Microsoft Revisited: Vista, Apple and the Sony/Nintendo Phenomenon

Overview

Microsoft on stage. Bill on The Daily Show. It's Vista time, baby. Survey says - thud. It is a hard thing to watch. A cranky, defensive and inarticulate Bill. Trends in the data that have to be massively disconcerting to Microsoft management (not to mention its external shareholders). Dripping, gloppy Apple envy coming from the top. Incredulity at the public's lack of understanding of Vista's greatness. These are not signs of a company, of a culture, of a management team doing well. They are failing. Failing to understand their customers. Failing to understand the tone of the market. Failing to understand the kind of messaging that is necessary to get people excited about their products. And yes, failing to transition into the Consumer Era of Computing, a phenomenon I had written about in a post about six weeks ago.

And I've got to say that this latest leg in the Microsoft/Apple battle bears stunning similarity to the duel (although it is hard to have a duel when one of the participants is already dead) between Sony and Nintendo in the PS3/Wii war, while a story that still needs to be fully played out looks increasingly like the nimble, adaptive, consumer-focused company kicking the crap out of the Grand Dame of Gaming. And I am sure over the ensuing months and years we will see more of this stuff happening, where the more consumer-centric, lighter, friendlier applications will dominate the legacy titans of yesteryear. It is all just beginning, and the first and highest profile casulty may well be Sony, closely followed by Microsoft. Anyway...

Structural Issues Limiting Early Adoption

eWeek had an interesting post on the day of the Vista consumer launch:

SEATTLE (Reuters)—After more than five years of development, over 50 million lines of software code, a $6 billion investment and a few headaches, Microsoft Corp.'s Windows Vista finally reaches consumers this week.

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Many corporate information technology executives are taking their time, as they often do for major software changes.

"If I was an IT manager and I valued my job, I wouldn't move to Vista or migrate my people to Vista for 12 months. I'd sit and wait," said Andy Walker, a technology columnist and author of an upcoming help book on Windows Vista.

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Research firm Gartner estimates that Windows Vista will be running on more than half of the world's consumer PCs by late 2008, but it won't be the dominant operating system for corporate computers until 2010.

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Only 15 percent of today's computers are capable of running Windows Vista Home Premium, considered to be the mainstream consumer version, according to Gartner. That is just one reason why people probably won't be lining up outside stores to buy Windows Vista out of the box on the first day of release.

In addition, the growing complexity of upgrades and general satisfaction with existing operating systems could result in a Vista launch that lacks the fanfare of previous Windows releases. A decade ago, people lined up outside stores to get a copy of Windows 95.

"You're not going to have people waiting around the block for CompUSA to open like they did 12 years ago," said Gartner's Silver. "However, Vista can still be successful even if people aren't lined up around the block."

Is it just me, or is Gartner looking at statistics different than their own? For the Gartner statistics to become reality doesn't it require a perfect storm, where almost all consumers who trade up their computers over the next 18 months buy Vista and don't, say, buy an Apple? I must say, lately some stuff I've been seeing from research firms like Yankee Group (PS3 will win, with the famous quote "Casual gamers don't buy consoles") and Forrester (iTunes store has declining sales trends, though the data used was incomplete, leading to a quasi-retraction) has been leaving me cold, and I expect this Gartner report to leave me with that same chilly feeling. Only 15% of consumers have machines powerful enough to run Vista Home Premium? I generally like to invest in businesses that have the wind at their back, not in their face. But hey, that's just me.

Bill's Public Persona Isn't Helping Matters

Bill's quick exit from the set of The Daily Show aside, he has not been doing Vista or Microsoft any favors with his recent performance. Contrast this with his alter-ego, Mr. Jobs, who even in the face of controversy surrounding the Apple options backdating scandal can get up on stage and wow his employees, his customers and the technology community at-large. Steve is a rock star. Bill looks as if he's been living under a rock. Check out some of his answers in a February 1st interview with Steven Levy of Newsweek:

NEWSWEEK: If one of our readers confronted you in a CompUSA and said, “Bill, why upgrade to Vista?” what would be your elevator pitch?
Bill Gates: The most effective thing would be if I could sit down with them and just take them through the new look for a couple of minutes, show them the Sidebar, show them the way the search lets you go through lots of things, including lots of photos. Set up a parental control. And then I might edit a high-definition movie and make a little DVD that's got photos. As I went through, they'd think, “Wow, is that something I could use, would that make a difference for me?”

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You also talk about improved security in Vista.
Yes, although security is a [complicated concept]. You’re [referring to] the fact that there have been some security updates already for Windows Vista. This is exactly the way it should work. When somebody comes to us [after discovering a vulnerability] we’ve got [a fix] before there is any exploit. So it’s totally according to plan, and that’s why we have the whole Windows Update thing. We made it way harder for guys to do exploits. The number [of violations] will be way less because we’ve done some dramatic things [to improve security] in the code base. Apple hasn’t done any of those things.

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Are you bugged by the Apple commercial where John Hodgman is the PC, and he has to undergo surgery to get Vista?
I've never seen it. I don't think the over 90 percent of the [population] who use Windows PCs think of themselves as dullards, or the kind of klutzes that somebody is trying to say they are.

How about the implication that you need surgery to upgrade?
Well, certainly we've done a better job letting you upgrade on the hardware than our competitors have done. You can choose to buy a new machine, or you can choose to do an upgrade. And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say? Does honesty matter in these things, or if you're really cool, that means you get to be a lying person whenever you feel like it? There's not even the slightest shred of truth to it.

Does the entire tenor of that campaign bother you, that Mac is the cool guy and PC—
That’s for my customers to decide.

Are you kidding me? Bill sounds a little like Glenn Close in Fatal Attraction, and that he is getting ready to boil Steve Jobs' bunny. First off, Bill, after having spend an amount exceeding the GDP of several sovereign nations - $500 million - to launch Vista, don't you think you could have spent even a little of that on media training? THAT is your elevator pitch? Sorry, Bill, but you're not getting the VC funding you desire. You're not even getting out of the elevator. Your answer on security: poor. Your paranoia and irritation at Apple's successful branding and image-making? Nauseating. You're the richest guy in the world. You do lots of great things with your money. You're a brilliant man. The Apple threat and a changing world is making you become unhinged. Do something about this. Fast. For your shareholders sake. Please.

And if you think that's bad, our friend Bill a/k/a Mr. Malaprop is getting the crap kicked out of him by former friends in the media - everywhere. For some reason Microsoft and Bill just don't get the props they used to. This thread was beautifully captured on the CyberPsych blog. You really should check out the post - it is quite thoughtful and has many humorous pictures - but I've recorded the more salient points below.

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I've looked at quite a few interviews featuring Bill Gates touting Vista's advantages on the mainstream networks, and if I'm not mistaken, he's actually getting a hard time of it.

