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Steve Ballmer Says Smartphones Came Between Him and Bill Gates (fortune.com)
Steve Ballmer once said Apple's iPhone would flop because it cost too much -- though he now admits that he failed to anticipate carriers subsidizing the cost of the phone. But that was only the beginning. An anonymous reader quotes Fortune:
The former CEO of Microsoft says he and Gates drifted apart over Microsoft's move into the hardware business in the early 2010s, according to Bloomberg. Ballmer says he was the one who pushed for Microsoft to design smartphones and tablets at a time when Apple was already well established. He says Gates and the board seemed reluctant to do so. "There was a fundamental disagreement about how important it was to be in the hardware business," Ballmer told Bloomberg. "I had pushed Surface. The board had been a little -- little reluctant in supporting it. And then things came to a climax around what to do about the phone business."
Microsoft eventually took a $900 million write down for its first tablet, the Surface RT -- plus most of the value of their $9.5 billion acquisition of Nokia Oyj's handset unit as Microsoft pushed into hardware. "Ballmer's only regret: not doing it sooner," Bloomberg reports, adding that Surface is now profitable and this year will generate more than $4 billion in sales.
Microsoft eventually took a $900 million write down for its first tablet, the Surface RT -- plus most of the value of their $9.5 billion acquisition of Nokia Oyj's handset unit as Microsoft pushed into hardware. "Ballmer's only regret: not doing it sooner," Bloomberg reports, adding that Surface is now profitable and this year will generate more than $4 billion in sales.
I think Microsoft did mobile all wrong. It should have focused on the software and let hardware makers decide the models to use it. Buying Nokia was a huge mistake although at the time Microsoft probably figured a big cell phone company like Nokia was a big advantage to pushing Windows mobile. I haven't used Windows mobile OS since 7.5 but even then it was a OS that could easily run well on cheaper and slower hardware. When you look at the sales figures today, Android is now killing IOS in sales. Even Apple hurts itself by not allowing IOS on more devices to give people options. I am a iPhone user myself, but see the much more flexible Android OS as a big advantage over Apple's closed end ecosystem. For example if a Samsung Galaxy phone would drop a 3.5 mm audio jack, a person could easily find another good Android phone with one. If you want USB C charging, or wireless, you can find options for those too. Microsoft obviously lost out on mobile which will hurt their OS going forward.
Apple's initial pricing scheme for the iPhone actually was different from the norm, but what Ballmer is missing is that it didn't work, and was dropped. So I'm not sure if Ballmer is talking about the initial unsuccessful model or the (as you say already widespread) traditional model that they reverted to. Not clever either way.
The pricing for 1st generation iPhone was a departure from the traditional wireless pricing model. Apple sold the phone to consumers at a modest discount and recouped their lost profit through kickbacks from AT&T in the form of a cut of the monthly service revenue. This was a great deal for Apple and AT&T but terrible for consumers. Consumers had to pay almost full price ($500-600) for an iPhone AND had to sign a 2-year contract. AT&T offered only 3 rate plans, which fortunately were price competitive with other carriers. These plans included an allocation of voice minutes, 200 text messages and unlimited data. However the original iPhone did not support 3G data or picture/video messaging, like a lot of the other phones on the market. Goldman Sachs predicted AT&T would activate 700,000 iPhones on launch weekend, they only activated 146,000.
While sales of the original iPhone were growing steadily, they were missing out on mass appeal because of the iPhone’s high initial cost. For the iPhone 3G, AT&T re-negotiated the revenue sharing deal and went back to a traditional handset subsidy model. Consumers would pay $200 less for the iPhone 3G. While $199 for an iPhone looked great, AT&T made some changes to the rate plans. The net result was that to get the same thing as you got with the original iPhone, (voice, unlimited data and 200 texts), you would pay $15 more per month ($10 for 3G data and $5 for 200 texts).
(from AT&T and the iPhone
Oh no... it's the future.
Fine example of selective memory...
"A door is what a dog is perpetually on the wrong side of" - Ogden Nash
wonder how many are anticipating the commoditization of so called smart phones, now that market is mature in most countries and hardly grows.
there isn't going to be money in that market.
Mr.Steve Ballmer. Would you like a chair to throw with that?
The problem with Microsoft's phone effort wasn't that Microsoft didn't invest in it soon enough or early enough; in fact, Microsoft was the dominant smartphone player prior to iPhone. The reason Microsoft lost in the smartphone market was because their product sucked.
If my business was selling snakeoil, I'd be calling medicine cancer, too.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Honestly Gates knew how to run a business and he knew that cell phone hardware was a stupid idea. And the world did prove gates right. The first mess starting with the BlackJack phones running WinCE and then the reboot attempt with the windows OS phones, every single attempt was a complete failure.
Do not look at laser with remaining good eye.
Apparently Ballmer didn't know squat about the phone business, and didn't bother to ask. Classic behavior for American financial types running technology businesses. Carriers had been subsidizing mobile phone costs since at least the mid-1990s after the PCS spectrum auctions.
From the Bloomberg article,
"I wish I'd thought about the model of subsidizing phones through the operators," [Ballmer] said.