Worries That Microsoft Is Growing Too Tricky to Manage

SEATTLE — At a time when many people in business believe the number of products at Microsoft should be getting smaller, it is about to become a lot bigger.

Marc Whitten, a top executive for Xbox, one of Microsoft’s many disparate product lines.

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Microsoft’s $7.2 billion acquisition of Nokia’s handset and services operations, when the deal closes early next year, will increase the company’s head count by 30 percent and add a big, new hardware unit to a dizzying variety of businesses — an unusual situation in an industry where focus is often prized more than breadth.

It’s a concern to everyone from academics to Microsoft alumni. A list of missed opportunities and disappointing investments at the company in the past decade in areas like smartphones, tablets and Internet search have led to the belief that a more focused, nimble collection of mini-Microsofts could respond more effectively to the never-ending flow of disruptive technologies nibbling at its foundations.

“It is very hard to be a broad-based tech conglomerate,” said David Yoffie, a professor at the Harvard Business School.

Thirteen years ago, Microsoft’s competitors and a federal judge demanded that Microsoft be split up because of its market power. But trying to do too much rather than wielding too much power is the issue now.

Microsoft already has a video game console, the No. 2 Internet search engine, a major Web portal, an enormous corporate software business, an operating system for personal computers, cloud computing services and applications software. The company is a mash-up of the businesses in which competitors like Google, Yahoo, Oracle, Apple and Nintendo specialize, putting an enormous burden on the company’s chief executive, Steven A. Ballmer, who has announced plans to retire within the next 12 months.

Microsoft’s complexity will make its search for a replacement for Mr. Ballmer more challenging, since the job will require a person with an uncommon array of skills, including fluency in corporate and consumer markets, hardware, software and Internet services. Mr. Ballmer recently announced a sweeping reorganization of the company intended to improve its agility, though its huge portfolio of products will remain intact.

 “It makes it harder to manage, which is a challenge for Microsoft no matter who the successor is,” said Mr. Yoffie. Long before Mr. Ballmer announced his retirement, he and Bill Gates, the Microsoft chairman and co-founder, had both quietly acknowledged that identifying a new leader for Microsoft would be hard. A person who spoke to Mr. Gates several years ago on the subject of succession recalls the Microsoft chairman saying he would support replacing Mr. Ballmer if he could think of someone who could do a better job.

Similarly, another person said Mr. Ballmer himself said a few years ago he would step aside if a better chief executive could be found. These people spoke on the condition that they not be named because the conversations were private.

Larry Cohen, a spokesman for Mr. Gates, did not respond to a request for comment. Frank Shaw, a spokesman for Microsoft, also declined to comment.

In 2000, when Microsoft’s business was simpler than it is now, Thomas Penfield Jackson, a federal judge, ruled that because of violations of antitrust law, Microsoft should be split into two companies — one focused on Windows and the other on applications. An appeals court later threw out the breakup order after deciding Judge Jackson had tainted the legal proceedings by making comments to the press about the case.

Pundits, business professors and alumni of Microsoft have spent years pondering whether, in hindsight, such a breakup might have given the resulting “Baby Bills” the agility to compete better. Several of Microsoft’s businesses would be substantial stand-alone companies, with Windows accounting for $19.2 billion in revenue for the fiscal year ending in June, and its business division, dominated by its Office applications, at $24.7 billion. A third business, servers and tools, had revenue of $20.3 billion in the period — compared with the $27.5 billion in software revenue at Oracle in its latest financial year ending in May.

Bits Blog: Smartphone Makers Pressed to Address Growing Theft Problem

Bebeto Matthews/Associated Press George Gascón, San Francisco’s district attorney, center, along with Attorney General Eric T. Schneiderman of New York, second from right, at a press conference Thursday to announce the formation of the Secure Our Smartphones initiative.

1:16 p.m. | Updated This post was changed to include the name of the company that estimated the total cost of cellphone theft.