In other words, he's being asked some challenging questions by media hosts who actually seem to have done some homework. Perhaps because they themselves use Windows Xp and are asking why the need to update, or they're Mac users and, well, same question, truncated: "why the need?"

Whatever, from the video streams I've seen, Bill has got to do something with those flailing hands - has nobody at Microsoft said to the boss, "Boss, you need some media training?"

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No, it seems to me that even mainstream media is not going to fall over just to please Bill. Because they too have put up with Windows all these years, journalists have themselves as their own test platforms from which to pitch questions, and from what I'm hearing, Bill is now working hard for his money.

This is no Windows 95 release. I'm seeing a lot of "hrummphing" and shoulder-shrugging in mainstream media's handling of Vista's release.

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The sense I'm getting (probably because I'm sensitive to it) is that Microsoft's free ride is coming to an end...

I've never seen non-techie mainstream media give MS such a hard time... you will find tech journalists going Wow! but by now we know that they are likely to be dipping into that $500million publicity well for their handouts in exchange for uncritical commentary.

But the others... those who just want a system that works... all seems to be asking of Bill tough questions about Apple and OS X and the need for Vista.

About time mainstream media got a little backbone and saw PR spin for what it is...

The world has changed. Bill either doesn't see it or doesn't want to see it. The Newsweek interview really reminds me of an extract from my December 12th post on Microsoft vs. Apple:

I guess the question is whether or not those 73 million households are a gimme. A lot has happened in the consumer market since the release of XP: the rise of the Mac Book,  the popularity of iTunes, the ubiquity of the Apple consumer experience. Analysts frequently love to base projections on previous product adoption cycles. Is Mr. Schadler correct in assuming that Vista will enjoy the same uptake as XP did when it went live? Today's world is clearly different, my friend, and woe be those who are bounded by yesterday's thinking in projecting tomorrow's reality. Even a small dent in Microsoft's OS market share would have a huge impact on its P&L (with the benefit going straight to Apple). I'm just saying it's a possibility, but apparently not to Mr. Schadler.

By the way, for context, the 73 million number refers to households running Vista by 2011, predicts Ted Schadler, an analyst at Forrester. This is, of course, an extrapolation of how XP penetrated the household market. The same kind of analysis done by the Yankee Group analyst when predicting PS3 dominance (by extrapolating the meteoric success of PS2). So even professional analysts don't see it, so why should Bill? Because he owns $50 billion of stock, that's why. Clearly mainstream media sees it (not to mention the blogosphere). So what gives?

The Smell of Fear is Palpable

What do you get when you take arrogance, a ton of cash, an enterprise software-laden culture and fierce competition? Microsoft. People (and what are companies but conglomerations of people, anyway?) react to fear in different ways. Some clam up and stick to what feels comfortable. Others challenge this comfort by acknowledging that something has changed and recognizing that they need to make decisive change. Microsoft, unfortunately, appears to be in the former camp. But why, when the sledding gets tough, would a company's response be arrogance? This was recently illustrated by a post on Gizmodo summarizing Microsoft's response to the slow uptake of the Xbox 360 in Asia. Though this doesn't directly relate to Vista, it does reflect a deep flaw in the culture that could well be pervasive. You will simply not believe this:

If you're in Singapore, Hong Kong, Taiwan or Korea, Microsoft wants to know what's wrong with you. That's right, your tepid response to their console isn't their fault, it's yours. Which leads Microsoft to launch the website "whatswrongwithu.com" questioning what really is wrong with you. C'mon, it's got great Japanese games, blockbuster titles, and it looks cool! Was it your inadequate parenting? Perhaps a childhood trauma? Fetal alcoholism? Just plain stupid? Tell Microsoft what's wrong with you at their website.

I clicked through to the site. It's real. Some heads should roll at Microsoft PR in Redmond. What is going on there? Actively calling out your customer base? Is this supposed to be edgy and cool? How about stupid and ill-conceived? First the Zune launch was an unmitigated disaster. Then Vista's was something less than stellar, notwithstanding the eyeball-popping budget. Now they are on a mission to undermine the one cool product that they actually have that is making headway? I just don't get it...

But if you really want to freak out Bill, share with him an analysis done at a blog called 10layers. It posits a scenario where Apple - yes, Apple - has revenues exceeding Microsoft's within 5 years. And I've got to tell you, it isn't totally crazy when you look at the numbers. But I'm sure Bill has an explanation (or at least a few juicy rationalizations) to do away with such talk.

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Both Microsoft and Apple have seen healthy revenue growth in the last 5 years. Microsoft’s revenues have grown approximately 60% from just under $30B in 2002 to over $44B in 2006. However, while Microsoft has grown linearly for this period, Apple has accelerated with revenues of just under $6B in 2002 growing to just under $21B in 2006. An impressive 250% revenue growth! In other words, Apple has been growing much faster than Microsoft.

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But equally as interesting as the post itself is a very detailed and thoughtful comment by Jack Campbell, who addresses some of the logical concerns with 10layers' analysis while positing his own scenario - where revenue crossover occurs at $40 billion, which implies Microsoft's revenues declining from current levels:

Though-provoking math exervise, but not a valid proposition in the real world, as it would presuppose Apple’s ability to stack mega-hit products of the maginitude of the iPod. It presupposes that Apple will either (a) continue the exponential sales growth of the iPod [impossible], (b) introduce a succession of new products that individually sustain the exponential iPod sales growth [unlikely], or (c) introduce a palette of mixed products that collectively sustain the exponential growth of the iPod’s peak sales growth period [barely possible]. Historically, few companies with such mega-hit wonder products as the iPod have successfully followed it with sustained growth of the magnitude of that product’s peak performance period. It is exquisitely unlikely Apple will buck this precedent.

With all that true, there is still another factor that could lead to your projected revenue crossover point — a reduction in Microsoft’s growth rate to below the linear pace you project forward. I actually can see a moment in the 2009 - 2011 period where Apple’s revenue surpasses Microsoft’s, but at the about $40 Billion level, not the about $68 Billion level your math exercise predicts. 10 million to 25 million iPhone platform unit sales per year equates to an extra 5 to 10 Billion Dollars in sales. Some similar success with home media platform products, continued Mac platform adoption, and — well, you can rationally see $40 Billion in annual sales, near-term.

As for Microsoft’s softening sales growth, if you reduce your historical data set to the past two years, your own “linear” projection method drops the cir. 2010 revenue crossover point to about $55 Billion. Any further softening in Microsoft’s growth rate reduces that point further, with $40 Billion not being an unrealistic contemplation. With business desktop PC’s havign been reduced to basically a replacement cycle revenue base, and Microsoft showing massive weakness against a wide array of Web 2.0 and home media assaults, supposing such a sales growth slide is not unreasonable.

