Microsoft needs direction, not blind faith
Microsoft's optimism is misplaced given its lack of a convincing long-term strategy, writes Guy Matthews.
Microsoft chief executive Steve Ballmer said recently that he wants to see the firm's profits grow by more than $1bn by this time next year.
He didn't mention anything about world peace or a cure for cancer, but his goals couldn't have sounded any more fantastic if he had.
This is not to say that Ballmer's plans entirely lack credit. He has refused to inflate earnings by cutting back on capital expenditure and lowering headcount, usually the first refuges of those desperate for a quick fix.
In fact, in a bid to get the .Net kite to fly, Ballmer plans to hire an extra 5,000 bodies and ramp up research and development to $5.2m. Full marks to him for bucking the blind downsizing frenzy.
It's when you look at exactly how Microsoft plans to boost earnings that questions start to emerge. Ballmer is not dumb enough to think he can achieve his aims with sales of Windows and Office. Those cash cows have been thoroughly milked already.
One of Ballmer's bright hopes is the small to medium sized enterprise (SME) sector. He believes that Microsoft could mop up the market for applications for SMEs, thanks to its acquisition of Great Plains and Navision. If only it was that easy.
He also sets great store by the MSN part of the business, believing that it can grow by up to 22 per cent in the next year. Why he thinks this, when every other business of that kind is going the other way, is a mystery.
Perhaps the biggest puzzle is the blind faith Microsoft has in .Net. To an outsider, web services in general, and .Net in particular, have all the hallmarks of an application looking for a solution.
The major enterprises that Microsoft is trying to court with .Net do not understand what it is about, and they don't want to either. They have more important things to worry about. But this truth has not dawned on Gates or Ballmer, locked in their ivory tower.
When .Net was announced two years ago, there was no signal that Microsoft would end up trying to boost its appeal by building links between its products and those of Oracle. How times have changed.
Microsoft does not seem to have lost its knack for effective short-term tactics. Witness the channel bonanza it has just delivered with Licensing 6.0, livening up an otherwise dull summer.
But it does seem to lack a convincing long-term strategy, or at least one that meets corporate demand. This should be a worry not only for Microsoft, but for the many third parties that depend on it.