Seeking to curb a nationwide increase in smartphone thefts, New York’s attorney general and San Francisco’s district attorney on Thursday announced an initiative to push the industry to develop technologies that will discourage theft and dry up the market for stolen devices.

The new group, the Secure Our Smartphones Initiative, will include prosecutors, political officials, law enforcement and consumer advocates from over a dozen states. The co-chairmen will be the New York attorney general, Eric T. Schneiderman, and the San Francisco district attorney, George Gascón.

Mr. Gascón and Mr. Schneiderman were scheduled to meet Thursday afternoon with representatives from Apple, Samsung, Google’s Motorola unit and Microsoft, which have about 90 percent of the smartphone market.

“It is totally unacceptable that we have an epidemic of crime that we believe can be eliminated if the technological fixes that we believe are available are put into place,” Mr. Schneiderman said.

The coalition is encouraging manufacturers to equip all smartphones with a “kill switch.” When consumers reported to providers that their cellphone had been stolen, the phone, like a stolen credit card, would be rendered inoperable.

“For the thieves who would steal them,” Mr. Schneiderman said, the phones would be “nothing more than a paperweight.”

The loss and theft of cellphones cost consumers over $30 billion in 2012, according to a recent study by Lookout, a San Francisco mobile security company. About 113 smartphones are lost or stolen each minute in the United States and, according to the Federal Communications Commission, cellphone thefts account for 30 to 40 percent of all robberies nationwide. In New York City, the thefts increased 40 percent last year alone.

“The industry has the moral and the social obligation to fix this problem,” Mr. Gascón said. “There are very few things that can be fixed with a technological solution, and this is one of them.”

Apple said on Monday that its next mobile operating system, iOS7, to be released in the fall, has a new feature called Activation Lock that will help to thwart theft. An Apple representative was not immediately available to comment.

Though he did not specify how the coalition would make manufacturers comply with its demands, Mr. Schneiderman said, “The stakes here are very high and we intend to pursue this with every tool in our toolbox.”

Solid Sales, but Growing Grumbles, for Windows 8

Microsoft revealed Thursday that it had sold 100 million licenses for its flagship software since it was released six months ago. That was roughly the same number of licenses it sold for the well-received, previous version of the system, Windows 7, in about the same time period.

Yet Windows 8 has struck a sour note with parts of the computer-buying public. With Windows 8, Microsoft replaced the operating system’s traditional appearance with an interface that looks like a screen of tiles. The change left some customers cold, and though they could switch between the old and te new look, it apparently was not clear enough to some of them how to do it.

In an interview, Tami Reller, chief marketing officer and chief financial officer of Microsoft’s Windows division, said an update to the software, code-named Windows Blue, was coming later this year. It will include modifications that make the software easier to figure out, especially on computers without touch screens.

“The learning curve is real and needs to be addressed,” Ms. Reller said.

There was another problem. The tile look was meant for people using touch-screen computers, and there are not many of those devices running Windows yet available. IDC researchers estimate Microsoft sold only about 900,000 of its Surface tablets during the first quarter of the year, about 1.8 percent of the overall market. Other Windows tablet makers like Acer accounted for additional sales.

By comparison, Apple, with iPad sales of 19.5 million, accounted for 39.6 percent.

Much to the disappointment of PC makers like Dell and Hewlett-Packard, Windows 8 has not helped fend off competition from devices like the iPad. Global shipments of PCs fell 13.9 percent to 76.3 million units during the first quarter of the year when compared with the same period a year ago — the worst showing in two decades, according to IDC. Tablet shipments grew 142.4 percent to 49.2 million units in that same period, IDC estimates.

Windows 8 was supposed to bridge tablets and traditional personal computers with software made for touch screens that had the option to switch to the desktop interface whenever someone wanted to create a PowerPoint slide or work on an Excel spreadsheet using a keyboard and mouse.