In any case, Microsoft is showing more weaknesses and general executive-level befuddlement that at any prior time. And, Apple is striding forward with its game face firmly in place.

A 2010 revenue crossover at about $40 Billion is conceivable. We’ll see.

Interesting, thoughtful stuff. I hope Bill doesn't see this. He might get those crazy flailing hands going again. But let's consider some facts:

• A slowing in the replacement rate of Windows-based PCs, which is bad for Vista
• Strong positive growth trends in Apple's computer business
• 50% of Apple Mac purchasers are "first timers"
• Xbox sold 10 million consoles in 18 months; Nintendo sold 4 million in 8 weeks and is poised to top 6 million by March

Bill's got a bunch of reasons to feel pretty lousy. Microsoft has never been as vulnerable as it is right now. And the blogosphere is all over this, particularly as it relates to Vista.

The Matter of Chatter

From the BBC: Can Microsoft's Vista inspire consumers?

From CNET: A frat party for Vista's debut

From Niall Kennedy's Weblog: No one is lining up for Windows Vista

From Blackfriars' Marketing: Windows Vista: the end of one revolution and the beginning of another

The Blackfriars' post has some particularly interesting comments that put some context around what is happening to Microsoft:

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In 30 years, it's amazing how little has changed.

It is time for another worker rebellion. But this time, the tools are different. The revolutionaries today are employing a million free Internet services, personal Web sites, and startups without investments in the status quo. The first shots have already been fired by business people forwarding their email to free GMail accounts to bypass corporate restrictions, airing dirty corporate laundry on personal blogs on Blogger and Weblogs, and launching test versions of new ideas using services from Google, Amazon, and Yahoo. And the famous Windows PC banner is long gone from rebel uniforms. Today's rebel is wearing a Google T-shirt, carrying an Apple laptop and promoting their company from a Linux infrastructure they don't even own.

Everyone from Bill Gates to high school students sees this change coming. But in this revolution, Microsoft is the defender of the status quo with billions of dollars of revenue and profit at stake, not the poor upstart. And for the new rebel generation that has grown up with computers, they see the Windows Vista PC, not as a tool that will help them build their dreams, but a barrier whose end user license agreements, restrictions on content, and closed development processes stand in their way. The high-school developer in a garage with a cool idea isn't thinking about getting her product to Microsoft -- she wants to get it onto the Internet where it make her world famous, not hold her hostage to lawyers and marketers locked into an obsolete business model. She wants her ideas to be used and shared in millions of devices across the world, not locked in a vault with a thousand others, waiting for a competitor's threat to free them.

The instigator of one revolution is never the leader of the next. Bill Gates knows that, and he is moving on from Microsoft. It's time the rest of us did too. We have nothing to lose but our nostalgia for when Microsoft actually mattered.

I think Carl Howe who pens Blackfriars' has it right. And just a quick reminder of the Information Arbitrage view on Microsoft and context from the December Microsoft vs. Apple post. It seems as if maybe Carl and I should go bowling together:

With the Internet, cheap storage and massive processing power, the playing field has flattened measurably. One doesn't need thousands of developers, hundreds of man-years and tens of millions of dollars in "big iron" to develop applications people want. People want to connect. People want to be able to share. People want to discover. Pictures, movies, music, email, web pages, files, spreadsheets, and more. This means that people want programs and applications that are easy to use. And fun. And open. People and companies became dependent upon Microsoft because the lack of computing power and bandwidth called for a high degree of desktop integration. However, this isn't the case any more. Big, heavy OS and related applications simply aren't necessary. Google threatens Microsoft in search and email. Apple is chipping away with consumers. And these are only two of many companies that are relentlessly challenging the Microsoft franchise. Further, I think what Apple is doing is actually pretty profound.

Apple has control over its entire value stack, while Microsoft only controls the software. In most places I'd argue that "vertical integration" is a bad thing, but Apple has created a total user experience second to none, which is evidenced by their intensely loyal and growing following. Apple is all about the consumer, and if the Mac wasn't enough the iPod certainly drove the point home. It is this laser-like focus on the customer intersected with innovation and out-of-the-box thinking that has led Apple to the position it's in. Apple is an innovation leader - what about Microsoft?

Hmmm. Remember that Newsweek article I had cited above? It just so happens that Bill was asked the question about the vertical integration that I had written about, and here is how he responded:

With Xbox and Zune, Microsoft has adopted an end-to-end approach, where you write the software, design the hardware and run the services. Will Microsoft now change its mobile-phone strategy and adopt an end-to-end approach, the way Apple has with the iPhone?
No, I don't think so. People like different styling, media storage, capability [in phones]. The benefit we get from having lots of great hardware partners is pretty phenomenal. And our software can run on any one of those things.

Thud.

Conclusion

We may be witnessing an historic changing of the guard, which takes place in every generation. Remember IBM? They were invincible. How could they be beat? By a couple of geeks in a dorm room, that's how. Microsoft rises. And then another snot-nosed kid with a great idea and a dorm room made it happen in the box business, enter Dell. Then others got wise and squeezed their efficiency-based margins to nothing. Apple rose like a phoenix, crashed and rose once again, by virtue of innovation and a customer-centric ethos. Sony was like IBM. Now they've been bloodied by the customer-centric and community-oriented Nintendo. And now there's Google, the poster-child for the democratization of the Internet and the ever-flattening, increasingly frictionless world. When put in this context Microsoft just seems so big and slow and old, hidebound by 30 years of culture and organizational silos that seem impregnable. And it appears that Vista - the product, the PR, the marketing approach - is the result of such an organization. At times brilliant, very heavy, complicated and expensive. This is not a product for today. This is a product for an era when the desktop ruled. And that era is long gone.   

The author does not hold a position in the securities of these companies.

Comments

[Bob Dobalina]

Yes, yes, I've heard of Stein's Law, but a quick glance at the history of the MSFT/AAPL war suggests that this conversation has been had four or five times already, and it has ended the exact same way.

[Matthew Rosen]

Roger-

First off, truly a great post. You have a rare knack for lassoing vast swatches of information toward such lucid and precise conclusions. I originally happened upon your blog back when you first addressed the "Vista vs. Mac" debate. As something of an Apple aficionado myself, I remember perking up and saying "Now here's a guy who 'gets it.' "

Rob Passarella and I discussed Apple at length when I came by your offices a few weeks back.

The bulk of our conversation surrounded the idea of the Era of Consumer Computing, and Apple's pioneering position in this tectonic shift. The past five years or so have shown us two things:

Apple has been and continues to be one of, if not the most exciting technology companies for investors and users alike; and:

It has become painfully obvious how much Microsoft has lost its way.

In advance, brace yourselves, kids. This is a long one. And I went easy. ;-) Feel free to e-mail for follow up.

