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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.'"
Not to mention that special "something" that Apple has and Microsoft clearly does not have. I don't claim to know what it is--I don't own a Mac--I'm bicurious about OSX and I don't know why
Translation: The question left out of this interview was whether Ballmer has to lie to himself that he's working for the greatest company on earth every morning when he wakes up or if that lie persists full strength throughout the week.
If you underestimate your enemies--no matter how big or small--you're going to get burned.
My work here is dung.
You just absolutely guaranteed that the iPhone will be a huge success.
Nice going.
yeah, go for the 85 year old demographic, lots of money in music downloads to be had there.
"No one likes working in a hamster wheel, and your shop smells of cedar shavings from here." - TaleSpinner
Excuse me, Mr. Balmer? Subsidized by who or what?
Maybe Balmer knows something I don't (always possible), but methinks that he needs to go back to CEO school* for lessons on how to pay attention to your competition. In specific, the reason why the iPhone is going to cost $500 is because it's not being subsidized by cell phone contracts. Jobs is trying to change the rules in that respect. Like Nintendo, Apple wants to make a profit off of every hardware unit sold. Any money that comes in through the surplus channels of additional content or features will simply be creme.
I can see how that went: "Here uncle, take this Zune player. It's FREE! That way I can tell everyone that my 85 year old uncle has a Zune, but doesn't want an iPod."
Uncle: "Have you lost your marbles, sonny-boy!?! What in tarnashun' does your old uncle here need with this Dune player?"
Balmer: "Zune..."
Uncle: "Don't interrupt me when I'm talking boy! You think you're so sh'mart with yer fancy electronics company!"
Balmer: "Technically soft-"
Uncle: "I said DON'T INTERRUPT ME!"
Blamer: "Um. Sorry."
Uncle: "That's better. Now get rid of this piece of junk. Did I ever tell you about the time I was flying over Iwo Jima and ended up in a blazing dogfight? I think it was 1942..."
Balmer: *sigh*
Two months later...
Blamer: "My 85-year-old uncle probably will never own an iPod, and I hope we'll get him to own a Zune."
Reporter: "Oooooo..."
* I hear that he didn't finish his Dark Lord training with Jeff Skilling...
Javascript + Nintendo DSi = DSiCade
"No squirting. Less weight than a Zune. Lame."
In a shocking news story Apple CEO Steve Jobs told the media that the Zune will be a totaly bust.r ied-about-the-zune-in-a-word-no/
http://www.engadget.com/2006/10/16/steve-jobs-wor
If you are #1 in your field with a monopoly, you should not be talking about (read advertising) your small competitors.
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.
Physicists get Hadrons!
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.
He knows the iPhone is going to be big and that it will put pressure on Microsoft's hand-held OS to match it feature for feature; but since MS doesn't not design the hardware, they'll be in tough to compete.
The hand-held market is the dominant computing platform and Jobs is going after it with a vigor not seen since the first Macintosh came out. Apple has yet to ship a single unit, but already iPhone (and mini OS X) is a top-ranked contender for that market.
Ballmer is either scared or stupid, plain and simple.
boxlight
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
The real Sig captains the Northwestern. This one captains
But my 85-year-old uncle probably will never own an iPod, and I hope we'll get him to own a Zune.
/. crowd being in the market for a portable media player, and strongly ruling out owning an iPod. I doubt, however, that his 85-year old Uncle is that kind of consumer. For him, there's essentially no difference between the two. If he isn't in the market for one, he probably isn't in the market for any.
If his uncle isn't in the market for an iPod, what makes him think that he'll be in the market for a Zune, or any other portable media player? Is his uncle such a discerning consumer that he would notice the differences among the devices? Would he merely own and use a Zune to make his nephew happy? (Note that I don't say "buy" a Zune.)
I could understand members of the
...oh, wait.
I wonder, will they come preloaded with Lawrence Welk?
Step into a huge movement. Don't Tread In Me.
