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PORTFOLIO LINKS
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Current financial data
and top competition:
Microsoft Corporation
Prepared under the direction of: Dr. Mary Tucker in Management
691.
Authors: Jonathan
Leal, Sonya Faust, Kiesha Gasparac, Kumi Takimoto
Date submitted:
August 1, 2000 |
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Financial data
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Microsoft is in a strong position, judging from its
current financial figures. Its total 1999 revenue was $1,974 million, which is more than double that of its closest
competitor, Oracle. Microsoft also announced recently year 2000 revenue of $2,296 million, a 16% increase over
the last year (Hoover's Online, 2000). Figure 1 shows the growth of the Microsoft's revenue since 1985. The company
is clearly the exception to the rule as its growth rate has been high for more than a decade. Its five-year net
income growth rate is 52.1%, and five-year sales-growth rate is 34.2%. (Schoch, Personal Communication, June 30,
1999). |
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Competition
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In order to complete our analysis, it is vital to
consider the chief rivals to Microsoft. In studying the threats posed by the competition, a better understanding
of Microsoft's current and future position can be assessed. There are three chief competitors which will be treated
briefly here: Sun Microsystems, Oracle Corporation, and America Online. The information in these summaries was
gleaned from the International Directory
of Company Histories. |
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Sun Microsystems
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Sun Microsystems, Inc., archrival of Microsoft, specializes
in network computing rather than desktop mainframes. Sum began in the 1980's and has enjoyed remarkable success
with its own computer chip, SPARC, and own operating system, SOLARIS. Sun created industry standards through the
pioneering use of shared software and hardware components among competing workstation manufacturers. During the
1990s, Sun charted new territory and positioned itself as an Internet and electronic commerce specialist. Sun gained
further recognition through the introduction of Java technology; the first universal software that only had to
be written once yet had the capacity to run on any computer. Sun sells its products globally through its offices
in 150 countries.
Originally beginning as a computer project, Sun was founded by Andreas Bechtolsheim while he was a graduate student
at Stanford University. Bechtolsheim created a workstation - which is similar to the personal computer but more
powerful - using off-the-shelf parts, thereby making it more affordable. Sun was officially founded in February
1982.
Sun's vision of a computer world in which powerful, high-end servers support networks contradicts the strategy
employed by the founder of Microsoft, Bill Gates. Sun openly attacked Microsoft in the press and in court, as they
challenged the duopoly Microsoft held with Windows and Intel's processing chips.
Sun and Microsoft continue to run the race against each other, as Sun remains to be the only major hardware and
software vendor without a cooperative relationship with Microsoft. Sun's independent stance has made effective
corporate structuring critical, but has positioned it as an extremely lucrative and well-respected company. The
ability to continuously stay ahead of the game by moving in the right direction years before the rest of the industry
could be the single most important reason Sun Microsystems, Inc. exists as one of Microsoft's top competitors. |
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Oracle Corporation
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Oracle Corporation, founded by Lawrence J. Ellison
and Robert N. Miner in 1977 is the largest supplier of database management systems software and the second largest
independent software and services company in the world next to Microsoft. The 1980s were a wonderful decade for
Oracle, because of the development of relational database management systems; but their good fortune did not last.
The 1990s brought about major stumbling blocks for the company with overzealous predictions for their financial
future that were not met. Today, things look better for Oracle. It has 40 percent of the data management market
and is retooling its products to work with smaller computers. It has restructured its organization and though it
still has some kinks to work out, it is running head on with Microsoft. Joining with Sun Microsystems and Netscape,
Oracle began working on the "Network Computer" (NC) in reaction to the "Wintel" giant (Microsoft
and Intel). The announcement of the NC caused a counteraction in Microsoft and Intel through the purchase of WebTV
and a jump on the market. Even thought the announcement turned out to be premature, Oracle continues to meet Microsoft
head on. In 1998, it released Oracle8, lessening its focus on the NC, and in June of 2000 Oracle admitted to hiring
a detective agency to follow Microsoft's political activities in hope of exposing its "underhanded attempts"
to win its antitrust case. (CNNfn, 2000). |
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America Online
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America Online, Inc. is one of the nation's largest
information providers. The company was founded in 1982 by M. Case. In October of 1989, AOL (at that time Quantum
computer service) introduced a nationwide network for computer users under its current name. Although AOL had originally
targeted IBM-compatible and Macintosh users, it expanded its market share by strategic alliances with the Chicago
Tribune, Apple Computer Inc, and Sprint Corporation. It also offered its online service, which was especially designed
for Windows, in the 1990s. Rapid expansion of AOL service drew the attention of Microsoft, whose cofounder P. Allen
held 25 percent of the outstanding shares of AOL. However, AOL refused to be a part of Microsoft, and held firm
to its commitment to remain independent. As use of the Internet has increased, so has AOL's subscriber and revenues.
AOL is constantly on the look-out for partners within the online world, in order to expand and establish its stable
position. It purchased Netscape Communications, which provides high quality Internet access and software tools,
and in 1998, it signed a three-year contract with Sun Microsystems for the license of workstations and the programming
language Java. It also bought out CompuServe and integrated that customer base into its own. The purchase of Netscape
and the agreement with Sun Microsystems has turned AOL into a serious competitor of Microsoft, whose browser Internet
Explorer still remains No. 1. |