Microsoft envisioned a bounty of new Windows 8 touch-screen devices, including laptops with displays that also respond to finger gestures.

But that has not panned out. The majority of personal computers on store shelves have been more old-fashioned keyboard-based systems.

“If you’re not going to provide the proper environment for people to understand how to use the system, you risk losing a lot of people who used the system for a decade,” said David Daoud, an analyst at IDC.

Ms. Reller said Microsoft would reveal more about the Windows 8 changes in the coming weeks, but she declined to confirm they would include an option to bypass the new tile interface at start-up, as recent reports on technology news sites have said.

Ms. Reller added that Microsoft had already trained its retail partners to remind customers that the old desktop interface still exists in Windows 8.

“We started talking about the desktop as an app,” she said. “But in reality, for PC buyers, the desktop is important.”

Microsoft’s own research on Windows 8 usage patterns showed customer satisfaction with the system was on par with that of Windows 7, if the users being analyzed have tablets or other systems with touch screens, Ms. Reller said. People with conventional PCs are not as happy.

“We need to help them learn faster,” she said.

Joshua Blood, an audio engineer in Hudson, Mass., put Windows 8 on one of his existing computers, but took it off after a few days, deciding that the software only made sense if he had a touch-screen machine. “I can do absolutely everything I need to do in Windows 7, and it’s a nice-looking O.S.,” Mr. Blood said.

While the 100 million licenses for Windows 8 sounds impressive, that figure does not indicate how many people are actually using the new operating system. That is because a significant portion of Microsoft’s Windows sales occur through multiyear contracts with business customers, who are allowed to pick which version of the operating system they run on their computers.

So while business customers who signed such deals since Windows 8 came out are counted among the licenses sold, many may have downgraded to Windows 7. Al Gillen, an IDC analyst, estimates that about 40 percent of Microsoft’s Windows sales are to customers with such downgrade rights.

Mr. Gillen said such a pattern among business customers, who tend to adopt new software cautiously, was common when new versions of Windows are released.

Tool Kit: Calling on Gadgetry to Keep the Garden Growing

Picture a tiny drone that arises from your vegetable garden to shoo away hungry deer. Or maybe a houseplant that, when you’re away, meanders through your rooms like a cat following a sunbeam. Or one that posts a request for water on Twitter.

The future is knocking at the door of home gardening. And, if some do-it-yourselfers have their way, there is no aspect of nature that can’t be improved with a rechargeable motor and a sensor or two.

Take, for example, the VegiBee. Bill Whaley, a former department store executive living in St. Louis, said he invented the device after a disappointing tomato yield.

Mr. Whaley concluded that the problem was pollination, and quickly set out to improve on the bees, which were clearly remiss.

Looking a little like an electric toothbrush, the VegiBee’s wand is held close to a flower on a tomato plant. The tiny vibrations — 44,000 a minute — gently shake the pollen into the plastic spoon that comes with the package. You dip the female part of another flower into the pollen. Vibrate, dip, repeat.

It does the trick, Mr. Whaley said. His harvest increased 38 percent and he recently put a rechargeable model on the market for $50.

Would the average gardener want to take all that trouble? Maybe.

Mr. Whaley said some determined gardeners have been performing a similar manual pollination for years using electric toothbrushes. The VegiBee, though, is better at shaking off the pollen because of its quick vibrations, he claims.

Gardeners love to dig in the dirt, but how can it be completely savored, you may ask, without spreadsheets full of sweet data? Garden stores have answered that call with an array of gadgets that test soil for moisture and acidity levels.

The Rapitest 4-Way Analyzer, for instance, not only measures moisture and pH levels, but also determines whether to add fertilizer and what the sunlight level is in a particular spot in the garden. It’s about $30 online or in stores. Or try a digital rain gauge. Digital gauges used to be so expensive that only true weather zealots bought them. “But they’ve gotten cheaper and cheaper as time went on,” said Matt Glenn, vice president for business development for Headwind Consumer Products in Syracuse, Neb.