In any case, given the MS philosophy of socializing the computer market through direct private investment, it is no wonder that radical idea of selling a competative product at a profit does not seem viable. How can Apple possibly imagine that it can survive if it sells a mere hundred thousand phones at a $100 profit, when in fact it should try to ship one million units at little or no profit, or even a $126 loss. Such a loss will be made up in volume.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
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.
1989: The GUI will never gain significant market share (And the end user will only ever need 640K of RAM!)
1994: The Internet is a passing fad and will never gain any significant market share!
1995: MS BOB Will be a huge market success!
1997: The DOJ will never convict us of being a monopoly!
1998: The end user doesn't care about security!
1999: What's this Linux thing you're talking about?
2001: What's this Apple thing you're talking about?
2002: iPod: Less storage than a Nomad and no wireless. Lame.
2006: iPod: Less storage than a Zune and no wireless. Lame.
2007: The iPhone will never gain significant market share!
It would seem that if you want to accurately predict popular technology trends all you have to do is listen to what Microsoft is saying and then predict exactly the opposite!
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Even if apple grabs 2-3% of the market share, they will be drawing the revenue from both the hardware and software side of the sale. After all, Jobs' state GOAL was only 1% of the market in 2008. So Ballmer is really saying that he thinks Apple will do better than they will publicly admit to thinking.
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Microsoft still doesn't get that Apple operates in a fundamentally different space than they do. Microsoft sells software; Apple sells hardware AND software.
Its like comparing Mac and PC sales. By controlling the hardware channel, Apple makes a hell of a lot more money per unit sale than Microsoft. Yet because they control both sides of the equation it is very difficult to compare them to pure software companies like Microsoft or to pure hardware companies like Dell. Apple's balance sheet shows net income in the ballpark of HP and Dell, based on revenues a half to a third the size. http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/9
So, yes, Microsoft would rather have software on 60% or 70% or 80% of the phones out there, just like they would like to have software on 60% or 70% or 80% or 90% of the desktops out there. Apple has a fundamentally different business model.
Sanity is a sandbox. I prefer the swings.
I think Slashdot should start a fund to purchase a iPod for Ballmer's Uncle.
I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress -J Adams
I happen to agree with one point he makes, Apple is late to the party. With the iPod they arrived "fashionably late", well before the party was going, but not until they knew it was going to be a good party. With the iPhone what we have is a big party and another glam-chick pining for attention. She'll attract eyes when she comes through the door but when people realize how shallow of an offering she is they will wait for her younger sister to arrive.
Talk is cheap, many people love to chime in they will buy one, but I bet they won't. It is a feel good response, makes them feel like part of the "in crowd" while never being obligated to do anything.
Apple's way late to the big show and their offering is seriously lacking. Wait for the second or THIRD revision of this iphone before jumping
* Winners compare their achievements to their goals, losers compare theirs to that of others.
Dude, shut up.
Bill
Ballmer's job seems to be to cast aspersions on any IT company that might be encroaching on Microsoft's world in the hope that people will pay attention, whereas it just looks like fear and loathing. Cool dance moves though.
I cant hear you over the sound of the zune sucking.
He has a lot in common with Young Frankenstein's monster.
But does he have an enormous schwanstucker?
Not that I care personally, mind you.
Mit der Dummheit kämpfen Götter selbst vergebens.
MSN has the most visitors? Is that because it is the default search for IE when it can't find something? And yet, it has yet to show profit. Google visitors spend the least amount of time yet Google is making the most money. Perhaps the reason is that they are the most efficient. I know when I search using Google, it takes me to the results I want right away and I don't spend a lot of time hunting. If I was an MS investor, I would like to know what MS is doing about the unprofitable divsions like MSN and Xbox which have not shown profits in half a decade.
The interviewer was talking about Apple's music player and upcoming smart phone, not OS. Different products and markets. In those categories, MS is substantially behind Apple in music players (20% only if you include all MS partners) and even further behind Symbian (4% of the phone market). Face the facts, Ballmer, in ventures other than OS and Office suites, MS is woefully behind others.
Funny how he forgets to mention that MS only has a very small market share in cell phone OS. At 5%, Apple would still beat MS in market share. At 2% or 3% it would be half of MS even though MS has been in the market years longer.
