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Microsoft is at a Fork in the Road

Many of us have caught the news that Microsoft’s CEO Steve Ballmer’s tenure is up. Over the next 12 month’s Ballmer will work to transition a replacement. This replacement will be faced with extremely hard decisions about Microsoft’s future. Whoever he or she is, I hope they are ready.

In my opinion the crux of Microsoft’s fade into irrelevance is their complete ineptitude to understand consumers. I believe Bill Gates, Steve Ballmer, and the rest of the crew at Microsoft understood a business user but I don’t believe for a second that they had any genuine understanding of consumers and consumer markets. On the flip side Steve Jobs had an amazing understanding of consumers. This was who Steve Jobs built products for and unfortunately in the early days it almost killed the company. The reason for this was because there was no true consumer market for PCs there was only a business/enterprise market. Bill Gates and Steve Ballmer and crew, built solutions that they understood–business and enterprise focused solutions. And during this time it was exactly what the market needed to grow. However in the early 2000s things changed. A pure consumer market emerged for computers and Microsoft was not prepared to compete against a company whose focus and passion were consumers.

The Fork in the Road

So Microsoft finds itself at a fork in the road. I find it very hard to believe in todays global marketplace that a single company can compete effectively in both consumer and enterprise markets at the same time. I believe Microsoft must choose to focus on business/enterprise customers OR consumer customers. They cannot do both.

Not much need change in the way of Microsoft’s outlook and strategic direction should they choose the enterprise focus. However, I don’t believe this is the path they will choose. RIM was in a similar position and chose to go after consumers and it killed them. But I believe the allure of a giant, yet not always profitable, consumer market will entice Microsoft to go this route. If this is the case, a lot must change at Microsoft.

The new CEO must change the culture first and foremost. Microsoft needs an agile and forward thinking group of executives with a vision of the 20 year future and Microsoft’s role in that future. Microsoft needs to focus more consumer oriented RND and innovation efforts. But perhaps most importantly, Microsoft needs to bring executives to the forefront who actually understand consumer markets. Things like the whats and why regular consumers buy things. This is not easy and only a few companies even remotely do this well.

The other expertise Microsoft needs to acquire if they choose the consumer path is regional expertise. Consumer markets in each region outside of the US like Asia, India, etc., will all behave differently. Gaining consumer intelligence is key but so is gaining that insight for the nuances of each region.

Without question Microsoft’s new CEO will be faced with a gamut of challenges. Even a new CEO does not guarantee Microsoft’s future security.

If Only Steve Jobs Were Alive To Witness The Final Destruction Of Microsoft

Steve Ballmer, Microsoft CEO, is officially out — sometime in the next 12 months. Another victim of Steve Jobs and the iPhone.

Blame that crazy, rebellious vision of Jobs which somehow changed the world, rendering Microsoft and the once impervious Windows as nothing more than fat, dumb, slow-moving dinosaurs.

Note the radical shift in value for Apple ($AAPL) from the very day the iPhone was first released (29 June 2007). Note Microsoft, standing still. Microsoft stayed big as the new world favored the small, the fast — the mobile.

Ballmer, for all the good he did for Microsoft — and anyone who says differently is either too young to be taken seriously, or too foolish to be tolerated — made the singular critical strategic mistake that has befallen so many of his ilk: a belief that the past is prologue.

Whereas Steve Jobs sought to destroy everything in his past, to remake the world, Ballmer sought to bring more and more of the past into the future. Ballmer’s way was right, for nearly a generation. Then it was completely wrong.

From the early days, when Microsoft became the Bill Gates – Steve Ballmer show, the men and the company were stunningly rewarded for pivoting from a software application company to a computer gateway troll. With Ballmer as the giddy lead tackle, Microsoft singularly changed computing: a computer was placed on every desktop and every computer required Windows to function.

There was no alternative. None. Every competing company was killed off. Excepting, Apple, which lay on the ground, bloodied, beaten and nearly dead.

As Steve Jobs remade himself, so too he soon remade Apple. Jobs understood immediately: to survive against Microsoft, there was only one way: to alter the very definition of “computer”.

As Ballmer clung to the strategy that had so richly rewarded Microsoft, building gateway upon gateway, attempting to create a “standard” for PCs, for gaming, for businesses large and small, for the Internet itself, Apple — under Jobs — took an alternate path: highly personal, highly mobile computers, with no keyboard, no mouse, and a relatively non-existent operating system.

A generation from now, perhaps Tim Cook will be forced to leave Apple, having missed some massive tectonic shift, just as Ballmer did.

Handicapping the Next Microsoft CEO

Steve Ballmer made many people very rich, few more so than himself. His future is secure. Microsoft’s much less so. A decision looms large for the company’s board: who will be the next CEO?

I caused quite a stir back in 2011 when I predicted the death of both Windows and Office by 2016. Time will prove me right. Nevertheless, right or wrong in my prediction, I believe that the next CEO of Microsoft must radically re-make the company. This will not be an easy task. As we learned once more with Ballmer, it is extremely hard for any CEO at any company to not focus on those areas that are raining down cash.

The new CEO must, however. Windows and Office have a limited future, no matter the profits they are bringing in today.

I believe the next CEO of Microsoft will be Stephen Elop, the current CEO of Nokia. Nokia is mobile and global, exactly what Microsoft needs.

What about you? Vote — and leave your comments below.

Ballmer is Retiring. A Look Back and A Look Ahead for Microsoft

When I first went to visit Microsoft, the company had only 28 people. In the early days of the PC industry there were no official PC analysts. I happened to be one of the first by default since I was covering mini-computers for Creative Strategies and was asked to cover the IBM PC introduction as well. This put me at the center of the PC industry from the beginning and after a trip to visit IBM I was asked to go see Microsoft too since their OS was on the IBM PC.

From the start, Gates hammered home that Microsoft was a software company. That was the core of his vision and it is what drove him during his tenure as CEO. This helped Microsoft become the dominant player in PC operating systems, server software and PC applications. While the PC was the major tool for all things digital for most of their existence, by the mid 2000’s the market began shifting to new platforms like smartphones and tablets. The irony is that Microsoft got involved with tablets in 1991 and smartphones as early as 1995. In fact in the late 1990’s Gates even predicted that the tablet would be the next major computing device for the masses.

But with the PC market booming, these other platforms turned out to be more hobbies for them than products that they would bet the company on. From my viewpoint their tablet and smartphone projects not only got low priority but also were really mismanaged during those days. With the world moving to mobile, and PC sales slowing down dramatically, Microsoft is at a crossroads and it is clear that Ballmer and Gates truly understand it. More importantly, they and the board now realize that it is now time for a new leader to grab the reigns and take them back to their roots and only concentrate on software but this time with a focus on mobile.

Business schools will do dozens of cases studies over the next few years on what went wrong at Microsoft under Ballmer’s leadership, but at the heart of it I suspect that they will discover that Microsoft’s dismissal of Apple as a competitor early on will be top of the list, along with their lack of proper priorities and management of their mobile projects over the years. Also, their deviation into hardware, outside of XBOX, has been disastrous. Microsoft recently wrote off over $800 million on the Windows RT project and their decision to do software has wounded their partners with all vendors.

Finding a new leader to take Microsoft into what my friend Chetan Sharma calls the “Golden Age of Mobile” will be difficult. Demand in PCs will stabilize as it continues to be a key tool in business, education, and even in homes, but it will never grow again. Instead, smartphones and tablets will continue to drive this golden age of mobile and become the dominant platforms for innovation, commerce and what Chetan Sharma calls “the connected intelligence era.” We are entering an age where devices are not only connected but will also be highly intelligent and manage contextual information and even have what I call anticipation engines that perceive what we need in context and provide intelligent links before we can even ask for them.

A new leader for Microsoft not only has to forcefully manage their past but intelligently manage their mobile future with an understanding that mobile software must be at the center of their future. That means that the new CEO they bring in to be their next leader has to be driven by a powerful mobile vision for Microsoft and make this the focus of their next generation of R&D.

Ballmer managed with an eye on the PC. That was the past. A new CEO has to manage Microsoft with an eye on mobile. This is their future. Let’s hope that Microsoft’s board understands this and it is not too late for Microsoft to still be a major player in this golden age of mobile.

The Microsoft Surface is (French) Toast

The Apology

Please allow me to begin by apologizing for the saucy language you are about to encounter. There is simply no way for me to tell the following joke without cursing. I really don’t like cursing (although, I do so love using it for effect), so I’m going to employ a substitute for the curse word. I trust that the savvy and discerning Techpinions reader will be able to pierce the veil and see through my little euphemism. Enjoy!

The Joke

On a Saturday morning, three boys come down to the kitchen and sit around the breakfast table.

Their mother asks the oldest boy what he’d like to eat.

“I’ll have some firetruckin’ French toast,” he says. The mother is outraged at his crude language. She hits him and sends him upstairs.

When she calms down, she asks the middle child what he wants. “Well, I guess that leaves more firetruckin’ French toast for me,” he says. The mom is livid. She smacks him and sends him away.

Finally, she looks at the youngest son and asks him what he wants for breakfast.

“I don’t know,” he says meekly, “but I definitely don’t want the firetruckin’ French toast!”

Excerpt from: “Jokes Every Man Should Know”

The Analogy

• The mother in the Joke represents the computer buying public.

• The first two boys represent any one of the several PC hardware manufacturers who made tablets running the Windows 8 software but who have since been booted from the market.

• The youngest boy represents Microsoft.

Microsoft – like the youngest boy in the Joke – has gotten the reaction of the public (the mother) all mixed up. The boy thinks that the mother is upset about the French Toast, not the cursing. Microsoft thinks that the public is upset about Windows 8. So Microsoft has been quick to swear off (see what I did there?) Windows 8 and move on to the brand, spanking, new Windows 8.1. That’s going to fix EVERYTHING!

Or not.

‘Cause the real problem – the problem that Microsoft doesn’t see or get – is with Microsoft’s accursed tablet philosophy. Microsoft thinks that what people REALLY want in a tablet is a PC. And Microsoft thinks that what people REALLY want in a PC is Windows. Thus and therefore, Microsoft thinks that what people REALLY want in a tablet is a PC that runs Windows – a hybrid, that does it all and is all things to all people.

Until Microsoft’s outlook (oh my, yet another obscure reference) changes – and I think it’s unlikely to change anytime too soon – Microsoft, like the youngest boy in the Joke, is going to keep on getting slapped around without a clue as to why it’s happening.

Paul Thurrott’s Analysis

Paul Thurrott, in his article entitled, “Can Surface be Saved?“, is seemingly critical of Microsoft’s tablet efforts but, in the end, he erroneously sides with Microsoft’s take on why Windows 8 tablets are failing in the marketplace.

The Surface Is The New Zune

The parallels with (Surface and) Zune are interesting. In both cases, Microsoft established a new (well, recycled in the case of Surface) brand for a new family of hardware products. In both cases, Microsoft adopted a coopetition model in which it sought to have it both ways by both supporting partner devices and then competing with them head-on with their own.

The fear at the time of the reveal event was that Microsoft would alienate these partners by making its own hardware. ~ Paul Thurrott

Microsoft’s move to “co-opetition” is quite interesting. When Microsoft announced the Surface, the pundits seemed to fall into one of two groups. The theorists suggested that by making their own hardware, Microsoft would harm their relationship with their hardware partners. On the other hand, realists looked at the market and concluded: “Harm their relationship? Nonsense. Where are the hardware manufacturer’s going to go?”

In a way, the theorists and the realists were both right. If the Microsoft Windows 8 Tablet program is the sinking Titanic, Microsoft’s PC manufacturers are the lifeboats and those lifeboats aren’t so much paddling toward anything as they are simply madly paddling to get AWAY from the sinking ship that is the Surface. ((Paul Thurrott: First, of the few PC and hardware makers that voiced support for Windows RT last year and the subset of those that actually shipped devices, virtually all have completely and publicly backed away from the platform. Indeed, the most successful Windows RT device, by all measures, is Surface RT. And that device required a nearly $1 billion write-off because of poor sales.
Second, more and more PC makers are turning to free Google platforms. Not just Chrome OS, which is a super-cheap/low-risk bet, but also now Android.))

Redefining “Superior”

Killing off Surface would just deprive customers of some of the only truly superior PC hardware out there.

And these devices really are superior. We can debate specifics around battery life, the keyboard choices, the number of ports, the non-adjustable kickstand, or whatever. But these are beautiful and well made products. ~ Paul Thurrott

Okey dokey then. Let’s take a step back for a second and examine that bit of analysis. I have no argument at all with the hardware quality of the Surface. Beautiful and well-made? Yes. But nothing is truly “superior”unless it serves its intended purpose.

There is nothing so useless as doing efficiently that which should not be done at all. ~ Peter Drucker

The “Pro” Tablet

I previously described (the Surface) as what a “Pro” line of iPads might look like if Apple were to make such a thing. ~ Paul Thurrott

This is where Paul’s analysis and Microsoft’s tablet philosophy go right off the rails. They both think that what the world wants – that what the world needs – is a “Pro” line of tablets.

…I still believe that this kind of hybrid device—one that combines work and play thematically and tablet and laptop physically—is the future of the PC. Not just the Ultrabook, but the PC. The ability to use and travel with just a single device that does it all is still a dream today. ~ Paul Thurrott

Yeah, not so very much.

