The Challenge of Windows 10

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With the move to Windows 10, as disclosed in detail on January 21st, Microsoft is finally making clear its support of a unified system for devices from phones to an 84″ Surface Hub. Windows 10 is an interesting challenge that takes on the work of a considerable new approach to Windows–but it remains to be seen whether Microsoft will be as successful as Apple.

Apple and Windows, of course, have difference reports to markets. Apple, at the beginning of the iPhone era, had to make it successful in partnership with a Windows PC. Having gotten used to Windows with the iPod, Apple knew how to do it. And a number of those with Apple programs that made sense for mobiles, most notably Microsoft Office, had no choice but to support iOS versions (while some producers for iOS, such as Tweetbot, offered Windows and Mac versions).

Microsoft’s position is very different. Microsoft has millions of Windows PCs in use for every Windows Phone, while Apple must settle for a majority of iPhones and iPads not in use with Macs. Microsoft is determined to win a unified market of phones, tablets, and PCs. Its initial move is a new version of Office that will use a common code base for PCs and phones (we don’t know yet how Microsoft will handle Office for iPhone and iPad). In addition to Word, PowerPoint, and Excel, it is rewriting Outlook to handle mail and calendaring on mobile.

Can IT do it? I have no doubt a critical Microsoft goal is to make the Windows Phone an attractive choice to its corporate customer. Most IT departments support the use of the Phone as demanded by workers, especially top executives, but they don’t like it. Android is, in some ways, even worse, especially since Samsung’s effort to supply Knox, an enterprise security issue, has flopped. BlackBerry is still the darling of IT departments, but it’s not making a comeback. That creates an opportunity for Windows Phones.

The big challenge is software. Based on what they have shown, Microsoft has done an impressive job of coming up with a version of Office that runs on PCs, tablets (( The tablet does not really exist as a category in the Microsoft lineup. Devices with displays up to 6″ are phones. Bigger devices are PCs. The closest thing Microsoft has offered to a distinctive tablet, the Windows RT system, is dead. )), and phones.

The question is what about apps not provided by Microsoft? Windows has been fighting it out with BlackBerry for third place in the software market. The Windows Phone apps store remains mighty scarce territory. The most recent business-related apps, Dropbox, is certainly welcome, but extremely late to Windows Phone.

Easier than Apple. Microsoft’s pledge in the Windows 10 reveal is that code will run on all devices across the Windows range. The unified operating system is a valuable move; it may make things a bit easier than for developers of Apple products who need to work in OS X  for PCs and iOS for iPhones and iPads (plus Windows for PCs). But it is still going to take a great deal of work to do versions of an app to work properly, and easily, in both PCs and phones. The Windows Phone segment has to get a lot bigger to make developers see it as worthwhile market. And if users are expected to use their Windows Phones for both business and personal purposes, building appeal will call for a lot of apps.

HoloLensDespite the challenge facing Microsoft, this was a sound decision. The alternative was to get out of the phone business, struggle in the tablet segment, and be stuck in a PC business that shows little prospect for growth. From Windows Phones to HoloLens and the Surface Hub, Satya Nadella is determined to rebuild Microsoft, and there’s no chance of winning without taking on some serious risks.

It’s Scary: Government’s Fight Against Encryption

Cameron-ObamaMost governments’ reaction to the terrorist attack on Charlie Hebdo and a kosher market in Paris seemed sensible. The major exception was a pledge by Prime Minister David Cameron to shut down encryption on messages in the U.K. No better is the push on President Obama to follow the mission. One reason for limited reaction in the U.S. is the lack of memory of the last U.S. fight in the 1990s.

The latest encryption brawl is a bit mysterious since if the police know something about the Paris attackers using encrypted messages they have not shared the knowledge. Instead, Cameron rolled out a promise to restrict encryption he made in his re-election campaign last year. Obama seems to base his position on friendship with Cameron and support for restrictions made last year by FBI Director James Comey.

The British technique would prohibit encryption of communications, likely to cover fast growing chat programs including Google Message, WhatsApp, Apple iMessage and FaceTime. These apps are designed so, unlike most email, messages are encrypted end-to-end by participants and cannot be read even with a warrant. The change would require providers install a mechanism for decrypting the messages as they pass through their equipment. (Good detail on the proposal is written by BoingBoing’s Corey Doctorow.)

Confused cooperation. The U.S. position as of the moment is confusing. The White House issued a “Fact Sheet: U.S.-United Kingdom Cybersecurity” but was only clear in endorsing a broad framework, neither including nor denying the anti-encryption moves proposed by the U.K. (adding to the problem, the links to the U.S. and U.K. documents in the fact sheet don’t link to anything). So we are working with the U.K., but it’s unclear on what. The FBI supports cutting in on encryption, assuming it sticks with the statement of Director Comey: “Encryption is nothing new. But the challenge to law enforcement and national security officials is markedly worse, with recent default encryption settings and encrypted devices and networks—all designed to increase security and privacy.”

In any event, both Obama and Cameron should look back on the 1990s encryption fiasco. Back then, commercial internet communications were just beginning to take off. There was growing pressure for law enforcement to prevent criminals and terrorists–yes, even then–from transmitting secret information in encrypted messages. Then-Senator Joe Biden was the sponsor of the Comprehensive Anti-Terrorism Act of 1991, which would have limited the use of encryption. (( Thanks to Declan McCullagh for pointing this out. ))

Clipper chipThe National Security Agency came up with a scheme called Skipjack, better remembered by its implementation on a chip called Clipper (left). The program would have made available two encryption codes — the regular code for users and an encrypted “escrow” code available to law enforcement. The Clinton administration fiercely supported the plan, with the effort led by Vice President Al Gore (although the effort got started under President George H.W. Bush, it really got rolling under Bill Clinton). The proposal set off a spirited argument between the technology industry and privacy and secrecy advocates on one side and the Clinton Administration, the NSA, and the FBI on the other.

The death of Clipper. Skipjack/Clipper was finally done in by the fact it just plain didn’t work. The flaw was the Law Enforcement Access Field, part of the key that gave officials access to to the encryption data. Matt Blaze, a security scientist at AT&T Research (now at the University of Pennsylvania), published a paper, “Protocol Failure in the Escrowed Encryption Standard”, but the technology it explained became generally known as the “LEAF Blower.” Nothing in a situation like this is more quickly lethal than ridicule; LEAF Blower killed Skipjack/Clipper.

Details of how the government would be able to access classified messages has yet to come out, but the history of Skipjack/Clipper reveals how difficult it is to get it right. Skipjack developers at NSA had worked for years but never realized the flaw. Furthermore, many of the cryptographic plans toughened by Apple, Google, and other message providers were installed after the collection of information was revealed in the data Edward Snowden released from the NSA. Getting their cooperation this time will be very difficult.

This is almost certainly a factor in the U.S. resistance to go as far as the U.K. wants. But Obama is under considerable pressure from Cameron. The Guardian reports the prime minister is working hard to convince Obama to go along. According to the paper, a British government source said: “The prime minister’s objective here is to get the U.S. companies to cooperate with us more, to make sure that our intelligence agencies get the information they need to keep us safe. That will be his approach in the discussion with President Obama – how can we work together to get them to cooperate more, what is the best approach to encourage them to do more.”

This fight is a long way from being over. So far, the opposition is left mainly to the companies trying to protect their information, but it’s a good time for the rest of the industry to get involved.

Why Obama Probably Can’t Succeed with Fiber

Obama visits a fiber facility

President Obama is vigorously–for a change–pushing two modifications in government policy for internet networks. One, changing the treatment of internet service to be more like the telephone service, is a complex issue with strong arguments on both sides. His second fight, the use of fiber distribution around the nation, is a clear advantage for citizens that likely isn’t going anywhere.

The President went out to little Cedar Fall, Iowa (pop. 39,000) on Jan. 14 for a speech on the need to make fiber available in cities. It seems like a reasonable enough idea, but it is fiercely opposed by the current internet service providers, cable TV services and phone companies. And the Republicans who control both the House and the Senate have already chosen an Iowa senator, the newly elected Joni Ernst, to respond to Obama’s comments on the subject in the State of the Union Jan. 20.

Obama called for federal regulation overruling 19 state laws that prohibit local governments from providing fiber service. “In too many places across America, some big companies are doing everything they can to keep out competitors,” the President said. “In some states it is virtually impossible to create networks like the one you have in Cedar Falls. Today I’m saying enough is enough, we’re going to change that.” The Federal Communications Commission plans to consider some state bans in February.

It’s less of an issue in big cities. Cable carriers such as Comcast, Time Warner Cable, Verizon FiOS, AT&T U-verse, and, in some places, Google, offer fast internet service. It may be expensive but the service is good. And where Google competes, it often drives down prices. And municipal service has turned out to be complex and pricey for big cities. By contrast, small towns are easier to provide for but have been offered little acceptable service by the existing carrier.

But it’s difficult to understand why small towns, which often are Republican (although Black Hawk County, which contains Cedar Falls, is slightly Democratic, perhaps the reason for Obama’s choice) want to stick with current services. Local business, whose owners tend to be overwhelmingly Republican, stand to gain considerably from better internet service that existing carriers seem unlikely to improve.

The reasons for the Republican opposition aren’t entirely clear. The Republicans were already opposed to increased regulation so why not this too? Republicans may have chosen to support cable and phone companies, which split their support. The GOP doesn’t like local government investment. Or perhaps, as is often the fact, Obama is for it so they are against.

The change in the new policy is following two courses. The White House is supporting legislation to bar the state from blocking fiber services, a measure that is unlikely to pass either the Republican House or Senate. And the FCC is considering banning prohibitions in North Carolina and Tennessee. If that passes, probably with the three Democratic votes of the commission, it would face being overturned by the Republican Congress.

Engineers, Math, and Invention

Slide rule

By no stretch of the imagination am I a mathematician or an engineer. But nearly every January, I spend much of a week at the Joint Mathematics Meetings, the annual collection of lectures, seminars (and job interviews) of academic mathematicians. One obvious thought that came out of the latest meeting in San Antonio is just what is math education contributing these days to the non-mathematicians, many of whom run tech companies. 