While the pending arrival of Vista did much to resuscitate the age-old Mac vs. PC debate at the fingertips of many a tech journalist during the last few months, a lot had happened in the years leading up to what amounted to that rather embarrassing, lone-cough-in-a-packed-auditorium-that's-so-quiet-you-could-hear-a-pin-drop dud of a "launch" last week that would make this go-around just a bit more, well, colorful. As you highlighted in your post, the overwhelmingly indifferent or occasionally even somewhat combative reactions from the mainstream press and the blogosphere, coupled with the "almost makes you feel bad for the guy" performances by a squirming-in-his-seat Bill Gates in various news outlets has definitely signaled that the groundswell of favorable opinion has indeed shifted away the from the staid behemoth of Redmond to its more nimble neighbor to the south.

Of course, this didn't happen overnight. I could go on at length about all the events - the wrong turns and missed deadlines on the part of Microsoft, versus the regular drop-kicking of expectations and constant stream of tangible innovations coming out of Cupertino - over the better part of this decade that lead us to this point. Anyone who has kept at least a pinky on the pulse of technology should however be aware of the highlights. For effect, though, I would like to present one of my favorite cases of when Steve Jobs laid a path along which Microsoft would then walk down years later, drive a signpost with a "Microsoft: Innovation" banner attached at its end, and hope no one noticed all the apple trees lining the way.

January 16, 2001.

I fished up the piece below on Apple's strategy from Wes George, writing for the old MacWeek. Read it. Look at the date again, and be witness to the genius that is Steve Jobs. Again, this was six years ago. (The article is saved on my hard drive, and the publication is now defunct, so I don't have a link.)

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"After last week's keynote, no one can say Apple lacks a cogent vision of how the information age will now evolve or what Apple's role in it is. It's reassuring to hear Jobs say that Apple has a future, and this is how we will get there...

Your digital hub

Steve Jobs began his vision of Apple's future by observing that media pundits and PC industry chieftains are loudly heralding the end of the PC era. Even staid veterans like Gateway and Compaq are actively moving their businesses (or at least their hyperbole) away from the PC market toward a burgeoning plethora of digital devices and new services far afield from their original business objectives.

Always thinking different(ly), Apple parts company with the rest of the PC industry's strategic diaspora. Instead of migrating away from the PC paradigm to prosper in our new century, Jobs thinks the PC will continue to play the central role in what he calls "our emerging digital lifestyle."

He began his description of Apple's future with a brief history of the PC era, noting two distinct growth phases for the industry. The first "PC golden age," from 1980 to 1994, was driven by huge leaps in productivity for businesses that adopted PCs to employ spreadsheets and desktop publishing applications. By 1995, the most striking uses for the PC seemed to have been identified, and the boom plateaued.

Then the Internet rescued the industry as its new "killer app," driving sales and market penetration to levels unimaginable in the mid-1980s, and we had the second golden age.

However, with the Internet/ PC combo now an ubiquitous fixture of daily life, people are again asking: What's next? Pundits have answered that all sorts of small, specialized (and often incompatible) digital devices will replace the PC, now dismissed as a lowly commodity.

Wrong! says Jobs.

"We think the PC is on the threshold of entering its third great age, the age of digital lifestyle, and that is being driven by new digital devices," he proclaimed. "We are living a digital lifestyle with an explosion of digital devices. It's huge. And we believe the PC, or more importantly the Mac, can become the new digital hub of our new emerging digital lifestyle with the ability to add tremendous value to the other digital devices."

Greater than the sum of its devices

Jobs cited compelling reasons why the PC should remain at the center of our personal informational world, most importantly that it can run complex applications well beyond the ability of less-powerful digital devices, and it has a full-size screen that allows all sorts of tasks that are virtually unmanageable on the tiny screens of cell phones or PDAs.

PCs also have large, inexpensive storage capacity, and--make no mistake about it--data storage on near-terabyte levels is about to become a part of most people's lives, as soon as broadband and digital video content become the norm. Huge, cheap hard drives combined with CD-RW and DVD-R drives will allow a PC to act as a sort of Grand Central Station, managing data from many different sources.

And, finally, PCs, "get on the Internet every way and at every speed," he said. "Very few of our digital devices get on the Internet at all, and those that do are slow."

He envisions a future where your Mac will interconnect, service and manage your growing collection of digital devices in a way that will add profound value to them. He cited the example of iMovie, which makes a digital camcorder "ten times more valuable," by allowing a user to create finished works from raw footage, and then format them for distribution on the web. With one inexpensive, elegant piece of software, Apple added functionality to camcorders that previously was only available to professionals and well-heeled DV buffs.

Jobs talked about leveraging all the components that make up the Mac experience to allow end users to integrate all their digital needs in one place. "We realized that Apple is uniquely suited to do this, because we are the last company in the business that has all these components under one roof."

Only Apple controls the necessary hardware, operating system, and applications to form the holistic solutions that end users will demand in the coming era of digital lifestyles. In order to compete with this concept, Wintel vendors will have to piece together a patchwork-quilt of third party components to form an unwieldy and complicated chimera. (So what else is new?)

Completing the dream

Job's didn't just announce Apple's new "hub" strategy, he also released two new applications and a new type of optical drive that, when combined with iMovie, really do turn your Mac into a digital authoring studio.

For shareholders, this is doubly good news, because the company is already delivering on its promise.

Combine iMovie, iTunes, iDVD and SuperDrive with your Macintosh, and it is easy to visualize Job's dream of one elegant and empowering environment. "Not just adding value to each of these devices," reiterated Jobs, "but interconnecting them as well."

All this articulation comes not a moment too soon. Whether it will really sell Macs is an entirely different question, which we'll consider at a later date. It's enough for now to know Apple does, indeed, have a plan."

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I remember it clearly. Jobs just showed us where we were headed for the next era of computing, and being a Mac user would ensure a seat at the front of the train.

The digital hub, the digital lifestyle, the digital living room - terms that all became part of the consumer technology vernacular on that fateful day.

Fast forward to today.

The proliferation of digital photos, videos, cameras, music, iPods (and, fine, wannabePods, too), the sudden emergence of user-created content-based sites like YouTube and Flickr, all demonstrate how SPOT ON Jobs was when he ushered in this new Consumer Era of the PC. For some empirical data, last year, for the first time, combined semiconductor sales to consumers were higher than those to enterprise customers. Spot on.

Truly something worth dwelling on, but, you know, this wasn't the first time the guy escorted the computing masses to an eventual enlightenment, so let's hold off on the applause, for now. There was the Apple II, the Mac, Pixar...we get it, Steve - you've got "vision." Looking back, Jobs certainly kept to his word that Apple would be at the forefront of this evolution in computing. To review, in the six years that followed, Apple has wrought:

- The PowerBook/MacBook Pro form factor, still the gold standard in notebook computing years later

- Mac OS X 10.0, 10.1, 10.2, 10.3, 10.4, 10.5 (pending), the world's most advanced operating system, about five times over.