I can see the appeal of Paul and Microsoft’s “dream”. But – as Microsoft has demonstrated – merging a tablet with a PC is not a “dream”, it’s a nightmare.

Not One Hybrid, But Multiple Screens

Ironically, Bill Gates predicted the future of computing back in 2007:

I don’t think you’ll have one device.

I think you’ll have a full-screen device that you can carry around and you’ll do dramatically more reading off of that – yeah, I believe in the tablet form factor…

…and then you’ll have the device that fits in your pocket…

…and then we’ll have the evolution of the portable machine. And the evolution of the phone will both be extremely high volume, complementary–that is, if you own one, you’re more likely to own the other.

[pullquote]The one, unifying computer is not the hybrid, it’s the Cloud.[/pullquote]

What’s actually happening is that we’re moving toward owning multiple windows (Ironic, eh?) to view and interact with our centralized data in the Cloud. One screen for our pocket (smart phone), one screen for the desk (PC), one screen for the wall (TV) and one screen for walking and lounging about (tablet). The one, unifying computer is not the hybrid, it’s the Cloud.

So if Bill Gates predicted this so very long ago, why doesn’t Microsoft get it? Well, as Upton Sinclair so rightly put it:

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

A hybrid computer that runs Windows is not the consumer’s dream, it’s Microsoft’s dream. And the bulk of the computer buying public is having none of it.

Black or White Thinking

Am I saying the the Surface isn’t good for anyone? Absolutely not. There are literally millions upon millions of users who will need it, love it, absolutely adore it.

But that’s not enough.

In today’s marketplace, millions of computers is a niche. The goal is to sell in the BILLIONS. And I’m not being hyperbolic. Android is closing in on a billion activations fast. And iOS isn’t that far behind.

The pertinent question isn’t whether Windows 8 tablets are good or bad. Like all products, they’re good for some people and bad for others. The pertinent question is one of proportion. Will enough people want enough Windows 8 tablets to make them a majority or even a plurality? All the evidence to date says that they will not.

The Surface Is Firetrucked

So let’s tie this into one nice, neat package and put a ribbon on it.

In the Joke, the mom’s problem isn’t with the French Toast. It’s with the kids’ cursing.

In reality, the public’s problem isn’t with the quality of the Surface hardware or about tweaking the Windows 8 software. It’s with Microsoft’s cursed belief that tablets really want to be PCs.

As long as the kid in the Joke doesn’t understand the problem, he’s going to keep getting smacked around by his mother.

As long as Microsoft doesn’t understand the problem, they’re going to keep getting smacked around by the marketplace.

If Microsoft doesn’t start getting the joke, instead of being the joke, their tablet ambitions are going to end up as (French) toast. ((Urban Dictionary: Toast – Destroyed, terminated, ceased functioning, ended abruptly by external forces.))

Beating The Dead Horse That Is Microsoft Windows (Part 2)

This is part two of a two-part series focusing on what’s gone wrong with Microsoft Windows. If you want to read part 1, click here. If you want to know what’s gone wrong with Microsoft Windows and what its probable future will be…well, read on….

Before you criticize someone, you should walk a mile in their shoes. That way when you criticize them, you are a mile away from them and you have their shoes.

Microsoft’s Core Beliefs

A company’s actions invariably revolve around its core beliefs. What then are some of the core beliefs that helped to shape Microsoft’s most recent Windows 8 campaign?

“We don’t see things as they are, we see them as we are.” – Anaïs Nin

A) “THE WINDOWS AND OFFICE CASH COWS MUST BE PROTECTED AT ALL COSTS.”

The advantages inherent in protecting the company’s biggest moneymakers is obvious. (The disadvantages, on the other hand, are far more obscure.) Focusing on what the company is especially good at – and where most of the company’s monies are made – is the default strategy of almost all businesses.

If the company is doing something well, then the norm is to keep on doing what they’re doing – only more of it.

“Nothing is more important at Microsoft than Windows.” — Steve Ballmer, CES 2012 Keynote

B) “THE WINDOWS’ BRAND IS VERY VALUABLE.”

Microsoft sincerely believes that the “Windows” Brand is both beloved and valuable. It only make sense then for Microsoft to leverage the value of that Brand by slapping it onto nearly everything they make.

“Convictions are more dangerous enemies of truth than lies.” ~ Nietzsche

C) “WE CAN DO IT TOO AND WE CAN DO IT MUCH, MUCH BETTER THAN YOU.”

Two classic business strategies are the “first mover” and the “fast follower”. I’d classify Microsoft as a “slow follower”. Microsoft seems to believe that the best way to compete in new markets is to do what the new product leader is doing…only do it better. Microsoft waits until a clear market winner has emerged and then they try to jump in, mid-race.

The obvious advantage to such a strategy is that Microsoft is able to wait and identify which markets are going to be winners. They can also learn from the mistakes of those who went before them and incorporate those learnings into their own, subsequent, product offerings.

Most importantly, Microsoft believes that their late start can be overcome by their superior technological know-how — aided, of course, by leveraging their existing Windows and Office monopolies and by exploiting their huge cash reserves. Such a belief reveals the incredible sense of self-confidence that Microsoft has in its own abilities. Some might call it hubris, but in Microsoft’s defense, their seemly arrogant strategy has been validated by past successes.

Microsoft dominated personal computing for 25 years. For many, many of those years, they controlled 95% of the personal computing market – a monopoly that is virtually unheard of without the assistance of government mandates. In computing, Microsoft was the very embodiment of the allegorical 900 pound gorilla. What Microsoft wanted, Microsoft took.

For example, Microsoft was late to the internet market, but when they put their mind and muscle to it, they slowly, but surely, smushed their Netscape internet challenger and made their own Internet Explorer THE default internet browser for the vast majority of personal computer users.

Similarly, Microsoft was a very new entrant in a very old gaming console market, but when they put their full weight behind the Xbox, they eventually (after going 5 billion dollars in the hole) became the gaming console market leader. Is there any other company that has the patience, perseverance or cash reserves necessary to follow such a strategy?

Microsoft won the internet wars and the console wars, and they did it with sheer brute force. When you are as big and as strong and as successful as Microsoft, is it any wonder that you think highly of your own abilities?

“An old belief is like an old shoe. We so value its comfort that we fail to notice the hole in it.” ~ Robert Brault

D) “THE MICROSOFT OFFICE SUITE IS THE KILLER APPLICATION, BOTH IN DESKTOP AND MOBILE COMPUTING.”

The Office Suite gives Microsoft a huge strategic advantage in the notebook and desktop markets. Microsoft Office wasn’t the first killer application, but it is the biggest, baddest suite of killer applications of our time.

Microsoft believes that Office is their ace in the hole in the mobile wars. The other mobile platforms may have a large lead in apps, but the Office Suite is the killer app that levels the playing field.

When in doubt, observe and ask questions. When certain, observe at length and ask many more questions. ~ George S. Patton

E) THE TABLET IS MERELY ANOTHER (LESS PRODUCTIVE) KIND OF PC.

Microsoft has always insisted that the tablet is simply another kind of PC. Microsoft contends that tablets alone don’t cut it. What people really want is a productive tablet, a two-in-one device that serves as both a tablet and a notebook, a hybrid that “powers people on-the-go for the activities people really value.”

A belief is not true because it is useful. ~ Henri Frédéric Amiel

Strategy

I believe Microsoft wanted to both differentiate Windows 8 from the offerings of their competitors and to strike at their competitors where they were the most vulnerable. This is a classic strategy known as “exploiting the line of least resistance.” Walmart parlayed this strategy into an empire by initially building their mega-stores in rural areas that their competitors found unprofitable.

Exploit the line of least resistance – so long as it can lead you to any objective which would contribute to your underlying object. ~ B.H. Liddell Hart, Strategy

Microsoft’s line of least resistance was – hybrid computers. In strategic terms, hybrids offered Microsoft a wealth of opportunities. First, no one else was seriously competing there. Second, Windows 8’s dual OS was the seemingly perfect hybrid operating system. Third, hybrids were a natural bridge that could be used to migrate Microsoft’s huge existing desktop customer base onto and into the burgeoning tablet market space.

In strategic terms, Microsoft was partially successful.They did go where Apple and Android were not – which is the beginning of a good strategy. However, they also went where the market was not.

Microsoft exploited the line of least resistance, but the reason it was the line of least resistance was because it didn’t lead to a meaningful objective. It does one no good to exploit a pass unguarded by the enemy if the reason the enemy left that pass unguarded was because it led to nowhere.

A girl phoned me the other day and said, “Come on over; nobody’s home.” I went over. Nobody was home. ~ Rodney Dangerfield

Following the line of least resistance is good strategy – but only if it takes you to your desired goal.

Microsoft’s Windows 8 Campaign

In their Windows 8 campaign, Microsoft made (at least) four key strategic decisions:

1) Create their own (Surface) hardware, but continue to license their operating system software to third-party manufacturers too.

2) Create three separate operating systems for the phone, tablet and desktop, then attempt to unify all three under one name and one user interface.

3) Start a brand new, incompatible, tablet platform named “RT” and supplement it with software from the existing Windows Office Suite.

4) Create a dual OS operating system that would work on tablets, notebooks and desktops but be tailored to run on tablet/notebook hybrids.

Every one of Microsoft’s major campaign decisions contains an inherent contradiction, an internal inconsistency, a self-destructive insistence on having things “both ways”. Let’s see how these decisions played out in practice.

You can’t dance at two weddings at the same time; nor can you sit on two horses with one behind. ~ Yiddish proverb

1) CREATE THEIR OWN HARDWARE, BUT CONTINUE TO LICENSE THEIR OPERATING SYSTEM SOFTWARE TO THIRD-PARTY MANUFACTURERS TOO.

1.1) Microsoft’s share of connected devices sales (in effect, PCs plus iOS and Android) collapsed from over 90% in 2009 to under 25% today.

Source: Benedict Evans

Microsoft is painfully aware of the fact that their Windows operating system is rapidly sliding from monopoly status to third place, behind Android and iOS.

“If things go wrong, don’t go with them.” – Roger Babson

1.2) Microsoft’s smart phone licensing strategy has been an utter disaster. Not only is Microsoft’s share of the smart phone market tiny, but Microsoft can’t charge the consumer for the operating system like it does on the PC, and Microsoft’s royalty fees from licensing the Windows Phone OS to manufacturers like Nokia, HTC and Samsung are being given back to these companies in the form of marketing dollars.

1.3) In light of these facts, Microsoft decided to adopt Apple’s integrated model and make their own hardware as well as their own software.

When people are free to do as they please, they usually imitate each other ~ Eric Hoffer

Microsoft is virtually telling the world “Our business model works great — except when it doesn’t.”

1.4) The good news is:

— Vertical integration allows Microsoft to better control the user experience from start to finish. ((“What this reorganization makes clear is that Microsoft now thinks it will have to control its own destiny: no longer will it depend on Intel for the computing power, Dell for manufacturing expertise, or HP for marketing heft (and, lest we forget, all of them for its technical support) to get its technologies in front of the public.”))

— It enables Microsoft to make money on hardware.

— It puts Microsoft in a position to directly compete with Apple. ((Microsoft CEO Steve Ballmer told CRN in an exclusive interview Monday that the company’s Surface tablet marks a new era in which the computer software giant will leave no “stone unturned” in its innovation battle against Apple.))

1.5) Make no mistake about it, this is a fundamental shift in the company’s business model, and it could absolutely end up backfiring.

— Microsoft has decided that third-party hardware manufacturers are part of the problem, and not part of the solution.

— Microsoft has stripped funding from its partners and reallocated it to their own hardware efforts. ((“Microsoft’s marketing budgets that are allocated so far for Q2 2013 include absolutely no support for Windows Phone partners.”))

— Microsoft’s strategy distances their interests from the interests of their hardware partners, such as Acer, ((Acer won’t do Windows Phone this year, wants Microsoft to pick up the pace.)) Samsung, ((Something Else Revealed At Samsung’s Launch Event: Disdain For Windows RT.)) Nokia, ((Nokia pulls plug on Windows RT tablet, signals end MSFT)) device makers based in Asia, ((Device makers based in Asia are not keen on Windows RT. That has become painfully clear.)) and trade shows such as Computex. ((One year after debut, Windows RT is a Computex no-show.))

— Microsoft’s policy encourages their hardware partners, such as AMD, ((After years of Windows OS exclusivity, Advanced Micro Devices is opening the door to design chips to run Google’s Android and Chrome OS in PCs and tablets.)) to migrate to Android. ((Android has become a hedge against Microsoft and Windows.))

— Hardware is – no pun intended – hard. Probably a lot harder than Microsoft thought. ((Switching from software to hardware, however, is proving very hard. I’m sure quite a bit harder than (Microsoft’s) management thought.))

— All of this hardware diversification is causing massive customer confusion. Quoting from “Making Sense of All the New Laptop Flavors“:

“Milunovich cites the two different models of Microsoft’s Surface — the ”RT” model running on an Nvidia (NVDA) microprocessor, and the … “Pro” model running on Intel‘s (INTC) microprocessor, as one prominent instance of possible “confusion among consumers relating to software versions and the herd of vendors churning out product.”

