Microsoft's Future

Washington Post staff writer Jonathan Krim was online to answer your questions on his most recent article , an examination of Microsoft's slowing growth.

A transcript follows.

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Jonathan Krim: Welcome to the chat about Microsoft. We actually have some additional news today about the company, with the EU threatening to impose heavy fines if MSFT doesnt comply with its order on interoperability disclosure. So let's get started.

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washingtonpost.com: EU threatens Microsoft with daily fines

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Fremont, CA: Dear Mr. Krim, With all the competitive hoopla occurring in the industry, would you not agree that companies are merely famished for innovation? An illustration, the recent minimal purchase of AOL by Google exemplifies the need for creation. Let's not dismiss the notion that Microsoft, Google, and Yahoo are always going to remain behemoths.

Jonathan Krim: I completely agree that there is greater hunger for innovation than ever. And there is a lot of it happening, even at big companies, and that includes Microsoft. I think the bigger concern is the speed at which innovation gets to market, and how easy and efficient it is for users to adopt.

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Arlington, Va.: I was sitting in a restaurant the day Windows 95 came out. The guy next to me was holding up his box with a look of wonder and awe that I'll never forget.

Think people will ever be that passionate about a Microsoft product again?

Jonathan Krim: Hard to say, really. I was out in Silicon Valley in those days, and the "event" of the Windows 95 intro was amazing to behold. I guess I doubt things will ever reach that level again. I hear a lot of pasion in some quarters about xBox 360, but it seems destined to be a niche product at the current price-point and level of avalability.

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Fort McDowell: Dear Mr. Krim, Bought new computer for $700 with $100 of that for Windows xp. computer has defective case (front usb shorted out mainboard) that seller refuses to accept back (event happened on arrival). So bought used computer for $150. it was supposed to have Windows 98, it didn't. Now i have two computers, both with "paid for" Microsoft operating systems & Microsoft will not allow myself to load up xp on used computer (while windows 98 never existed outside sticker on used case), so in effect used computer has no o/s at all. can you recommend "free" operating system, as I feel Microsoft is just big hoocky crime that public needs to be protected from. Our World will be better off when Microsoft goes out of business.

Jonathan Krim: Microsoft's crackdown on multiple use of the OS in the same home certainly made a lot of people unhappy.

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Anonymous: I have owned Microsoft for five years and have lost money, what is your advice?

Jonathan Krim: I cannot, and wouldn't want to, offer stock advice. I think most analysts would agree this is not likely to be a hot growth stock anytime soon. But long-time holders of the stock were VERY happy at the big dividend checks they got awhile back. So it all depends on your investing strategy.

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Laurel, Md.: At one point during the tech bubble, Microsoft had the highest Earnings/Revenue ratio of any stock in any of the major markets; put still sported the P/E ratio of a startup. Such a combination can't last.

The company transitioned from being an up-and-comer in a new industry, to being the dominant market force in a mature one.

Jonathan Krim: all true.

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Fairfax, Virginia: I believe that Microsoft has the most experience, technological resources, and the customer base to lead the convergence of media, computing, and information with an appliance such as or similar to their XBOX console. Though this has been attempted before, Microsoft seems poised to be able to offer these services in a package easy to operate and they have the business models and infrastructure to support it already in place. Linux offerings will lead the market in embedded operating systems in such products as cell phones, cable boxes, etc, but will never really compete for the desktop. Would you agree with this outlook, or do you see something altogether different in store for the industry?

Jonathan Krim: I think what you say might well come to pass, but I think we really can't be certain. I would never count Mr. Gates out of anything he put his mind to. That said, there has never been a time when Microsoft has been fighting so many fires on so many fronts. Some of them are piddling, but others are pretty big and fast-moving.

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Logan Circle: How does Microsoft compare in the marketplace with wireless applications development and mobility solutions? It seems like this is a largely untapped arena.

Jonathan Krim: I think it's working very hard in these areas, but has found only marginal success. In an ideal world for Microsoft, it powers the smart phone. But it has some tough competitors, and some handset makers and sevice providers dont want to be locked into Microsoft's proprietary software world.

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Leawood, KS: Do you think Microsoft's decision to quit supporting IE for the Macintosh will be followed by a decision to no longer support Office on the Mac? If not, why?

Jonathan Krim: A very good question. I think the browser decision was easier, given Firefox and Safari. If Office for the Mac went away, it could get the regulators staring at them again. Also, Office makes tons of money for MSFT. browsers don't.

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US: It seems like Microsoft always gets the criticism,attention, etc. because it is the biggest. Don't you feel like some of the doom and gloom being directed at the company is a bit short-sighted?

Jonathan Krim: No, I dont think it's short sighted to examine the issue. But that doesn't mean MSFT is washed up. Far from it. Things are still playing out, and Microsoft could still regain the leadership position that it has lost in some critical areas. But getting there will be harder for them than ever; they can't just buy their way back to the top anymore.

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Washington, D.C.: I read recently that Microsoft sees its future in online services, specifically providing some scaled=back versions of Office online with advertising generating most of the revenue. Isn't that where all the dot com companies failed in the late 90s, and how does Microsoft expect to succeed in an internet business model that is failing Time Warner, AOL, Viacom, and several newspapers?

Jonathan Krim: What failed for dot.com companies back in the boom/bust days is not an indicator of anything, in my book. Convergence was hot, then it was cold, now it's hot again. Web-based software and services are definitely an integral part of the future. And that's very different than the business AOL is in, to take one example.

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Bellvue, Colorado: The current political administration, for whatever reason, elected not to address much of the behavior Microsoft was found guilty of in the anti-trust case during the remedy portion of the trial. This has left consumers largely in the same situation they were in prior to the anti trust case- without any realistic alternatives and subject to whatever policies and initiatives Microsoft chooses to inflict upon them. Could another anti trust case be filed against Microsoft after the Bush administration ends in January 2009?

Jonathan Krim: I highly doubt that would happen, though I try to never say never. Some of its most egregious conduct is now forbidden. Although the company paid no great penalty for its actions, it does run its busines differently now.

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Washington, DC: I bought a new computer a couple of months ago and my only two choices were laptops running Windows or an Apple laptop. There does not seem to be a market for computers running stuff like Linux. If that's the case (and I could be wrong), does Microsoft really face much of a threat? Even hardware that connects to the Internet to make use of web-based software needs an operating system to run on, and Microsoft seems to offer the largest and most popular OS out there.

Jonathan Krim: The threat to Microsoft is, today, less from a similarly packaged OS. Open-source desktop apps so far havent been good enough to generate enough demand to spur a lot of them being offered. But there are plenty of threats elsewhere, including servers, search and other Web-based software.

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Logan Circle: Do you think that windows is still the best platform for most business-user applications? Security is obviously a problem, but open source OSs (e.g., linux, unix) usually require lots of dedication and updates to keep them running.

Jonathan Krim: Companies and government organizatins seem to be finding that the answer varies depending on the organization.I doubt we'll see a single wisdom taking hold.

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Anchorage AK: Can you comment on the rumors that Microsoft has been eyeing Scientific Atlanta as a possible Hostile takeover target. Recently Cisco has agreed buy SFA.

Jonathan Krim: I have not heard this.

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Jonathan Krim: Thanks to all for your questions. Happy holidays.

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