- The iPod, which changed the way the world listened to music

- The iTunes Store, giving us a glimpse of the future of media distribution

- iLife, enabling the expression and integration of your "digital life" at heights still unmatched on Windows years later

- A retail strategy that has perhaps done more to expose new customers to The Apple Way than 100 Super Bowl commercials could ever hope to. The Apple Store became the fastest retail chain to reach $1 Billion in sales...all when every "expert" said it was doomed from the start.

- The continued evolutionary lines of iMacs and iBooks/MacBooks, the definitive "digital life" toolkits for consumers

- A transition to Intel, which not only
gained mind share, but an advanced processor architecture for the latest demanding applications, and positioned the Mac as the MOST CAPABLE AND COMPATIBLE platform, able to run essentially ANY APPLICATION AVAILABLE, along with Mac OS X, Windows, and Linux CONCURRENTLY ALL ON ONE MACHINE.

- iTV, truly bridging the gap between the "digital hub" and the living room

- The frickin' iPhone, which makes the competition look about 12 years out of date.

And every time Apple chalked up another home run in their arsenal, one of their competitors was there to wave it off as "just a fad" or "easy to replicate."

The original gum-drop iMac? Bill Gates belittled Apple’s new design-focused direction saying that “[They] now lead the industry in color...but I think we’ll catch up.” Still waiting...

The iPod and iTunes? Countless manufacturers, from Dell, to Sony, to Creative, etc. have come and gone with their supposed "iPod Killers." More digital music stores have shut down than there are operating today. One of my favorite lines out of the Apple camp in recent years came a while back in response to Gates going on in the press about how "consumers want choice" and how the iPod is destined to become a niche just like the Mac. Jobs, or perhaps Phil Shiller, Apple's VP of Worldwide Sales, said "Consumers have choice. And they've made their choice. You just don't like the choice they've made!"

Gates on the iPod:" "I look at the iPod, and think, that's not something we [MSFT] couldn't do." Sorry, Bill, the Zune is a joke, and if that's the best you can do, then, well, "Redmond, we have an emergency." And, boy, if you were one of Microsoft's "partners" in that PlaysForSure ecosystem, how pissed off are you that they just went ahead and put all their muscle behind the Zune and Zune marketplace? This is what you get for years of loyalty? To be relegated to second-tier status and closed out of their proprietary vertical approach that makes all the hard work you've done (as futile as it was in the face of the iPod/iTunes juggernaut, but hey, no hard feelings?) over the last few years basically a complete and utter waste?

I could go on...but enough about Apple for a bit. Now for the funny part.

January 7, 2007

Bill Gates gives the Keynote at the CES show.

He starts off by announcing that we are in "the digital decade."

No shit?

More eye-openers:

"The PC continues to have a central role, all these devices have to work together."

Sound familiar?

"Media Center."

"Ecosystem."

"Connected Entertainment."

"Digital Hub." (Whoops!)

Now, in all fairness, Bill spouted on about much of the same at CES 2006, so essentially, he was ONLY five years behind Jobs. The difference this year being that Microsoft actually, finally, delivered a product instead of more vaporware. Pardon the snideness, it had just been so long, "we weren't sure if you knew how to anymore" (to cite ex-Vista chief, Jim Allchin). As Jobs used to say back in the day, "Real artists ship," Billy Boy.

So, there it is. Just another forehead slapping example illustrating the "taillight chasing" that's been going on at Microsoft for as long as anyone can
remember.

Fortunately, as Roger mentioned, these days Bill had a much harder time of pulling the wool over the world's eyes than he has ever had before, and, boy, did he look uncomfortable when faced with this reality.

On a side note, that is exactly what Microsoft has been doing all these years. They've consistently delivered well below sub-par, half-assed, "good enough" solutions to a public that for awhile seemed content to give the company a huge pass, even if it meant their personal data, security, or sanity was at risk. Think about it, any other company in any other industry in Microsoft's position would have been held accountable a long time ago for it's shoddy record of quality, meeting deadlines, etc. Imagine if Ford shipped cars whose engines spontaneously combusted at random or whose brakes failed once a month at an unspecified time. I can totally see the driver saying "It's fine, they're going to fix that with the 2012 models." Right.

To reiterate, the backlash against Microsoft's complacent "Let them eat cake" attitude toward it's own customers took time to build. Apple, for a while, remained focused on delivering the best products and solutions, fostering relationships and in the process ending up with a whole network of brand advocates in its rapidly expanding base of customers. They took the high road. "Our stuff's better. Sooner or later, people will realize this."

Sound familiar? That's exactly what Apple said twenty years ago, just before Microsoft swept in with Windows, its "backwards, upside-down" attempt at copying the Mac OS and took the market from them. Why should we expect any other result this time around? The difference? The big difference? That was during the first Golden Era of Computing, the desktop publishing/productivty phase. And who made up the majority of the customer base during this era? Business, enterprise users. And who makes the buying decisions for business PCs? Individual employees who get to make discrete, individual purchases based on all available options? Nope. IT departments, CIOs, etc. and they made their decisions based, for the most part, on one thing: price. This set off a race to the bottom for the box makers, who fought tooth and nail to undercut one another, by packing faster chips into ever cheaper machines for the better part of the 90's. Now, some credit is due for driving advances in things like processing power, memory capacity, etc. and big thanks to Sir Moore whose prophecy gave something of a bar for the industry to set itself toward achieving.

Then something happened that nearly derailed the industry. Computers became "fast enough" for the most common everyday tasks. Word processing, e-mail, web browsing didn't require the latest and greatest hardware. Marketing via megahertz alone would not be enough to continue to drive sales as it had for the prior decade or two. Hence, calls for "the end of the PC" started to be heard. "We've got no where else to goooooo!" cried the obviously shaken manufacturers. They panicked, started selling copycat big screen TVs and rebranded digital cameras made by nameless Asian manufacturers.

Enter Steve Jobs, and THANK GOODNESS for Steve Jobs and for his guidance through what nearly amounted to the first Dark Age of Computing. So, now, let's assess the market at this point and the various players involved and we'll see why Apple is where it is today, positioned at the head of the pack in the latest chapter of the PC's evolution.

It had been decided that consumers would be the driving force behind this next Golden Age of Computing. This was perfect for Apple. It allows Apple to excel at what it does best -- solving difficult technology usage problems in a way that reduces or hides the complexity of the task, making technology work "for the rest of us." "Our stuff's better. Sooner or later, people will realize this." Well, as we saw, this ended up not being the case during the early history of personal computing. Now, to answer the question posed earlier, what would be different this time?