Are engineers mathematicians at heart? In the minds of many in the public engineers, especially those doing computer-related work, are indistinguishable from mathematicians. But many math teachers, especially those offering advanced courses in both high school and college, are more focused on theory than the practical. ((The concern here is not with controversy over the Common Core Standard, which is generally involved in earlier subjects.))

Mathematical tools. Once upon a time, when I was in school, the only tools you used were a slide rule and, maybe in college, a mechanical desktop calculator. One interesting effect is you learned a lot of calculating methods in high school courses, such as computing the square root of a number or using a trig table to find the cosine of an angle between those in the list.

The universal availability of electronic calculators, especially the Texas Instrument calculators, eliminated the need for anyone to understand these techniques. They could compute faster, but would lose some depth of knowledge.

To get some expert opinion on the difference in the belief of mathematics and engineering, I had the fortune of consulting my sons. Jonathan Wildstrom, a research computer engineer at IBM’s Watson Research Center, and D. Jacob (Jake) Wildstrom, a mathematics professor at the University of Louisville.

Calculation precision. One crucial difference in style is the precision of calculation. Mathematicians usually want an exact value, even if that means an expression full of square (or higher) roots and e’s. An engineer generally prefers a calculation that gives the result that is needed, which is both easier and more useful.

“In computer science and software engineering, for the bulk of things close, is usually enough,” says Jon. “In most applications, the existing algorithms are ‘good enough’. There are tricks of the trade—memoization is one, dynamic programming another—that help improve algorithms without needing mathematical support.” An example is calculating the Fibonacci numbers. ((Numbers in the infinite series 1,1,2,3,5,8… that are often needed in computations.)) Mathematicians proudly use a somewhat complicated formula that can compute the nth term in the series. For an engineer or a computer program, it will do well to just run the series of n terms. It’s not elegant, but it’s efficient and practical. For very large numbers, there’s a fast term that will give a close approximation.

“I think mathematicians tend to see approximation as an interesting challenge,” says Jake. “But unlike those in the engineering or scientific domain, we don’t have a well-defined notions of ‘good enough.’”

Engineers’ work focuses on the efficiency of their techniques. “Algorithms and tricks to access specific memory areas quickly can be important,” says Jon. “But in all these algorithms, multiplication is frowned upon and division is flat out forbidden because of the performance implications of even a single division.”

“It seems to me mathematicians do revel in the arcaneness for its own sake,” says Jake. “Even a mundane problem such as ‘how do we approximate this closely?’ ends up swaddled in layers of abstraction once mathematicians are through with it. We may exaggerate beyond the point where it is necessarily helpful or instructive to those who aren’t planning to be mathematicians.”

Practical separation. The separation of mathematicians from the more practical fields is a relatively recent development, no earlier than the middle of the nineteenth century. From Aristotle to Leonhard Euler in the eighteenth century, the best mathematicians were often put to work to apply their skills to military needs. More recently, serious mathematicians have typically found themselves limiting their involvement to theoretical physics, where those from Hermann Minkowski and Henri Poincare to Richard Feynman and Edward Witten have been leaders in both math and physics. ((As a matter of fact, a lot of interest in pure mathematics recently has become of much greater interest to biologists and biochemists. ))

But modern theoretical physics, like math, avoids obsessions with the practical or even understandable. “I’ve definitely thought of the mathematician/engineer divide as one going back philosophically to the long-standing difference between Plato’s ideal schools and Aristotle’s empirical schools,” says Jake. “Mathematicians invariably drank from a well of ideals.” Not surprising, or impractical, that their approach often offers something far from what engineers want or need.

Palm and the Potential Silliness of CES

palm-logo-100539479-largeEd Colligan, a founder and former CEO of Palm, got it right. In a post to Facebook (on former Fox PR head Lynn Fox’s page), Colligan says: “I think it’s amazing these companies think they can buy a brand and stick some crappy products under it, and somehow they will get the benefit of the brand.”

The coverage of Chinese electronics maker TCL’s purchase of the Palm name and logo from Hewlett-Packard’s junk pile unsurprisingly got serious coverage from the same media that gives incredulous coverage to every announcement released at CES. Palm is no exception. “Palm lives! TCL to revive the classic brand” says PCWorld. “Chinese TV giant TCL brings Palm Inc. back to life,” declared Engadget. And more from many others.

Come on tech reporters, we deserve better than this. I won’t bother you with the whole tortured history of Palm, but HP bought the troubled company in 2010. HP had serious plans for Palm’s webOS software, but the CEO had no interest and killed the project. HP sold the entire webOS package and most if not all of Palm’s patents to LG, but kept the brand in a closet somewhere until TCL found it.

TCL intends to put the brand on a U.S. phone (it has been selling its phones under the Alcatel brand, another story) But the product will bear no resemblance to an actual Palm, no new models of which have been designed in three years. The TCL will be built on Android, not Palm’s webOS.

One of the nuisances of the tech industry’s edge is the willingness of some marginal player to buy the rights to a name. You can get a cheap TV branded Westinghouse. You can get an assortment of low cost consumer products branded Bell & Howell. And soon, the same for Palm.

 

 

 

Is Apple Ruining Software Quality?

Marco Arment, founder of Instapaper, podcaster, and coffee aficionado, wrote a weekend post criticizing Apple for inadequate quality focus on new versions of the Mac operating system. Arment certainly overstated his case more than a little and other posters grossly exaggerated it — Huffington Post wrote a headline describing Arment’s concern about OS X as saying “Apple’s iOS Is In Rapid Decline.”

Arment, a passionate writer, began his blog post: “Apple’s hardware today is amazing — it has never been better. But the software quality has fallen so much in the last few years that I’m deeply concerned for its future.” (( Arment was taken aback by some of the reaction to his post and suggested he should have taken a softened stand in a second post of his own. After reading the hypervented posts of others, Arment wrote: “Had I known that it would go as far as it did, I never would have written it.” )) His main criticism is Apple is rushing Mac software out too quickly. “We don’t need major OS releases every year,” he writes. “We don’t need each OS release to have a huge list of new features. We need our computers, phones, and tablets to work well first so we can enjoy new features released at a healthy, gradual, sustainable pace.” [pullquote]Apple’s customers were once a small and fiercely loyal group; the expansive growth of both the iPhone and the Mac is allowing Apple to accept shaky quality and try to fix it later. [/pullquote]

Two part complaint. I think there are actually two complaints partially combined here. One is releasing software before the bugs are all squashed. This has been a problem in the last OS X versions, Maverick and Yosemite, and in a deeper history of iOS releases. The second concern is there have been too many changes to bring the Mac closer to the iPhone, creating a version of OS X that is particularly bothersome to those who use a Mac primarily for software development.

Apple’s willingness to release software now and fix it later, a habit practiced by others for a while, has clearly damaged that software. There appear to be a number of reasons for this. There is pressure within the corporation and in the market to get products to market as quickly as possible. At the same time, there are complaints about not enough development software. The ability to send software updates easily and often automatically, make it possible to cut corners and update when you can. Apple’s customers were once a small and fiercely loyal group; the expansive growth of both the iPhone and the Mac is allowing Apple to accept shaky quality and try to fix it later.

The iOS 8 problem. The iPhone has been a particular concern. iOS 8.0, released last summer, needed an update to fix initial release problems. Unfortunately, 8.0.1 had serious problems in distribution and failed to work in a number of the phones in which it was installed.  An embarrassed Apple had to rush out iOS 8.0.2 to fix the problem. There are also flaws in the design of software. I think as the versions of Mail have moved closer to each other on the iPhone, iPad, and Mac, they have all gotten worse. And I find all the versions of photo storage all but useless.

The impositions developers see in OS X designs are more difficult to analyze and change. Particularly Yosemite which added an assortment of phone-like features, including the ability to get voice calls and receive SMS messages, that are likely to please Mac consumers but are more a nuisance than an advantage. An expanded iCloud allowing the sharing of data across devices is of value to consumers, but of less value to a professional using Dropbox and Amazon S3. If you are using a Mac (or any PC) primarily or exclusively for development, your concern will be on accuracy, security, and, above all, processing speed.

Stripped for speed. In a perfect world, Apple could go on adding the consumer features for the Mac users who want them and offer a speedy and stripped down version for processors, scientists, computerized movie production, and others whose need is for power, not fancy gewgaws. But it’s not going to happen. The consumers represent an enormous majority of the Mac market; the small audience of developers would make the cost of a specialist version of the OS absurdly expensive and even then probably not profitable to Apple.

And while a developer, Greg Wozniak (( No relation to Steve Wozniak, though the shared name produced a lot of confusion in reference to the issue )) wrote he has left the Mac for Linux (unfortunately, he has chosen to remove the post), Arment isn’t ready to: “I suspect the biggest force keeping stories like this from being more common is that Windows is still worse overall and desktop Linux is still too much of a pain in the ass for most people.”

 

DISH Steps Up the Fight with Cable TV

Sling TVIf I were looking for people to break down the force of TV show producers (including sports), broadcasters, and cable carriers, I’d keep a close eye on Charlie Ergen, founder and chairman of DISH Network.

Just before the start of CES on Jan. 5, DISH unveiled content for Sling TV, a service announced last summer, to deliver programming to internet devices including Roku and Xbox One as well as PCs. The services that really count are HBO and live sports on ESPN. The limited service of ESPN, currently available only to cable subscribers, is a serious blow to the future of cable. It will especially be true if DISH, which has developed some good program display systems for its cable boxes, can improve the list for internet-based programming.

$20 bargain. The $20 a month charge makes the service very attractive. Throw in $30 a month or so to Netflix, get Amazon Video with the subscription to Amazon Prime, some free services such as PBS, and you have quite a cable TV package for substantially less than Comcast, TWC and the others want.