This is rather revisionist history. Apple was not the first MP3 player out there, and they were not the first music store. But they were able to recognize what people really wanted.
So the first attempt to market the Zune as edgy and cool failed. I've seen the ads and the biggest mistake was the attempt to copy the style of Apple (which MS didn't do very well) without any real substance. With the iPod ads, you understand (1) what the product does, and (2) who is making the product. With the Zune ads, it was a totally mystery as to what was being advertised and who was adverstising.
Well, there's spam egg sausage and spam, that's not got much spam in it.
I think it's funny how he claims that MS is the giant in this arena, and Apple will just be small potatoes, for three reasons:
A) Someone else posted the actual market share of Windows Mobile phones, compared to Symbian, Linux, etc., and MS only had about 4%. So I don't know where he's getting his 3% for Apple and 50/60/70% for MS numbers, but that's not consistent with reality. For crying out loud, Linux, his sworn cancerous enemy, has like 4x the market share MS has (*according to those numbers).
B) He talks as if Apple is stupid for entering this market because they won't be able to grab a huge market share, but look at what MS just released a few months ago, that really didn't have a hope of gaining a large share of the market: the Zune. Going up against Apple no less.
C) Mac OSX has a similiar share of the market for PCs, and it's doing just fine, and it's very recognizable. Of course, in movies, they seem to have 95% of the market share, which serves to make them even more recognizable.
Sure, at $500/$600 sans subsidies, it's more of a premium phone (for now), and premium items aren't intended to get the largest market share, they're intended to have the cream of the crop image. But as someone else pointed out, the iPod was priced similarly when it launched, and look where it is now. Really, market share isn't everything. I think Apple has proven that by hanging in there, and in recent years flourishing in spite of not being the market leader for PCs.
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.
The society for a thought-free internet welcomes you.
Right up front, it needs to be said that Steve Ballmer is a smart guy, and for him as CEO to come out and be anything less than wildly enthusiastic about his own company's products would be malfeasant.
What's curious to me about Ballmer's statement, though, is his apparent belief that Microsoft can indeed push their software into 60% or more of the entire mobile phone market. Does he actually think that Windows Mobile, in any of its current forms or imagined future forms, will ever make it into 60% of all mobile phones? That's ludicrous. Most of the 1.3b annual phones sold are of the vanilla dial-numbers-and-talk variety. 60% of people don't want to struggle with the Windows interface just to dial their phone.
More to the point, there's an equivocation inherent in Ballmer's thinking that will keep Windows Mobile in marketshare obscurity forever until he, and all of Microsoft with him, unlearns it. Windows Mobile and what we've seen of the iPhone are both "smartphones" only insofar as they both possess "phone, plus other stuff" featuresets. But go watch Jobs' keynote demonstration of the iPhone and try to draw meaningful comparisons between it and Windows Mobile. WM has a defined and seemingly content userbase, especially in business, but that's a totally different "smartphone" from the lifestyle device that the iPhone was demonstrated to be.
Ballmer, in saying that he'd like 60% of phones to run Microsoft's software, is saying he'd like 60% of phones to behave like enterprise corporate devices. Steve Jobs, in saying that he'd like 1% of phones to be iPhones, is saying he'd like 1% of phones to be something more useful to people than just a lump of telecom in their pocket.
The difference between those two views says a lot about who, in a two-decade-or-so predictive view, is statistically more likely to be "the mobile phone company."
The 640k quote is a total myth.
Even though they were convicted of being a monopoly, they pretty much dodged that bullet.
Security wasn't as huge of a deal in 1998 for end users on dial-up as it is today, and insofar, Linux has still failed to take off completely. (On the other hand OS X has been very successful)
(And the iPod/Nomad comments were made by our very own CmdrTaco)
Right now, I personally put the odds of the iPhone being a success at 40/60. Unless they can get the price down, and open it up to other carriers, it's just not going to fly. GSM coverage in many parts of the US tends to be very poor in comparison to CDMA.