These rain gauges are impressive. They are wireless and track rainfall by the day, week, month or year. They also have thermometers for indoor and outdoor temperatures.

Why stop there? Once you have data, why not share it on a social network of other like-minded gardeners?

Enter Future Tech Farms, the high-tech gardening brainchild of Brian Falther and his business partner, Austin Lawrence. The two mechanical engineers are trying to develop a network of indoor gardening pods, hooked up via phone or home Wi-Fi, to a social pod network, which would share information on the most effective growing conditions.

“The whole goal is to create a food production format for the world that is ecologically sustainable, energy sustainable and carbon neutral,” said Mr. Falther, a 2010 graduate of Kettering University in Flint, Mich., where Mr. Lawrence is a senior. “I don’t know why everyone isn’t doing this.”

Why indeed? The small self-contained pods would collect data on water temperature, light, pH levels and such. Then the information on what works best could be shared on the network, making it easier for newcomers and participants to garden, Mr. Falther said.

The two have more than $30,000 in start-up money and are hoping that someday their pods will be as familiar a sight in homes as refrigerators and televisions.

Outdoors, gardeners are constantly battling voracious creatures. It never fails that, just when you’re ready to pick that perfect tomato, a squirrel snatches it away.

But there is some high-tech help for that too. The Garden Defense Electronic Owl, made by Easy Gardener, is placed on a fence post, and when a sensor in the battery-operated plastic bird detects a woodland creature, the owl’s head turns to fix the intruder with a murderous stare intended to frighten it away.

The owl, about $40, is not the only device meant to scare on the market, but it may be the creepiest. Several brands of sensor-driven, motion-activated sprinklers are also available, with names like the ScareCrow, Yard Enforcer and Spray Away, ranging in price from $49 to about $140.

But why settle for a threatening turn of the head or a simple squirt of water when you could have a quadricopter drone?

At the University of Victoria in British Columbia, engineering students charged with the problem of deterring garden pests came up with the Garden Gnome Drone, a small but noisy machine that rises off its landing pad when infrared sensors detect an intruder, then flies a quick pattern around the garden before settling back down in its place.

The students didn’t test their device to see if it deterred garden animals, said Chandra Beaveridge, who was one of five on the design team. But theoretically, any wandering raccoon would drop its ear of corn and flee in terror at the eerie sight. The idea is to scare creatures away from the garden without harm or the use of water, she said.

Drones for home gardens would be expensive, she acknowledged. The drone, called Parrot, costs about $200, which is one reason there are no plans to market it at the moment. But the group left behind its code for future engineers to build on, she said, so someday someone might market and sell it as an animal deterrent.

But your garden robot need not be airborne.

Stephen Verstraete, a sculptor living in Belgium, designed a do-it-yourself garden robot. “I don’t have green thumbs. All my plants always seem to die,” he said. So when he was asked to create robots to roam around a technology convention in Amsterdam last year, Mr. Verstraete built robots that detected sunlight and moved house plants to the light.

“I wanted to make them as cheap as possible and easy for anybody to make,” he said. “I made mine with stuff lying around, but if you want to buy everything new, I guess the cost will be a minimum of $15,” he said. He lists the parts at instructables.com/id/Plant-Host-Drone/

If your plants don’t visit you in your sunny breakfast nook, they could at least call, right?

Or, better yet, send a message by Twitter.

Botanicalls, a collaboration among artists and technologists, has designed a do-it-yourself kit with a sensor that goes into the dirt to measure moisture. When it gets too dry, the plant posts, “Water me please.” And it will send out a polite thank you when you respond.

“We didn’t want it to be like that person who only calls when he wants something,” said Robert Faludi, a professor at the School of Visual Arts in New York and in the Interactive Telecommunications program at New York University. The kit is for sale at botanicalls.com/buy/ for $100.

