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Last Updated: Friday, 23 September 2005, 13:28 GMT 14:28 UK
Microsoft facing middle age at 30
By Ben Richardson
BBC business reporter

Microsoft founder Bill Gates
For some Bill Gates is visionary, for others the face of a corporate bully
In the middle of the 1990s Bill Gates - already well on his way to becoming the world's richest man - decided to turn his hand to writing.

Insights gleaned from building up software giant Microsoft helped propel his books, The Road Ahead and Business @ the Speed of Thought, into the bestseller lists.

Here was a man who had helped to fuel the technology revolution, seen the potential for computers and made them usable for all but the most technologically confused.

Today, as Microsoft celebrates its 30th birthday, his critics are less kind.

Battle lines

Many of the plaudits have turned to catcalls and the company stands accused of bullying and uncompetitive behaviour, of growing too big and of becoming bureaucratic, sluggish and complacent.

Rivals are lining up to take pot-shots, rubbing their hands at the market leader's problems and setting themselves up as the next big thing.

Their argument is simple - why pay for Microsoft's big, expensive bundles of software like Office and Windows when you can find cheaper or free versions that do more of what the consumer wants elsewhere?

HQ: Redmond, Washington
Sales: $36bn (2004)
Profits: $8.2bn (2004)
Staff: 57,000
Founded: 1975
Chairman: Bill Gates
Chief executive: Steven Ballmer

"Open source" projects - which are developed by legions of volunteers but backed by big and small corporate players like IBM and Red Hat - are undermining Microsoft's hold on the business world and reducing its revenues from licence sales.

Leading this pack is Linux, an operating system which has been winning support from such diverse places as the city council of Munich to the government offices of Sao Paulo.

At the same time, Microsoft is accused of being slow to develop its internet search technology and so losing ground to Google; while its online music product loses listeners to Apple; and users desert its instant messaging system for AOL.

At the same time its Internet Explorer browser is fighting off the increasingly popular open source web browser Mozilla Firefox, and there are questions about the security of its products, which are easily hacked and regularly fall victim to viruses.

Layer cake

"Microsoft has always been terrified that there would be a big change in software like this," George Colony, chief executive of research firm Forrester, said in an interview with the Sunday Times newspaper.

The work being done by companies like Google "begins to push Microsoft off the PC", he explained.

Microsoft all but admitted that it needs to change the way it does business earlier this week when it launched a reorganisation of its operations.

Microsoft X-Box games console
Microsoft offers more than just software

The firm will cut its current seven divisions down to three - a move chief executive Stephen Ballmer believes will make decision making more nimble and give managers greater autonomy to get things done.

Mr Gates is also said to be taking a more central role in the decision making process.

If anything, Microsoft argues, its size helps more than it hinders and the company is looking to offer a wide range of products to consumers including media centres and computer game consoles.

"We've always wanted to be a company that got the benefit of the scale, going back to the beginning where we said: 'Hey we're not a one-product company'," Mr Gates explained.

Microsoft is quite frankly a wonder of the modern age
Ian, Whitwick, England

"So is it a benefit to us that we work across these realms that we can expose you to the same user interface at home that you get at work? We think so."

Analysts agree, saying that the shake-up will allow Microsoft to shed its image as the "big daddy" of office software and broaden revenue streams.

Under the radar

Despite his core software products coming under pressure, Mr Gates is not unduly worried because "some things that are actually the biggest opportunity for us I think people miss".

He contends that businesses will always be interested in becoming more efficient and that Microsoft is one of the few companies asking "how can scheduling be better, how can meetings be better"?

These may be less headline grabbing avenues of growth, but ultimately they may prove to be far more rewarding.

And the group is expecting to rake in sales of more than $44bn (26bn) during its current fiscal year - giving it the time and cash to get things right.

Analysts say that Microsoft has never been one of the great innovators. But what it does do extremely well is market its products and protect its position.

"The next 10 years we'll make as many advances as we've made in the last 30," Mr Gates predicts.

If he is right, the company that started out as a two-man show in Albuquerque, New Mexico, is unlikely to relinquish its top spot any time soon.

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