“Milunovich thinks the increasing diversity in tablets offered on the market plays to Apple’s advantage, because “user confusion favors Apple given its leading brand, relatively simple product line, and retail store support,” he argues.”

1.6) The entire exercise is counter-productive. The Surface RT and the Surface Pro are not taking sales away from iOS and Android devices. If anything, Microsoft’s hardware is cannibalizing their partner’s Ultrabook sales. ((“Surface Pro is really a PC, and potential buyers will also be considering notebooks and ultrabooks.” noted Moorhead.)) What purpose does that serve?

“A house divided against itself cannot stand.” ~ Abraham Lincoln

2) “CREATE THREE SEPARATE OPERATING SYSTEMS FOR THE PHONE, TABLET AND DESKTOP, THEN ATTEMPT TO UNIFY ALL THREE UNDER ONE NAME AND ONE USER INTERFACE.”

It has always been the dream of programmers to use one underlying code base to run software everywhere. Microsoft has turned that dream on its head and has, instead, devised a scheme that uses three, wholly separate and incompatible phone, tablet and desktop code bases, to run one, seemingly self-same, user interface.

Microsoft has gotten it completely backwards.

Try imagining using one user interface on three different form factors. For example, would you want the same user interface on your bicycle, your motorcycle and your car? On a trowel, a shovel and a backhoe? On a cork-board, a blackboard and a scoreboard? Even the iPad – which critics view as “merely a big iPod touch” – employs a separate user interface from that of the iPhone.

The form factor should not be tailored to the user interface. It’s the other way around. The user interface should be tailored to the form factor. In Microsoft’s desire to have one user interface across all of their Windows devices, they forgot about the most important thing – the user experience.

“How many legs does a dog have if you call the tail a leg? Four. Calling a tail a leg doesn’t make it a leg.” – Abraham Lincoln

How many operating systems do you have if you call them all “Windows 8”? Three. Calling three operating systems by one name does not make them one operating system.

3) “START A BRAND NEW, INCOMPATIBLE, TABLET PLATFORM NAMED “RT” AND SUPPLEMENT IT WITH SOFTWARE FROM THE EXISTING WINDOWS OFFICE SUITE.”

3.1) Microsoft knew that Windows RT was starting at a severe disadvantage to the incumbent tablet makers. It was late, late, late in the platform game and their iOS and Android competitors had literally racked up millions of competing mobile apps. What to do, what to do?

Well, here’s a couple of things that you should probably not do when launching a brand new platform:

— Call your new platform “RT” for “Run Time. (I mean…are you kidding me?)

— Craft your tablet advertising campaign around…a keyboard? RT is supposed to be a tablet platform, right? Focusing tablet advertising on the keyboard is like focusing car advertising on the trailer hitch.

— Introduce the platform with virtually no native software.

— Introduce a platform that doesn’t run Windows 8 applications on the very same day that you introduce Windows 8.

— Make it hard for App developers to know where they’re supposed to focus. (Windows Phone 8, Surface RT, Windows 8?)

— Osborne yourself by telling potential customers that you will be, in a few months, releasing a Windows Pro tablet that will do everything that the RT tablet does not.

— Introduce your platform with no clear message, no clear identity and no clear use case.

You have two systems (and operating systems) that look the same and run some of the same apps, but aren’t the same. ~ Mashable

Let me put this to you, the reader. Can you adequately explain the difference between Windows RT and the Windows Pro in a sentence? In a paragraph?

Neither can Microsoft.

If you want to give God a good laugh, tell Him your plans. ~ Yiddish proverb

3.2) Microsoft thought that the Office Suite would be the killer app that would drive sales of the RT platform. But does RT’s ability to run the Office Suite make up for its inability to run the 199,999 apps it’s missing? Not hardly.

Office is not the killer app that Microsoft thinks it is. Non-Microsoft competitors are already far more useful on touch devices. Porting the desktop Office to the touchscreen device is merely an exercise in futility. ((Microsoft Office for the iPhone Is Here. Yawn. / Office for iPhone downloads start with a bang, but fizzle before 4th; Office Mobile for iPhone: Why? / Microsoft Doesn’t Seem To Be Fooling Anyone With Its New Office For iPhone App / Office for iPhone is a belated, ambivalent move, analysts say / Microsoft Office not worth wait / Microsoft’s Office For iPhone: Wrong Product, Wrong Market))

Microsoft’s Office gambit has failed. If you really want Office on your computer, RT is not the solution for you. You’ll be far happier with a Windows laptop or desktop.

Most manufacturers have already dropped plans for developing Windows RT-based products, given the timid sales of their first batch, due to the limited number of applications for the platform. Microsoft’s second Surface RT tablet might be the sole king of a barren land.

“A half-baked idea is okay as long as it’s in the oven.”

4) “CREATE A DUAL OS OPERATING SYSTEM THAT WILL WORK ON TABLETS, NOTEBOOKS AND DESKTOPS BUT WILL BE TAILORED FOR TABLET/NOTEBOOK HYBRIDS.”

4.1) Microsoft seems to truly believe that tablets are underpowered, unproductive devices and that people don’t really want to use them. Of course, this completely ignores the success of the iPad, but let’s set that aside for the moment.

Microsoft believes that what people really want is a single device that they can use to get serious work done; what people really want is a hybrid that does it all; what people really want is a replacement for both the PC and the iPad. According to Microsoft, ordinary people may need to use a tablet here and there, but what they really want in a tablet is the power of a PC and a PC powered by Microsoft Windows.

Microsoft’s products and advertising say it loud and say it proud:
— Two operating systems are better than one;
— A two-in-one device is twice as good as owning two separate devices; and
— A dual Operating System that runs on tablets and desktops and hybrids (oh my!) is the best of all possible worlds!

Whenever you look at a piece of work and you think the fellow was crazy, then you want to pay some attention to that. One of you is likely to be, and you had better find out which one it is. It makes an awful lot of difference. ~ Charles Franklin Kettering

4.2) Only, here’s the rub. All of Microsoft’s assertions and assumptions fly in the face of reality.

— No single manufacturer has successfully combined a full PC with the form factor of a tablet and made it work. That should be telling you something.

— The Windows 8 interface baffles consumers.

— People don’t want to use apps on their desktop PC. People don’t want a two-in-one device or touchscreen on their PC. People don’t want a tablet OS with the desktop OS bolted on. People don’t want a tablet on their PC.

— People don’t want legacy Windows applications on their tablet. People don’t want a two-headed OS on their tablet. People don’t want a desktop computer on their tablet.

— People don’t want an all-in-one computer. People DO want multiple connected devices

“Many users are realizing that everyday computing, such as accessing the Web, connecting to social media, sending emails, as well as using a variety of apps, doesn’t require a lot of computing power or local storage,” said IDC analyst Loren Loverde. “Instead, they are putting a premium on access from a variety of smaller devices with longer battery life, an instant-on function, and intuitive touch-centric interfaces.” ~ AllThingsD

The market has voted: Tablets that are just tablets are trouncing Microsoft’s hybrid tablet/PC devices.

PCs are like Humpty Dumpty; they are being broken into pieces and won’t be put back together again. ~ Stratechery

4.3) The sad thing is, Microsoft knew better.

Mossberg: What’s your device in five years that you’ll rely on the most?

Gates: I don’t think you’ll have one device. I think you’ll have a full screen device that you can carry around and you’ll do dramatically more reading off of that – yeah, I believe in the tablet form factor – and then we’ll have the evolution of the portable machine and the evolution of the phone will both be extremely high volume, complimentary, that is if you own one you’re likely to own the other… ~ AllThingsD, 2007

Bill Gates saw the future, but he – and Microsoft – abandoned their vision in an attempt to salvage their Windows empire. The future, they knew, was multiple connected devices. But that future had touch operating systems – not Windows operating systems – at its core. And Microsoft couldn’t have that.

Windows 8 is not an attempt to create the future of computing.

Windows 8 is an attempt to preserve Microsoft’s past.

Vision without action is daydream. Action without vision is nightmare. ~ Japanese proverb

Conclusion

“If you cannot answer a man’s argument, all it not lost; you can still call him vile names.” – Elbert Hubbard

Are Microsoft’s Windows 8 problems fixable or are they intractable?

— So long as Microsoft does both hardware and software, either Microsoft’s hardware sales, or the hardware sales of their partners, or both, will suffer.

— So long as Microsoft has 3 different operating systems, Developers and app development will suffer.

— So long as RT tries to use the Office Suite as a substitute for native apps, RT sales will suffer.

— So long as Microsoft’s tablet OS runs dual operating systems tailored for hybrids, their tablet sales (and their tablet owners) will suffer.

Post-PC does not mean no PC. It means that the PC is no longer the dominant device; the center of the computing world.

It is a certainty that Microsoft Windows will continue too. But it is just as certain that it will no longer be the dominant operating system. And unless Microsoft radically changes its strategy – which I highly doubt – Window’s will not be vying for dominance – it will be vying for relevance.

One meets his destiny often in the road he takes to avoid it. ~ French proverb

Whose funeral is this, anyway?

Why Windows RT Will Survive $900M Later

Yesterday, Microsoft announced that they were writing off $900M in Surface RT inventory. This is based on price reductions on Surface RT to clear inventory. If we assume that Microsoft factored in $150 per unit and we do some simple math, we can then estimate that Microsoft is sitting on 6M Surface RTs. This is an absolute abomination, and I don’t think this is a surprise to many that Surface RT didn’t sell well, but what is a surprise is the magnitude of the write-down. Even with nearly $1B in write-downs, I don’t think Microsoft will cancel Windows RT and I want to share my thinking.

I would be remiss if I didn’t first give my opinion on why Windows RT didn’t sell well. First, I disagree with the notion that it has to do with the dual tablet-PC nature of Windows 8, and for that matter, RT. Research I have conducted and research I have seen shows that once users actually use a use a touch-Windows device, they like it. It’s that trial that is the tough part. What doomed Surface RT, plain and simple, was the lack of premier apps and because the tablet market shifted to the 7-8″ form factor. This isn’t the main topic of this post but I needed to weigh in.

To better understand why Microsoft will keep investing in Windows RT, we have to know why they invested in it in the first place. When Microsoft would have had to make the decision to support an ARM-based Windows RT, Intel did not have a competitive mobile part and had just come off of some very public mobile failures, Menlow and Moorestown. The CloverTrail schedule was risky, too, and Microsoft felt that they needed lower power ARM-based SOCs to meet the battery life bar set by the iPad and the Motorola Xoom. The other factor is that in the minds of both Microsoft and Intel, any dollar invested by an OEM into each others products, is a dollar that they lose. Microsoft is interested in cheap hardware so they can charge more for software. Intel is interested in cheap software so they can charge more for hardware. Makes sense, right?

The first reason Microsoft will keep investing in Windows RT is to keep Intel competitive on tablets. Microsoft thinks that if they don’t hold something over Intel’s head, they won’t see solutions in the future as competitive as Bay Trail which, at least on paper, looks very competitive for holiday 2013 Windows 8-based tablets. Microsoft is also seeking to lower prices on 7-8″ tablets, and they see ARM-based SOCs from someone like Rockchip or Huawei providing that cost reduction necessary to enable Microsoft to charge more for software or lower the product street price. We also need to factor in phones. Windows Phone 9 will most likely share the same kernel as Windows RT (9) and therefore it would make sense to cease development now for ARM to revive it a few years later. Finally, Microsoft is thinking wearables and IoT devices based on this shared Windows RT (9) kernel, and so far, Intel doesn’t have a roadmap that would provide this level of performance/watt necessary to last weeks on a single charge.

So even with nearly $1B in “losses” racked up so far, Microsoft will trudge on, because they believe that they need ARM-based silicon to cover all their product segment bases and increase the price of their software to OEMs.

Beating The Dead Horse That Is Microsoft Windows (Part 1)

Few people enjoy beating a dead horse more than I do, but man, beating up on Microsoft Windows is simply no fun anymore…because everybody’s doing it.

The defining company of the PC era — which for the purposes of this discussion we’ll consider the 25 years from 1981 to 2006 — has not articulated a unique and compelling vision for the future of computing since the iPhone rocked it to its core in 2007. ~ Tom Krazit, Gigaom

Yup, that about sums it up.

The first part of this two-part series will focus on what’s gone wrong with Microsoft Windows. Next week, I’ll conclude the series by focusing on why Microsoft is in this position and what, if anything, they can do to resuscitate the dead horse that is Windows.

Let Me Count The Ways

So, exactly how badly is Microsoft losing in the personal computing space? Let me count the ways:

1) PCs are in decline;
2) Mobile is ascendant;
3) Windows Phone 8 sales have been disappointing;
4) Windows RT sales have been disappointing;
5) Microsoft Surface sales have been disappointing;
6) Third-party Windows 8 tablet sales have been disappointing;
7) Ultrabook sales have been disappointing;
8) Windows 8 adoption has been disappointing;
9) Microsoft App Store growth has been disappointing;
10) Business and Enterprise is moving on without Microsoft’s products or services;
11) Microsoft has lost its monopoly and its monopoly powers; and
12) Microsoft is dependent upon legacy products – Windows and Office – for the bulk of its profits.

No reasonable person is arguing that Microsoft is going away. What rational people ARE contending is that Microsoft is becoming irrelevant in the front end – the consumer facing portion – of the personal computing space.

