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