Not Backing Down – Windows 8 and the future of Microsoft: My Exclusive Interview with Adam Hartung Part 1

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Onuora: Well thank you very much for agreeing to do this, I’m really just trying to understand a little bit more about what you said in your article. Did you have any questions or concerns before we get started?
Adam: No that’s OK, fine.

Onuora: Once again thank you. Could you just give my readers a little bit of a background about what you do and how you got started.
Adam: Sure, so, academically I do have an MBA from Harvard Business School. Career-wise I worked at the Boston Consulting Group; I was head of Business Development at PepsiCo for three years and head of Business Development at DuPont for a little over 3 years.

Then I moved to Chicago and was head of Strategy, Sales & Marketing in a turnaround company called AM International. And then I went back into consulting and started up my own company which was sold to Coopers & Lybrand.

I was a senior partner there for about 3 years and then I went to Computer Sciences Corporation and I was a senior partner for about 8 years. Now I’ve been on my own and the reason I did that is because my focus is completely around understanding revenue generation, growth, and the ability to develop and implement innovation.

So that’s where I spend all my time, around innovation and implementation and growth and how companies grow and why companies get stuck in ruts and don’t grow.

Onuora: OK. So before we even get to the article in question, yesterday and the day before that, Microsoft, Apple, and Google released a bunch of numbers from Q4. Have you had a chance to look at all those numbers?
Adam: Yes I have.

Onuora: In light of all those numbers do you still stand 100% behind what you wrote?
Adam: Oh yeah, yeah.

Onuora: OK.
Adam: Our focus is very much not around stock trading. I am not a stock trader and I don’t give stock recommendations around the stock on the basis of quarterly movements. If you look at the recommendations from an investor’s point of view I believe that unless you are able to literally do it as a living where you are literally studying the stocks all the time you should only buy equities that you are ready to buy and not even look at it for 18-24 months. You should feel so confident about that company that you’re buying that stock to hold it for 5, 6, 7 years.

Onuora: OK.
Adam: And if you don’t feel confident to own a stock for 5 or 6 years then you should sell it.

Onuora: OK.
Adam: And that’s because I’ve dedicated my lifetime of talking to people, and a typical individual investor is terrible at knowing stocks. Why? Because they trade too often and they tend to sell low and buy high and because as an active investor they’ll trade on information that’s late to them compared to the professional investor and stuff like that. You know what they say – buy for the long term and I say long term that means you buy it for 5 years.

Onuora: Sounds good. So the article you wrote called “The Sale of Microsoft: Game Over Ballmer Loses” caused a bit of a tornado on the web. Were you shocked at the reaction you got after it was published?
Adam: Yeah, actually I was.

I always expect to get comments and dialogue going when I talk about high profile companies and tech and there are a lot of users out there so they tend to get loyal to a brand and the thing is when I make a strong recommendation like buy or sell I tend to get people’s opinions because I’m not hedging my bets deciding a target and I’m like don’t ever buy it or don’t ever sell it.

Onuora: OK.
Adam: So I knew I was going to get some reaction but I didn’t expect this sort of extraordinarily personal attacks where people came after me and accused me of being a bad person and called me a hater and all kinds of things like that.

I thought the personalization of it as opposed to saying I disagree with your logic was more intense than what I’ve experienced in the past.

Onuora: So what would you say to those who think the article was like bait and all you wanted was a little publicity for being hyperbolic?
Adam:: Umm I would say that’s absolutely not true because I’ve written several articles about Microsoft and what has been consistent for the last several years is my columns have been highlighting the fact that I think Microsoft is on dangerous ground.

What happened is we were coming into earnings and rather than earnings coming out and having everyone fixated on “ OK, well what were earnings”, I wanted to jump out there and say look it’s not about this quarter’s earnings but let’s take a look at the trends and what has been happening in the volume trends.

If you look at that instead of looking at last quarter’s earnings you have some serious reasons to be worried about the future of Microsoft and whether it will even exist in 5-7 years.

Onuora: OK. So 5-7 years is the window you were thinking about really.
Adam: Yeah.

Onuora: OK. So let’s get into the article in question. So you said this inability to make a big splash and mount a serious attack on Apple Android is for Microsoft primarily because we know the traditional PC sales are going to decline. Despite the big Windows 8 launch and promotion, holiday PC sales declined over 3% compared to 2011 as journalists reported consumers found no compelling reason to upgrade, which is true.

My question is while the holiday sales definitely weren’t that great and Q4 results notwithstanding, Windows 8 was released to manufacturing on Aug 21, 2012 and released for GA on Oct 26, 2012. So isn’t it understandable that with barely 2 months between being exposed to the public and OEM’s scrambling to catch up, sales wouldn’t be stellar?
Adam: Yeah I think that’s a really bad quarter and let me explain that to you in a little more detail. So you have at least 1 billion PC’s out there already so that’s our installed base, OK?

Onuora: OK.
Adam: You can easily wind back the clock and remember years ago, a decade or more ago, when Microsoft issued a new release people were sort of lined up saying “Wow, there are a lot of things that I’m not happy with about my current product and when I get a new release I’m ready to jump”.

Certainly we can remember there were users and corporations who were just hammering the IT Department saying “I want the latest greatest PC, I want the latest greatest rendition of this product”. So your installed base could be expected to convert at a rate of 50-75% in the first 12-18 months.

Plus you still had all the new user sales out there so you did the math at companies, like I said I was at Computer Science Corporation for 8 years and we used to get advanced warning of these Microsoft upgrades and you used to get prepped to go out there and do literally tens of thousands of laptop and desktop upgrades within months.