In short, a sale to an enterprise customer is a different beast than a sale to a consumer. A simple deconstruction: A CIO for an enterprise customer authorizes the purchase of 1,000 new PCs for a company's office. 1,000 PCs, but only ONE purchasing decision has been made. One, discrete purchasing decision, again, based mainly on price, or more specifically, INITIAL cost of ownership. (Side note: Initial vs. TOTAL cost of ownership, which accounts for costs involved with maintenance, security, stability, lifespan, etc. Macs tend to last longer than the average PCs; Macs have a more stable operating system resulting in less down time and, in turn, more productivity; Macs have dramatically fewer security issues, thus requiring less time, energy and financial costs to defending against vulnerabilities. The list goes on...) Plus, by this point, margins on non-Apple PC sales were razor thin, so you could sell all the $499 PCs you want, but it would be like squeezing water from a rock.

Contrast this with a sale to a consumer. A consumer enters a store, virtual or otherwise, and buys a new PC. One PC, ONE purchasing decision. Two consumers, two discrete purchasing decisions. Three...Four... And in this age of consumer-centric computing, price alone is not the determining factor in driving decisions. "Didn't I hear something about the digital life and interconnectivity and sharing?" says Joe Consumer to the man in the royal blue polo shirt with name embroidered above the left breast pocket. And the rout is on. Once the attention was placed on individual consumers, the game changed forever. Apple, again, positioned itself to take advantage. The competition? Not so much.

A little anecdote: I own some AAPL at around $8 (was $16 or so at the time, before the last 2:1 split. I would have liked to have gotten in at $14, but I was away on a road trip the week before). I bought in May of 2003. Take a look at a chart:

http://finance.yahoo.com/q/bc?s=AAPL&t=5y&l=on&z=m&q=l&c=

Pretty precipitous. The reasons, in short. The market overall was coming out of a downturn, and when looking for companies that were going to lead the recovery, one had to ask himself "What have these guys been doing during the last few lackluster years to position themselves once the smoke clears?" Let's just focus on the PC makers. Most of the boxmakers did all they could to simply cut costs, cut costs, and cut costs. They had to reign in the slack and excess carried over from the bubble days, or the tail end of that last Internet Era of the PC (which was still pretty business-centric). Dell was the only PC company (along with Apple) that was able to turn any type of profit during those down years, as they were just that much more able to cut costs and squeeze margins versus their peers at Gateway, HP/Compaq, and the like.

Apple, on the other hand, what had they done? Well, remember? Up to this point, they had put out the new PowerBook, the iPod, Mac OS X, iLife, embarked on the retail strategy, and had just announced the iTunes Store - basically, they emerged at the start of 2003 with the most compelling line-up of products in the company's history, and a new, highly focused network of outlets to tell people - individuals, consumers - about it. They innovated their way out of the downturn. Who else but Apple would be able to convince people to plunk down $399 for an MP3 player during a recession? That's how they weathered the storm. Rather than clamp down on R&D, they continued to put out compelling products that people just HAD to buy, their energy bill, be damned. You want to discuss numbers? They were growing, profitable, and trading at one point about $1 above cash on the books. What have you done for me lately, Gateway? Right. So, I bought AAPL.

At the time, no other company was positioned as well as Apple to reap the benefits of the shift toward consumers in the PC industry. A few years, and a few hundred percentage point increase in the price of AAPL shares reflects that. The writing was on the wall. Jobs told us! Those who listened ended up owning one of the top performing stocks in the S&P 500. How 'bout those poor souls who were holding MSFT shares all that time? Your stock is at the same price it was in 1998. Ouch.

So, again, here we are today. It didn't happen overnight and there is no one reason why that we can single out. Reasons for Apple mind share gains and success in the market run the gamut from superior security versus Windows, Apple's growing retail store network, the iPod and the Halo Effect, award-winning design, Mac OS X, Mac-only applications such as iLife, ease-of-use, the Mac's ability to run Mac OS X, Linux and Windows concurrently, word-of-mouth, excellent reviews, and more. And don't forget Apple finally saying "Forget the highroad!" and throwing the gauntlet down with the 'Switcher' and 'Get A Mac' ad campaigns. As Roger suggested, one would think that with all this Apple-scented wind in their face upon the eve of what is meant to be the company's biggest, most significant release in its history with Vista, Bill and the Microsoftees would have done a little more to prepare for their debut. They didn't and in doing so made Apple look great, embarrassed themselves, and provided entertainment for all those watching! Thanks for that, at least! (I, of course, am not a MSFT shareholder, so I can laugh about it).

I loved seeing Bill get called out on more than one occasion.

---------------------------------

Go here for a really funny video of Gates being interviewed on CNN:

MacDailyNews | Bill Gates lists Microsoft ‘innovations’ that Apple has offered Mac users for years

January 30, 2007

http://macdailynews.com/index.php/weblog/comments/12472/

CNN's Miles O'Brien interviewed Bill Gates about the debut of Microsoft's new operating system, Windows Vista, this morning.

One portion was especially interesting: 

O'Brien: Frankly, a lot of what I see here, um, seems to mimic a little bit [Apple's Mac] OS X. Were you going after a specific look there, the Mac look, or?

Gates: No, no, no. Actually, uh, the, we're ahead [slight pause] on a lot, uh, there's whole areas where we've innovated like Media Center and tablet, uh, that, uh, no one else is doing and the parental control, that's the first time that's been done. Even in this photo area, you know, we'd love to have you compare how we've done, make it easy to make a DVD, edit high definition movies.

MacDailyNews Take:

• Parental Controls: Apple debuted Parental Controls in Mac OS X Tiger, released on April 29. 2005. That's nearly two years ago. 
• Photos: Apple debuted iPhoto on January 7, 2002. That's over five years ago.
• DVD creation: Apple debuted iDVD on January 9, 2001. That's over six years ago.
• Movies: Apple debuted iMovie on October 5, 1999. That's over seven years ago. Oh, HD? Okay, Apple debuted iMovie HD on January 11, 2005. That's over two years ago.

So much for Microsoft's "whole areas" of innovation.

---------------------------------

What a classic 'Emperor's New Clothes' kind of moment! I would have loved it even more if any one of those journalists he sat down with was really a closet Mac Head. Imagine the exchange:

Gates [makes an outrageous claim]: "Vista is the first OS to have Parental Controls built in."

The interviewer whips out his MacBook from behind the news desk and brings up the Parental Controls settings in Mac OS 10.4 Tiger, released April 29, 2005, almost two years ago.

Interviewer: "Go on, Bill, what else is new in Vista?"

Gates: "Uhm, well, [squirms a bit, face begins to blush, a lone bead of sweat emerges from his forehead], you can, uhm, create DVDs really easily. We really, uhm, innovated there." [Voice cracks on "innovated"]

Interviewer: "iDVD debuted on January 9, 2001. And it's really great and powerful. And so simple to use! Step 1) Drag. Drop. Step 2) Click 'Burn.' Really, how much more can you innovate there, Bill?"

