BW Online | April 19, 2004 | Microsoft's Midlife Crisis "Would you invest your hard-earned dollars in a company like this? Its revenues soared an average of 36% through the 1990s, but now it's heading into miserly single-digit growth. It has long been a powerful engine fueled by major updates of its products, yet the next major one, an unprecedented five years in the making, isn't expected until 2006. The company hasn't made much headway in newer, promising markets. And its share price is stuck exactly where it was in mid-1998. Not buying, huh? Well, tough luck: You probably already own a piece of this rock.
The company is Microsoft Corp. (MSFT ), one of the most widely held stocks on the planet. And sure, for all its challenges, this icon of American capitalism still has a lot going for it. With a market cap of $279 billion, its valuation is the second highest in the world after General Electric Co. (GE ). And it remains the most profitable company in the $1 trillion tech industry, pumping out $1 billion a month in cash.
But Microsoft just isn't the phenom it used to be. After 29 years, the software giant is starting to look like a star athlete who's past his prime. Growth is tepid. Expansion is stymied. Bureaucracy is a concern. And a company that used to be so intimidating it attracted antitrust suits on two continents seems, well, vulnerable.
But ask CEO Steven A. Ballmer if Microsoft is past its prime, and he bristles. "No -- in no sense do I feel like we're past our prime," he says during an interview in his windowless conference room. "The thing that I think is fair to say is we are past adolescence. Isn't adolescence when you grow really fast and you can sometimes be a little raucous? And then when you get into your prime, you're just hitting on every cylinder, you're having a great life, you're creating a family, you're rising to new responsibilities. We're in our prime, baby. We're post-adolescent. We are in our prime." He pulls out color-coded charts that show Microsoft outpacing a host of well-respected companies: Intel (INTC ), GE, SAP (SAP ). "Here's Dell, the great growth story of our industry," he says, pointing. "Growing more slowly than Microsoft."