There are some obvious disadvantages. Sling TV is designed to be watched on a single device at a time (of course, clever users may find a way around this). At least initially, it will not be available for Chromecast or the Apple TV. And getting local broadcast stations will require a tuner and antenna–and the quality may decline if you are either too close or too far from the transmitter site.

The initial demonstration shows that the programming will be a lot like existing internet service and that is likely to be a drawback. I have had a Roku for as long as the service has existed and the miserable program listing still continues. First, you have to select the service for the program you want and then look through the listing for the channel. Many show programs in what seems to be a random order. Searching alphabetically is an alternative to searching by view, but entering letters using the Roku controller requires going painfully through the on-screen keyboard (and weirdly, the iPhone Roku app forces you to peck your way through the letters on the screen rather than use the keyboard). I despise the display of shows on the screen from my FiOS set top box but even this is heaven compared to the Roku screen.

Questions about sports. Providing two sports stations, ESPN and ESPN2, also raises some questions. Most of the internet stations make all programs available at the same time and you get to chose what you want to watch at the time. But the sports events have to be offered live as they occur. What will the selection look like and how will it work?

There’s also the question about how good the quality of sports will be. I have watched a number of sports events from ESPN, Big Ten Network, and broadcast networks on both mobile devices and PCs. The quality has often been poor, with blackouts, freeze ups, and reduction of picture quality. Fortunately, DISH has some really good picture quality for its Sling service and maybe it is in a position to bring significant improvement.

We won’t be able to fully judge this service until it becomes available later this year. But the opportunity for significant improvement to the existing cable and internet service is needed. Let’s hope DISH brings it.

Why I Am Passing on CES

ces-posterA few months ago, as I was slowly recovering from illness, I assumed I would be unable to go to CES. The recovery came, but I found it hard to change my mind. My official excuse was CES would be exhausting, and it would. But it is looking like there will be a distinct shortage of news in Las Vegas next week. While CES still has reason for others, from meeting with manufacturers and vendors to seeing hundreds of obscure Chinese products, I’m still looking for news.

It’s not yet clear whether this is simply a weak year–though the second weak year in a row–or the beginning of a permanent decline in the show. There clearly has been a basic change in how major manufacturers approach it.

Another Apple move. Like so many other things, the change starts with Apple. When the rest of the industry crammed into Comdex and CES, Apple dominated the Macworld Expo–at its peak in San Francisco in the winter and Boston or New York in the summer. Starting in 2009, Apple decided it no longer needed IDG/Macworld and from 2010 onwards, it announced new products only at its own exclusive company events.

In 2013, Microsoft, which had a huge display and dominated CES with an opening keynote by Bill Gates and later Steve Ballmer, pulled out. It too found it could do better launching new items, such as the Surface, at its private events. Lenovo will likely be the only important PC maker on the show floor. Hewlett-Packard and Dell have disappeared.

The shift of the product interest from PCs to phones also hurt CES. The show that matters for phones is the Mobile World Congress in Barcelona in February and there is no desire to scoop MWC in January. (The success of MWC has also clobbered the U.S. CTIA show)

TV Is Back in Charge. The absence of computer companies has turned much of CES back to the traditional focus on consumer electronics, particularly televisions. The problem is there is painfully little to talk about. The last two TV breakthroughs were 3D displays and curved screens. Both got extensive coverage, especially 3D, but neither won much support from customers.

This year, the TV news is 4K displays. Two problems. There is essentially no 4K content, similar to one of the problems of the 3D market. The industry is making 4K movies for theaters, but the staggering strain on the network make it very hard to stream content to homes, even if there were a demand. Second, the full advantage of a 4K display requires a very big screen, one few homes have space or budget for.

There will be a flood of reports from Las Vegas. CES will be filled with hundreds of journalists, especially from the hungry online services. But I fear we are not going to see a lot of announcements that readers, or customers, really care about. I’ll be displeased if I miss big news at CES, but it doesn’t seem likely I will.

Time to Take Internet Attacks Seriously

The attack on Sony and The Interview and the odd events that followed have looked a lot like a Coen brothers movie. But the affair has left us with a lot of evidence that forces, including both inside the industry and the U.S. government, are failing to deal with real and serious threats as attacks by a range of sources–governments, revolutionaries, criminals, punks, and who knows what else–are hurting the internet.

Let’s review what happened. The Seth Rogan-James Franco comedy (I admit I am no fan of the two and have no taste to see it) featured a U.S. assault on North Korean (DPRK) that ended with the stars having Kim Jung-il assassinated. The DPRK was greatly annoyed and demanded the cancellation of the movie.

About 10 days before the scheduled Christmas release, a flood of Sony information, including hundreds of thousands of emails, was released. The U.S. government says it has proof the DPRK government carried out or approved the attack as a response to the film — though has presented no evidence of it. The Guardian of Peace, the unknown thief of the Sony records, added a threat to attack anyone who attended The Interview. Sony cancelled (only temporarily, as it turned out) the showing of the film and Paramount, in one of the most bizarre events of the affair, added the cancellation of Team America: World Police that some theaters offered as a substitute.

Then Korea’s restricted internet services and wireless data services were shut down. The DPRK thought the U.S. government, led by the “monkey” Obama, was behind the attack. The U.S., of course, said nothing.

Web attacks. To round out the attack, the internet service of Sony’s PlayStation and Microsoft’s Xbox were blocked by a group called LizardSquad. Although they tried to claim a connection with the Sony affair, Brian Krebs (if you are interested in issues of network attacks, I strongly recommend following KrebsonSecurity) wrote:

Various statements posted by self-described LizardSquad members on their open online chat forum — chat.lizardpatrol.com — suggest that these misguided individuals launched the attack for no other reason than because they thought it would be amusing to annoy and disappoint people who received new Xbox and Playstation consoles as holiday gifts.

The attack on Sony’s information and Korea’s internet access may or may not have something in common. But the point is that it is time for governments–the U.S. and others who wants serious communication–and businesses to create and enforce some rules that allow internet communications to run properly.

Mail, phone, and email. An important rule is to bring the use of the network under the sort of guidelines that have long governed other communication. In 1929, Secretary of State Henry Stimson declared, “Gentlemen do not read each other’s mail.” Though he has long been ridiculed for cutting back on government interpretation and decryption of messages, he actually stated a declaration of civility. To this day, government needs a warrant to read anyone’s mail and there is no way for individuals or businesses to do it legally with or without a warrant.

When telephones came into use, the privacy of mail was extended to phone conversations. Even with the government’s ability to snoop on phone conversations post-9/11, there are still broad protections of domestic calls and continued prohibition of privation invasion. [pullquote]It was fun to read Sony’s stolen email about stars, but the effort of Sony lawyers to block the distribution should have had some legal force.[/pullquote]

But we have never been similarly protected with internet communications. Businesses are prohibited from reading employee’s letters (once sealed mail) or monitoring office phone calls, but email is regularly monitored and stored. It’s far from clear who benefits. It was fun to read Sony’s stolen email about stars, but the effort of Sony lawyers to block the distribution should have had some legal force.

Furthermore, we need some serious legal efforts on issues such as the shutdown of the Playstation and Xbox service–or of internet services in general. There are, of course, laws prohibiting these violations and enforcement by the FBI and the Secret Service (the Homeland Security Dept. overseas some violations, particularly those involving finance), but there’s not much evidence they care or focus very much. For better or worse, the terrorists that dominate enforcement are not serious internet attackers.

We also need to put an end to international internet attacks. The FBI is convinced North Korea had something to do with the original attack on Sony, although it’s done nothing to prove the claim. Blocking Korean attacks may be impossible by law; there doesn’t seem to be any punishments we can add short of actual warfare.

Protect the messages. I am more concerned by the charge the U.S. responded by shutting down Korean internet contact for a couple of days, a charge which the FBI has said nothing in response to either the attack on or the PRKA claim the U.S. government was responsible. So far, it remains unclear who did it. “If the U.S. government was going to do something, it would not be so blatant and it would be way worse,” said Dan Holden of Arbor Networks to Bloomberg. “This could just be someone in the U.S. who is ticked off because they’re unable to see the movie.”

I’ll go further: It would be wrong for the U.S. to respond to internet attacks with its own counterattacks. Without going into the ethical issues, it’s obvious the U.S. stands far more to lose than gain from playing this game, with the U.S. vs. Korea a prime example.

It is far too late for the U.S. government to end the widespread breakdown of internet privacy. In fact, we are having trouble enough preserving the evidence of mail and voice services. But Congress and the Administration should do what it can to protect both the privacy of email and attacks or attempts to block internet access. Business should join the fight, even if the cost is exposing its own efforts to spy on both employees and competitors, domestic and international. What we are losing involves far more lost than gain.

Where Can Intel Find Growth?

XScaleJean-Louis Gassée, a veteran executive, investor, and observer of the tech industry, wrote an accurate and depressing account on the position of once high-flying Intel. Like Microsoft, Intel was unable to to keep up with a rapidly changing world where the kings of PCs were being overrun by small, lightweight, mobile equipment.

The question is, how did Intel get into this mess and how does it get out? One thing to remember is Intel, again like Microsoft, has lots of problems but is not in dire straits. Its revenue and profits have both fallen slightly over the past three years but nothing in danger of putting it out of business. The server market, for which it owns the processor business, is strong and, while PC sales are weak, that business isn’t going away. But this can’t change the fact the market for Intel’s processors is far, far behind the demand for ARM designs in mobile devices.

Intel, of course, could be on top of the world of processors for everything from PCs to phones. In 1997, Intel agreed to acquire Digital Equipment’s StrongARM, a top-of-the-line ARM chip, to settle a legal dispute with DEC. The problem was that the x86 had all the real power within Intel. The x86 teams wanted to build smaller and cheaper chips of their own (of course, mobiles phones in those day did nothing but make phone calls).

Intel renamed the StrongARM XScale and it became a real contender as much more sophisticated mobile data devices, such as Palm, migrated into phones. But it never really counted as a central Intel product.

