Cuts versus Taxes, Microsoft versus Apple

Yesterday wasn’t pretty in the stock markets of the world, though many exchanges did manage to close off their lows.  Here in the US the problem was that S&P issued an opinion on US debt that threatened to cut its triple-A rating if something weren’t done by 2013 to rein in deficits.  How much of this is political or posturing is hard to say (these same bond rating agencies were asleep before the 2008 crisis), but the move sent stocks down.  We’ll likely see today how much of the dive was simply short selling.

The challenge of the S&P comments is that they tend to create pressure on Washington to do something difficult, and in politics hard things involve so many dodges, lobbying cave-ins, and scams that almost anything could happen.  Logically you need to raise taxes in the higher brackets; the US has arguably the lowest marginal rates of the industrial nations.  It’s defensible to have that situation if it’s creating broad-based prosperity, but no possible interpretation of the last 15 years of economic numbers would support that claim at this point.  Anyway, those who make a lot can contribute a lot to politicians.  Logically you also need to cut costs, but everyone in Congress wants their own power bases well padded with cash.

In tech, Microsoft made its Office 365 available as a public beta.  The “cloud-based” version of Office is targeted at reducing Microsoft’s risks in its critical Office franchise by limiting the damage that things like Google Docs could cause.  What they seem to be circling around is a plan that would offer SMBs a license for the “collective” parts of Office that are normally hosted on a server, and enterprises a per-seat license for the full Office suite.  That’s likely a smart move because SMBs can probably spend the dough for per-worker versions of Office but can’t sustain central server tools.  Enterprises are looking at moving some of their less tech-literate workers to cloud packages, and this could stem the tide.

Microsoft’s big problem isn’t Google and the cloud, though, it’s Apple.  We’re living in a world where wireless and appliances are redefining how people do just about everything, and Microsoft has let itself get trapped outside the candy store window.  Phone 7 just isn’t going to catch up in the mobile handset space, Nokia deals notwithstanding.  Microsoft has no effective tablet strategy because they’re afraid of undermining their Windows 7 space.  The more iPads Apple sells, the more they turn the consumer away from Microsoft; away, in fact, from anywhere that Microsoft appears even able to move.  Yes, Microsoft has to protect its current incumbencies, but without creating new ones that matter that’s only delaying the inevitable.  Microsoft won in PC operating systems over Digital Research because DRI missed the IBM PC opportunity.  One slip and you’re done.  Microsoft has missed MP3 players, smartphones, and now tablets.  They need to get their act together–and fast.



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