And as the camera pans back to where Gates was sitting, you see an empty chair with a microphone wire strewn over the back, as he is walking out of the studio. Or, in a dream world, the camera pans down from the chair to Gates, on the floor, curled up in the fetal position, pulling at the hair above his temples, murmuring "We innovated...We innovated..."

Cut to commercial.

More Vista fun:

David Pogue, a rather well-respected tech columnist (by Mac users, at least) in a video for The New York Times:

---------------------------------

Windows Vista did not steal ideas from Mac OS X! [Sarcasm alert]

http://www.youtube.com/watch?v=TaIUkwPybtM

"Apple's little pop-up programs are called 'Widgets.' Microsoft's? 'Gadgets." Not the same!" ;-)

---------------------------------

Lost. Its. Way. It's all happening. The PC business isn't about hawking a commodity product to enterprise, volume purchasers anymore. I am out of fingers and toes in being able to count all of the people I know who over the last couple of years have switched to Macs. On Christmas Day alone, 6 people IM-ed me to say they got a new Mac under the tree.

And I've been stealthily keeping track of Mac sales in my little circle of "Buddies," using what I call the "iChat Test." Roger, while I can't say for sure as I've only been reading your blog for a few months so I don't know if you've mentioned this before, but based on your tone, I'm going to go out on a limb and infer that maybe, just maybe, you use a Mac. For those who don't, iChat is Mac OS X's built-in instant messaging program. All Apple notebooks, along with the iMacs, come with built-in cameras that enable seamless, no-hassle video conferencing. In the iChat Buddy List, a 'camera' or 'microphone' icon appears next to a buddy's name if they too are using iChat and have a camera and/or microphone available for conferencing. I believe using the newer releases of the AIM client for Windows will display these icons in iChat, as well, although, I know who uses what platform in my Buddy List. I have 221 Buddies. Right now, a little under 50 are signed on. 22 have camera/microphone icons next to their names. Conclusion? Almost 50% of the people in my circle of Buddies USE MACS. And, for the record, I don't hang out exclusively at The Apple Store or anything. ;-) These are friends, family, school chums, work associates, etc. the bulk of which are located in the New York Tri-State Area, but a good amount are spread across the country.

I personally "worked on" many of these people over the years on their way to buying Macs. Many came to it on their own. To my amusement, many were the same ones who just a few years ago chimed in with all the classic anti-Mac fodder. "A Mac??? Haha! I used to use a Mac, when I was in Second Grade!" "Macs? Well, they're good for graphics." I love that ol' chestnut! Come to think of it, many people are buying Macs today for their advanced multimedia capabilities, so there may be some truth to that statement. Good for "graphics," indeed.

While I'd like to think it was me who drove these people to Macs, I can't take all the credit. For all the ways mentioned above, Apple did a hell of a job on their own in getting out in front of the masses with their story. I was just there to offer up an "Amen!" when Jobs would lay out the latest and greatest from Apple for all to see. Again, thank goodness for Jobs. Can you imagine what our world would be like without the advancements he ushered into the mainstream? Going back a few years, what if he never gave that speech in 2001? The Consumer Era of Computing never materialized. No "digital hub." We'd all have pockets filled with nine different gadgets, with ugly, non-intuitive interfaces, incompatible connections, etc. Go back further. No GUI? No mouse? PCs as business machines forever and always. Bor-ing.

Apple's success in the Consumer Era of Computing cannot be attributed to Jobs' "Reality Distortion Field." It has gotten too big for that. It's much more. It's about focus. It's about attention to the most minute details. It's about a better experience. It's the same reason why some people drive Porsches, when a Kia "does the same thing." To use that car metaphor one more time, there has always been a lot of focus on Apple's market share. Mercedes-Benz, BMW, Porsche, all have a few percentage points of market share in auto sales. You never hear anyone bitch about how they're "beleaguered" because of it, do you? Apple's share of the personal computer market remains in the single digits, as does Lenovo's, Acer's, Fujitsu's, Gateway's, and every other PC maker outside of Dell and HP , both in the teens. Isn't perspective a wonderful thing? Apple makes plenty of profit selling to its currently small slice of the market and has the highest margins in the industry. What's the problem? And as suggested earlier, how many of Dell's sales are to discrete customers. How many discrete purchasing decisions were made? That sort of thing matters in the Consumer Era of Computing. Have you seen what's been happening to Dell lately? Plus, Apple created a $10 billion a year market from scratch in a short while with the iPod, whose halo-effect helped spike Mac sales to about $10 billion a year, as well. And now they are about to drop the iPhone bomb, which could be the next $10 billion opportunity for the company in the coming years. It's easy to imagine. A few percentage points of the mobile phone market captured in the coming years, and there you go. Imagine if the iPhone line takes off like the iPod? Imagine if it becomes the market leader? And Mac sales continue to creep up in parallel? And, and, and...

And that is why Apple has been and continues to be one of, if not the most exciting technology companies for investors and users alike. And if Microsoft doesn't adapt soon, it faces the prospect of becoming a lot less relevant in the eyes of consumers. And as consumers are now driving technology market, that would be a bad thing. What's the solution? New leadership? Gates is already taking off from day to day operations next year. At this point, really, no big loss. I read an interview with Ballmer last weekend in the New York Times. He said, as a CEO, one of the most important things is "simply to believe. You have to believe." I agree there. You've got to at least appear to believe in your company's mission, if only to stir up confidence in those around you. But is believing enough? How do you account for "belief?" Is there a column on income statements for "faith?" The Ford family could have believed all they wanted that things would just magically turn around for their company. It wouldn't, not without a new way of thinking. Same goes for Microsoft. Office and Windows are the only two products that have ever been profitable for the company. The rest? Not so much. As for the old Microsoft way of throwing money at something until it becomes "good enough," well, you can't do that forever. Occasionally, you've got to have another hit, if only to inspire your base of customers and keep them from detracting to your competitors. And in this Era of Consumer Computing, with discrete consumers making purchase decisions, and with a proven and formidable foe like Apple, confidence in old Softee's ability to come up with hits is wearing thin, no matter how much Ballmer "believes" otherwise.

I'll close with commentary from the guys over at MacDailyNews. They actually mentioned this in response to Roger's story.

---------------------------------

As we have always said, even as many short-sightedly waved (and continue to wave) the white flag, the war is not over. And, yes, we shall prevail. For the naysayers: In 1929, Ford held just over 61% of the U.S. market for automobiles. GM's market share stood at just 12%. Ford was thought to be invincible, with GM regarded as a niche auto maker. Probably, some analyst at the time said, "The reality is, long term, GM will always be a niche player." But, in 1936, just seven years later, Ford held just 22% of the market for new automobiles while General Motors held a 43% share. No company is invincible. Not even Microsoft.