The goal was to encourage a happy relationship between plants and people. “A lot of people are afraid of plants. They’re afraid whatever they do the plant is going to die. This makes it possible for them to have a plant in their lives where they might not otherwise,” Mr. Faludi said.

DealBook: Icahn Is Said to Have a Growing Stake in Dell, and No Taste for Buyout

Chip East/ReutersCarl Icahn has gained a major stake in Dell but is dissatisfied with the buyout, according to a person briefed on the matter.

11:17 p.m. | Updated

The shareholder opposition to the $24.4 billion buyout of Dell is growing louder.

Carl C. Icahn, the longtime activist investor, is planning to unveil a major stake in the troubled computer maker, a person briefed on the matter said on Wednesday. As with other investors, he is expected to express dissatisfaction with the price, the person said.

With Mr. Icahn joining the opposition, the Dell deal faces longer odds.

The buyers — the company’s founder, Michael S. Dell, and the private equity firm Silver Lake — contend that the deal is the best option for Dell in an increasingly competitive marketplace. Shares of the company have languished as its core personal computer business has eroded.

But big investors balked at the offer of $13.65 a share, saying it undervalued Dell. Two of the company’s biggest outside investors, Southeastern Asset Management and T. Rowe Price, have already said that they will not support the current bid, as have a handful of smaller shareholders. Together, Southeastern and T. Rowe Price own more than 14 percent of Dell. It is not clear how big a position Mr. Icahn has amassed, although CNBC has reported that his stake is over 6 percent.

As part of the deal agreement, a majority of Dell’s independent shareholders must approve the buyout. Mr. Dell, who controls about 16 percent of outstanding shares, will not get to cast a vote.

Mr. Icahn has already met with advisers to a special committee of Dell’s board to discuss the deal, according to the person briefed on the matter. The directors had asked Mr. Icahn to participate in the process to find potential higher bids, which is scheduled to end on March 22. But Mr. Icahn refused, the person said.

Mr. Icahn could not be reached for comment. Representatives for Dell and Southeastern declined to comment on Mr. Icahn’s plans.

With the pressure mounting, Dell has gone on the defensive.

On Wednesday morning, the special committee issued a statement, telling shareholders that it had fought hard to get the highest price. “We negotiated aggressively to ensure that stockholders received the best possible value,” the committee said.

The committee also said it had requested a number of provisions meant to help any competing bidders make a higher offer. For example, Dell will reward the investment bank Evercore Partners if it finds a better offer.

Several companies already have signed nondisclosure agreements to take a peek at Dell’s books as part of the so-called go-shop period, according to the person briefed on the matter. Hewlett-Packard, Lenovo and the Blackstone Group have all expressed interest.

The special committee, which handled the negotiations with Mr. Dell’s group, added that it had considered several possible alternatives to the sale, including a transaction known as a leveraged recapitalization. In such a deal, the company would borrow billions of dollars to pay out a special dividend, but Dell would remain publicly traded.

Both Mr. Icahn and Southeastern have advocated such a move, which they said would generate more value for shareholders. Mr. Icahn has told Dell’s special committee that it should consider paying about $9 a share, while Southeastern has recommended a dividend of $12 a share.

People close to the committee have warned that the company’s shares may tumble if the deal dies. Driving Mr. Dell’s bid is the belief that the company cannot successfully continue its transformation from a PC maker into an enterprise software provider as a public company.

But Southeastern has disagreed, arguing that the company had already begun its turnaround and was worth more than $20 a share.

People close to Southeastern have said that the firm was prepared to risk seeing Mr. Dell’s offer die rather than accept what it believed was an undervalued bid.

For much of the last month, shares in Dell have traded above the offer price, suggesting investors are anticipating an improved offer from its founder. Shares closed on Wednesday at $14.32.

Analysts and people involved in the deal process believe a significant amount of Dell’s shares — over 20 percent, by one count — are now in the hands of hedge funds betting on the buyout’s prospects.