How did it come to this?

1) PCs Are In Decline

If you don’t cannibalize yourself, someone else will. ~ Steve Jobs

Evidence of the PCs decline is indisputable and, frankly, no one is trying to dispute it.

— Dropoff in PC Sales Is Accelerating and Tablets Are the Culprit, Says IDC

— In mature markets, the PC is saturated. And that’s where tablets are secondary devices. Shim says in emerging markets tablets are going to be primary devices. If the tablet takes off there, that kills the traditional PC’s chances of ever growing again.

— …for the 4th quarter PC sales declined by almost 5% according to Gartner research, and by almost 6.5% according to IDC. Both groups no longer expect a rebound in PC shipments, as they believe homes will no longer have more than 1 PC due to mobile device penetration, a market where Surface and Win8 phones have failed to make a significant impact or move beyond a tiny market share.

— In the model IDC used to forecast the 7.8% decline, the second quarter — which ended June 30 — was to be down 11.7%, a smaller drop than the first quarter’s historic 13.9% plunge. Shipments in the third and fourth quarters, meanwhile, would decline 4.7% and 1.6%, respectively, from the same periods in 2012.

2) Mobile is ascendant

“The best way to predict the future is to invent it.” ~ Alan Kay

— Half of U.S. adults now own a tablet or smartphone, Pew study finds

— …mobile devices — in particular iOS and Android — will continue to cannibalize PC sales throughout the year. Put simply, consumers and enterprise buyers prefer to spend their money on post-PC devices rather than on PCs.

— Next year, tablet sales will beat notebook sales for the first time ever, says NPD’s DisplaySearch. It is projecting tablet shipments of 240 million units versus notebook shipments of 203 million units. That’s 64 percent growth for tablet versus a 5 percent decline for notebooks.

— IDC: Tablets to outsell notebooks in 2013, all PCs in 2015

— The latest prediction from NPD DisplaySearch shows just how quickly the market has changed. It was six months ago, in July 2012, that the same organization predicted that it would take until 2016 for tablets to surpass notebook shipments.

3) Windows Phone 8 sales have been disappointing

I wish developing great products was as easy as writing a check. If that was the case, Microsoft would have great products. ~ Steve Jobs

Source: Ben Evans

— iOS and Android comprised 92.3% of Q1 2013 smartphone shipments

— According to Murtazin, Microsoft’s royalty fees from licensing the Windows Phone OS to manufacturers like Nokia, HTC (2498) and Samsung (005930) are being given back to these companies in the form of marketing dollars. In Nokia’s case, an arrangement similar to the one Murtazin describes is a matter of public record, as per the company’s 2011 annual report

— Windows Phone gets no traction despite the Nokia deal and RIM’s collapse

— Manufacturers reportedly ignoring Windows Phone due to OS fees… and Nokia

— Rumor: Microsoft paying $100,000 to some Windows Phone app makers?

You won’t help shoots grow by pulling them up higher. ~ Chinese proverb

4) Windows RT sales have been disappointing

It is perfectly monstrous the way people go about nowadays saying things against one behind one’s back that are absolutely and entirely true. ~ Oscar Wilde

— …Gottheil dubbed the RT tablets a “meta-tweener,” a “tweener between a tweener (Windows 8 x86) and a pure tablet like iPad,” he said. … “I don’t think Windows 8 RT can be successful unless and until its price is much lower.”

— Microsoft slashes Surface RT prices by $150 as it flounders against Apple’s iPad

— Lenovo released one of the few PCs that ran Microsoft’s ARM-based Windows RT operating system last fall with the 11 inch Yoga 11 notebook-tablet hybrid. Now it looks like Lenovo is phasing out its lone Windows RT product, as it no longer sells the Yoga 11 on its own website.

5) Microsoft Surface sales have been disappointing

To change and to improve are two different things. – German proverb

— Microsoft’s Surface Experiment Has Fallen Flat

“Perfection is the goal we’re going for, and that perfection comes with trade-offs,” said Panos Panay, general manager of Surface.

The above statement is “perfectly” ridiculous.

Someone at Microsoft needs to invest in a dictionary.

6) Third-party Windows 8 tablet sales have been disappointing

Bad engineering is solving a problem that you didn’t have in a way that you don’t understand.

— …(A)t a time when buyers seems price-sensitive, Wu finds the $500 to $1200 price tags slapped on Windows 8 hardware to be “uncompetitive” when compared to Android with prices as low as $99, and the iPad mini which starts at $329.

— Windows 8 tablet sales have been almost non-existent, with unit sales representing less than 1% of all Windows 8 device sales to date, NPD said, excluding sales of the Windows Surface tablet.

— Windows 8 device sales have not met Redmond’s internal projections, and the company is blaming it on lackluster hardware from OEMs.

7) Ultrabook sales have been disappointing

Imitation is a good servant, but a bad master.

— In October, IHS iSuppli downgraded its estimate of 2012’s ultrabook sales, cutting its projections by more than half from 22 million to 10.3 million, citing too-high prices. iSuppli argued that sales won’t take off until prices fall toward the $600 bar, perhaps in 2013. … The problem for Microsoft is that the outlook for ultrabooks, which the Surface Pro emulates, is dim. Windows ultrabook sales have been disappointing this year, and show little sign of improving sans dramatic price cuts.

— NPD: Apple’s MacBook Air dominates with 56% of U.S. thin-and-light notebook market

8) Windows 8 adoption has been disappointing

I heard that if you play a Windows 8 CD backwards, you’ll get a satanic message. But the most frightening thing is that if you play it forward, it installs Windows 8.

— The Windows 8 Sales Data Is In, And It’s Bad News For Microsoft

— Windows 8 continues to fail

— Windows 8 Is Failing to Beat Windows 7… And XP… And Even Vista!

— Worse still, Windows 8’s month-over-month growth rate is lagging further and further behind Vista’s dreadful 2007 adoption numbers. When comparing the operating systems when they were first launched, Windows 8’s adoption rate in its first month trailed Vista by just over half-a-percent among PC buyers. Now, in their 8th month out, Vista’s market-share numbers now lead Windows 8 by 3.64 percent. Needless to say, both lag far behind XP and Windows 7’s numbers at similar points in their product life-cycle.

— How bad are Windows 8 sales? In April 2013’s Net Applications numbers, Windows 8 barely crept up to 3.82-percent. That still leaves Windows 8 behind Microsoft’s last operating system flop, Vista, after seven months in the market. Windows on tablets fared even worse with touch-screen-based Windows 8 devices and Windows RT devices coming in at 0.02-percent and 0.00-percent each. The last was not a typo. The Surface RT is now in the running for worst Microsoft launch ever.

— StatCounter’s findings follow a similarly worrying report from NPD this week, which found that Windows 8 had captured just 58% of all Windows device sales since its launch, while Windows 7 captured 83% during the same period.

9) Microsoft App Store growth has been disappointing

“There comes a time in the affairs of man when he’s got to take the bull by the tail and face the situation.” – W.C. Fields

— In a classic chicken-and-the-egg conundrum, the Windows Store needs more Windows 8 customers and Windows 8 customers need more worthwhile apps from the store. Microsoft has failed miserably at attracting compelling content, a painful fact for any developer — or software company — thinking about committing the resources to bring a Metro app to market. How bad is it? … In short, it’s a wasteland.

— Microsoft expected 100,000 Windows 8 apps in 90 days. It took 248

— Sources: Microsoft Is Paying Developers Up To $100,000 To Write Windows Phone 8 Apps

Source

— Windows 8 users are turning to apps, on average, 1.52 times a day. Breaking this down by type indicates that tablet users are the heaviest app users, launching them 2.71 times per day, while touch-screen notebook users launch 47 percent more apps than those on a standard notebook. … Desktop users make the least use of Modern apps. … Soluto crunched the data further, and took a closer look at those who launch fewer than one Modern app a day. Here, the company noticed that a staggering 60 percent of users launch an app less than once a day. Even when it comes to tablet users, the heaviest users of Windows 8 apps according to Soluto, 44 percent of those sometimes go a day without launching an app.

10) Business and Enterprise are moving on without Microsoft’s products or services

If you’re in a card game and you don’t know who the sucker is, you’re it. ~ Anonymous

— Gartner: By 2014, Apple will be as accepted by enterprise IT as Microsoft is today

— Thanks To BYOD, Apple Invades The Enterprise

— More Data Showing iOS, Especially The iPhone, Still Killing It In The Enterprise

— Why companies are still deploying iOS apps first

— Fortune 500 Companies Moving to iPad Hits 94%

— Apple’s iOS still dominated the enterprise mobile circuit with 75 percent of total device activations last quarter.

11) Microsoft has lost its monopoly and its monopoly powers

That which has been believed by everyone, always and everywhere, has every chance of being false. ~ Paul Valery

— Forrester Report: Microsoft’s Windows Dominance Is Over

— …and Windows is no longer the dominant end-user operating system when PCs, smartphones and tablets are considered.

— In the greater end-user market, as Mary Meeker, the well-regarded analyst and venture capitalist, pointed out in her May 2013 Kleiner Perkins Caufield & Byers’ 2013 Internet Trends report, Windows is on the decline no matter how you measure it. Apple iOS and Android now have the lion’s share of computing devices, including PCs, smartphones and tablets, with 65-percent share over Windows’ 35-percent.

Source

— Microsoft’s mobile operating system share is actually worse than it appears. None of its most recent smartphone/tablet operating systems, Windows 8, Windows Phone 8 or RT. even breaks the 0.01-percent mark on NetMarketShare’s mobile/tablet operating system market share chart. How bad it is that? Android 1.6, with 0.01-percent, does make the chart.

— While Microsoft apologists focus on Windows continuing to be the dominant desktop operating system, they keep missing the two elephants in the room: Windows 8 continues to fall behind Microsoft’s previous top operating system failure, Vista, and Windows is no longer the dominant end-user operating system when PCs, smartphones and tablets are considered.

Men occasionally stumble over the truth, but most of them pick themselves up and hurry on as if nothing had happened. ~ Sir Winston Churchill

— “We had a little bit different expectations for Windows 8 than previous OS launches,” Jeff Barney, VP and general manager of Toshiba America’s PC and TV business, said. “In the past Windows was the only game in town, when it was Windows 7 or Vista it was the big event of the year. These days it’s a different environment.”

— The erstwhile truism You Won’t Get Fired For Buying From Microsoft has lost its luster.

— In the consumer market, we expect to Apple to gain share as the younger generation has grown up on Apples at school. … Pretty soon it could be that the ‘rebels’ will be the Windows users rather than the Mac users.

12) Microsoft is dependent upon legacy products – Windows and Office – for the bulk of its profits

There is only one boss: the customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else. ~ Sam Walton

— Microsoft makes more than 75% of its profits from Windows and Office. Less than 25% comes from its vaunted servers and tools. And Microsoft makes nothing from its xBox/Kinect entertainment division, while losing vast sums in its on-line division (negative $350M-$750M/quarter).

Microsoft uses a licensing model. A licensing model only takes a portion of the total profits from a sale. In a licensing model, volume matters.

If Microsoft can’t move its Windows and Office products and services onto mobile phones and tablets, well…

Next Week

The first part of this two-part series focused on what’s gone wrong with Microsoft Windows. Next week, I’ll conclude the series by focusing on why Microsoft is in this position and what, if anything, they can do to resuscitate the dead horse that is Windows.

To Touch or Not to Touch, That is the Question

This is an excerpt from an analysis on the strategic errors of Windows 8 and the philosophy behind the product that was written for our Tech.pinions Insiders Members. To learn more about Tech.pinions Insiders click here or to see all Insider topics and articles click here.

Adopting a New Posture

While I was at Microsoft’s build conference last week, I decided to make a point to keenly observe those attendees who have embraced touch on notebooks and watch how they use them. The plus to being at a Microsoft conference was that I saw more touch notebooks, and Surfaces for that matter, in one location than I have ever seen out in one place.

What I observed was interesting. Those who had adopted touch on their notebook would type with the device at arms length, but then move their body and face closer to the screen as they sought to use touch input. In essence to use touch they actually leaned in, performed the action and either stayed or leaned in to scroll a web site for example, and then leaned back to start typing again.

Interestingly, Surface owners had adopted an entire experience built around leaning in. I can only speculate that this is because the screen is so small that staying leaned in closer to the screen makes it easier to read the text, etc. Surface owners would even type with arms bent significantly more because of how close they were to the screen.

My key takeaways from these observations were that to use a Windows 8 notebook, or an aspiring hybrid like Surface, adopting touch as a paradigm is one necessary component, but so is adopting new body language to operate it in a useful and efficient way.

So the question we need to ask ourselves is this: Is this better? Does touch bring so much to the notebook and desktop form factor that we should consider this new, somewhat un-natural required body posture worth the effort?

Let’s look at it this way. Is adding touch as a UI mechanism to something like a desktop or notebook a more efficient input mechanism? In notebook and some desktop form factors, I would argue that it is not.

I absolutely condone touch on smartphones and tablets. In these devices touch is natural, and the best and most efficient input mechanism for the use cases they are best at. This is because they are truly mobile and you use natural motions to touch the screen to navigate. But notebooks and desktop are different beasts that succeed at very different use cases for very different reasons.