The classic test came along when Apple, which had already switched to Intel’s x86 for the Mac, expressed interest in XScale for the iPhone. But Apple drove a hard bargain. In an interview with The Atlantic, retiring Intel CEO Paul Otellini said:

At the end of the day, there was a chip that they were interested in that they wanted to pay a certain price for and not a nickel more and that price was below our forecasted cost. I couldn’t see it. It wasn’t one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought.

Intel decided to leave the ARM business instead and sold the division to Marvell. Since then, it has been focusing exclusively on miniature x86 system-on-a-chip (SoC) for mobile devices but has failed to make a dent in a field dominated by the ARM products of Samsung, Apple, Qualcomm, Nvidia, and others.

Intel has been pushing its x86 Atom SoC for a while. It’s found a market for its Medfied, Merrified, and Moorfield systems on Windows and Android tablets and a variety of industrial products, but not very many phones. It has been able the shrink the SoCs ever smaller, but ARM has continued to stay ahead. Today Apple’s A7 processor, a Samsung-made SoC, is still substantially smaller at a die size of 102 square mm, compared to the 196 square mm Moorefield.

Intel is going to need a way to get into a phone device, and it seems unlikely to be x86. But Intel, unlike most of its competitors, is in the business of manufacturing its own chips and the drop in demand for PCs has left it with a significant amount of fabrication capacity.

It could get into the business of manufacturing chips for ARM designers. But while Apple would like to take its business away from Samsung, making iPhone chips would be a bitter move for Intel. Taking on the iPhone at its launch would have made Intel a successful partner for the decade’s most important product. But Apple has learned so much about chip design that Apple would be the leader and Intel just a hired fab operator.

To get back into real competition, Intel will probably have to find away to reverse the mistake of the XScale sale and get back into the ARM business. It would be a painful and expensive move, especially since there are no readily available ARM manufacturers on the market. But it may be Intel’s only way to find a growth market.

Samsung Sees Role as Third Player in the Credit Card War

Looppay web image

It looked like Apple and the banks on one side and retailers on the other were headed for a war over phone payments. But now, Samsung seems ready to make it a three-sided fight. An article by Jason Del Ray on Re/code reports Samsung is negotiating with Massachusetts-based LoopPay over adding a third method for mobile payment to its product line.

Assuming Samsung jumps in, and the company is so far not commenting, it adds new complexity to the fight (Insiders). Apple Pay has the advantage of being the most sophisticated emerging standard with broad support of banks and credit card companies who are already advertising its availability. But it requires hardware accessible only in the iPhone 6/Plus, and Apple has shown no indication of any plan to make it available for use on non-Apple phones. CurrentC, the product of Merchant Customer Exchange (MCX), a consortium of big retailers, will work on a variety of iPhone and Android phones. While Apple Pay (and the related Google Wallet) uses Near Field Communication (NFC) to send encrypted data from the phone to the retailer, CurrentC uses a QR matrix on the screen of the phone to be read and interpreted by the retailer.

LoopPay (video demonstration) generates a data signal through a technology it calls a Magnetic Secure Transmission. The data can be read by existing retail devices that believe a card was just swiped. There are two big drawbacks. One is it requires the use of one of several devices that include a LoopPay CardCase, which serves as an iPhone case, and a LoopPay Case, a free-standing device that can be used with no phone attached. Both of these devices has a built-in system that can be set up for retail use by swiping a card once. Presumably, an adoption by Samsung would result in the LoopPay function being built into phones. The second disadvantage is it is designed to need standard swipe-able credit cards at time of purchase. Apple Pay and CurrentC may disagree on just about everything else, but they agree on the desirability of eliminating traditional credit cards as quickly as possible.

LoopPay is trying hard to argue its choices represent the strongest option. In a public note, LoopPay CEO Will Graylin argues the company’s approach, described as David v. Goliath, is superior to Apple Pay, Google Wallet, and the largely abandoned Software (CurrentC is not discussed). He claims LoopPay provides equal security to Apple Pay and LoopPay allows consumers to stop worrying about credit cards. “One less thing to carry is one less thing to worry about or lose,” Graylin writes. “They  want to use the cards they already have, at their favorite merchants, on the devices they own. Their wallet account is personal. It should belong to them, and not be tied to any one device or just a few select banks.”

looppay2It looks like Samsung would face a serious hurdle with LoopPay in challenging both Apple Pay and CurrentC. Apple and its supporters are moving aggressively to take advantage of the solo control of credit card transactions. The other night, I saw back to back TV ads from CitiBank and BankAmerica supporting Apple Pay. MCX supporters Target and Walmart are likely to advertise CurrentC when it becomes available on phones next year.

Unlike the Apple-bank alliance and CurrentC, Samsung’s use of LoopPay, assuming they could get phones supporting it into the markets quickly, is going to find it tough to fight with one force already working hard and another that will enter the market soon with a big pitch. But Samsung has been active in trying to add consumer services beyond making phones and its complex relationship with Google may account for its lack of interest in promoting Google Wallet. They would be getting into the fight very late, but Samsung could make the battle more interesting.

IBM Leads Apple Into the Corporate Market

The last time Apple and IBM did serious business, the companies were fighting over the processors that powered the Macs of the day. IBM had no interest in meeting Apple’s desire for G5 chips for laptops and the end of the quarrel pushed Apple to Intel (and fabulous success for Macs).

Almost a decade later, when Apple has grown far larger than IBM, the company that now mainly sells corporate services is in another partnership with Apple. With the deal revealed in detail on Dec. 10, IBM will be selling iPhones and iPads to its industrial services customers and supplying them with secured, Apple-designed iOS business services.

For Apple, this is largely a payoff of iOS 8. A key step in the operating system was the redesign of the security operating structure. Of course, the attention has been focused on how Apple Pay is structured. But the improved security design can support a broad range of applications, including corporate security desires.

Although Apple acts as though the consumer market is the only thing it really cares about, when it comes to the iPhone and the iPad, the corporate market has looked increasingly attractive. Corporate employees have lots of Apple mobile devices, usually bought on their own (though often snuck into the T&E budget). Apple and IBM are now creating iPhone and iPad-based offerings with IBM corporate services installed.

Secure applications have been difficult to provide for Android since Google has mostly left the development of security features to manufacturers. Samsung has attempted a service called Knox but it has sold poorly and the company is rumored to be hoping Google will take over security in a future Android version. With Android struggling and corporations generally moving away from BlackBerry’s offerings, Apple has a huge advantage.

That gives the Apple-IBM partnership a big opening. The IBM service, called MobileFirst, starts with programs aimed at key industry partners. The travel and transportation offerings include Plan Flight, a fuel expense management program and Passengers+, which provides rebooking, baggage information, and special services in-flight. Advice & Grow provides small business with financial communications, while Trusted Advice allows advisors to get confidential information on customers’ investments even when they are away from their secure office machines.  Other initial applications are designed for insurance, government, retail, and telecommunications. Applications for additional industries are coming.

From “frenemies” to full scale partners, the Apple-IBM history has been fascinating to watch. With this latest association, it promises to bring more to the table for both companies and make the rest of the industry take notice.

Will the Tech Industry Ever Learn Philanthropy

In 2012, Chris Hughes, a co-founder of Facebook, bought The New Republic, an almost century old magazine of liberal politics and literature. The magazine has not be profitable for many years and Hughes, though in his 20s, was seen as one in a string of wealthy investors who were prepared to keep the magazine afloat.

The view was false. On Dec. 3, Hughes fired top editors Franklin Foer and Leon Wieseltier, moved the office from Washington to New York, and reduced the publication to 10 issues per year with an online offering of unknown style and content. Most of the rest of the staff quit and the small but influential audience immediately viewed the venerable magazine as dead.

Originally most observers, both in tech and the TNR audience, thought Hughes had become the latest executive to use his fortune to invest in a charity or charitable business, since no one expected this deal was likely to make a profit. It’s not clear whether Hughes simply got tired of a money losing proposition or had a plan all along to turn the magazine into something else. But it again raised the question of what sort of charitable deeds we should expected from rich, successful tech execs. (You can try to figure our Hughes’ thinking from a rather confusing article he wrote for The Washington Post.)

Top tech givers

The Chronicle of Philanthropy recently published the top 50 U.S. financial givers in 2013. Facebook founder Mark Zuckenberg was by far the largest donor. Pierre Omidyar, funder of eBay, was seventh overall and Sergey Brin and Anne Wojcicki of Google, still married although separated, ranked ninth. Lawrence Ellison of Oracle was 26th. The other two of the top 50, Microsoft co-founder Paul Allen (11) and James H. Clark (36), co-founder of both Silicon Graphics and Netscape, are big donors but not currently active in tech companies.

(One important piece of information. The data reported includes only gifts actually made last year. So Bill Gates doesn’t make the list because the family earlier gave a staggering fortune to the Bill and  Melinda Gates Foundation, which now makes the actual gifts. Other tech execs may be missing because of large transfers to foundations in the past.)

It’s easy to come up with a list of missing contributors. Steve Jobs is the most obvious one. A 2011 New York Times column by Andrew Ross Sorkin went through the details of  Job’s relatively minimal contributions. The only big gift revealed after his death was a $50 million donation to Stanford University Hospital. While that’s a big chunk, it was very tiny part of his wealth. Steve Ballmer and his wife Connie recent made funded donations of 12 professors, probably around $60 million worth, to Harvard and $50 million to Connie Ballmer’s college, Oregon. But that’s not a high percentage of the $5.3 billion in Microsoft compensation he received in 2010-13.

I found it fairly rare that rich text executives were major donors. It’s not clear the generous Sergey Brin has made much of an impression on Eric Schmidt or Larry Page. Schmidt has been an active political donor but much less so in philanthropy. Page, at a recent TED conference, said in an interview with Charlie Rose it might be better to give his money to Elon Musk’s space industry than to a charity.

