If Microsoft Does Just This One Thing, Its Stock Price Will Rise

Wow, what the heck just happened at Microsoft Corporation (NASDAQ/MSFT)? The company reported earnings that missed the target by a whopping $0.23 per diluted share.

I should also add to that question: what explanation did CEO Steven A. Ballmer offer? Could you imagine the look on Bill Gates’ face when he found out the numbers were so dismal?

The company, which I have discussed in the past, missed the boat on the mobility movement and is now trying to catch up. Its tablets appear to be overpriced and have not been well received.

And as I wrote in a previous article, I believe the best business under Microsoft at this time is its gaming and entertainment unit, which is responsible for the “Xbox” platform. (Read “Has Microsoft Found Its Savior?”)

The problem is that the entertainment console unit is still a small part considering the size of the overall business. In fact, I think Microsoft would probably better reward investors by creating a separate company to focus on the Xbox and spin it out to investors. Microsoft said it shipped out one million “Xbox 360” consoles in its fiscal fourth quarter.

The immediate concern is still the company’s missteps. Its touchscreen “Windows 8” operating system was supposed to be the next big thing, but so far, sales have been disappointing, and the company has had to update the software to provide fixes.

The problem is clearly one of vision and execution. Microsoft missed the move to mobility and is now paying for it, as it tries to play catch-up.

As the company’s earnings report details, “Windows continued its transition in the evolving device market,” and “the consumer PC [personal computer] market remains challenged and declined again this quarter.” I mean, no kidding. Everyone seemed to have known the shift to mobile devices was coming ever since Apple Inc. (NASDAQ/AAPL) first launched its “iPad.” Microsoft seems to have been asleep on this one.

Now, Microsoft will need to look at its strategy again. The stock is not dead, but there are better growth opportunities elsewhere—they’re just surely not here.

A start should begin with the examination of Ballmer at the helm. As I said, it may be time to change the leadership and try to steer the company back around. It may be too late, but this option could be superior to watching Microsoft do nothing for another decade.