WHY TOUCH?

What I’ve tried to bring out, both in public and in private, is this: does using touch as an input mechanism on a notebook or desktop make me more efficient in my workflow? I’m yet to find that it does.

When you sit behind a notebook or a desktop you are prepared to get work done. In this context speed, efficiency, and ease of use are keys to make these devices the best tools for the job. So for touch to be compelling, it must be better at the above experiences than a solid trackpad or external mouse. Does it do this? The answer is no.

Take the trackpad for example. My hands have less distance to travel for me to reach the trackpad on all installations. To use a trackpad I bring my hands closer to me a very short distance (maybe 2-3 inches). Contrast that with using touch as an input mechanism and rather than bring my hands in a short distance I must reach for the screen (approximately 5-6 inches). This requires more effort and more time than using the trackpad and is more tiring to the arm, by keeping it fully extended to operate. Unless you hunch over or lean in, which is also uncomfortable for any length of time. I concede that for some the amount of time and effort may not be considered much difference by some, but it is still a key point.

When I discuss this with those who advocate touch screens on notebooks, they propose that touching the device for input is a preferred mechanism to the trackpad. My counter point is that this is because most trackpads put on Windows PCs are downright terrible. Sometimes I wonder if Microsoft pushed OEMs to do this on purpose to make touching the screen seem like a better experience, simply because the trackpad is so bad, that it makes touching the device appear to feel like a better alternative.

I’d like to quantify this sometime by having a race with a Windows user and challenge them to a similar task, like creating a few slides and graphs in Power Point. Them on their touch notebook and me on my MacBook Air. We will see who can finish the task the quickest.

When Microsoft Ruled Tech: An Elegy

Almost 20 years ago, when Microsoft was king, I became a full time tech writer after many years of writing about economics and politics and working as an editor. As I watch Microsft struggling to get its mojo back, especially in consumer markets, I realize that I really miss the swashbuckling Microsoft of the mid–1990s.

There’s never been anything quite like it, and may never be again. This was a Microsoft that its competitors industry feared and that many regarded as downright evil. It was at the start of a run of domination that would lead to it being found guilty of civil violations of antitrust laws in the U.S. and Europe. And it was an exciting and dynamic company. (Probably the closest thing to it today is Google. But despite Microsoft’s many sins, it lacked two of Google’s most significant traits, a lack of focus and an annoying streak of self-righteousness.)

What was this Microsoft really like? By 1994, Microsoft was on its way to ruling the PC world with Windows and it was developing a never-realized vision in which Windows code would run on everything, from PCs to copiers to coffeemakers. But Windows 3.1, despite its success, was a thin, kludgy layer of code on top of the rickety foundation of MS-DOS. Within Microsoft, two groups were racing to replace it, the Windows 95 team headed by Brad Silverberg and the Windows NT group skippered by Jim Allchin. In the best Microsoft tradittion, these groups competed hotly with each other. Windows NT was the more ambitious effort, built on a solid operating system kernel architected by Dave Cutler, who had created VMS for Digital Equipment. Windows 95 was a huge user interface improvement, but still a kludge dependent on a DOS core. Windows 95 was an instant hit, while NT provided Microsoft with its OS of the future: the NT kernel powers all current Windows versions.

Microsoft was a fierce competitor. But until recently, it has had phenomenal luck in the incompetence of its competitors. Apple slowly crumbled through the 90s, turning out lousy Mac hardware running outdated software, and steadily lost market share. The Newton, years ahead of its time, sapped scarce resources. IBM’s attempt to challenge Windows, OS/2, was just the consumer product you would expect from a mainframe maker. The dominant DOS applications software makers, WordPerfect and Lotus, both missed the rise of Windows, leaving the field open. Microsoft Office was born more or less by accident. Microsoft had developed Excel for the Mac, which lacked a good spreadsheet, but was having a hard time getting customers to trade MacWrite for Word. The company created Office by throwing in a copy of Word with Excel, a product that former Offcie marketing chief Laura Jennings once described to me as “crap in a box.”[pullquote]Microsoft was a fierce competitor. But until recently, it has had phenomenal luck in the incompetance of its competitors.[/pullquote]

That the internet and Internet Explorer would be central to the government’s antitrust case is the great irony of Microsoft history. Bill Gates and other executives of Microsoft were late to recognize the importance of the internet. Windows 95 originally shipped without a browser or any real internet support. This mistake, probably the biggest in the company’s history, helps explain why it came to regard Netscape as an existential threat that had to be destroyed. During the development of Windows 98, there was a fierce battle between Silverberg, who wanted a more net-centric approach for the future, and Allchin. Allchin won, and Silverberg and much of his team left the company. It’s impossible to say whether Microsoft would have done better had the fight gone the other way, but it definitely would have been much different.

Microsoft in the mid–90s was a fun company to cover. It believed in Bill Gates’ mission of putting a PC in every home and on devery desktop. Its executives were open and frank and it dreamed big dreams. It’s aggressiveness made it interesting. I used to look forward to my regular trips to Redmond. The antitrust case, a disaster from which Microsoft has never really recovered, sucked most of the fun and a lot of the life out of the company.

Microsoft was going to change anyway: It had become a big company and many of the executives who had led the phenomenal growth period and had grown rich beyond imagination in the process, were starting to move on. In nearly every case, their replacements were more managerial and less adventurous. The prosecution added to the growing sense of caution, and Gates, much of whose time was absorbed by the case, seemed to lose his fire and, gradually, his interest.

The dominant companies of today, Apple and Google, are nowhere near as much fun to write about as Microsoft in its prime. Both are secretive, Apple obssessively so, and neither makes its senior executives available except in very tightly controlled situations. For a writer fresh to the tech business, the Microsoft of 1994 was a dream. In an industry that has grown up a lot in the last 20 years, I doubt we will se its like again.

I Owe Bill Gates An Apology

I have changed my view of no person, whether living or dead, more so than I have changed my view of Bill Gates. Where once I hoped he failed, hoped his company would fail, believed him responsible for stifling competition, innovation, cheered when my very own government was working against him, now I accept him for what he really is: the man who has most transformed the world during my lifetime.

I owe Gates an apology.

No one, not Steve Jobs, not Mark Zuckerberg, not Hewlett nor Packard, has had a more profound global impact on people and business, on the spread of technology or the continued pre-eminence of America’s globe-spanning computing innovation, than has Bill Gates. Despite innumerable obstacles, Gates succeeded with his once-mad vision of placing a PC on every desktop.

Now, he has a new mission, one far more audacious, far more transformative. It is plainly stated through his well-funded
foundation:

“We believe every person deserves the chance to live a healthy, productive life.”

Sadly, we are far from realizing this vision. Yet, with Gates bringing his skills to bear on this rather base human failing, I honestly believe we will move radically closer to turning the hope that every person deserves a healthy, productive life, into actual reality.

Think how computing changed and improved and spread from 1980 – 2000, only now, those changes applied to people and medicine and learning and access and work.

If, as Steve Jobs said, Bill Gates “just shamelessly ripped off other people’s ideas,” then perhaps in trying to solve the world’s biggest problems, this is a good thing. Gate’s tactics may have found their logical pursuit.

Gates – still the world’s richest man – no doubt understands how profoundly billions of lives can be changed for the better by radically improving the code that now now dominates our world. In public classrooms, where our nation’s children are not realizing their fullest potential, and in villages thousands of miles away, where their children are dying, the tools to alter this reality are either at hand or very soon will be. We have an amazing opportunity to remake the world.

Think Gates can’t change the world a second time? Maybe. Although, if it was 1975 again – nearly 40 years in our past, before most of the people on this planet were even born – and by some odd coincidence you actually saw this machine, a Altair 8800, could you have divined how it foretold the future? Gates could.

Embrace, extend, extinguish – the modus operandi of Microsoft under Gates, and now eagerly adopted by today’s Google – laid everything to waste, it seemed. Netscape, Lotus, Apple (nearly), Wordstar – and all the many companies and products and people we no longer can even recall.

Yet it’s this same mental prowess, this same hyper-competitive drive, likely tempered by age, that could allow Gates to show us how to extend computing power, applied data, and a ruthless fealty to results, to extinguish some of the planet’s most chronic, life-limiting maladies.

If the world can be radically improved, it will take a fundamental re-working of the existing algorithms of modern life – all the nasty realities we presently tolerate or ignore, or simply fail to see. Gates was as good at crafting an algorithm, as good at writing code, as he was a unrelenting business tycoon. The world needs him.

This time, I am on Gates’ side, without apology.

Microsoft’s Windows 8 Blunder

When I first saw the direction Microsoft and their partners were looking to take Windows 8, I was optimistic. Metro sounded good in concept, as did some of the features and functions built into Windows 8. But then as the time got closer, it became very clear that this version, more so than any other, was going to depend a lot more on hardware than any previous version.

Prior to Windows 8, Vista was a hardware hog. In fact, I would argue that had more companies been more intentional about adding chips with better graphics, either discreet or integrated, that Vista would have performed better on early hardware. But Vista looks like a raging success compared to Windows 8 at this point.

As Patrick noted in his column the other day, it is ironic that we are in a position where the hardware is necessary to save the software. Building touch into notebooks and desktops is now the only way forward for Microsoft and partners. Microsoft has gone down a path of attempting to condition the market to not only be comfortable using touch on their notebooks and desktops but to desire it. I remain doubtful this will happen.

The primary reason is proximity and context. When we use notebooks or desktops we do so at arms length. This is the most comfortable position when the device is on your lap or on a table. Even though our arms are likely slightly bent while resting on the keyboard, the screen in most cases, is a full arms length away. Sometimes quite a bit more with a desktop.

Adopting a New Posture

My key takeaways from these observations were that to use a notebook, or an aspiring hybrid like Surface, adopting touch as a paradigm is one necessary component, but so is adopting new body language to operate it in a useful and efficient way.

So the question we need to ask ourselves is this: Is this better? Does touch bring so much to the notebook and desktop form factor that we should consider this new, somewhat un-natural required body posture worth the effort?

WHY TOUCH?

THE BLUNDER

So what is Microsoft’s blunder? Well, in my opinion, they made the strategic error of believing that what they did in Windows 8 would be the shortcut to help them compete with tablets from competitors. When in reality, to compete with other tablets, what they should have done was bring a version of Windows phone to the tablet form factor. Doing this would have done several things.

First, it would have significantly helped the Windows Phone ecosystem by way of apps. Quality and long tail apps are so dramatically void from the Windows Phone ecosystem that several carriers have specifically told me it is the reason for the abnormally high return rates of Windows Phones to their stores. By bringing Windows Phone to to the tablet form factor, it would have spurred more developer attention for phone apps and most likely tablet apps as well. Apple has lapped Microsoft in this area many times over.

The second thing it would have done was position Microsoft better for small screen tablets. Windows 8 is overkill in my opinion for what consumers want and do with smaller screen tablets. Windows Phone is positioned well for portrait mode use cases, which is the dominant orientation for consumers with small screen tablets.

Microsoft is at least 3 years or more behind in mobile. Windows 8 has and is doing nothing to help catch them up in mobile and realistically is only leading them down the path of being more behind. They have spent the bulk of their resources focused on areas of computing that are declining not growing. Tablets and smartphones are the growth segment and should have been the top priority. I would argue Windows Phone innovation and focus should have been a higher priority than Windows 8. I would even go so far as to make the case that Windows 8 should have been more evolutionary to Windows 7 and the revolutionary attempt should have been with Windows Phone and a specific tablet version of the Phone OS.

It would be hard to argue that an evolutionary version of Windows 7 would not have sold well running on the powerful, all day computing, thin and light hardware we are seeing enter the market this fall. You certainly could not make the case that we would have sold less Windows 7 devices in 2013 that’s for sure. In fact, I’m pretty sure I could make a compelling case that had Windows 7 or an evolutionary flavor of it, been the OS for 2013, that we would have sold more notebooks and desktops than we have and the PC market wouldn’t be off as much as it is.

To be clear, the blunder was thinking they could turn the ship by taking a PC approach instead of a post PC approach by focusing more on smartphones and tablets.

Who knows, maybe Microsoft will prove me wrong and announce some brilliant unification strategy with Windows 9 that solves the problems outlined above. I’d have an easier time believing this possibility if Microsoft had a better track record at getting things right the first time.

On a side note, notice that Apple has NOT introduced a touch based laptop. I believe Apple, who is very picky when it comes to user interfaces, knew that touching a screen on a laptop is completely unnatural and instead made the Magic Trackpad to emulate touch in a way that does not disrupt that natural motion of hands placed on a keyboard. I remain skeptical you will ever see a touchscreen based laptop from Apple.

How Windows RT could Thrive

Microsoft’s decision to create a Windows 8 version for use on ARM processors called Windows RT has become a bit of an enigma in the industry. Windows RT based tablets were launched with much fan fare yet sales of RT based devices has fallen way short of predictions.

In fact, Microsoft is selling their Surface RT to schools now for $100, something that suggests that the Windows Surface RT experiment is pretty much dead. Microsoft has its own self to blame for this. Their decision to include Office minus Outlook was a serious blow for these early models. While newly created Windows 8 apps worked on RT, the fact that it was not backward compatible with existing Windows Apps really added to its lack of allure for most customers

Also their TV ads didn’t help either. Instead of showing people the virtues of Surface they decided to show hip young people dancing and jiving holding RT Surface tablets, something that makes no sense to anyone who wanted to know what Surface really was and why they should even consider buying it. These ads were a waste of money and a big mistake in my book.

