On July 11, Microsoft Corporation (NASDAQ:MSFT) announced a realignment of its company along the lines of function instead of product line. Microsoft hopes that these functional teams can collaborate on developing products that can compete with the likes of the Apple Inc. (NASDAQ:AAPL)’s iPad and iPhone, as wells as the Google Inc (NASDAQ:GOOG) Nexus tablet and Android smartphone. Unfortunately, it seems that Microsoft may be waking up too late.
Microsoft Corporation (NASDAQ:MSFT) resided in an embarrassing sixth place in tablet shipments during Q1 2013, owning a dismal 2% of the market. Apple Inc. (NASDAQ:AAPL) maintains market leadership with a 39% market share. In an act of desperation Microsoft cut the price of its Surface RT by $150 to spur consumer interest. In fact, Microsoft had to take a $900 million charge in its most recent quarter stemming from inventory adjustments on its Surface RT.
In the most recent quarter, Microsoft Corporation (NASDAQ:MSFT) experienced an increase in revenue of 10% due to its new product cycle, versus Apple’s 11% increase. Google Inc (NASDAQ:GOOG) blew past both of them with a 19% increase in revenue. Over the long-term it will most likely be a fight between Apple Inc. (NASDAQ:AAPL) and Google in terms of tablet and smartphone market leadership, with Microsoft in last place as a fading tech name.
Currently, Microsoft’s chief core competency still resides in operating and productivity software on PCs. With PCs on the endangered species list and the world moving toward a cloud-internet-app consuming marketplace, Microsoft Corporation (NASDAQ:MSFT) not only needs new products but a new way of thinking in order to move the needle on its place in the new tech paradigm.
Based upon the restructuring announcement, you could infer that Microsoft’s product divisions kind of operated on their own without much interaction with other divisions. Each division even sported its own procedures and financing. This created too much bureaucracy.
Steve Ballmer realized that he needed to re-invigorate Microsoft Corporation (NASDAQ:MSFT)’s mojo by encouraging entrepreneurial drive among employees. An entrepreneurial culture seems to work for other big companies such as The Coca-Cola Company (NYSE:KO) and Starbucks Corporation (NASDAQ:SBUX) as they encourage stakeholders to develop product ideas of their own. His statement in the most recent quarter serves as proof of his belief in this new approach,
Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most.