-- If you try to fail and succeed, which have you done? - Uli's moose
And Ballmer is right. That "insignificant" 3% market share of 1.3 billion handsets would translate to 39 million iPhones sold. Which translates to $19.5 billion in revenue. With a conservative 20% margin, that's $3.9 billion on the bottom line.
Isn't that the whole point of running a business?
...but iPhone and Windows Mobile aren't competing with the 1.3 billion phones sold. They are competing for the same, relatively small subset of the market representing high-end smartphones with EMAIL and serious web-browsing facilities.
Now, in the MS corner, we have Windows Mobile. I have a fairly high-end Windows smartphone, and while I like the pwer of the thing, using it can be like kicking a dead whale along a beach. Using it as a music player is particularly excruciating. I would be very reluctant to recommend it to a non techie. Mind you, some basic phones are pretty nasty to use, as well.
Although nobody has seen an iPhone properly, Apple have a track record and would need to be having a very bad day not to produce something vastly more usable. Its not like XP vs. OSX: personally, ignoring security and reliability, I don't think that there is any clear blue water between OSX and Win2K/XP on the usability front - I actually prefer the XP GUI in some ways - but Windows Mobile feels like a throwback to Windows 2.
Its not that Apple stuff is perfect - just that it usually gives the impression that it was actually designed by people who gave a damn about the product in a world where many - if not most - other computer and home electronics products seem to have congealed out of a committee process.
Also - Apple seem to be capable of making "less is more" decisions. Notice that hardly anybody has matched Apple's minimalist design style? Other manufacturers have produced designer-y ranges but the extra buttons, chrome grills, go-faster stripes and blinkenlighten just creep back in - as if the designers are scared that punters will see "less chrome" as "less power". My phone has about a dozen buttons scattered about its periphery PLUS a thumbwheel PLUS a touch screen/stylus PLUS a slide out keyboard - and while you can pretty much do anything using just buttons, just touch-screen or just keyboard, you need a lot of practices and cover-to-cover RTFMing. Usually, you end up using an inefficient combo of all of them (untilyou drop the stylus). Apple have the cojones to say "no - you're not having any buttons or a slide-out keyboard" and, if they put all their efforts into making the touchscreen work really intuitively, they could have a winner that will "grow" the market for powerful smartphones.
The non-3G thing seems "interesting" though - perhaps it makes sense in the USA but I assume that they don't plan to launch in Europe without 3G or better...
In a survey of 100 programmers, 111111 thought that duck-typing was a good idea.
The supposed debunking of the 640k quote is from BillyG himself. If you said something that fucking stupid, wouldn't you deny it, too, if no one had an audio recording of the event?
The only argument AGAINST the argument I'm making is that when he visited Acorn computer he said "What's a network" and he hasn't denied that. Yet.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
Overall market share numbers capture the vast scale of PC disposability, but do not reflect the product profitability that comes from building a better quality product.
While Apple is cited by Gartner and IDC as selling around 5% of all the computers in the US, it isn't obvious that Apple's 5% share is the cream of the market; it's actually worth more than the same or larger percentage shares held by rivals.
There were 9.8 million Macs sold in the last two years, up from 6.2 million in the previous two year period. Those numbers don't compare with the stunning volume of PCs shipped by HP and Dell--which each sold 38 million PCs in 2006 alone--but Apple's profits do.
In the forth quarter of last year, HP and Dell combined sold 10 times as many PCs as Apple in the US, earned 5.5 times as much revenue as Apple, but together only ended up with 2.2 times as much net income as Apple.
In other words, Apple earned nearly half as much net income with its 5% share the market as HP and Dell together, with their combined 55% share of the US PC market: $1 billion for Apple vs $2.2 billion for HP and Dell together!
"But my 85-year-old uncle probably will never own an iPod, and I hope we'll get him to own a Zune." There is sell and there is sell not, there is no 'hope'!.....And this is why you fail....