Our research suggests that Windows RT in 10-inch tablets and laptops probably will never take off. Mostly because of lack of backward compatibility with current Windows apps, which to a lot of people is still a big issue. While it is true that Windows 8 apps work on RT devices, the lack of Windows 8 apps, especially those long tail apps, will continue to hurt it in these types of models too.

However, there is one device, or area, where RT could be quite welcomed. One of the things you may have noticed is that 7” or 8” tablet prices have come down in price. Over the weekend I saw a 9” tablet for $99.00 at Fry’s. Sure it was a no-name brand but it had Android Ice Cream Sandwich on it and was more than serviceable as a basic tablet. What we are seeing is a race to the bottom with smaller screen tablets and it is becoming harder and harder for any tablet players to compete when prices get this low and they are all pretty much alike.

Gaming and Media

What is needed in the small tablet space is differentiation. Just using a mainstream processor will not cut it if the goal is to be heard above the crowd. It is true that being tied to a rich ecosystem like Amazon and Apple have for their smaller tablets helps them differentiate but for others, especially those betting on Windows 8 for tablets, they have no edge against this onslaught of race to the bottom low-end tablet space.

While CPUs in smaller tablets are important for delivering long battery life, the need for an upscale processor is somewhat minimal. However, one area of content that is important–even in small tablets–is games and video. For games, the GPU will become an important part of differentiating these smaller tablets. Especially since the use case for many of these smaller tablets will lean toward media and entertainment.

This is where RT could be on somewhat equal footing. In smaller tablets, backward compatibility with existing Windows apps is not important. Rather, it just needs to run Windows 8 apps and do them extremely well. But games and video built for Windows 8 could have an advantage when running an ARM processor like Nvidia’s Tegra or Qualcomm’s Snapdragon. Both processors which, for the time being, are likely to have a graphics advantage over their lower cost x86 counterparts. ((We can debate all we want the degree of which “good enough” experiences exist, but graphics is still an area where we will continue to observe clearly better visual experiences))

Nvidia has made the GPU a key part of their mobile processor known as Tegra and to date, Nvidia has had some pretty big wins in tablets because of the robustness of Tegra’s CPU and GPU. Qualcomm, with Adreno, and Intel as well, both realize that the GPU is becoming much more important in mobile and they too have been working hard on developing more powerful graphics processors for use with their mobile SoCs.

Most of Nvidia’s tablet wins have been for use with Android but vendors wanting to do Windows 8 ARM based tablets need to look closely at the role a GPU will have in driving greater differentiation with these smaller tablets. From our research we are finding that smaller tablets are mostly used for content consumption and games and not productivity. Making these smaller tablets exceed consumer’s expectations, especially with games, could allow Windows RT to be taken seriously. An SoC with an emphasis on graphics added to deliver a great gaming experience could help deliver on this use case. And if the graphics and media experience is objectively clear, consumers will pay a premium for this if the tablet is to be used for HD games and video. ((Obviously there are many variables to this, including rich applications and games being developed for Windows RT))

It will be important to watch what happens at Microsoft’s Build conf in SF next week and see how much emphasis they make on creating games for Windows 8. If this is a major part of their strategy, then RT based small notebooks and tablets could thrive in this space even if they are not a bargain based prices.

In The Bizarro World In Which We Live, It’s Microsoft That Complains About Monopolies

Apple Inc. won a $30-million contract Tuesday from the Los Angeles Unified School District, paving the way for the company to provide every student with an iPad in the nation’s second-largest school system. ~ Los Angeles Times

Microsoft, unsurprisingly, objected to the purchase. But what was surprising was the rationale Microsoft used to support their position:

A Microsoft representative urged the board to try more than one product and not to rely on one platform. Doing so could cut off the district from future price reductions and innovations, said Robyn Hines, senior director of state government affairs for Microsoft.

But district staff countered that Apple offered the superior product.

Wow. Payback is a witch.

New Microsoft and Best Buy “Store Within a Store” a Big Step Forward

Last week, Microsoft and Best Buy announced that they will be doing a Microsoft “store-within-a-store”. Essentially, Microsoft will pay Best Buy a large sum of money to “own” part of the store, in a way similar to Samsung and Apple. Best Buy will still own the inventory, but Microsoft will own the merchandising, staffing-levels and training. I believe this is a big step forward, and if executed well, helps solve many of the issues associated with Windows 8 PC experience. Let me start with some perspective on Windows 8.

For anyone who has been in the industry a while, you know that a few things defines the Windows experience over the last 20 years:

primary keyboard and mouse UI
one, windowed Desktop environment with lots of “chrome”
start button (18 years ago)
multitasking of any app
backwards app and peripheral compatibility
desktops and notebook form factors

Windows 8 changed ALL of this:

primary UI display touch, secondarily mouse and keyboard
two environments; one Metro and secondly Desktop
no start button
every Desktop app multitasks, select Metro apps multitask
Desktop X86 backwards compatibility, ARM no app backwards compatibility, undetermined peripheral compatibility
desktops, notebooks, convertibles, detachables, tablets

In other words, everything changed. The problem was, that Best Buy’s training and merchandising didn’t change dramatically to educate the buyer on the benefits of Windows 8 nor the differences between Windows 8 and Windows RT. After talking at length with Microsoft, here are my expectations:

computer will always be turned on and internet-connected
security devices won’t impede ability to try convertibles and detachables
more knowledgeable sales associates
touch devices clearly merchandised
more, higher-priced “hero” SKUs that are the best of the best

If executed well, I believe this will go a long way in mitigating the current buying experience issues inherent with Windows 8 and Windows RT. The Austin store is one of the first stores to open and I will be there on opening night to gauge their level of execution. And of course, will report back.

Is Apple Making A Play For the PC Market Too?

Everyone knows that Google’s Android operating system dominates phone market share, Apple’s iOS operating system dominates tablet market share (for now) and Microsoft’s Windows dominates PC market share. While Windows is shrinking in overall market share – if you combine phones, tablets and notebooks/desktops together (and you should) – it has, until now, been a given that Windows will continue to dominate the massive, but shrinking, PC marketplace.

But is that true?

— The MacBook Air used to be a high-priced luxury product for Apple. Now it is their lowest priced, base model. For a thousand dollars, you get one of the lightest, fastest, most powerful notebooks on the market.

— Windows owns the low-end of the market, but the low end is being swallowed whole by tablets. When faced with a choice between a bottom-of-the-line $350 HP or Dell notebook and a top-of-the-line $350 iPad Mini, many consumers are opting for the latter.

Apple has captured 90 percent of the PC market for machines over $1000 since 2009. And given the rapid collapse of the PC market (at the hands of Apple’s iPad and smartphones), that’s a pretty sweet segment of the market to own. ~ AppleInsider

Microsoft has virtually no presence in either the phone or tablet markets. But they also have virtually no presence in the high end of the PC market either. And that’s the only end of the market making money and, in the long-run, it may be the only end of the market that survives the invasion of phones and tablets, too.

Thoughts?

Source for Graphic: NPD Group

Platform Wars: Some Things Will Never Change

Regular readers of Tech.pinions will know that John Kirk’s column last week on Android’s market share being a joke, went massively viral. As I watched the stats of real-time visitors and new hourly spikes of traffic I was truly amazed. Many of you may not know but for about a year and a half I was on the executive team of one of the popular tech and gadget blogs. In my time there I never saw anything do what John’s column did in terms of global attention.

With the wide-spread circulation of John’s 2400 word analysis came a slew of comments. Over 560 and counting to be precise. Many of our regular readers jumped in and what ensued was a pretty healthy dialogue for the most part. But in the course of the large comment thread, I think we saw every major anti-Apple argument come out. ((I hope to do a summary of the major points from each side and provide key thoughts on each of them)) Which leads me to my point. In regard to these platform wars, some things will never change.

Ultimately, humans are tribal beings. We have a strong urge to associate and affiliate with a tribe. This is perhaps most strongly demonstrated at any major sporting event. We praise the home team but boo the opposing team and all their players. We have a strong desire to win and be on the winning team. So it shouldn’t surprise us when a polarizing situation presents itself that we see tribal behavior.

It doesn’t matter how rational of a conversation we try to have about understanding the complexities of business, like market share statistics for example. Or that business is made up of a complex web of market forces that when isolated do not tell the whole story around the health or viability of a product, company, or market.

So many points in this platform war discussion are based on flawed assumptions that everyone values the same thing. That people are pragmatic, and rational beings. Nothing could be farther from the truth. Humans are diverse and that diversity is reflected in the diversity of products and solutions that exist in the markets we study. It is this profound market diversity that many don’t understand.

So this discussion will continue and we will all try to have an informed dialogue on the complexities of business but some things will never change. Humans are tribal beings. If only we could recognize that there are situations where for one tribe to win the other does not have to lose. If only.

Why Google is Not the New Microsoft

My history with the PC industry is very long. I got to work on the original IBM PC with Don Estridge’s team in Boca Raton and saw up close and personal how the PC industry developed and how the value creation for the industry came about. I also got to work on early marketing programs for the Mac as well as programs for Compaq, Dell, HP, Toshiba, DEC, and many others as the PC market was hatched and eventually became an almost trillion dollar industry. Perhaps the most interesting fact from the early days of the PC is that IBM created their PC from off the shelf parts and never even considered developing a proprietary design at first. By using an open approach to the PC architecture it did not take long before others created IBM PC clones and took IBM on soon after the IBM PC hit the market in 1981.

Most industry folks know that when IBM sought out an OS for their PC, they first visited Gary Kildall and his company Digital Research Inc. as they were interested in his CPM OS. But when they arrived, Gary was not there and more or less snubbed them and they instead went to see Bill Gates and as they say, the rest is history. I did many Computer Chronicle shows with Kildall and he refuted the idea that he intentionally snubbed them; regardless, the end result was that IBM ended up using MS-DOS and it became the heart of their and many PC Clone’s operating system for almost a decade.

Over the years Microsoft has become an industry behemoth and has gotten into many different businesses to help extend their Windows franchise. But from the beginning, Microsoft did have one important goal and focus. It was to give PC OEMs an OS and actually help them make money with their PCs. Microsoft licensed MS DOS and then Windows to PC makers and continued to refine it and upgrade it along the way. The PC vendors could then create hardware optimized for these operating systems and add value through hardware and software add-ons. With each new version of Windows, Microsoft helped their PC partners grow their business and as people upgraded from one version of the OS to the others, many people along the value chain were greatly enriched. Besides PC companies making money, VARs, retailers and value added service providers all benefited from an ecosystem in which they could build new designs and services around Windows and keep all of that money for themselves.

When it comes to money and value creation for their partners, Google’s goals are very different and this is what really sets them apart from Microsoft.

A One Sided Relationship

While they too have an OS that companies can license, the real goal of their licensed OS is to bring users of these devices into direct contact with Google’s ads and services. Google says they really want their partners to be successful and while that is probably true, what they really mean is that if partners are successful in distributing their OS, than Google can reap the majority of the financial benefits. Sources tell me that a company like Samsung, who is literally their largest partner and almost single handily making Android successful, gets only a 10% commission on any of Googles ads or services they bring to Google. That same 10% commission applies to a giant like Samsung as well as any other companies distributing Android on their smartphones and tablets, except for Amazon and Barnes and Noble. In these two cases, Amazon and Barnes and Noble have forked Android for their own uses and can keep all proceeds from products and services sold through their devices. This works because they have an ecosystem of books, music, apps, and services that are their own and don’t need Google’s content to be successful. But most of Androids partners, such as Samsung, HTC and others, must rely on Google for music, video and apps and must pay this very large tax to Google if they want to use Android.

This is not to say that Microsoft’s OS licensee fee is not a tax in its own right. However, once that fee is paid, Microsoft gets no extra revenue from their partners regardless of what they sell in way of their hardware and services. And even if they tap into Microsoft’s ecosystem of apps or services, I understand their revenue cut to their partners is much more than Google gives their partners. This is why there have been rumors that Samsung has not been happy with Google since they do all of the hard work in creating a device, optimizing Android’s OS and delivering a value added UI to it as well as managing the channels and pay to make their own ads. Yet Google treats their cut of the profits the same as a small player that sells a much lower volume of devices than Samsung does with their products. No wonder analysts are looking closely at Samsung’s recent decision to fold their own mobile OS called Bada into Tizen and suspect that if Samsung wants to control their own destiny and keep more of the app, ads and services for themselves, that they might move more and more to Tizen as their mobile OS of choice.

While many rag on Microsoft as being a 900 pound gorilla lording their wares over their partners with a heavy hand, they at least let their partners make and keep as much profit as they can from any products and services they offer their customers. Not so Google. They too are a 900 pound gorilla but in their case these vendors are just a front end distribution medium for putting Google’s ads and services before their customers and ultimately reap the lions share of most of the profits made at the expense of their partners. And in this sense, the difference between Microsoft and Google is glaring indeed.