One thing that makes the role of rich executives as contributor is that they are often very young. Very few, if any, are currently being inspired by Zuckerberg to become philanthropists at such a tender age. It’s hard to compare their behavior to past tycoon donors such as Andrew Carnegie or John D. Rockefeller who did not accumulate fortunes until a relatively advanced age. Perhaps young, rich executives will become more like today’s elderly founders such as Gordon Moore of Intel or Irving Jacobs of Qualcom.

Let’s hope so. More than most countries, the United States expects rich folks to support social needs rather than steep taxing that is used to let the government give the money away. We can argue about how good giving is to fund society, but it’s the American tradition.

 

Why Wireless TV on the Road Disappoints

Driving home from New York on Saturday, I decided to use my iPad to catch the Michigan-Ohio State game (I was not, of course, behind the wheel at the time). I have used a phone or an iPad often enough for calls or maps while on the road, so I figured it would work fine. I was wrong.

The reason is obvious. A phone conversation does not require a very good wireless connection — something I should have realized for the many times I have been able to make a decent call with one or two dots. Voice service (and SMS messaging) does not require a whole lot of service, which is why it works many places video doesn’t. Map service works acceptably on spotty service; the worst thing you’ll suffer is temporary breaks in the constant updating of road service on Google Map.

TV, by contrast, faces enormous issues while moving. The loss of a frame will, of course, show up with the loss of both audio and video. The bigger problem is losing enough of the signal to keep the program showing. Degrading the image can keep a tolerable program going for a while on a bad signal–our brain can stand the bad picture if the audio maintains the quality. But a loss of the signal will result in video and audio that freeze or go blank.

Traveling on the Garden State Parkway and the New Jersey Turnpike, outages happened a lot on both the iPad on Verizon and the iPhone 4S on AT&T. You could watch the meter on the screen drop from four or five dots of LTE to three or even one of 4G. And the video died. I expect this in rural areas. But it’s depressing along the Garden State, which travels through dense parts of the New York community from Montvale to Iselin. And though the New Jersey Turnpike covers a lot of residential territory, I expected the volume of traffic would justify better quality wireless. However, the phone carriers seem quite content to provide minimal coverage when you get away from prime urban areas.

There’s no easily available solution. The carriers seem to be enhancing their LTE coverage, but the focus is still on cities and some suburbs.

So, if you get video in your car while driving around a big city, the chances are the wireless signal will be pretty good, at least good enough to keep the kids entertained. But you probably should count on something recorded when you head out on the highway.

Odds are, there isn’t much chance of getting this fixed any time soon. The carriers don’t seem to see much evidence for LTE coverage good enough for highways, even though they like to advertise as though they do. And you have to read the footnotes of their coverage map, in this case Verizon: “Access the 4G LTE network within the Verizon Extended Coverage Area; certain conditions may cause your service to connect to 3G in this Area. Some of the Coverage Areas include networks run by other carriers, the coverage depicted is based on their information and public sources, and we cannot ensure its accuracy.”

WiFi is certainly becoming available in many urban areas and the coverage is often better and a lot cheaper than LTE. The problem is, WiFi is not designed to handle more service by switching you to different stations, and certainly not to shift you on the fly between networks. This may be available some day, but not yet. And, in any event, the sheer number of WiFi stations needed to provide wireless around a highway is not likely to be practical.

Fortunately, I didn’t miss too much. Michigan has been a lousy football team all season (coach Brady Hoke was just fired) and even missing a fair number of minutes during the game didn’t cause the loss of plays that deserved to be missed.

There are also some other benefits wireless can provide even with coverage too poor for decent video. A large study by Compass Intelligence found that, while riders are looking forward to video coverage, 66% want a service that can determine and communicate car system flaws, 60% want real time traffic conditions, and over half want to be notified of maintenance service. Not the most exciting features of wireless, but worth it.

The New Realities of Christmas Shopping (UPDATED)

If you had any doubt the realities of post-Thanksgiving shopping are changing, you have already missed the big change.

The data from IBM’s U.S. retail survey (Tech.pinions subscribers can see Ben Bajarin’s analysis of the IBM Black Friday survey here) shows the change in consumer activity. The 11% decline in Black Friday was likely the result, at least in part, of a major shift of purchase activities from brick-and-mortar stores to online ordering.

The big change is the availability of mobile shopping. Based on IBM’s data until noon EST on Monday, total online sales have risen 9.2%. But mobile traffic was 39.9%, a 28.4% increase from 2013. Mobile sales were 23%, a 28.7% increase from last year. Note that shows 60% of the total traffic still comes from PCs, but the mobile share continues to rise.

Asymco
Asymco

 There are three big lessons in the news about Thanksgiving data:

Android May Dominate Phone Sales, but iPhones Dominate Shopping

Android phones outnumber iPhones in the U.S. The advantage is nowhere near as impressive as in most of the rest of the world, but Android holds about 10% more of the total U.S. phone share. But according to IBM, iOS accounted for 27% of all online traffic vs. 12.4% for Android. The iOS sales advantage was even greater — 17.8% of online sales verse a paltry 5% of Android sales. The average iPhone sale is $127.85 per order, 22% more than the average Android sale.

There doesn’t seem to be any good statistics explaining this gap, but it’s not hard to come up with some speculative ideas on what is responsible. Probably the most important is a considerable percentage of Android acquirers are moving from traditional, and disappearing, feature phones. But these customers do not have online experience of mobile device purchases. Although the top of the line Androids phones may equal or even exceed the price of an iPhone, many Android competitors are filling the bottom of the market, where mobile purchases are smaller and less common.

Forget About Black Friday

The notion of Black Friday has always been an invention of retailers to help draw customers to stores the day after Thanksgiving. But the decline in a general strong economy this year is a good sign the Black Friday is no longer is what it used to be. One reason for the weaker sales is definitely the growing volume of online selling. Online shopping, whether it’s mobile or desktop, is available day or night, seven days a week. The affect is likely to be a spreading of holiday shopping from Thanksgiving to the day shippers cut off Christmas deliveries. The relatively slow start to post-Thanksgiving shopping should probably not be viewed as a slow market.

Forget About Cyber Monday, Too

There once was a real reason for Cyber Monday. Those who wanted to buy right after Thanksgiving needed a chance to get onto the internet and, for many, that was the first time back to the office. But of course, nearly all of those customers now have desktops or tablets at home and mobile devices nearly everywhere. If they want to whip out their phones and order presents during Thanksgiving dinner, they could. So the expectation for Cyber Monday to be a specific day for shopping no longer exists.

PCs Aren’t Dead for Shopping

The growth of business over mobile devices is taking attention away from laptop and desktop computers. But, as IBM puts it, “Even as mobile shopping continues to grow, many consumers chose a more traditional online experience. Desktop PC traffic represented 59.9% of all online traffic, and 77% of all online sales. Further, consumers spent more money on their desktops with an average order value of $141.14 compared to their mobile devices at $122.04, a difference of 15.7%.”

Of course, one alternative I know well myself is to shop on a mobile device and then make the actual purchase on a PC. The alternative here is to use a tablet. I’m not fond of shopping on the phone because I simply can’t see enough on the screen.

But my iPad is often a very good alternative to the PC, especially with well-designed shopping apps effectively using the display. For example, Amazon has a much broader shopping app for the iPad than it does for the iPhone. Of course, this is likely to become much more of an issue as the largest phones bump against the smallest tablets.

———-

UPDATE: By the end of the day, IBM found that online sales were up 8.5% from last year, although orders were down 3.5%. Mobile traffic accounted for 41.2% of all online traffic, up from 30.1% in 1983. New York led the market, followed by Washington, Atlanta, and Chicago. iOS continued to outpace Android: Traffic of 28%, more than double Android. iOS sales 17.4% of all online sales, more than four times Android. And average sales of $114.79, 18.5% more than Android.

Happy Thanksgiving Winners

Early Thanksgiving

With Thanksgiving upon us, at least in the U.S., it’s a good time to look back upon the year of nearly 11 months and see some random participants in tech who have done well in 2014.

Apple: Every year seems to be a good year for Apple, but 2013 was an exceptionally good one. At a time when most competitors were struggling, Apple took off with the release of iPhone 6, updated products for Macs with strong sales in a market PC where most were dying, and popular operating system releases of iOS 8 and Yosemite. There’s lots of interest in the Apple Watch, even though it won’t be on the market until next year. And Apple Pay, which might have been considered a late response to Google Wallet, instead came out as the finance industries solution to credit card thefts–and could leave Apple with dominance of a new business line.

Microsoft: Historically, a good year for Apple has been a bad one for Microsoft and vice versa. This year, however, brought gain to both. The biggest change for Microsoft was the retirement of CEO Steve Ballmer and his replacement with Satya Nadella, who had been head of the cloud and enterprise group. Nadella moved aggressively (so aggressively that some of the change was under way while while Ballmer was still in charge) to shift Microsoft’s concentration on Windows, Window, Windows to clouds, Office for iPhone and Android, and realization that its successful future demands on lots of viable devices. And while Microsoft posted declines in operating systems and Office sales in the September quarter, commercial cloud services were up 128% and sales of devices, including phones, Xboxes, and the struggling Surface, also shows a decent gain.

Internet: This one takes a little struggle to understand.  Internet regulation has been an ongoing fight between those who want to continue  treating the network as similar to cable TV (cable and phone network operators) and those who want to go to a more telephone-like regulatory regime (an odd combination of of content deliverers such as Netflix and Google, academics, and liberal pro-regulators). The fight was going nowhere until just after the election, President Obama issued a statement calling for regulating the internet by reclassifying it as Title II, like phone companies. Republicans in Congress did what they did with all Obama proposals–opposed. But more interestingly, Federal Communications Chair Thomas Wheeler, came out against the Obama plan and said the commission will seek a middle ground, likely to leave the internet as Title I but with requirements that services such as Netflix (an example that gets cited a lot) are carried without interference. If Wheeler pulls this off, there’s a reasonable chance for helpful regulation that protects the internet.