Media Decoder Blog: Survey Shows Growing Strength of E-Books

E-books continued their surge in popularity last year, surpassing hardcover books and paperbacks to become the dominant format for adult fiction in 2011, according to a survey of publishers released Wednesday.

For several years, consumers have been rapidly switching from print to digital for reading novels, a sign of the growing strength of the e-book for narrative, straightforward storytelling.

Over all, digital books kept up their explosive growth in 2011, the survey confirmed. Publishers’ net revenue from sales of e-books more than doubled last year, reaching $2.07 billion, up from $869 million in 2010. E-books accounted for 15.5 percent of publishers’ revenues.

But as digital revenue grew, print sales suffered, dropping to $11.1 billion in 2011 from $12.1 billion in 2010.

The annual survey, known as BookStats, includes data from nearly 2,000 publishers of all sizes. It was conducted by two trade groups, the Book Industry Study Group and the Association of American Publishers.

The survey also revealed that revenue in the overall trade book business was relatively flat. Publishers’ net revenues in 2011 were $13.97 billion, up from $13.9 billion in 2010, an increase of 0.5 percent.

Children’s books, a category that includes young-adult fiction like the hugely popular “Hunger Games” trilogy, grew 12 percent in 2011, to $2.78 billion from $2.48 billion in 2010.

Despite the closing of hundreds of Borders stores, brick-and-mortar stores remained the largest sales channel for books, the survey found. Many in the publishing industry worried that the disappearance of Borders would have a significant effect on the overall business, but analysts said it appeared that many of those customers had moved to other retailers.

Online retailing, however, increased to $5.04 billion in 2011 from $3.72 billion in 2010.

“I would never dare to call an industry healthy, but it certainly seems to be robust,” said Dominique Raccah, the publisher of Sourcebooks and co-chairwoman of the Book Industry Study Group, adding that unit sales of books had increased. “We, as an industry, appear to be getting books into more hands.”

Media Decoder Blog: Survey Shows Growing Strength of E-Books

E-books continued their surge in popularity last year, surpassing hardcover books and paperbacks to become the dominant format for adult fiction in 2011, according to a survey of publishers released Wednesday.

For several years, consumers have been rapidly switching from print to digital for reading novels, a sign of the growing strength of the e-book for narrative, straightforward storytelling.

Over all, digital books kept up their explosive growth in 2011, the survey confirmed. Publishers’ net revenue from sales of e-books more than doubled last year, reaching $2.07 billion, up from $869 million in 2010. E-books accounted for 15.5 percent of publishers’ revenues.

But as digital revenue grew, print sales suffered, dropping to $11.1 billion in 2011 from $12.1 billion in 2010.

The annual survey, known as BookStats, includes data from nearly 2,000 publishers of all sizes. It was conducted by two trade groups, the Book Industry Study Group and the Association of American Publishers.

The survey also revealed that revenue in the overall trade book business was relatively flat. Publishers’ net revenues in 2011 were $13.97 billion, up from $13.9 billion in 2010, an increase of 0.5 percent.

Children’s books, a category that includes young-adult fiction like the hugely popular “Hunger Games” trilogy, grew 12 percent in 2011, to $2.78 billion from $2.48 billion in 2010.

Despite the closing of hundreds of Borders stores, brick-and-mortar stores remained the largest sales channel for books, the survey found. Many in the publishing industry worried that the disappearance of Borders would have a significant effect on the overall business, but analysts said it appeared that many of those customers had moved to other retailers.

Online retailing, however, increased to $5.04 billion in 2011 from $3.72 billion in 2010.

“I would never dare to call an industry healthy, but it certainly seems to be robust,” said Dominique Raccah, the publisher of Sourcebooks and co-chairwoman of the Book Industry Study Group, adding that unit sales of books had increased. “We, as an industry, appear to be getting books into more hands.”