After 30 years, is the IBM PC reign ending?

Cross-posted from the IT History Society blog.

Thirty years ago, the International Business Machines company introduced its first general-purpose personal computer, the 5150. (The IBM 5100 and DisplayWriter were also personal computing devices, but most people don’t count them as a first.)

Although I have written about August 1981, I would have forgotten about the anniversary except my friend Tom Pfaeffle linked a BBC article on his Facebook account. Most significantly, the article cited a blog posting by Mark Dean, an IBM executive who was there at the beginning:

It’s amazing to me to think that August 12 marks the 30th anniversary of the IBM Personal Computer. The announcement helped launch a phenomenon that changed the way we work, play and communicate. Little did we expect to create an industry that ultimately peaked at more than 300 million unit sales per year. I’m proud that I was one of a dozen IBM engineers who designed the first machine and was fortunate to have lead subsequent IBM PC designs through the 1980s.

What’s grabbing the attention is Dean’s claim that we’re already in the post-PC era:

It may be odd for me to say this, but I’m also proud IBM decided to leave the personal computer business in 2005, selling our PC division to Lenovo. While many in the tech industry questioned IBM’s decision to exit the business at the time, it’s now clear that our company was in the vanguard of the post-PC era.

I, personally, have moved beyond the PC as well. My primary computer now is a tablet. When I helped design the PC, I didn’t think I’d live long enough to witness its decline. But, while PCs will continue to be much-used devices, they’re no longer at the leading edge of computing. They’re going the way of the vacuum tube, typewriter, vinyl records, CRT and incandescent light bulbs.

The remainder of the posting goes on to discuss IBM’s success in the “post-PC era” and his own career trajectory from IBM Research to become CTO for IBM’s Middle East and Africa operations in Dubai.

I wonder if the claims of the post-PC era are a bit premature. I own a tablet too, but I’m writing this on a (Mac) personal computer because it has a bigger screen and a keyboard. It’s possible that we’re heading to the post-Windows, post-Mac era — one where the personal computers have a slightly different form factor but a new (smartphone or tablet) OS.

Still, as Tim Bresnahan and Shane Greenstein established in the late 20th century, computing platforms decline (or die) only when replaced another platform. So the idea that the PC will be replaced by something new is nothing new, but just another round of Schumpeterian revolution that claimed minicomputers and workstations — not to mention the mainframe businesses of the BUNCH.

Can get some satisfaction

Prof. Claes Fornell and his American Customer Satisfaction Index have come out with new quarterly satisfaction rankings for a variety of industries, two of them IT-related.

Here are the rankings for search

• Google: 86%
• Yahoo: 77%
• MSN: 75%
• Ask: 74%
• AOL: 70%

Prof. Fornell’s commentary:

Google has led among portals and search engines for seven of the last eight years and this edge in user satisfaction is reflected in Google's dominance of the search market. Measured by query volume, Google does 74% of all search business on the Internet, with Yahoo! a distant second with 17% and Microsoft’s new entrant Bing.com third with 7%. Bing has won early accolades among industry insiders, but even a recent collaboration by the two smaller rivals (Yahoo! Search is now powered by Bing) hasn't managed to put a dent in Google’s usage. Strong and stable customer satisfaction has also left Google’s share value more insulated than most companies.

Here are the rankings for personal computers

• Apple: 84% (down 1.2%)
• Dell: 75%
• Compaq (HP): 74% (up 5.7%)
• Gateway (Acer): 74% (up 2.8%)
• HP (HP): 74% up 1.4%)

and Prof. Fornell’s commentary:

Customer satisfaction with PCs improved slightly after two years of decline, increasing 1.4% to an ACSI score of 75. Rising satisfaction among Windows-based machines drove the improvement. Dell was steady with an ACSI of 75, while Gateway improved 3% to 74. The aggregate of smaller manufacturers also improved 3% to 74. The HP division of Hewlett-Packard made a modest gain of 1% to 74, while the Compaq division surged 6%, also to a score of 74. The satisfaction of Apple PC customers retreated slightly (down 1% to 84), but the small decline has done nothing to hurt the large lead Apple has enjoyed for six straight years over the Windows-based PC manufacturers. In fact, Apple’s customer satisfaction lead is the second largest of any industry in ACSI—only Southwest Airlines' advantage over its closest rival is bigger.

…Despite the recession, Apple has posted strong financial results, with profits up 15% for the second quarter, and sales of Mac computers have increased, while competitors’ sales have shrunk.

As the recession has shifted demand for lower priced PCs, Hewlett-Packard has been rolling out less expensive Compaq laptops—consumers can now get a fully loaded Compaq notebook computer for less than $300. The emphasis on Compaq has driven up recent sales and HP's stock is up 20% since the beginning of 2009, more than double the market.

Surprise, surprise: success in the sale of commoditized Windows boxes has come from selling ever-cheaper commodity boxes. At the other extreme, Apple has more than 90% of revenues from computers priced over $1,000.

What I found surprising is that Fornell didn’t mentioned the role of Microsoft’s $300 million “I’m a PC” ad campaign (made on a Mac) in raising satisfaction of Windows machines across the board. The initial ads last fall emphasized “pride” in being part of the Windows clan, while this year the fetching actress Lauren De Long and her “laptop hunters” ad (recently revived by HP) have been brutally effective in identifying Apple’s price premium at a time in which buyers are pinching pennies.

The Windows brand revival story is a pretty clear one, particularly after they dropped the attempt to leverage Jerry Seinfeld’s popularity and got a little closer to their actual product attributes — cheap hardware, ubiquitous, lots of choice.

