The Dataquest unit of Gartner Group Inc says there is a whole string of problems for Microsoft Corp lurking just round the corner. Dataquest’s tale of woe is that the worldwide suite market is not as sweet as it used to be, and showed early signs of slowing down in the second quarter of this year. It may have been up 24.3% year on year but was up only 2.3% quarter to quarter, and Dataquest says that while Microsoft continues to dominate the market, if the second quarter’s slowdown continues there could be serious ramifications for Microsoft and the entire market since, Microsoft relies extensively on suite revenue and profitability to drive its overall business. Meantime, far more serious medium term for Microsoft is that growth in the company’s share price is slowing, making the Redmond hiring model of paying modest salaries to its programmers and using attractive stock options as incentives may well become unsustainable quite soon as stock options are no incentive if the share price is stagnant. At that point, Microsoft will either have to start paying much higher salaries if it wants to attract high caliber people, or settle for less competent programmers. Either would seriously damage the bottom line and compound the problem by increasing the negative pressure on the share price.
