Profit or Passion Part 2

I never thought I will write part two so fast but once event has forced me to do so. The event was Apple take over Microsoft was world’s most valuable tech company having market capitalisation of more than USD 222 billion. The reply from Microsoft chief to this news was not different or surprising. He said it is a long game and we are still most profitable company.

The view of Microsoft chief shows how much important is for them to make profit. No matter what happens profit will remain top priority. In today’s dynamic world profit is important but should not be your aim. If you do so you will not be able to make profit after few years.

In the past companies required to be in business for many years to start making profit and it took many years to go bust. But today situation has changed dramatically. Today company is in profit from the first year and companies go bust in few months. So strategy of the company for long term growth is more important than profitability. Share holders have also now learnt that EPS is important but should not be the only factor to gauge company’s value and hence you see Apple shares having higher valuation than Microsoft.

People believe future belongs to Apple. People are optimistic that Apple will change landscape of computing but people do not have anything to see in Microsoft. What people see is Office 2010 which is priced even more, having similar features and more of a revamp rather than new thing.

Microsoft lost its crown of being World’s most valuable tech company, it is not a small crown to lost, it may sound as end of era so Microsoft has to be careful and not to take this as some event, it has to start creating great products, products which people need, products that will affect Masses and not think of affecting bank balance.

 

Signing off

Nikhil Parchure

Profit OR Passion

I started writing few days back about my views about corporate life and companies. This is in the same series

Profit or Passion, what you will choose, this is biggest question in front of companies. Many choose profit but some choose passion. What makes some companies exciting and some companies boring, I tried to do some research in this. I started looking at fortune 500 companies. Which companies create excitement, which create profit and what is long term value that these companies have given.

Of course classic example in front of me is Google and Microsoft. When Microsoft was in starting stage it was a passionate company which was committed to bring PC to common man, created software that was extremely user friendly but now the focus is shifted to profits and they are coming up with different price versions of same product, no new path breaking innovation. Many will not accept but after Windows nothing significantly new has come from Microsoft which has touch life of millions. Now take case of Google, it is relatively new company and passionate about internet reaching to common man, It brought out many innovative products and given great power to common man. But Google is not looking for profit only, this was evident when they decided to leave China. Let us hope this management thinking keeps on for years.

The case study of Microsoft and Google is as follows with some numbers to back it.

Now just see the share price chart of Microsoft (Courtesy Yahoo Finance)

Starting Decade was very great for Microsoft share price was growing each year and also the profits, but in the last decade the share price is trapped in one range. Microsoft which successfully survived the Dot Com bust is now not able to maintain the share price growth. Now let us see different events that took place in those years and try to establish some relationship between passion and profit. The word passion here do not indicate any specific product or service but shows the overall mindset of company.

Launch of windows 95 was a great product launch, many features were totally new and it made PC more accessible to home users that started the whole revolution of PC industry. This followed by launches of great value added versions such as windows 98, 2000 and server addition.After Dot Com bust Microsoft survived the trouble because of these wonderful products.

Then came era of profit making from monopoly they established in the market, Microsoft started exploiting market and due to which it was slapped with fines by EU and other countries. The passion was lost and company was thinking of every new product as a new source of revenue rather than exciting offering for customer. According to me that is wrong and Microsoft paid the price. Many dissatisfied customers and anti Microsoft lobby started to build up. This encouraged many competitors and whole process of Open source movement got support

I am gathering more evidences to support my observation. I want to look into aspects other than profit, revenue. Work force motivation, work culture etc also linked to this. I will post part two of this after some time.

Disclaimer/ copy write note: I should mention this that thoughts mentioned above are not influenced by any company, policy or person. The content above is original and not copied from any reference book or website. Copying, posting the content without permission is prohibited.

Signing Off

Nikhil Parchure