Ed’s Daily Notes for September 4th   Leave a comment

Bloomberg: Microsoft Jettisons Windows Playbook With Nokia Devices

[Microsoft], which built a dominant position in personal-computing operating systems by focusing on software and relying on multiple partners to offer hardware, is diving into its own smartphone line, a low-end handset business and manufacturing operations. With rivals like Apple Inc. (AAPL) and Google Inc. (GOOG) leading in mobile, Microsoft executives said the company had few options except to break from its software past.

“We were in software exclusively and that was a logical thing to do for a long period of time, but the reality today is that’s no longer possible,” Microsoft Chief Financial Officer Amy Hood said in an interview.

Ballmer had no choice, said Carolina Milanesi, an analyst at Gartner Inc. Even combined with Nokia, Microsoft has less than a 4 percent share in smartphones and is running out of time to carve out a piece of a market ruled by Google’s Android and Apple’s iOS.

Here is the problem: Microsoft is setting itself up to compete with Apple, NOT Google. Google can keep giving away Android to hardware manufacturers forever, because that isn’t how Google makes it’s money. Google makes it’s money on the back-end with advertising. Apple has an extensive system, so they can make enough money from selling things so they don’t need advertising income, although their business model requires high margins, which means sacrificing market share to Google and their partners. Feel free to explain to me what a Microsoft-Nokia merger is going to bring to the table?

The truth is that Microsoft and Nokia need each other more than the market needs both of them. I won’t call the new Microsoft a dead company yet, but they will continue to be marginalized. Adding a cash leech like Nokia is not a solution.

The icing on the cake (or is that the straw that breaks the camel’s back?):

Bloomberg: Elop Rejoining Microsoft Lifts Odds of Succeeding Ballmer

Stephen Elop, already an odds-makers’ favorite to take over as Microsoft Corp. (MSFT)’s next leader, just boosted his chances by helping orchestrate the $7.2 billion deal that makes him a senior executive at the software maker he once helped run.

The 49-year-old Canadian, who has been chief executive officer at Nokia Oyj (NOK1V) for three years, will move back to Microsoft as it buys the Finnish company’s mobile-phone unit. The one-time head of the software maker’s business division returns with experience competing head-on in mobile devices against Apple Inc. (AAPL) and Google Inc. (GOOG)

And failed miserably…

Seriously, Elop couldn’t turn Nokia around (sorry, increasing your company’s market share to 4% is not a “success” in my book), but he will somehow succeed with Microsoft? Bull. What Elop is, is someone with whom Microsoft’s board of directors is comfortable. You don’t make the “comfy” choice when you’re trying to turn a company around. This is a “rearranging deck chairs on the Titanic” move.

Reuters (via Yahoo): Switzerland keeps crown as most competitive economy

Switzerland has kept its title as the world’s most competitive economy for the fifth year running, though it needs to resist any temptation to protect its core banking sector if it wants to stay top, the World Economic Forum said on Wednesday.

The Geneva-based body, most famous for gathering politicians and billionaires at an annual shindig in the Alpine resort of Davos, said the same economies made the top 10 as last year, but in a different order.

Singapore and Finland remained in second and third place respectively in the Forum’s annual Global Competitiveness Report.

Germany, the United States, Hong Kong and Japan all edged up while Sweden, the Netherlands and the United Kingdom all slipped by two or three notches.

One surprise in the report:

While most of the top 40 remained relatively static, South Korea slid six places to 25th, weakened by its poorly functioning financial market, quality of its institutions and extremely rigid labor market, said the report.

I find it interesting that South Korea, for all of it’s tech know-how, can’t seem to master the financial market. Admittedly, the two aren’t closely related, but it shows that South Korea has an uneven growth pattern.

What about China? They remained in 29th place. You have to look at the report’s criteria:

The Forum bases its assessment on a dozen drivers of competitiveness, including institutions, infrastructure, health and education, market size and the macroeconomic environment.

The report also factors in a survey among business leaders, assessing the government’s efficiency and transparency.

China fails miserably when it comes to transparency. Also, while they have built up physical infrastructure, their legal infrastructure is still lacking. Just ask Apple about all the phony Apple stores in China…


Posted September 4, 2013 by edmcgon in Market Analysis, News, Stocks

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