Why Microsoft Can Win the Living Room

As Ben Bajarin pointed out in his post here yesterday, Microsoft’s Xbox One is a whole lot more than a game console. Of course, the Xbox has long been the leading edge of Microsoft’s effort to dominate digital home entertainment. But a combination of clever new hardware and Microsoft’s unique positioning with respect to the entertainment industry could propel it to victory–and reverse in faltering fortunes in consumer businesses.

Of course, the hardware still has a lot to prove. The ultimate goal of the digital living room is a single box that can deliver all your entertainment desires. On paper, at least, the Xbox One comes closer than anything we have seen before. But features on paper, or even in a demo, are one thing and real life is another. Even Google TV looked sort of good in a demo before flopping with consumers.

The biggest challenge facing the Xbox One is the promised integration with cable set top boxes. Success will depend on the new Xbox’s ability to control the set top box through an easily set up HDMI connection. It needs to banish the cable box to irrelevancy for everything except accessing and decoding content, ultimately becoming your DVR and your gateway to video on demand. That would make it a huge breakthrough. But if it needs IR blasters to control cable, it will go the way of Google TV. Microsoft is so far silent on which boxes from which cable operators the Xbox will integrate with.

It also remains to be seen how well the gesture and voice control will work to replace traditional remotes or controllers. Again, these are technologies that often demo better than they work, but successful elimination of the need to use hardware to control the box would also be a huge step forward.

So it looks like Microsoft will have a hardware edge when the Xbox One ships “later this year.” The real challenge is to build on what already appears to be a slim lead in the availability of content. Here Microsoft can built on two advantages. One is that it has been a technology partner of both studios and and cable and satellite operators for years. For example, AT&T U-verse service runs on Mediaroom IPTV technology developed by Microsoft (the division was recently sold to Ericsson.)[pullquote]If Apple ever announces that unicorn of tech unicorns, an Apple television, it will have to get over a bar that has been raised by Microsoft. It’s been a long time since we could say that about any product.[/pullquote]

But a more important reason, and an odd one given Microsoft’s history as the big bully of the tech industry, is that Microsoft is the company that Hollywood is not afraid of. Microsoft’s leading rivals in the living room are Apple, Amazon, and Google (Sony could claw back into contention, but it has fallen a long way behind.) Each of these competitors inspires fear and loathing in the studios. Apple is the company that ate the music business. Amazon is the company that seems to destroy value in every market it enters–good for consumers, but torture for producers. And Google is a company whose ambitious are scarily unbounded. Apple and Google TV effort has been hobbled by lack of cooperation from content owners and distributors’ Google so far has restricted itself to selling and streaming downloads to other companies’ devices, though it is rumored to be contemplating a set top box of its own. In this company, Microsoft can position itself as an honest broker, a neutral player with no dog in the fight.

The only entertainment content deal that Microsoft announced at the Xbox launch was an exclusive with the National Football League that will bring a lot of “second screen” content, such as stats and highlights, while watching a game on your Xbox. But there was no word about making the games available outside of the NFL’s existing deals with CBS, Fox, NBC, and ESPN. (Microsoft will also get branding on the hoods of replay stations; let’s hope that works out better for them than Motorola branding on coaches’ intercom systems.)

In the end, it is Microsoft’s ability to strike content deals with studios, networks, and sports leagues and getting cable operators to support deep integration of Xbox with their services that will determine success in the living room. At a minimum, though, it seems that if Apple ever announces that unicorn of tech unicorns, an Apple television, it will have to get over a bar that has been raised by Microsoft. It’s been a long time since we could say that about any product.

Xbox One and the Future of the Digital Living Room

When I started my career as an industry analyst in 2000, my focus was on the video game industry and the digital living room. We had a belief that at some point in the future rich media and entertainment would collide and set the norm for living room multimedia and immersive experiences. Today with the unveiling of the newest Xbox generation, called the Xbox One, Microsoft has taken another step closer to this vision.

I’ve closely observed each major console announcement since 2000 and at each and every one there was a clear and focused message: this console was first and foremost about a great gaming experience. No longer is that the message. Great gaming experiences are simply assumed. They are the new normal and expected. The question that consoles need to address in order to evolve and appeal the wider audience necessary for broader adoption is: what else can you do for me?

Microsoft spent not only the introduction of the Xbox One but the vast majority of the presentations emphasis not on gaming, but on the what else can you do for me. This is very telling. Not just about where we are as an industry but Microsoft’s living room agenda at large.

I’ve long said, and I’ll continue to state that I believe Microsoft’s best asset to build upon and around is the Xbox. It is, arguably, the strongest and most relevant consumer brand they own today. It is also the strongest from an ecosystem standpoint, and the one I feel they need to build out from with regards to personal computing.

Of course the Xbox One will have amazing games, and I for one am extremely excited about that aspect. But, the most interesting parts of the unveiling were not the graphics, or games, or even the exclusive titles. The most interesting announcements were the OTHER exclusives.

Exclusivity is No Longer About Game Titles

We have a name for exclusive games. We call them platform drivers. The first Halo on the first Xbox was a platform driver. It was the single greatest selling point for that generation of XBOX hardware and it was exclusive to the Xbox. Many other top-tier titles were born as Xbox exclusives and its continued demand and strong sales were tied to those exclusives regardless of whether they stayed exclusive. It was almost always Xbox first or Xbox only with many top-tier franchises. To be fair Sony has many of their own, but the elusive hard-core gamer between the ages of 18-35 seemed to generally gravitate to the Xbox and the exclusive titles that drove the Xbox experience.

Today, however, Microsoft discussed exclusives of a new kind. Of course there will still be exclusive games, but now games are not the only exclusive content Microsoft appears to aggressively going after. Exclusive TV series, and network deals with the NFL, along with unique interactive content with SportsCenter were key parts of this announcement. I get the feeling that Microsot hopes that unique content of this kind may drive platform adoption the same way exclusive titles have in the past.

We keep wondering when our set-top boxes will break free from the mercantilist nature of our cable and TV programing companies. My thoughts on this is that we are simply waiting for an Internet only, or over-the-top-service only, blockbuster success. If that happens we will almost certainly see a paradigm shift. Perhaps Microsoft with the Xbox One will be the catalyst to drive this paradigm shift and create a true leadership position in the digital living room.

Microsoft is Missing Apps the Same Way They Missed the Early Internet

It seems odd to me that Microsoft of all companies is so drastically behind the curve when it comes to apps for Windows 8 and Windows Phone. When you think about it, Microsoft of all companies was in the best position to create a better software buying experience, via an app store than anyone. Windows had 97 to 98 percent market share for the bulk of the PC era and software played a key role in that dominance. Why was there no Windows app store until the end of last year? ((Updated: There was a Windows Marketplace but came no where close to the app stores I am talking about)) It just makes no sense.

 Similarly, Microsoft was in a growing position in smartphones with Windows Mobile. They had tinkered with software stores but the experience never really gained significant traction. Companies like Handango helped fill the gap but again much of what existed then is gone now.

The most robust third party mobile developer network I witnessed when I joined Creative Strategies 13 years ago was the Palm developer community. In fact, the Palm developer community in terms of passion, excitement, and quality of applications being developed, reminds me a lot of today’s iOS developer community. Microsoft never enticed the same commitment and passion for their mobile platforms as the Palm community, even when they gained share and Palm itself began shipping Windows Phone. Despite their efforts Microsoft is still today struggling with weak developer interest.

As I think about this situation that Microsoft is in, it reminds me of the situation they were in with Internet Explorer for so long. They missed the boat on leading the Internet revolution and now again they have missed the boat on leading the app revolution. All while they were in the best position to lead in both.

The Network Effect

Both Palm and Apple achieved the network effect.

In economics and business, a network effect (also called network externality or demand-side economies of scale) is the effect that one user of a goods or service has on the value of that product to other people. ((Alpheus Bingham and Dwayne Spradlin))

The economics in turns of monetary opportunity for developers, as well as the critical total addressable market achieved by both Palm and then with Apple, created a strong network effect. This is still going strong for Apple today.

Interestingly, despite Microsoft’s position in PCs, I would argue they never achieved the network effect. ((Happy to debate this point.))

You may have noted that I did not include Android in the network effect discussion. While it’s true Android has the lions share of the smartphone market, we also know just looking at Android’s market share does not singularly indicate the strength of a platform. Engagement is consistently reported as lower on Android than iPhone and developers are continually facing economic challenges of making money with Android.

 Being in Silicon Valley I get to meet and talk with a lot of software startups. Android to many of these software companies I meet with is treated as a secondary priority. Rarely, do I meet with a company creating software for Android first or only. If this platform was doing well for the masses then I would imagine we would see more exclusive applications and I would see more software startups getting funded for Android only development. This is simply not the case. Android is benefiting from the network effect of iOS, however, as developers are generally taking their iOS first apps to Android eventually. Android has achieved a degree of the network effect by default, and on the heels of the iPhone.

This network effect is a key area that is driving both iOS and Android. This network effect has created long tail applications.

Long Tail Developers

Chris Anderson helped popularize the concept of the Long Tail with his book called The Long Tail: Why the Future of Business is Selling Less of More. (link) The concept in short is that there is value found in having large quantities of something (apps in this case) which appeals to smaller groups of people. Another way of describing would be simply to say having a successful long tail model means having massive quantities of niche content. [pullquote]Popular apps may be the most profitable but long tail apps are often the most discoverable[/pullquote]

A successful long tail strategy, the one that I would argue creates the highest degree of loyalty to a platform or service, is one that has all the mass market goods (the popular items) but also and large quantities of goods that appeal to smaller groups of people. When we apply this theory to apps only iOS and to a degree the Google Play store are in the discussion. Popular apps may be the most profitable but long tail apps are often the most discoverable.

Imagine being a Windows Phone or BlackBerry user for a moment. Your friends or family members are all talking about the new apps they discovered or are using, for things like health and fitness, education, gardening, sports, etc. They all rave about these great apps that they love and are adding value to their lives. These apps don’t exist on your platform and probably won’t for a long time if ever, unless a critical mass is acquired. Which, of course, is not going to happen without long tail apps and long tail app developers. Its a chicken and egg problem.

Or imagine your kids sports team starts using an application to help manage schedules and parents assignments, but it only exists on iOS or Android. Your favorite grocery store, market, magazine, favorite brand, etc., comes out with an app, but it’s only available on iOS or Android. Your kids schools offer mobile apps, but they are only on iOS or Android. The workout video series you just bought has an app but it is only on iOS or Android. I hope you see my point.

Windows Phone and possibly BlackBerry may get the popular apps from the big developers, but where the platform really suffers is in the long tail apps and content, which is the driving strength for the mass market with iOS and Android. Only iOS and Android are attracting long tail developers at the moment.

Developing a critical mass of long tail apps and the developers who will continue to make them, is the biggest single hurdle I believe Microsoft, BlackBerry, and any other platform that aspires to enter the market. Without them, these alternative mobile operating systems will continue to struggle to find customers for their products until the same long tail apps make it to their platforms. If they make it to their platforms of course.

Can Microsoft Compete in a Post-PC World?

Microsoft says it sold 100 million licenses for Windows 8 in the six months it was on sale. Not spectacular, but not bad either. But for Windows RT, Widows 8’s tablet-friendly little brother, things haven’t been so hot. Microsoft hasn’t given out numbers, but IDC estimates sales of Microsoft’s Surface RT at a bit over a million for October through March. It seems likely that combined sales of OEM RT products–all four of them–were even lower. By contrast, Apple is selling nearly 1.5 million iPads a week.

The failure of Windows RT–and it is getting very hard to call it anything else–leaves Microsoft in a terrible bind, as least a s a seller of consumer products. The post-PC era is upon us, not in the sense that traditional PCs are going way, but that they are no longer the center of the computing world, either in most people’s usage, in mindshare, or in sales. We’ve just entered this new era and it should be possible for a company with Microsoft’s resources to recover. But the first step in recovery is recognizing that you have a problem, and Microsoft doesn’t seem to quite be there yet. Consider Board Chairman Bill Gates’ comments on CNBC:

Windows 8 really is revolutionary in that it takes the benefits of the tablet and the benefits of the PC and it’s able to support both of those. On Surface and Surface Pro, you have the portability of the tablet but the richness in terms of the keyboard and Microsoft Office…. A lot of [iPad] users are frustrated. They can’t type, they can’t create documents, they don’t have Office there. We’re providing them something with the benefits they’ve seen that have made that a big category without giving up the benefits of the PC.

In other words, what people want is more mobile versions of traditional PCs, and that’s what Microsoft is determined to give them. The problem is that this is a serious misreading of why customers are flocking to tablets. Mobility is, of course, an important attribute of the tablet. But so–and here is where Gates and Microsoft go wrong–simplicity. The iPad has limitations which users accept in exchange for wonderful simplicity and great ease of use. Tablets, and especially, the iPad, have the shallowest learning curve in the history of computing. Their software does not break. The process of updating their software is simple automatic. They don’t run Office but, while this may come as a surprise to Gates, many people do not see that as a disadvantage. They are, as my colleague Ben Bajarin would put it, a great example of “good enough” computing.