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  • Coatsey

    I have to agree, brilliantly thought through and MS might just do it but like Adam, I’d argue they will have done it the hard way. I have a Surface RT Tablet, the more Tablet friendly version and I find myself turning to my Nexus 7 and iPad for ease of use, they are just not awkward. Add to this that Google has a great set of tools in Doc’s, Spreadsheets, Google+ & Email mean I can have a really good, cost effective, anywhere usage which further threatens Microsoft sales of Windows & Office… Imagine you are an SME starting from scratch, would you use these tools or the new ones available on tablets and any device… Ok Lunch over back to work…

    • ECI-Tampa

      Your description outlines the opportunity MS has to win market share; Google does a few things well and Apples does a few things well but they don’t do them all well. If MS can figure out the ease of use thing and seamless integration, they will do what the others have not. Google continues to ignore what real business users need. You can’t use Google Docs to prepare a professional document and Apple isn’t even trying. MS just needs to improve ease of use and pull their products together so people can use one platform. I’ve been using Apple, Google and MS for years and recently dropped Apply because the Surface and Windows 8 phone fit my needs with seamless integration. I’m frustrated learning Windows 8 RT and that is the arrogance of MS thinking it is okay to make consumers completely relearn how to use their OS. It is a better browser IF it is compatible with websites, reliable and faster.

      • http://www.windows8update.com/ Onuora Amobi

        Thanks!

    • http://www.windows8update.com/ Onuora Amobi

      Thanks Coatsey!

  • ECI-Tampa

    I don’t see why defending your customer base by adding innovating technology is a bad part of your strategy. A seamless integration of business systems makes it harder to move to other systems. At the same time innovative technology competes with others taking market share. A two pronged approach seems smart. The problem is that Microsoft has been arrogant for years and thinking they don’t have to compete. Microsoft has put about several lack luster products thinking the market would just accept them since they are from Microsoft. Consumers are not blind minions following Microsoft. If Microsoft can be humble and realize they must product great products and services seamless integrated and encourage development they will gain market share. Apply and Google have captured market share because their products are easy and just work. Microsoft puts out IE 9 and 10 and it has constant performance and integration issues. Every time a user has to close IE because it crashes or freezes Microsoft loses stock with users. I have a Surface and a Windows 8 phone and both are excellent choices. If Microsoft can get more apps they will be going head to head with iPad and others plus have the advantage of Office product integration.

    • http://www.windows8update.com/ Onuora Amobi

      Thanks for the comment.

      :-)

  • george_szubinski

    and I disagree with Coatsey.
    Having owned a Surface RT and sold it patiently waiting for my Surface Pro… I found my ipad Nexus grossly inferior and couldnt wait to get onto my Surface. I have been in IT a very long time and seen too many people like this guy pumping up his background and his mentors… only to still be there in 10 years when his predictions have failed….

    nope…. I cannot see it happening…

    as for great set of google tools… Coatsey… perhaps but not for the heavy duty stuff I do… and my corporate customers need…. you see there is the difference … the toys are for kids to consume… but business is totally different…

    • http://www.windows8update.com/ Onuora Amobi

      Thanks George!

      Microsoft have to hope that more corporate users think like you…

  • CiÇãO

    Forget about it. Microsoft ppl are smart. They are different, they deal with technology and those kind of people can adapt very fast if they want to. Besides I have had convertibles for about 5 years now (Vista, 7 and 8). Well yeah, Vista convertibles were clunky heavy and ultra-expensive, but they were awesome. Windows 7 convertibles were also nice, with the addition of multitouch and capacitive screens (vista’s ones were resistive). But the device was still somehow heavy and was more of a laptop than a convertible that could be used as a real tablet. And now I’ve got a Windows 8 convertible (Sony Vaio Duo 11 256GB SSD i7) and I can tell everybody it is just SO MUCH F&*&*ING better than whatever other tablet / convertible / whatever ever made. And Windows 8 is just a complete pleasure to use!! Absolutely nothing can beat up this beast!!

  • Rex

    Very interesting. I was really sure I would disagree with what he said, but instead found myself agreeing in large part. MS has a big job ahead of itself for exactly the reasons he states. MS is reacting defensively instead of proactively attacking a new market. I think people intrinsically see that and make decisions base on confidence displays by the manufactures.

    That said. People do have a problem, which enterprises are the first to recognize. “How do I get all I need to do done on a tablet?” The solution to this must be either on the front end or the back end, or a combination. MS has the complete answer to this already on the front end with Windows 8. It is just not conveying that message to them well. Apple has absolutely no answer to this, as iPad is at least 3 generations away from that and shows no signs they understand the problem. iPads are only viable to consumers that have computers to fall back on when necessary. Their hope then lies in a third party building a backend solution. Google is a lot closer if they combine Android with Google Chrome OS. However his comments really sinks in to me that Windows RT is exactly the type of venture that MS needs to avoid. This is the exact sign that MS is hedging its complete solution bet. This shows that MS is not confident in its convergence strategy. People are picking this up and unless MS changes its message, it will be in trouble.

    So where does that leave Windows Phone? I am sorry to admit this, as I am really wanting Windows Phone to be a viable platform. The current endevor seems bound to fail. It has been playing catch-up and will continue to appear this way even thought technically they have caught up. They actually need to go beyond. MS has always been about taking some idea and making it better. That works when they are ahead, but they are not in the phone and tablet arenas. It is time that MS implements disruptive technology or they will never break into this market.

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