Lenovo: While Apple and Microsoft get the attention, Lenovo has seen a  lot of growth in a year that has seen most of its competitors suffer. It has passed Hewlett-Packard in PCs. Its purchase of Motorola from Google should make it the #3 global producer of phones. And the acquisition of Intel-based servers from IBM equips it to increase its competition with HP and Dell in dominating the corporate market.  Not bad for a company that a decade ago was an obscure producer of PCs for the Chinese market.

Me: An odd claim for me. Those who have been following me know I had surgery for a brain tumor in March and spent the next several months with neither my body nor brain performing very well. But in the last couple of months, I was fortunate to make a remarkable recovery and am now getting back into work. It wasn’t a great year by any normal interpretation, but I’ve learned a lot about life–and death. My glioblastoma will eventually come back; I just hope it takes its time and lets me go on observing and writing about the tech industry and enjoying life with my family (including my third grandson born in October.)

A cheerful Thanksgiving to all of you.

How Apple Forces New Technology to Improve the Future

Apple’s decisions on redesign of the technology of just about everything are an endless source of criticism, especially by those who have a right to tinker with their devices. History suggests Apple has the sense to choose the right technology for the future.

As GlennC777 said in a comment on my article on Apple Pay, “Apple Makes Old Security Business Lead to the Future,” Apple’s decisions have been both mistrusted and missjudged:

When the Mac was first introduced I was enough into computers to be a young reader of Byte magazine, and I remember the reader letters complaining that the too-simple “pointing” and “pictures” interface was a backwards step that would hobble “real” computer users. A real computer was operated by command line, and if you weren’t willing to go to the considerable trouble of learning how to use it then you probably weren’t worthy of the privilege. With binary blood running through my veins I was very much one of these people at the time, and very much wrong.

Let’s take a look at some history.

USB: The Universal Serial Bus was introduced in 1996. Intel quickly started doing everything it could to force the USB port onto the motherboard of PCs. Those ports sat there idle since most people could not figure out what to do with them. Then Steve Jobs came out with the original iMac. It did not just add USB; it eliminated all of the ports for mice, keyboards, printers, and everything else. In time, Windows PCs that came equipped with other ports were using nothing but USB.

Floppy drive: Back in the Apple ][ days, the Apple beat out some competitors PCs by replacing tapes with the floppy drive. Later, Apple replaced the 5.25 inch floppy with the 3 inch hard-covered floppy on the Macintosh and later Apple ][. But the iMac got rid of the floppy all together. The CD had already replaced the floppy for software distribution and, with relatively large (for the time) hard drives, the introduction of network storage, and USB thumb drives it eliminated the need for floppies. Eventually, Windows began to see the advantage of eliminating drives from laptops, though they lingered on desktops for a very long time.

CD/DVD: By 2011, Apple decided users didn’t need the CD/DVD drive on both the iMac and the MacBook. The network had replaced disks for software delivery, iTunes had replaced DVDs and CDs for video and music delivery, the cloud was there for storage. The desire to shrink the size of laptops led Windows devices to accept the no-drive design relatively quickly.

Wi-Fi: In the early 1990s, wireless networking was used mostly in industrial communication, but in 1998 Apple worked with Lucent (now Alcatel Lucent) to take advantage of the faster and less expensive wireless networking. It wasn’t even named Wi-Fi until 1999, but it gained popularity quickly.

Modems: Macs got internal modems in 1984 but they disappeared in 2008. The availability of the network in homes, offices, and hotels–Wi-Fi everywhere–has eliminated the need for a dial up connection. Modems hung on in many Windows computers for a long time, especially those intended for business use, but have now disappeared. A built in radio for wireless data on a phone network was never offered on the MacBook. It was widely offered as an option in commercial laptops, though it never became very popular.

Phone keyboard: The Palm Treo and the BlackBerry, the most successful early text and later internet content phones, depended on keyboards. The introduction of the screen-only iPhone in 2007 attracted a lot of criticism because of the decision to eliminate the hard button keyboard. The BlackBerry continued to dominate the market and the first Android phone featured a slide out keyboard. But it didn’t take long for the iPhone to nearly kill the BlackBerry and all but eliminate keyboard Android phones.

Interestingly, Apple’s success generally did not come on the invention of these components. Apple supported Firewire, which it designed with Texas Instruments, as an alternative to USB. But it was more complex and more expensive, and has lived on only as a super high speed connector. Even LG had brought out the touch keyboard Prada ahead of the iPhone. Wi-Fi technology was probably the only technology where Apple deserves credit for being the first and even here it is not responsible for the invention.

Apple’s actions leverage the company’s ability to see the consumers’ use of new technology before the competition and, almost as important, its willingness to get rid of technology as better becomes available. It has been a key to Apple’s success, with Apple Pay just the latest such innovation.

Apple Makes Old Security Business Lead to the Future

Apple’s role in getting the future right has always been been a little strange. Everything it has done, from the mouse and visual display of the Mac, to the mobile music player of the iPod, to the computer-as-phone of the iPhone, Apple has had to work hard to convince consumers these moves were the future they wanted. But with Apple Pay, the new secure commerce tool in the iPhone 6, iOS may have hit the market at a time consumers are ready for a major technology change. And the aggressive control of on-line commerce technology could be a huge new business for Apple.

Like the original Mac, the iPod, and the iPhone, Apple Pay does not represent much of an Apple technical revolution. The major components have, in fact, been around for quite a while. NFC, the short distance wireless communication technology, has been available on Nokia phones since 2006. EMV, a secure communications protection based on standard chips, is built on technology first developed by France’s Bulle in 1985. The two technologies–the basic security tech and wireless links–have been included, if little used, in a variety of mobile devices including most recent Android phones.

Apple is making this move as the desire increases for consumers to pay with credit cards and the ability of retailers and banks to protect the security of those cards is crumbling. From TJ Max to Target to Home Depot, information from millions of consumer credit cards has been stolen in retail transactions. There’s not much retailers can do to defend the cards–even those with the best anti-theft measures are getting ripped off by the millions. They need new technology.

The new approach is your phone replaces your credit card though–and this is vital–the credit card number and other information is not stored on the phone. It’s hardly a new idea. It has been promoted in Europe for a while, particularly by Nokia. Google Wallet uses the same technology on Android phones to transfer card information from secure network cloud storage to a card processor with well-guarded transmission. But it has failed to achieve much use by consumers because of the failure of Android makers to promote it. Samsung  includes NFC on most of its phones and has been building in EMV since 2002 (!). If you should want to use Google Wallet, Google’s web site will give you vague instructions for your Samsung. But I could not find a word of reference to Google Wallet on Samsung’s web site. That means most Samsung phone customers will never think of Wallet.

Samsung's NFC web site

Apple, by contrast, made Apple Pay a prominent feature of the iPhone 6. The banks and credit card companies supporting Apple Pay before the launch of the iPhone 6 had made the service available and began promoting it as soon as the phone was announced. Apple Pay started with the support of Visa, MasterCard, Discover/Diners Club, American Express, and JCB. And, in a hugely important move this week, UnionPay, the largest credit retail processor in China, climbed aboard Apple Pay.

Apple understands it still has to fight for the dominance of Apple Pay, especially in U.S. retailing. As popular as Apple Pay is with banks, small to medium retailers, and a handful of daring big retailers such as Walgreens, some of the leading retailers such as CVS and Wal-mart are blocking it. Instead, they are favoring a rival called CurrentC created by a consortium of large retailers.

Whether the big retailers see an advantage to Apple Pay or not, many of them are prevented from implementing it by contracts they have signed with CurrentC. CurrentC does have an advantage of sorts by being able to work on just about any phone–it uses a QR code on the display and does not require any specific hardware like Apple Pay or Google Wallet.

But the disadvantages of CurrentC are critical. It transmits a considerable amount of information about the owner of the phone–the exact amount is the subject of some dispute–while Apple Pay requires only a single code. Even more important, Apple Pay and the more limited Google Wallet are ready to be used today with the banks and retailers who support it, while CurrentC still has a lot of details, both technical and commercial, to work out before it is available to consumers.

Assuming the initial success of Apple Pay, the challenge for Apple is what to do next. Apple can’t make Apple Pay available just by offering a download through the Apple Store. Participation also requires hardware and dedicated software, similar to but not identical to the EMV chips, needed to support communication. The way to get competitors to accept Apple hardware, or perhaps a way to unify the secure retail communications approaches applied by both Apple Pay and Google Wallet, pose a huge challenge.

Of course, the transitional action of Apple is to limit development like this to Apple products. The company traditionally has reserved keeping such devices to itself to protect sales of its products. But Apple could also be in the position to dominate the rapidly growing market for secure retail communications by licensing competitors the hardware and software needed for Apple Pay, which has shot out as the leader of consumers’ product.

Lenovo’s Move to Industry Leadership

Many descriptions of the smartphone business focus on the competition between Apple and Samsung, with some attention paid to the assault of Xaiomi in Asia. The computer business is concerned with Macs and occasionally Windows. Hardly anyone pays attention to the sale of low end Intel-based servers.

That may be why there is a tendency to overlook the activities of Lenovo, a Chinese-and-semi-American manufacturer that has been making a considerable impact on the industry. While attention has been mostly distracted, Lenovo has become the global leader in the PC business, is moving into third in the phone business, and becoming an important leader in the x86 server business.

I have been following Lenovo for a long time. I was a member of the rather grandiosely named IBM Mobile Computing Industrial Advisory Council and traveled to Beijing (along with a group that included Tim Bajarin) for the official close of the sale of the IBM PC business to Lenovo in 2005. I stayed on for nearly five years with the Lenovo version. We knew little or nothing about Lenovo at first except that it had changed from being the domestic Chinese PC company called Legend into a business with far greater international ambitions.

PC salesIn PCs, Lenovo has had somewhat slow but steady growth in the computer market, having taken the number one spot over Hewlett-Packard this year. It’s my bias, but I find ThinkPads the only serious contenders to MacBooks. Lenovo also does well with ThinkCentre desktops, a corporate market to which most industry analysts don’t give a lot of attention. Consumers and small business markets are offered Lenovo-branded laptops and desktops. And the redone Lenovo Yoga may be the best Windows table available.

