Ten Threats to Microsoft's Success

Microsoft Corp. (NASDAQ: MSFT) has entered into a new era. With Satya Nadella in charge as Chief Executive Officer, Steve Ballmer and Bill Gates are out as far as running the daily operations. Nadella’s efforts so far are being met with praise, but this is very cautious praise. Microsoft has been so unpopular for so long that people just have a hard time believing that its turnaround can be made.

Perhaps the real issue to consider in Microsoft’s turnaround are what items are weighing on the company. Even more important than identifying the problems is coming up with the proper real-world solutions to those issues.

24/7 Wall St. wanted to identify the biggest threats and hurdles that lie ahead for Microsoft. These are issues which are current, but they could also persist for years. Some of the issues could likely take years to remedy even if they are executed upon with perfection.

Microsoft shares fell 2.8% to $39.87 on Friday as the Nasdaq Composite Index had its worst point loss since 2011. The drop felt even more extreme when you consider that Microsoft shares hit a 52-week high and decade high of $41.66 just this week!

Many of the hurdles in Microsoft’s way are already being addressed. Some have yet to be addressed. So some of these may seem redundant or known. Others, however, remain up in the air, and it will take time to be the verdict of success or failure.

These are 10 hurdles and threats that could get in the way of Microsoft’s future success.

Bill Gates and Steve Ballmer

Bill Gates may now mostly be a great philanthropist focused on international charity and goodwill efforts, but he still owns well over 300 million shares of Microsoft. Steve Ballmer also implemented a turnaround strategy before he left, and Ballmer has reportedly not given up all control that a new CEO may need to succeed. In short, Bill Gates or Steve Ballmer could drastically impede Satya Nadella’s ambitions. He may have the best ideas in the world, but if the two guys who had to sign off on Nadella do not want to go they may hold his plans back. It is going to take time to see if Nadella can say, “You trusted me to take this role, now I am taking this direction, and you are just going to have to trust me on it or fire me over it.”

A Generation Gap on the Board of Directors

Satya Nadella is 46 years old, but as CEO he is the youngest board member who works daily at Microsoft. The addition of G. Mason Morfit of ValueAct to Microsoft’s board of directors was not just smart. It was crucial, as he is just under 40. In 2013, we wrote how Microsoft’s ancient board of directors may be one of its single largest problems. It was stacked full of a bunch of old guys who thought that desktop PCs located inside an office suite or cubicle was the best thing since sliced bread. That being said, this board still needs to be expanded AND expanded with younger tech-savvy geniuses who are not married to a future of desktops and laptops. Nadella’s cover sheet says that Microsoft’s opportunity ahead is vast, but he admits that the company has to move faster, focus and continue to transform. If the board does not agree on a direction, that effort could end up being a paradise lost.

The Office Empire

Microsoft’s billions upon billions of dollars added to its Treasury have come largely from sales of Office products. Microsoft made a huge splash when it released its version of Office for iPad. This is a coup that makes the Office platform agnostic — for both the device and the operating system. Microsoft also has Office 365 as a subscription service, often for dirt cheap. Still, a declining PC market and a declining Windows share ultimately will mean fewer and fewer $200 and $300 software sales. It will likely be years before the full extent of the Office empire’s future is known. Will Google’s Spreadsheet, Document, and Presentation get good enough to usurp Office? Or what about OpenOffice? Again, there are threats.

Hackers & Security

The public is scared of hackers and fearful about data security. Now imagine being a technology giant that can theoretically be wiped off the map by teenagers from somewhere else in the world. It happens, and companies who provide software, data, entertainment, and hardware all have to worry about this security threat. Quite literally, this is just like the defense sector having to worry about its weapons of warfare being stolen or destroyed. There is even some concern that hacking could cause the next world war, and that is far from just the National Security Agency snooping concerns. Now imagine that you run Microsoft: You know that if a rising hacker would have the greatest “victory” of a hacking career, it would be saying “I took down Microsoft.”