Microsoft CEO Claims iPhone Will Be Bust

Theaetetus writes "In an interview with USA Today, Microsoft CEO Steve Ballmer claimed there is no chance that the iPhone is going to get any significant market share. The article also deals with Microsoft's friction with the Justice Department, friction with Google, and the profitability of MSN. 'No chance. It's a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get. In the case of music, Apple got out early. They were the first to really recognize that you couldn't just think about the device and all the pieces separately. Bravo. Credit that to Steve (Jobs) and Apple. They did a nice job. But it's not like we're at the end of the line of innovation that's going to come in the way people listen to music, watch videos, etc. I'll bet our ads will be less edgy. But my 85-year-old uncle probably will never own an iPod, and I hope we'll get him to own a Zune.'"

Comments

marketing genius

[sir 8ed]

yeah, go for the 85 year old demographic, lots of money in music downloads to be had there.

Shocking news Apple CEOo claims Zune will bust!

[F34nor]

In a shocking news story Apple CEO Steve Jobs told the media that the Zune will be a totaly bust.
http://www.engadget.com/2006/10/16/steve-jobs-worr ied-about-the-zune-in-a-word-no/

Bad Ballmer Bellicosity

[BoRegardless]

If you are #1 in your field with a monopoly, you should not be talking about (read advertising) your small competitors.

Methinks the Ballmer doth protest too much

[Space cowboy]

This is a product that hasn't launched yet, hasn't been seen in the wild, and only demo'd under controlled circumstances. Yet we've had his illustrious personage repeatedly tell us that this phone is going to be a bust.

If it's such a dead-certain bust, why is he constantly mentioning it in the media ? Surely shome mishtake ? The fact is that he's terrified Apple are going to repeat their success with the iPod, and it shows.

Simon.

Re:Methinks the Ballmer doth protest too much

[kjart]

If it's such a dead-certain bust, why is he constantly mentioning it in the media ? Surely shome mishtake ? The fact is that he's terrified Apple are going to repeat their success with the iPod, and it shows.

He was specifically asked about the iPhone - I tend to talk about things too when I'm asked about them. Read the rest of the interview - he speaks fairly candidly (if obviously from a biased position) with respect to Office competitors from Google and Open Office.

In any case, I tend to agree with his analysis, which is that the iPhone wont get a significant marketshare. Most people will not shell out $500 for a phone. He does say that Apple may find the iPhone very profitable (i.e. it will be a high-margin item, for sure, like most Apple products), just that they wont get a huge marketshare.

Re:Methinks the Ballmer doth protest too much

[cowscows]

The thing is, you're both right, and so was Ballmer. In fact, the only thing wrong here is the headline of the /. article. Ballmer is right that Apple won't see the utter dominance in phones that they've gotten with the iPod. But he and you are also correct in that Apple will sell these things as fast as they can make them for a good while, and they'll make bucketloads of cash off of it.

I guess it's the fault of Microsoft (and maybe IBM before that), that so many people have a hard time calling a company/product successful unless they utterly dominate all of their competitors and basically own the market. In reality, most industries have many competitors, many of which make consistent profit and should certainly be considered successful.

Anyone looking for Apple to own the cellphone market a few years down the line is going to be very disappointed. No matter how big a splash they make, it's an absolutely huge industry, and the iPhone can only grow so fast. Apple will likely be a significant player, and much like in the computer industry, they'll probably hold some influence well beyond what their market share would indicate. And that'll be good for Apple, hopefully good for the mobile phone industry, and good for people who want iPhones.

Name rec after one year

[hirschma]

Want to bet which brand is more recognizable to consumers after one year - iPhone or Windows Mobile 5/6/7? The figures will be even more skewed on the desirability factor. Let's see - do I want something cool, or do I want something that reminds me of the operating system that I _have to use_ at work/home? I mean, the name is just stupid marketing - Windows (a brand that's as old as dirt, with more than a few dings), 5/6/7 (reinforces the whole "oldness").

Balmer shouldn't be afraid of the first iPhone. He should be afraid of the first "iPhone NanoMini". He'll be singing a new tune after that.

Um.. what market share is he talking about.

[thestudio_bob]

I hope he's not saying that windows has 50%, 60% or 70% of the mobile handset market share, because microsoft is not even close.

Symbian - 72.5%
Linux - 16.9%
PalmSource - 2.0%
Microsoft - 4.6%
RIM - 3.8%
Others - 0.2%

So if he's saying Apple will get 5% of the market share, well they will then have a larger share of the market than MS.

Silly Ballmer-speak

Comparing Apples To Lemons

[nick_davison]

Microsoft CEO Steve Ballmer claimed there is no chance that the iPhone is going to get any significant market share... 'No chance. It's a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get. In other news, Ford's CEO mocked Ferarri: It's a $200,000 item. They may make a lot of money. But if you actually look at the 1.3 billion cars that get sold, I'd prefer 60% or 70% or 80% of them to be Fords, than I would to have 2% or 3% which is what Ferarri might get.

In both cases, a company is completely happy building a niche product, that does its job exceptionally well, that they can be truly proud of, and that they can turn a profit on every single one.

Apple themselves said they were only going after 1% of the market. 1% of 1.3 billion is still 13 million. If they can turn $50 profit on each and every one of those, they walk away with an extra $650m on their bottom line next year. Not a bad kick in the teeth for the indignity of having to be exactly the market you went for.

Microsoft has a totally different model. They want global dominance in cell phones because it'll help prop up their model of making the entire world have to use your stuff if they want compatibility and then you can extort money on things like office suites. They'll happily give away their mobile O.S. if it means propping up that model.

Neither one is particularly wrong per se. They're just two totally different models that, evidently, are successful for both companies. Microsoft turns a profit, Apple turns a profit, yay for both of them.

But knocking one model for failing to succeed based on the metrics of your model... while totally succeeding on their own model's metrics and turning a profit... that's a little cheap.

What is interesting is that Apple's own figures were they were aiming for 1% market saturation but Balmer's already referencing 2-3% before it comes out. I'm curious as to whether that's a case of his not getting numbers straight, of Microsoft expecting more success for Apple than Apple's actually banking on, or whether they're just trying to raise the bar now so they can say Apple failed to meet numbers Apple never went for later.

So what?

[gillbates]

Motorola's CEO said basically the same thing: it's a niche product, and it doesn't have the backing of the major carriers.

That's really not the point. Jobs could care less how many of them sell - he's more concerned with testing out the market for unencumbered phones, and hoping that he can create a new market for phones.

The iPhone is dangerous and disruptive in this respect. If consumers can grow a pair and tell the cellphone companies they'd rather have an unencumbered, standards-based service than a proprietary, locked in, shaft-the-consumer service, then we will see real positive change in the cellphone industry.

Jobs can do this. Ballmer can't. And that is what scares him and everyone else at Microsoft.

Maybe it will become another Newton. But it doesn't matter, because Apple can afford the risk, and they stand a fortune to gain by being the first in the unencumbered phone services market.