[exelius]

Microsoft really isn't a consumer company: they make all their profit from enterprise software. Ballmer's biggest mistake was trying to convince an elephant to become a mouse. What he left was a mess that needs a lot of cleaning up. It doesn't help that he reorganized the company 6 months ago, effectively preventing his successor from making any substantial changes from the Ballmer way.

Given the number of people that were mentioned as front runners in this CEO search over the last few months, this seems to be a job that nobody outside Microsoft wants. Nadella was always the most likely internal candidate, and it really feels like they're settling on him because everyone external candidate they wanted turned them down.

[blah32497]

"Microsoft really isn't a consumer company"

yeah, except the video game market and the whole hardware market...

It's definitely the most obvious area for growth that they have available. The enterprise market is more or less saturated by them already. They're sorta trying to push their cloud solution, but they're late to that game. They aren't going to sell a whole bunch more of MS Office... It's a segment that will continue to develop organically, but the place where they really wanna be dumping cash on is definitely the consumer market.

I know everyone hates on Balmer, but he seemed to follow a very sensibly strategy and there seems to have been a genuinely big effort to integrate their different platforms and services into something that pleasant to use and develope for. At least stylistically, Windows RT, 8, Phone and Xbox are identical. The underlying "meat" is in wonderful languages (C#/F#), with a great IDE (VS13), with - from what I understand - and well made new libraries. They've also aggressively tried to cut out the old moldy stuff, and have paid for it in the short term (ex: Windows RT not supporting Win32 & Windows Phone 7 not being very compatible with Windows Phone 8)

[exelius]

What market? I know I'll probably get crucified for saying this, but video games are only a good business if you're making the games themselves. The hardware is low margin, and you don't really make it up on the licensing anymore either since gamers have so many platforms to choose from. Worse still, you can't form a dominant platform through the methods Microsoft traditionally uses: you have to convince consumers directly. And video games are just a "good" business, never a great one: they are very risky and the maximum payout is limited. EA and Activision both made about $5 billion in revenue. Combined they made as much as half of the Server and Tools business (and at much lower margins.)

Microsoft's core strength is licensing software to businesses. Hardware and game consoles are a foray into a high-risk, low-margin business (well, low margin relative to software.) By contrast, Microsoft's operating margin on enterprise software is close to 50%. The margin on their entertainment and devices division is currently less than 1%. Comparables would say that a good margin in a hardware business like that is 10-20%.

Worse still, selling consumer electronics and media properties to consumers requires a sales channel that Microsoft has still not mastered. Windows and enterprise software are sold through a reseller model: Microsoft makes products and advertises them to a network of people who have discovered they can make a living selling and implementing Microsoft software (be they PC OEMs or consultants.) They have never been good at consumer marketing or retail sales. They've never had that "cool" brand image you need to succeed there, and the amount of money you have to spend on marketing is insane compared to their more profitable cash cow.

There's still plenty of room for them to innovate in the enterprise space too. Oracle and SAP suck donkey balls to use and Microsoft is actually really good at delivering rock-solid enterprise software with a good blend of usability and power. I just fear that if any new CEO focuses too much on the consumer side of the business, there are a lot of much more profitable options on the enterprise side.

The consumer side is a huge distraction to Microsoft, one that has produced a lot of red ink but never really any profit. Look at their historical results since, well, ever, and you'll see that the consumer products consistently lose money while the enterprise software keeps growing margins and top line.

[r00fus]

Microsoft can't rely on dominating markets. They have to get back into the, and do as Apple and Google have done and invent markets.

I feel Microsoft will only have the confidence to attack the consumer market when they feel their enterprise market position is a competitive advantage.