---------------------------------

Think Different.

Err, I mean, Good for Graphics.

[Martin at Switch Blog]

Jess, the XBOX 360 is important, so maybe the point of all this is that operating system is in decline, not Microsoft; well, and Bill Gates ego.

Apple and Microsoft are racing to the living room, Apple with Apple TV and Microsoft with XBOX. Right now, Microsoft seems to have an advantage with Blue-Ray disk, and clearly with the games. Apple has a problem when it comes to games, but they have a huge long-term advantage in media consumption, consumers like them and trust them. Steve Jobs public letter about iTunes DRM is a part of that.

The iPhone is a first step into new product categories that will make current operating systems less relevant. Apple has the clear advantage there.

----

Jignish, Macs are anything but simplistic. They are elegantly designed and are even becoming mainstays in science and research, particularly genetics.

[RK]

If 50M lines of code and 6 years of investment do not mark the apotheosis of OS for personal computers, I don't know what is. The investment is just not worth it. The money could have been invested in so many other areas: mobile devices, game technologies, web based services, wireless. I look forward to the day when I no longer need to carry 1 PC: windows or MAC. I really don't need to carry all that complexities.

[Jess Curtis]

I agree that Gates needs some serious PR training. However.

XBOX 360. I think you're vastly underestimating the relevance of that magical little box. Its trouncing Sony because its cheaper, has better games, and is technically equivalent. And crucially, its online component, xbox live, is best of breed. As a user all I can say is: the xbox 360 is going to be M$'s ipod. The ease of use, the ability to manage friends lists, to interact with PCs, to facilitate chat, video chat, gaming, messaging, IPTV!, its extraordinary.
But the real money comes when you talk about video download. The other services are good (itunes being the best IMO), but they are absolutely crippled by the fact that most people can't get those videos from their computer to their tvs. Xbox 360 does. I just love the video download service -- it delivers reasonably priced HD rentals right to your HDTV without leaving the couch. Game over. And we'll start seeing the network effect big-time -- I'm already there. My sister has a 360, my friends have 360s -- xbox live has become my biggest social network "service". The value increases for me as more people join, and the increased value makes the platform more attractive. I see an xbox (or its successor) in half the homes in america in 5 years. (Because whos not going to want to be where all their friends and family are ... playing the cool games, downloading the HD movies and tv, streaming their youtube videos and mp3 collections to their tvs and stereo systems ...)

Or maybe I'm just a fanboy. In any case, M$ has made a believer out of me. (and I run linux!)

[jignish ray]

Apple is simplistic, like Fisher-price. That's the appeal of it. Windows is baroque and piled with legacy like a european city trying to modernize. If Apple ever became the dominant OS, they would have the same problems. Soon it would be uncool to like Apple. It has nothing to do with how user-friendly it is. Most people on Apples, just surf the web and use Adium/iChat like most people on Windows. In other words, the OS is no longer super important. It's just another false dichotomy.

[Jeremy Sisson]

I remember getting/installing Windows 95 for the first time. It was exciting, so many new things!

Who is excited by Vista?

[Carl Howe]

Thanks for the link to my post; I just wrote up some of my additional thoughts and reactions. You can read them at:

http://www.blackfriarsinc.com/blog/2007/02/windows-vista-secret-wow

I agree that we have very similar views on the topic and the prospects of Microsoft. In my opinion, the press and consumers have always given Microsoft huge benefit of the doubt with regard to its products because of the validation of it being so widely used. As you note, the situation seems to be changing now, with reporters relying more on their own experiences with microsoft software. As others have pointed out, it's not 1995 any more.

Thanks again for the links, and bowling sounds great any time.

Carl

[Stephane Rodriguez]

Another area where I think MS has made a big mistake since 2005 is on the unnecessary limitation of virtual machines scenarios, despite the fact that many consumer and enterprise scenarios make economies of scale with it.

Here are the two Microsoft mistakes :
- the EULA in some of the Vista editions explicitely prohibits the usage of any virtual machine whatsoever.
- the WGA check, which is built in Vista, is used to make it impossible for anybody to implement those virtual machine scenarios unless you are ready to pay for a lot of licenses. That's obviously a show-stopper.
- Corporate Windows XP volume licensing, which does not include check, is now replaced with a licensing server. More work for IT people, more budget.
- "Virtual PC" software offering from Microsoft just appalling. (Virtual PC was acquired by Microsoft from Connectix. Little has happened since then).

[Stephane Rodriguez]

Great article.

I disagree on one point, the 10lasers numbers about MS versus Apple growth in the last 5 years.

You are being played by numbers here, that's all there is.

When a revenue is small, any growth expressed in percentage will be big. However, if your revenue is large, then your growth expressed in percentage is going to be small.

Face it, it's not because MS are ducks and Apple are marketing geniuses here. It's because expressing numbers in percentage is flawed by design. And that's why, for the same reason, any other numbers like that should be taken with a grain of salt.

[Yaser Anwar]

I think from the desktop era we've moved into all-in-1 era.

If you notice, from Cisco to Apple to Dell to Sony etc, they are all competing to be the one-stop system for providing complete entertainment. From your movies to surfing to tivo.

Consumers don't want to use X for videos and Y for music, they want X and Y combined with Z all in one box which they can control with a, if I may say, universal remote.

Just a trend I've noticed happening for a long time now.

[howard Lindzon]

wow - a cool way to get to those conclusions.

the gates elevato pitch was so pathetic it is scary and may explain their horrible acquisitions the last 5 years.

Compare to Cisco's and their elevance.

value trap for microsoft continues I think.

[Les Posen]

First time visitor, and deeply impressed with your analysis and sourcing of references and examples.... even if one of the sources was my own Cyberpsych blog.

Glad someone else saw what I saw, and thought it worthwhile to include as part of a wide ranging discussion of the threats exposing Microsoft to an IBM-style fall from grace. Not that it ever had many good graces. It served its purpose... right place, right time, right products. Twenty years later, we learn that nothing stays forever. Talk about trying to turn around the Titanic on a sixpence. Please keep up the good work.

[ANiTOKiD]

There's a big difference in the personalities leading Microsoft and Apple. Bill is a nerd, while Steve is a geek. Both have technological know-how that others would die for and both are very tech-savvy. However, the nerd has a poor grasp and understanding of the social aspects that come with the job and product launches, while one has virtually turned it into a “magic pill,” casting a spell and enticing everyone to tout and embrace his product without question. Such lack of understanding has made its way down to Microsoft's public relations and marketing departments, both of which failed miserably in generating significant interest for Vista. This failure has even turned into a catalyst for depicting Microsoft as a soon-to-be “has been” company. Steve's full grasp of the social aspects of the product and his job has both analysts and consumers touting the iPhone as a revolutionary product, even though it isn't.