You have a valid point. There's another interesting way to look at this issue, however. People's choices affect other people at times and in ways they don't always anticipate or even care about if informed. The classic example is the protective helmet. If you ride your bicycle or motorcycle without a helmet, you are contributing to a social problem (head injuries) which cost me (the taxpayer) money. Eventually somebody (insurance companies and Medicare) get tired of paying for stupidity and persuade Congress (or State Legislatures) change a law to reduce the cost to the society as a whole from individual stupidity.
If you choose to run Windows that's fine on the level of the individual decision. In theory, I don't care what you run on your PC so long as you and I have access to web sites, can exchange email and photographs, etc. We can be friends and share data freely without even knowing what type of system the other person uses.
However, I care about the fact that email is very nearly useless now. I care about identity theft. I care about industry and government data which is protected in order to reduce the proliferation of nuclear weapons technology.
How many billions of dollars must be stolen or wasted and how many years must pass before we admit that there are systemic problems with security on Windows which seem to be deeply rooted not solely in hubris as often thought, but also in more subtle philosophy, technology, and methodology choices? These go back decades, and have enabled an enormous industry in identity theft and spamvertising to take root and thrive despite, ahem, entirely new versions of Windows which are, ahem, more secure than ever. Some of these problems can be fixed, and some of them have been substantially mitigated if not outright fixed, for decades, on UNIX. The sad realization that Microsoft apologists refuse to admit is that development methodology and management philosophy affect the security of products produced by the organizations practicing them.
If software vendors were held liable for the expensive calamities that result from their security defects, would the technology industry collapse? Or would it adjust, and then march steadily on, with a greater emphasis placed on security? I suspect it would not collapse, but I don't have the lobbying dollars t back up my position, and neither does anybody else who shares it (thus far). The recent law suits brought against TJX by banks over stolen credit card data may portend a coming shift in alliances. If the banks turn against the software industry next, we will see a shakeup in political alliances and an eventual fight in Congress over this issue. Until then, the issue will remain the abstract musing of the occasional columnist or security analyst.
Discussions of botnets in forums like Slashdot often include the idea that individual home users should be held accountable for the security of their home PC. Well, should they really? They didn't sign up for that. Are they held accountable for the global security implications of their refrigerator? No, they are not because there aren't any except for a few highly abstract issues related to the resources it took to build it and the energy it takes to run it. With a home PC the global security implications are complex, but not highly abstract, rather they are quite direct. Your home PC can be used to steal your identity which could be sold to raise funds for terrorism, for example, which is pretty direct. It can be used to attack other hosts or assist with Distributed Denial of Service attacks on hosts or entire networks, which is unambiguously direct: PC -> Shitstorm.
Quite frankly, the statistics are stark and unforgiving. Windows: roughly 100,000 "known viruses" vs. roughly zero for the Macintosh (margin of error +/- 5 (five)). Twenty percent of home Windows PCs infected vs. roughly zero percent of home Macintosh or Linux systems infected (margin of error +/- 1/100 of 1%). If a relationship bet
If you mod me down, I shall become more powerful than you could possibly imagine.
According to a Bloomberg News article I found, the global cellphone market is forecast to grow 12% over the previous year and reach 1.14 billion units in 2007.
The same article describes how Motorola grabbed 4% more of the market,with Sony Ericcsson the star performer grabbing 8%.
Sony Ericcsson models (at least the one with music that I wanted to buy) when I looked cost about $500 bucks. These things aren't subsidized either. You pay a chunk up front and then a chunk all along.
So Ballmer says Apple will grab 2%? Wow. 2% of 1.14 billion is 22.8 million units. At $500 each, that's over 11 billion dollars. Apple's sales for the fiscal year ending Sept. 2006 was$19 billion. So Ballmer says they are going to have *only* this incredible success, whereas if Apple pulls anything at all interesting out of this hat it has a chance at going like Sony Ericcson, which actually has worse design and features than the iPhone?
That, plus the trend for phones toward full browsers, larger screens and music. Maybe not in the U.S. where people don't spend money and are happy with motorola bricks, but there is a distinct possibility the iPhone could grab market overseas too.
My forecast is Microsoft needs to start ordering in chairs by the busload.