 

The phone business requires more effort. In recent years, Lenovo has been in the phone market producing Android phones for China, gradually expanding into the larger Asian market. Its dramatic effort in the rest of the world’s market was buying the phone business from Google, a plan still pending an approval that appears all but certain. (Google made clear its intent in the Motorola purchase by selling the phones and holding on to the patents part of the package.) Combing its own phones with Motorola should make Lenovo third in the market this year, though lagging at a considerable distance behind Apple and Samsung. Still, if you doubt Lenovo’s long term plans, consider the statement in its second quarter presentation: “We will attack the top 2 to become the leader–just like in PCs.”

Lenovo’s other recent measure was the acquisition of IBM’s Intel-based servers. Lenovo had started its own line of x86 servers, but had been a relatively small players, at least outside of China. The IBM acquisition, which has just been closed, gives Lenovo a complete line of x86 servers and makes it competitive with HP and Dell.

Lenovo is well equipped to compete in the PC, phone, and server market because it is prepared for a business of high volume and low margins. In its most recent revenue quarter, its sales increased to $20.8 billion, 12% over the same period last year (and before the addition of servers). But it could claim only $483 million in net profit, 26% more than last year but only 2.3% of revenue.

A somewhat curious split beast, Lenovo is based in both Beijing and Morrisville, N.C. The senior IBM official surviving at Lenovo is chief technical officer, once a top executive in the ThinkPad business. The leadership is mostly Chinese, including CEO Yang Yuanqing but other westerners include COO Gianfranco Lanci, former CEO of Acer; America’s head Jerry Smith, formerly from Dell; and CMO David Roman, an Apple and HP veteran.

Obama’s Strange Challenge to Net Neutrality

Obama banner

For months, President Obama has been under pressure from liberals, many Democrats in Congress, special issue groups such as the Electronic Frontier Foundation, and a fair chunk of the tech companies such as Google and Netflix to act to regulate internet network neutrality. Today he finally took action after waiting for a Republican election victory that could well make the action impossible.

The main effect of Obama’s statement is to move the regulation of internet communications from Title I to Title II of the Telecommunications Act. Services under Title I, designed primarily for cable TV, are lightly regulated. Title II is designed for telephone services and would require approval–and might provide for outright blockage–for such step as extra charges for the delivery of higher network speeds for things like TV content.

Personally, I believe the issue to be extremely complicated and find it difficult, perhaps impossible, to see a simple decision to support either side. Obama’s position looks like he is throwing support to liberal Democrats and law school and computer science departments. Obama led EFF to announce:

This is an important moment in the fight for the open Internet. President Obama has chosen to stand with the us: the users, the innovators, the creators who depend on an open internet. But the fight isn’t over yet: we still need to persuade the FCC to join him. Stay tuned for ways you can help.

Conservatives and regulation foes found this a simple move to oppose. Says libertarian Berin Szoka, president of TechFreedom:

Title II is a wolf in sheep’s clothing. A radical fringe has dressed up a government takeover of the Internet as ‘Net Neutrality.’ Google, Facebook, and the NAACP haven’t jumped on the Title II bandwagon, because they know better. Imposing public utility regulations on the Internet won’t create Net Neutrality, but the heavy hand of government will crush innovation and investment in broadband.

But the history of the situation makes it less likely that post-election Obama can change anything. First of all, the current position of the FCC goes back to January, when the D.C. Circuit Court of Appeal struck down an earlier FCC decision that set up network neutrality rules. The network neutrality provision was the work of Obama’s first FCC chair, Julius Genachoski. Thomas Wheeler, the second term chair, decided to try to come up with a new regulatory plan rather than appeal to the Supreme Court. Wheeler responded with some very squishy support that ended with a statement that suggests the issue be left to the big boys.:

I am grateful for the input of the President and look forward to continuing to receive input from all stakeholders, including the public, members of Congress of both parties, including the leadership of the Senate and House committees, and my fellow commissioners. Ten years have passed since the Commission started down the road towards enforceable Open Internet rules. We must take the time to get the job done correctly, once and for all, in order to successfully protect consumers and innovators online.

With two Republican FCC commissioners all but certain to oppose the Obama plan, it would take the full support of Wheeler for a 3-4 majority (and that assumes votes for by Democratic members Mingon Clyburn and Jessica Rosenworcel).

Then there’s the Court. If the Obama plan were to be approved by the FCC, the opposition of opponents such as Verizon, Comcast, and Time Warner Cable, are certain to appeal to the D.C. Circuit (which has automatic justice over FCC decisions). The Republicans, who now control the Senate, are certain to oppose Obama’s attempt to fill vacant seats, so the old conservative appeals court is as unlikely to support a new FCC net neutrality move as the old one.

Finally, should the court somehow let the FCC do it, the Republicans who control both the House and Senate would  be likely to overrule them. (Although the split on net neutrality is not naturally a partisan split, politics has now overcome the issue.) When you consider the opponents of net neutrality need only prevent new action, always the easier course, the prospects for nothing happening for the next two years are likely.

Aereo Is Dying, But It May Have Saved Internet TV

In 2012, the inventors of Aereo, with investment from Barry Diller of IAC, put pressure on TV producers and networks’ control of content. It was basically a goofy idea: Servers at a data center would employ miniature antennas that would capture broadcasts, convert them to internet signals, and send them to customers who were paying about $30 a month.

Quick legal action came as a surprise to no one. The technology was ruled a copyright violation by the lower courts, who were quickly upheld by the Supreme Court last spring. Aereo slowly faded away and what is left of the company is disappearing. This week, it shut down its Boston office and laid off 43 employees. The company’s threat to the cable distributors is going away.

For Aereo founder Chet Kanojia, the affair is a big defeat. For Diller however, it’s probably the effect he has always been hoping for. The goal was more designed to attack the cable companies control of TV content.

The content distributors have increased their control by making a selective variety of content available to phones and tablets. Mostly however, it has been available only to cable subscribers who have to supply registered identification to receive shows via the internet.

But major players have started to change the game. CBS All Access provides streaming broadcast to over a dozen big cities. In effect, it’s like Aereo for one network, offering content for $5.95 a month. Not all the programming is available though. In particular, the National Football League blocks its games (the NFL has its own deal with DirecTV for internet game delivery). HBO, unlike the HBO GO internet service for cable customers, will offer internet content to subscribers with no cable subscription.

Most broadcasters are moving slowly to the new game. They have always been reluctant to mess with their existing successful relationships. (Don’t overlook the fact HBO came up with the internet channel after its owner, Time Warner Inc., sold off Time Warner Cable.)

But the pressure is likely to become irresistible. As the expense of cable networks extends to both viewers and content owners, direct internet delivery is going to become an ever more popular channel.

Why Bill Hewlett and Dave Packard Made HP What It Was

In my discussion of PC maker’s problems in a piece on the industry’s struggle with Apple, commenter David Olson wondered what had gone wrong at Hewlett-Packard: “Lots of success, lots of brains, lots of potential. What happened?” Although some of HP’s mistakes were the result of some odd bad moves, history contains some important examples of how a big and successful company can go seriously wrong.

A pair of electrical engineering grads from Stanford, William Hewlett and David Packard founded the company famously in a garage in Palo Alto in 1939. From the beginning, HP’s business was manufacturing electronic test equipment. It stayed out of the new growing computer industry (more based on the east coast of the US in the early days), though it came to dominate the high end calculator market. After Fairchild Semiconductor launched the chip industry, HP did start making semiconductors, mostly for internal use.

It also started making computers as they became a key to the test materials. Unlike others, HP had no interest in challenging IBM in the computer business, focusing on smaller devices useful to engineers and laboratories. Although HP eventually entered the standard PC group, its first important move in the industry was the introduction of the laser printer although it was not a HP invention. The original work was done by Canon and Xerox and one of the first desk laser printer was the Apple Writer. But the Apple Writer was expensive and Mac only. HP brought the product to the mass market.

HP, as run by Hewlett and Packard (the order of the names was chosen by flipping a coin by in 1939) was, somewhat like IBM, governed with a deep sense of the company’s virtues. A set of rules on integrity, teamwork, and trust of individuals, for as long as “Bill and Dave” ran the company and for years afterward, shaped the company. Hewlett remained CEO until 1978, but he and Packard both were active in the corporation for a decade after and there was never any doubt their replacement, John Young, followed their leadership. The next CEO, Lew Platt, also continued the tradition.[pullquote]A set of rules on integrity, teamwork, and trust of individuals, for as long as “Bill and Dave” ran the company and for years afterward shaped the company.[/pullquote]

Things started change with the hiring of Carly Fiorina, an AT&T and Lucent executive, in 1999. One of her first acts was to oversee getting rid of HP’s original instrument business (now Agilent), but the bigger move was the 2000 acquisition of Compaq. HP became a lot bigger, but also a company whose main competition was the mass computer business. It also set off a fierce, long fight in the board room between Fiorina and Walter Hewlett, William’s son. Fiorina,  of course, won, but never maintained the support of the Hewlett-Packard tradition. After another fight with the board, Fiorina resigned in 2005.

HP had been a successful company. It led in PC and printer sales and expanded corporate services with the purchase of 3Com and EDS. But the top management was an ugly mess. Mark Hurd, the CEO of NCR, was named to replace Fiorina. The tension between the CEO and the fractious board was never really healed and Hurd gradually lost popularity. In 2010, the board got rid of him after he was embarrassed by an affair with a woman who was an exhibition contractor. He was replaced by the unpopular Léo Apotheker of SAP, who spent a year trying to move HP into a more IBM-like position, proposing the sale of the PC and printer operations. He was done in by a $9 billion loss in the purchase of Autonomy, a British big data company, and that was that. Meg Whitman, an early CEO of eBay, took over in 2011, cleaning up HP. The company had failed to find a major role in the phone business (if you ignore Apotheker’s catastrophic management of Palm) and has had to deal with shrinking volume and profits. The current plan is to spin the PC and printer business off as HP Inc. — a business with a challenging future.

