news hook: It’s been a particularly challenging week for Ballmer. Hedge fund manager David Einhorn wants Ballmer ousted. Einhorn accused Ballmer on Wednesday of “being stuck in the past” noted Reuters. But a source close to Microsoft’s board said the company remains committed to Ballmer, Reuters reported Thursday.
Meanwhile, Chambers has spent recent weeks shuttering businesses (Rest In Peace, Flip), introducing a voluntary early retirement plan for selected employees, confirming layoff plans, and refocusing the company on five core market opportunities.
It Ain’t All Bad
Both Microsoft and Cisco remain very profitable. Microsoft’s latest quarterly net income was $5.23 billion; Cisco’s was $1.5 billion. Not too shabby — plenty of companies would crave that type of income.
Still, Microsoft and Cisco are under pressure on Wall Street. Their share prices have been stagnant over the past decade amid heightened competition from new and emerging rivals.
At Microsoft, the company has continued to perform strongly in the server software market but…
Windows 7 sales fell 4 percent in the latest quarter;
Microsoft is getting trampled in tablet and smart phone markets;
Microsoft is overhauling its cloud applications strategy — with Office 365 set to debut in June or July 2011; and
rivals like Apple and Google are widely viewed as out-innovating Microsoft in emerging IT markets.
At Cisco, the company has jumped on the convergence of servers, storage and networking but…
HP seems to be chipping away at Cisco’s low-end networking business;
Cisco employees seem to have been tied up in “committees” that lacked budget authority and slowed decision making;
a consumer push has pressured Cisco’s profitability; and
CEO Chambers was slow to name a COO to assist with day-to-day management of the company.
A Common Solution: Do Less
Simple put, it’s time for Cisco and Microsoft to exit some markets. Potential moves worth mulling:
Some pundits think Cisco should sell of its WebEx and home networking businesses. The VAR Guy is starting to agree. Once Cisco scales down it can resume a 1990s strategy that worked so darn well: Acquire emerging, disruptive networking companies before they gain critical mass.
Over at Microsoft, perhaps it’s time to de-emphasize Windows Phone 7 and retreat to cloud servers. The idea: Make sure Office 365 and Windows Azure applications are incredibly easy to access and use from Google Android, Apple iPhone, iPad and other popular mobile devices. Simply put: Microsoft needs to re-inspire application developers.
Both companies should emulate IBM’s selective business processes. As you’ll recall, IBM exited some markets (networking, PCs) and avoided the temptation to enter certain markets (enterprise applications) in order to double down on high-end hardware, software middleware and IT services.
Alas, The VAR Guy does not envy Ballmer and Chambers. Both are smart. Both made thousands of employees and investors millionaires in the 1990s. But Wall Street is starting to ask both executives: What have you done for me lately?
Sign up for The VAR Guy’s Weekly Newsletter, Webcasts and Resource Center. Follow The VAR Guy via RSS, Facebook and Twitter. Follow experts at VARtweet. Read The VAR Guy’s editorial disclosures here.
About the Author
You May Also Like
Mar 24 - Mar 27, 2025
Mar 24 - Mar 27, 2025
The Channel Partners Conference & Expo, co-located with MSP Summit, is the gathering place for the technology services community. Agents, VARs, MSPs, integrators and service providers will converge to share ideas and drive discussion on the topics shaping our industry.
REGISTER NOW