One of the first things that will need to happen in the short term is to get rid of products and services that are loss leaders and only drag Microsoft’s value down. We expect to see their online storage and, yes the Xbox and Entertainment divisions to become their own company (possibly becoming one company). This will leave the core business of software and services intact, but get rid of a portion that is not making the money that it should.
Microsoft may also move away from building their own products, but that will really depend on who steps in at the top stop. The reason we have a feeling this will happen is that you do not try to bolster your company’s value only to screw it up with another fiasco like the Surface. Microsoft could license the name and design to another company, but that is not a likely solution at this point. Microsoft is rumored to be committed to a second round of Surface products (with a very confusing naming convention). Once these new versions are on the street we will know fairly quickly which way Microsoft will move on this part of their business. It also does not make sense to continue to build hardware if you spin off the only other major product that you manufacture.
So where does that leave Microsoft’s core business? Again over the next few months things will become clearer, but we think that their services offerings will move back to the consumer space while allowing the enterprise to run things their own way. This will not kill off Azure of their infrastructure as a service business, but its foot print will shrink as will other online business services. The privately run internal “cloud” will become more prominent meaning that Microsoft will probably work to improve Hyper-V (or come up with something new). The next versions of Windows will probably fall back into the same lines that we are all used to.
In the end the comments from Microsoft that the company will follow Ballmer’s wishes are more to keep everyone calm as Ballmer exits the building. The fact that they were not needed and might be counterproductive is something that is apparently lost on the people that decided to make them. Most people right now would welcome change at Microsoft in many areas. Staying the course is not what investors, partners or consumers want to hear right now. Microsoft will be in a state of flux for the next 12-14 months which will put their stock in the same situation. Until they have a clear course and direction investors will continue to be leery of putting more money into them. Sure there will be an incidental rise in stock prices, but that is mostly people trying to cash in on the turmoil that happens after a CEO leaves and not a reflection of renewed confidence that Microsoft is moving in the right direction. Rest assured though, Microsoft is not going to go away, but we do expect them to lose some more money over the next few months while they try to find themselves again.