Is Microsoft relevant?September 23, 2009: 6:50 AM ET
Oracle's Ellison gives the tech world a topic. Discuss among yourselves.
Does Microsoft matter? That's the question the noted Microsoft (MSFT) hater and Oracle (ORCL) CEO Larry Ellison found himself answering at a Silicon Valley event Monday night. The short answer, as Jon Fortt reported here, was yes.
The longer version of his answer on the one hand shows Ellison as the old zen master that he is, making a backhanded and self-serving swipe sound like an innocuous observation. At the same time Ellison raises a fascinating point that's worth exploring further.
They make a lot of money. I think they're clearly relevant. I divide the computer industry into two groups. And I know for a long time I was constantly picking a fight with Microsoft. Now Oracle's constantly picking a fight with IBM (IBM). Because you've got to pick your enemies very carefully, because you're destined to become most like those enemies you select.
Microsoft, culturally now, is a very consumer-centric company. They've got the Xbox. They've got Zune. … I think they are obsessed with Apple (AAPL). They're obsessed with Google (GOOG). … Under the new administration at Microsoft, I see all of their energies going into being successful in the consumer space.
Larry's rap v. Oracle's 10-K
The funny thing about Ellison's clever positioning is that Oracle considers Microsoft a major competitor in nearly every important market in which it competes. A quick look at Oracle's last 10-K, the regulatory filing where companies are required to list their significant competition (as opposed to musing about who they like to think they go up against), reveals how Oracle lines up against Microsoft.
"In the sale of database software," Oracle discloses, " our competitors include IBM, Microsoft, Sybase (SY)" and others. (Presumably these are listed in order of market share because the order changes. Note that Microsoft is the No. 2 foe in Oracle's most important market.) "Our middleware competitors include IBM, Microsoft, SAP (SAP)," and so on. "Our applications compete against offerings from . . . SAP AG, IBM (through Maximo, MRO Software, Ascential Software, Cognos), Microsoft (through Dynamics GP, Dynamics NAV, Dynamics AX, Dynamics CRM, Dynamics Snap, Dynamics SL)," and others.
This shpiel continues as Oracle lists the enemy in content management and collaboration products (where Microsoft is listed first), development tools, operating systems (an understatement regarding Microsoft), and virtualization products. Microsoft appears in each grouping.
Enterprise software still rules
Suffice it to say that Oracle competes against Microsoft and it's awfully clever of Ellison to highlight Microsoft's grudges against two consumer-oriented companies with whom Oracle doesn't currently compete. (In fact, neither Apple nor Google appear anywhere in Oracle's filing.)
This still leaves the larger questions of Microsoft's relevance and to what extent it is culturally a consumer company. If you want to pick on Microsoft, Zune (its floundering iPod wannabe), its online business, and Xbox are good places to start. Only the latter has had a modicum of success, and even then not a profitable success.
But has Microsoft forsaken the "enterprise" for the home? Microsoft's two divisions that focus almost entirely on business customers -- one called the"Microsoft Business Divison," also known as the Office franchise, and the other called "server and tools" -- accounted for 57% of the company's revenues last year and 85% of its operating profits. Yes, Microsoft most certainly is a business-focused company.
Still, Ellison has a point. His old (and current) foe spends oodles on its flailing consumer businesses, and CEO Steve Ballmer certainly seems to devote a tremendous amount of energy to them. He's famous for saying Microsoft never quits and that these newer businesses will crush the ball eventually.
They'd better. In a recent article I referred to Microsoft as a monopolist. I consulted a handful of experts on the term who assured me that hobbled or not a company operating under agreements with antitrust regulators can still be called a monopolist. Those monopolies are in its business segments, though, and they're under attack. At least today it seems laughable that Microsoft would ever become dominant on products like music devices, cell phones or search engines. Is Microsoft relevant? Absolutely. But for how long?