The management struggles since the arrival of Fiorina has hurt in an era when the competition has often had much more stable leadership. Apple has been led by Steve Jobs and Tim Cook. IBM, brought back from a near collapse by Louis Gerstner, has had steady management by Sam Palmisano and  Ginnie Rommety. Except for an ill-fated three year period when he stepped down from leadership, Michael Dell ran Dell himself.

It’s hard to predict just how the choice of management leadership will support a top corporation. But you can be sure big fights and and endless plots among leaders will chase success away.

Photo of Bill Hewlett and David Packard by HP.

New Thoughts, New Links, New Microsoft

Sadella

It wasn’t the biggest news of the week. But anyone who paid attention to the recent announcement by Microsoft, a deal that will integrate Dropbox into Office, sees a new way the company is run by Satya Nadella.

For the decades it was run by Bill Gates and Steven Ballmer, Microsoft saw little reason to support non-Windows gear, a spirit generally shared by its rivals. As Microsoft and its competitors, Apple and Google, have tried to create clouds for consumers and small businesses, they have kept the opportunities narrow. Google wants its applications to use Google Drive. Apple favors Apple iCloud. And Microsoft supports OneFile.

For PCs and Macs, this is not much of a problem for Microsoft applications. Cloud systems, such as Google Drive or Dropbox, are easy for Office apps to treat in Windows 7 as though they were drives that then are listed as available for applications. You can do it in Windows 8.1 too, though you have to contend a bit with its integrated favor to OneDrive.

Apple and Google are actually less cooperative with other storage efforts. It’s possible to get Pages and other Apple software to work on files with cloud tools other than Apple iCloud though it is a bit tricky to learn. Google Docs, though, is downright hostile to anything other than Google Drive; you can make it work, but it’s a lot of fuss.

The problem of Windows and Macs, however, is very simple compared to phones and tablets. Because straightforward access to file storage is impossible with iOS and discouraged on Android, offering links between applications and cloud storage other than that presented directly by the operating system is difficult. This can create all sorts of problems when trying to share information among the users of disparate devices, say Android phones, iPads, Windows 8 PCs (including tablets), and Macs.

And the world is changing. Microsoft knows better than to expect Windows users to be committed solely to Windows phones and Windows tablets rather than Android and Apple products. That’s why the actions of Microsoft and Dropbox–the favorite independent provider of cloud storage–is important. “In our mobile-first and cloud-first world, people need easier ways to create, share and collaborate regardless of their device or platform,” said Nadella. “Together, Microsoft and Dropbox will provide our shared customers with flexible tools that put them at the center for the way they live and work today.”

Microsoft would prefer its customers use OneDrive as a cloud service to connect Windows PCs and iPads, but it is a service considerably more clumsy than Dropbox. And OneDrive is really only satisfactory for combining Microsoft apps, while Dropbox is happy to provide storage and  delivery for any application. Personally, I find I rarely use either OneDrive or Google Drive (the latter for anything other than Google Docs apps that give you no choice) rather than Dropbox.

Microsoft says Office 365 versions for both iOS and Android will be available in the “next several weeks”. A version to support Office Online, the web-based version, expects to have Dropbox service in the first half of next year.

Why Apple Pay Will Win

Apple Pay promotion

When Apple announced Apple Pay as part of the iPhone 6 and 6 Plus, it failed to tell consumers something it clearly knew: Many retailers would prevent iPhone owners from using Apple Pay for quick and simple payments. For the time being, a lot of retailers, especially big ones such as Walmart and Best Buy, will reject Apple Pay. But in the end, Apple is likely to win.

Apple is, in fact, a player caught in the middle of a massive fight over new technology between banks and some big retailers. These retailers have invested heavily in Merchant Customer Exchange, or MCX, and a consumer technology called CurrentC. Banks, which have invested a lot of money over the years in credit card technology, seem OK to let Apple (and the so far not terribly successful Google Wallet) do the work.

The biggest advantage for MCX is a promise to support “new and old” iPhones and Androids, whereas Apple Pay is limited to the iPhone 6 and 6 Plus. But Apple has a number of advantages of its own. The most important is Apple Pay is out there working now and will run through retailers’  existing NFC readers. CurrentC requires the phone to give information through a QR code displayed on the phone screen. It’s not yet known when CurrentC will be available or how well it will work.

So far, Apple Pay seems to be reasonably secure. CurrentC has just been embarrassed by the theft of email addresses from subscribers. It’s not a serious loss and apparently most of the names belong to test accounts, not real customers. But delivering security accounts is an important CurrentC promise and this cannot help it.

The banks and credit card companies, who do not want to see retailers take control of the payment mechanism, were actually smart to trust Apple with the design. In addition to Apple’s security and software design strengths, the arrangement doesn’t leave a place for a lot of fighting over the details, things that seem to be both complicating and slowing the development of CurrentC.

When Apple first launched the iPhone 6, customers discovered retailers with any NFC processor were able to accept Apple Pay transaction. MCX demanded CurrentC participants, including CVS and Rite Aid retailers, cut off Apple Pay, which they promptly did. MCX has made it clear it will enforce contracts prohibiting use of competing payment services on its subscribers, and it’s going to be messy.

The big question for Apple is whether it fundamentally sees Apple Pay as a way to serve iPhone sales or a way to to enhance its role  as the manager of sales technology. The latter would require Apple to supply software to manufacturers such as Samsung or to Android and Windows — and neither Samsung nor Android are on good terms with Apple. Still, it provides a new and potentially lucrative market for Apple.

The Computer Struggles: Apple vs. the Industry

Early Compaq

There was a time not that long ago that making a television was the pride of manufacturers. The U.S. industry was dominated by the likes of Motorola, RCA, and Magnavox (Philips). Today they have ceased to exist or have left the industry. The makers such as Sony want a way out, and the U.S business is dominated by Vizio and others who  have learned to sell at the bottom of the market.

Tech manufacturers have discovered that computer making is much like TV history. In the early days, there were lots of computer makers, but many of them failed attempts to make much money, from AT&T to Texas Instruments. Manufacturers such as Digital Equipment, Compaq, and Hewlett-Packard  consolidated. And now the successful survivors are forced to live off small margins in a commodity market.

Apple, of course, remains the huge exception. Though these days Apple relies on iPhones and iPads for the bulk of its sales, it sold $24 billion worth of Macs in fiscal 2014, an increase of 12% in a strongly shrinking industry. Unlike its competitors, Apple is not looking for an escape route.

The reason, of course, is that makers of PCs continue to live in an industry where the Microsoft software–particularly Windows and Office–are the same on everyone’s products. The manufactures other than Apple are forced to produce fundamentally products. The consumer market, which generates most of the volume, is a painful mess that is driving out many of the remaining competitors. Sony has left the business. Samsung, never a significant PC vendor in the U.S.,  is pulling both laptops and tablets out of the European market. LG is considering leaving the PC business. And HP, of course, has decided to dump its PC and printer makers into a startup called HP Inc. while its corporate storage and support business, Hewlett-Packard Enterprises, is keeping CEO Meg Whitman, most of the senior staff, and the bulk of the profits.

HP Stream 11 description.HP’s current PC competition is a tough business. The new Stream line of Windows notebooks is designed as a low-end offering and looks to be pretty well suited for customers who can get by fine with minimal service–when you realize minimal service includes a 1366×768 display, a 2.16 GHz processor and a 8.25 hour battery. The 11.6″ display (stats on the left) costs just $200, while a 13″ display costs $225. The laptop even includes a one-year subscription to Microsoft Office Personal with 1 TB of storage on Microsoft OneDrive cloud storage.

Not a bad deal at all for someone who has a decent connection setup and is using a laptop to pursue the internet, watch some video, do homework, and write the occasional letter. But not so great if you are a manufacturer trying to make a living. The prices of the Stream series suggests that HP is not going to do much more than break even on the sales.

The facts suggest that consumer computer sales are struggling mightily. Acer and Asus, both Taiwan-based, are having a tough time. Dell, which has been increasing on corporate rather than consumer business, saw its profits in its end-user computing business fall 5 percent in the quarter than ended in August. Lenovo, which bought IBM’s PC products, is probably the healthiest competitor, with a 24% increase in profit in the quarter ended in July, but that was still only about 2% of the total revenue for its computer and phone business.

Charles Arthur in The Guardian, argues that the Windows PC business is a value trap:

The value trap is deep, though. Because Windows and its apps are easily moved from one PC to another (which is a huge benefit to the consumer), it’s almost impossible for hardware makers to differentiate themselves from rivals. In the past, their best hope has been to encourage repeat buying through having extra hardware features; that’s what some are trying to do with touchscreen laptops and desktops now. But there’s little sign that buyers are enthusiastic about those, preferring instead to buy offerings that are just a little cheaper.

That means there is always downward pressure on both prices and margins, while the only way to make useful profits is to be able to build at scale.

John Kirk writes about how well Apple is doing in “Apple Takes Its Place in the Post-PC World.” Apple’s condition is dramatically different for the simple reason that only Apple makes Macs and only Apple makes money from the operating system and other software, whether included or sold at extra charge. At the same time that it has driven down Microsoft prices. And by offering a relatively limited line of Macs (especially compared to the offering of, say, HP) and offers only top-shelf equipment at top-line prices, Apple enjoys healthy profit margins.

There doesn’t seem to be an escape for the makers of Windows computers, or phones for that matter. The last real attempt by competition was the HP attempt to build on the webOS it acquired by buying Palm. Unfortunately, it has just brought out a couple of phones and a hurried, badly rushed tablet when HP CEO Léo Apotheker killed it off as part of his move to make corporate services the heart of the company’s efforts. Except for a handful of Google-based Chromebooks, the computer business is all Microsoft–and nearly all of  the profit is going to Microsoft.