So what can Microsoft do about this? I have always thought the company made a strategic mistake when it decided to adapt desktop Windows to tablets rather than follow Apple’s lead by using an enhanced version of Windows Phone. It ended up compromising both the desktop and the tablet experience (based on the reports we’ve been hearing lately, such as this from ZDnet’s Mary Jo Foley, the upcoming “Blue” update to Windows is designed more to address Windows 8’s shortcomings as a desktop OS than to rescue Windows RT.[pullquote]I have always thought the company made a strategic mistake when it decided to adapt desktop Windows to tablets rather than follow Apple’s lead by using an enhanced version of Windows Phone.[/pullquote]

Windows 8/RT was a radical step for Microsoft, but in the end it just didn’t go far enough to succeed on tablets while perhaps going too far to win friends on the desktop. A true tablet OS simply would not have a Desktop mode that depends on a keyboard and mouse for usability, and Windows RT regularly requires going into Desktop for critical tasks (we can only hope that Blue will fix this.) The vaunted availability of Office is no advantage at all for most users because the Desktop Office apps simply don’t work well on a tablet. True touch versions of Office applications are reportedly in the works, but they are not expected before late 2014.

OEMs disappointed with Windows RT are building Windows 8 tablets. The most PC-like of these may succeed as sort of Ultra-ultrabooks, Windows 8 is fundamentally unsuited to a pure tablet. It requires too much process, too much battery power, too much storage, and too much keyboard. The same OEMs, even those most loyal to Microsoft, are also hedging their bets with Android.

That may well be too late. iOS 7, expected this fall, is likely to be a major enhancement of the iPad and we may see iOS 8 before the Windows tablet software upgrade is complete. Android tablet software still lags; the operating system has not made nearly as much progress on tablets as on phones. But Google and its partners will get it right sooner or later, and probably before Microsoft.

None of this means that Microsoft is going away. It’s back-end software powers most enterprise computing and its clients continue to have a vital place in business. For some business users, Gates might even be right about tablets: they need Office worse than they need the elegance and simplicty of an iPad. But with the mass of consumers, for whom a conventional PC is more likely to be a place where they store stuff rather than do stuff, Microsoft is in real trouble with no easy way out.

The Difference Between Bill Gates and Steve Jobs

Yesterday Bill Gates took some heat in the media when he proclaimed that Windows 8 and Surface tablets are giving the masses what they really want in a tablet product. I watched his remarks in the CNBC video and they are not as bad as many made them out to be. But reading much of the commentary got me thinking. The tablet form factor may be the ultimate showcase of the differences between Bill Gates and Steve Jobs.

Some of the best business advice you consistently hear, as well as the root of many entrepreneurs success stories, is to create products that you would find desirable and would want to use. Both Bill Gates and Steve Jobs are/were men of great vision. But they both also created products with this philosophy in mind. They made products that not only fit their vision but were something they genuinely wanted to use. In fact Steve Jobs was more vocal on this point than anyone. On numerous occasions he pointed out that his–and Apple’s–core culture is to make the type of products that they themselves would be delighted using.

Both Bill gates and Steve Jobs had the correct vision of how the tablet would become the broader future of computing. Bill Gates’ vision for tablets led to Windows XP Tablet PC edition. This vision was representative of the type of tablet Bill wanted to use and the experience he valued. Steve Jobs’ vision led to the iPad. This vision encompassed Steve’s desired experience with a tablet computer.

I think its clear which product captured the hearts of the mass consumer market. The difference between Bill Gates and Steve Jobs is that ones man’s desired product is more reflective of the mass consumer market. Bill’s vision appealed more to the business audience while Steve’s vision, and his own product desires, appealed to the masses. Apple and Microsoft are in very different places today because of this reality.

Re-thinking Winners and Losers In Tech

There are narratives that circle the technology industry that are wearing out their welcome. The primary one, and the one where I wish more intelligent heads would prevail, is the narrative that there can only be one winner in this industry. Namely that for Google’s ecosystem to win, means that all the others must fail. Or that for Microsoft’s ecosystem to win it means that Apple’s and Google’s needs to lose. And of course that for Apple to win, Google and Microsoft need to lose.

As far as I can tell these narratives are rooted not only a limited view of the technology industy’s history but also a very short-sighted one. It seems as though since Microsoft’s Windows platform dominated much of computing for several decades, that it must mean that it is inevitable that this domination repeat itself. It seems the expectation from many is that we are simply waiting to see which platform wins. More specifically, which platform will dominate computing market share the way Microsoft did in the past. Let me explain why this is not going to happen.

Big Consumer Markets

The reason I say the one platform to rule them all narrative is deeply flawed is because when Microsoft dominated computing, the market was very small from a global standpoint. The market for PCs was so very small compared to the market for smartphones for example. Small markets favor fewer players who typically dominate the segment.

The global consumer market for technology is massive. Massive global consumer markets can sustain many players, competing for segments of markets, and all making money. Look at how many automobile companies the global consumer market can sustain. Look at how many clothing companies, types of aspirin, types of cereal, etc., the market can sustain. Believing that for Google to win Apple has to lose–or vice-versa–is like believing that for Pepsi to win Coca-Cola has to lose, for Burger King to win McDonald’s has to lose, or for BMW to win Mercedes-Benz has to lose. We all know how silly that sounds and that is the point.

Interestingly, even though a few major conglomerates own many of the underlying products that make up the variety I mention, its success often transcends the product, or company, itself but is wrapped into a larger experience. This larger experience is bound to something central which is key to that companies sustainability in the global consumer market–their brand.

Brands Rule the World

When you look at the global consumer market, you simply will not find a company succeeding and competing on the basis of a product who does not have a strong brand. A strong brand stands out. It is recognizable. It leads to continually high customer satisfaction, loyalty and trust. A strong brand continually re-creates an enjoyable and memorable experience for its customers.

When a company builds a brand that the global consumer market considers valuable, it puts itself in lasting position. Nike, BMW, Mercedes-Benz, Coke and Pepsi, McDonald’s, etc., are not in danger of going out of business any time soon. To predict their demise, is as ridiculous as predicting the demise of the strong global consumer brands in the technology industry.

A strong brand is not just sustainable it is also versatile. Brands compete well in the markets they play but a strong brand also allows a company the ability to compete in new markets with new products. A strong brand is one of the strongest, most defensible assets any company has. It is one of the foundational things that often gets overlooked in many analysis.

Its time to re-think winners and losers in the technology industry. Its time to take a more holistic look at who is well positioned to still exist in 20-30-50 or even 100 years. A strong brand today means a strong brand tomorrow. Products come and go, but brands can stand the test of time.

Forget Mad Men Or Breaking Bad. Give Me The Recurring Tales Of Microsoft.

People are often surprised to discover that I rarely watch television. Make no mistake, though. I’m no culture snob. It’s just that tracking tech companies is so much more fascinating. None more so than Microsoft.

No, not Apple, not Oracle, not Google or Facebook, not even a Marissa Mayer-led Yahoo. Microsoft stands alone, equal parts The Office, Lord of the Rings, and and a really bad, big budget Tom Cruise flick. The stories tumble out, one after the other, always somehow both a shock and painfully obvious.

Founder Bill Gates, we all know, has gone from despised to beloved. Once the face of the evil monopolistic digital land baron, now the big data soul of 21st century philanthropy.

Next, of course, there’s Steve Ballmer, Gate’s Salieri. Ballmer has spent most of his adult life fighting Gate’s wars, living in Gate’s shadow. Small wonder that, despite his many billions earned in sweat and blood and equity, he is now loathe to relinquish his role as lord of Microsoft.

Ballmer is worth as many stories as Gates, and most of them even better. For decades, Ballmer has faithfully spent his days and nights aggressively, angrily growing Windows – convinced it was the very same thing as growing Microsoft. Too late, he discovered the truth. No. Comically, he has yet to discover this truth even though everyone else has.

There’s so much more…

How many billions has Microsoft poured away in its futile efforts to catch up to Google?

How many billions more will it spend now that it has decided catching up to Apple is also necessary?

How many worthy competitors has Microsoft destroyed over the years – obliterated, in fact – only to suddenly later find itself rebuffed by a bumbling Yahoo, or scorned by a geeky Mark Zuckerberg, who decides to stake the future of his company on something as inconsequential as an Android launcher?

I cannot be the only one that finds watching Ballmer transform from an angry grizzly to a toothless Pooh Bear far more entertaining than anything put out by Hollywood.

I cannot be the only one who lived through the Microsoft Terror, watched as Microsoft took on GM, IBM, GE, even governments, now staring dumbfounded as Microsoft runs to France, crying about Google.

The stories write themselves…

The biggest, baddest personal computing company of our age spent years talking about, developing, showing off and building all manner of mobile computing devices. After years of toil they arrived at the gates of the promised land, inexplicably turned around, then mocked Apple and Google as they passed through that magical portal.

Then were turned away when they finally got mobile religion.

Microsoft destroyed Netscape, yet somehow missed out on the Internet’s greatest riches.

Microsoft rode in on a white horse and saved Apple, only to be mesmerized by the wizardry of Steve Jobs.

On its mighty shoulders, Microsoft alone raised up PC companies to the heavens – like Dell and HP – only to sit idly by as they quickly fed upon themselves in a foolish race to the bottom.

The company spent a king’s ransom to destroy Sony only to discover – too late – that Apple was the future of music, movies and gaming.

Microsoft developed the best ever PC operating system – after PCs became damn near irrelevant.

Worse. The company may no longer possess even the ability to right itself as Ballmer has spent the last decade swiftly excising all who possessed even the hint of challenging him.

But you want to see what’s on Netflix?

The company continues to earn ungodly profits – yet their stock refuses to budge.

Their software licensing model, once considered impervious to attack, is now beaten and bloodied. Only, not by free and open but by pricey consumer hardware.

They’ve spent so much over the years on media relations that now no one in the media can stand them.

Microsoft is everywhere yet ignored. Microsoft is giant yet mocked. Microsoft is rich yet may have no future. There is no better story in tech, in fiction nor on the silver screen.

The Revenge of Steve Jobs

Steve Jobs’ original vision for Apple was to own the PC market. When he and Steve Wozniak created the original Apple PC, they fully expected to be the company that brought the PC to the masses. However, once IBM came into the PC market the game changed. By 1983 the IBM PC was the defacto standard in personal computers and Apple was pretty much left in its dust.

When Jobs introduced the Mac in 1984, he was convinced that his new Apple PC would be considered easier to use than the IBM PC and as a result leapfrog the IBM PC and become the PC for the masses. But at that time, the masses could not afford the price of the Mac or the IBM PC and the real growth in PCs was driven by the business market, a market which IBM compatibles helped define and continues to be the top selling PC even today. Even more galling to Jobs was the fact that Bill Gates, with the intro of the Windows UI, basically took Jobs’ implementation of a GUI and put it onto all PCs and in essence made GUIs the defacto standard in how a person navigates the PC experience. Up to now, Gates and team reaped most of the financial benefits from the growth of the PC market.

Although Jobs introduced the first commercial version of a PC as well as commercialized a radical new UI, the PC market under the leadership of IBM compatible vendors and with Gates’ software, fundamentally has been at the center of the PC revolution and even to date, IBM PC compatible products dominate the market overall for personal computing and Jobs never realized his goal of Apple owning the PC market.

The PCs Run is Over

Earlier this week, IDC updated their forecasts for Q1 of 2013 and gave some guidance about the future growth of PCs throughout this year. In late 2012, IDC forecasted that the PC market would see a negative growth of 7.7% in Q1 of 2013. But in their updated report on PC sales for the last quarter, PC sales were actually down 13.9%, the worst quarterly decline since they began tracking PC shipments.

All Things D published both the IDC and Gartner numbers for Q1, 2013 and wrote about both companies guidance for PC sales for the rest of the year. Even though the IDC numbers and Gartners numbers are a bit different, they both conclude that demand for PCs is in a real decline and that the likelihood of them recovering is slim.

In this article, Arik Hesseldahl of All Things D states “At this time, it has to be said that much of the blame for the damage being done to the PC businesses of all the companies around the world can be laid at Apple’s feet: Sales of the iPad, the world’s leading tablet brand, have a lot to do with the collapse in PC sales.”

When Jobs introduced the iPad, he clearly stated that this product would drive the post PC era. I think he knew that his tablet was finally the reinvention of the PC he had longed to bring to market and that it would actually cause the decline of PCs, even if it meant eating some of his own children (the Mac). More importantly, by the time he introduced the iPad, he had in place all of the hardware, software, and services needed to connect the iPad to his ecosystem and even with any decline in the Mac business, he was fully insulated from the impact any downturn in Mac sales would have on his business. On the other hand, HP, Dell, Acer and other PC OEMs who were totally PC driven are feeling the shock of the decline in their PC businesses and are not any where insulated like Apple to withstand the impact of these sharp declines in PC demand. Their only hope is that Microsoft can deliver key software and services that they can use on tablets and convertibles of their own. But it may be too late for them given the strong position in tablets Apple already has and from strong competitors like Samsung, Amazon, and others who are in many ways better insulated through their own ecosystem of products and services already up and running.

While Steve Jobs is no longer with us, I think he knew that this would happen. Perhaps his last major act was to give us the iPad and finally have revenge for the years of toil in the PC market where he always ended up #2, even though he was first with many of the innovations that actually drove PCs to the masses. If he were with us today I suspect he would not shed any tears to see the decline of the PC market and instead revel in the role the iPad played in bringing his PC competitors to their knees.