Capitalizing on the Downturn


Our collective fascination with the Forbes list of the world's billionaires has never been as strong as it is now. The bad financial news keeps coming, all day, every day, so yesterday's report on the richest of the rich was a welcome break.


In the past, it might have brought a twinge of jealousy. Ok, not "might." Did. But now, it's reassuring somehow to know that these people are just like us -- they're losing money, too. Only so much more of it. Yet, they are still not like us because they're rolling in dough. We like that, too, because we want to know that somebody is, even if it's not us. And this year, Bill Gates is back at the top of the list, fulfilling both of those emotional needs, with a fortune of $40 billion to his name, down $18 billion for the year.


Three hundred thirty-two of last year's 1,125 billionaires fell off the list this year, and 38 new ones made it on for the first time. NPR asked Forbes magazine CEO Steve Forbes and his editors about those newly minted billionaires, "how did they make money in a recession?" No point in asking the veterans, because most of them lost money. Big winner and big loser, Bill Gates is still Microsoft chairman but is focused on philanthropy as of last summer, funded largely through his personal fortune and regular sales of his Microsoft stock. So, that being the case, how safe is his top spot? What might happen to his fortune and his ability to alleviate global hunger and cure disease? How might Microsoft fare in regards to Forbes' list of the "secrets" to making scads of money in a bad economy?


Secret 1: "Pick your location wisely." The United States, after faltering, is now apparently the place to be as far as this list is concerned, with 44 percent of the money and 45 percent of the slots. So Washington-based Microsoft chose wisely, though that doesn't mean it is free from European antitrust actions or rampant piracy of its products hurting revenues.


Secret 2: "Make your money in something tangible." Forbes editors cited shampoo, liquor and illegal drugs as proven winners this past year, so with that narrow definition of luxurious and decadent products, this may be a weak area for Redmond. Then again, the contrast Forbes made was with financial services, whose collapse is creating a regulation-rich environment, powered by technology. The company knows it needs to make a success of its plans for Windows 7 in the growing netbook market, keep close tabs on the shrinking gap between its non-mobile and mobile OSes, keep its resellers happy, get Office 14 out, and continue adding competitive cloud-based solutions for business customers, as it did this week, for example, with CRM Online and Dynamics updates and free add-ons, appealing to clients' fears about a more highly regulated future and a tech-savvy up-and-coming work force that has no patience for clunky tools.


Secret 3: "Don't go along with the crowd." Market downturns mean bursts of mergers and acquisitions, but Microsoft is exhibiting patience and temperance for the rest of its fiscal year, ending in June, it says. In 2008, the company stepped up significantly its acquisition pace, but for 2009, reports San Francisco Business Times, the company will keep the checkbook closed and wait until valuations settle and presumably become more attractive before buying. As the uncompleted Yahoo deal shows, it can pay to take your time, which also leads us to secret number four.


Secret 4: "Luck." This one, Microsoft has. From licensing MS-DOS, to seeing Apple fire Steve Jobs, to the timing of Windows 95, you can stroll down Microsoft's lucky lane in this eWEEK slide slow.


Secret 5: "Don't try to replicate what happened last year. Take advantage of it." While this tip doesn't seem to make sense, the advice is to jump in and make something new. Which could pay off for an ambitious multi-millionaire with his or her eyes on the billionaire list, but not as much for Microsoft. Of course, Microsoft can follow these secrets for recession-era money making, all while increasing its marketing and operating expenses in pursuit of the opportunity to grow its existing consumer and enterprise markets -- taking advantage of the opportunity provided by the damage done to competitors whose generally higher prices make them vulnerable to market poaching, as InformationWeek's Michael Hickins wrote recently. But all that doesn't mean that Microsoft won't also focus on the "new;" Steve Ballmer is studying the successful business strategies of previous recessions and depressions and is finding that a strong investment in R&D now will add to his company's strength when times are good again.