Recessionary cost savings: Linux < Windows < Mac

Steve Ballmer argued that it’s foolish to pay extra for a Mac in a recession. Then open source partisan Matt Asay argues that the same could be said about paying extra for a Windoze license on your $400 netbook.

As Asay concluded:

Why pay a few hundred dollars for Windows on a device that costs only a few hundred dollars and drops all the time? The economics of the recession may help Microsoft against Apple, but they're no help against Linux-based Netbooks.

Netbooks in the news

In his monologue last night, late night comedian Jay Leno decided to mention the new Sony P-series notebooks introduced last week at CES. (They are the same size as a netbook but at twice the price.)

Leno’s analysis:

Sony announced they’re coming out with a new computer that weighs just 1.4 pounds — weighs less than a pound and a half.

They say this will be the lightest computer ever on which Windows Vista will not work.

(It’s at 7:30 into the video if you want to see it.)

Netbooks: the future of PCs

In my in-laws’ Sunday paper this morning, Fry’s advertised a Windows notebook computer for $300, their “everyday low price” albeit with “no rainchecks.” (Perhaps they now have better prices after suing a former exec for defaulting on $10m in loans to cover gambling losses). The same computer is $327 at Amazon.

While this particular model of the Acer Aspire One has only an 8gb flash memory drive, it otherwise has the recommended features: 8.9" screen, 1gb of RAM and Windows XP. It certainly makes me feel like a dolt for spending $150 to (as long planned) put Windows XP on my MacBook Air instead of buying a new $300 netbook.

There is no denying that the netbook boomlet — started in Fall 2007 by the Asus Eee PC — was one of the biggest computer stories of 2008. The 1 million units sold in 2007 have reached 13 million this year as both Taiwanese ODMs (like Acer) and major branded PC makers (Dell, HP, Lenovo) have jumped into the fray.

As it turns out, the netbook was also the subject of one of the better student projects earlier this month from my MBA technology strategy class. The four students started out asking whether netbooks are betwixt and between smartphones on the low end, and laptops on the high end. Their conclusion was that the netbook looks a lot like a Clayton Christensen “disruptive innovation” for the existing laptop market. I am inclined to agree (which is why they got a good grade).

I draw four conclusions from the rapid success of the netbooks.

First, Intel’s low-cost, power-saving Atom microprocessor has been both a success and a failure. It’s a success in that it’s becoming the popular choice for the various netbooks. However, with the exception of a (numerically) few Linux servers, Intel is still basically a one trick pony: selling microprocessors to run Windows. Their efforts to use the Atom to create an entire new category of device, the “mobile Internet device,” is instead commoditizing its main source of product growth, laptops.

Second, the fact that netbooks are Windows machines raises doubts about whether any new computing platform can be established, at least in the next decade. Sure, a wide ranges of vendors offer netbooks with Linux but 90% of buyers prefer XP. In retrospect, Palm never stood a chance in its hopes to establish the Linux-based Foleo on its own and so was right to pull the plug.

Third, within 18 months — if not Fall 2009 then Fall 2010 — netbooks will take over the US college market, becoming the standard computer for most entering freshmen. (In the rest of the world, it will be netbooks vs smartphones and I can’t predict the winner yet). For students, netbooks have no disadvantages and many advantages. Students don't buy CDs or software; except for PC gamers, they don’t need high performance machines. They walk all day across campuses, long distances, and thus need to lighten their backpacks as much as possible. They are cash poor, and some carry laptops in urban campuses where robbery is a risk. And unlike us geezers, they have good eyes, and thus can read smaller but higher resolution LCD screens.

Given all this, Apple needs to respond to the netbook threat. Yes, my MacBook Air is small, light, with a low-power processor, small hard disk and no DVD drive — but it’s $1600, not $300-400. There have been rumors of an Apple netbook in October and November, but they are so vague to make it clear that no announcement is coming at next month’s Macworld Expo.

While I think Apple will respond (and probably in 2009), I think the response will be different than expected; I believe today’s predictions will prove as inaccurate as the predictions of the “Mac tablet” (which proved to be the iPod Touch). For 20 years, Apple has been loathe to cannibalize its main franchise, and I don’t think it will cannibalize its 13" MacBook (or MacBook Air) sales to respond to netbooks.

Instead of a stripped MacBook, I think it more likely that Apple will offer a scaled up iPod Touch or iPhone: adding a keyboard and increasing from the 3.5" 480x320 screen to either netbook resolution (9", 1024x600) or perhaps even an HDTV-compatible 720p (1280x720). Unlike the Foleo, such an iPod Touchbook would start life with more than 10,000 applications.

The only question in my mind is whether the device will be a GSM phone or merely a Wi-Fi-connected mobile Internet device. I think requiring an AT&T contract would put Apple at a huge disadvantage, so my money would be on the Wi-Fi device (or both).

What's up with that?

Tired of getting its butt kicked by Apple, Microsoft reportedly will use Jerry Seinfeld to anchor a $300 million ad campaign to rebuild its brand. My initial reaction: What’s up with that?

The campaign is intended to address the slow update of Windows Vista, as well as the increasing (but still small) market share of Apple’s Mac OS X. IMHO the article in this morning’s Wall Street Journal sugar coats the problem:

Microsoft's immediate goal is to reverse the negative public perception of Windows Vista, the latest version of the company's personal-computer operating system. Windows is Microsoft's largest generator of profit and revenue, accounting for 28% of the company's revenue of $60.4 billion in the year ended June 30.

The software has sold well, and Microsoft retains an overwhelming share of the market for operating system software over Apple. But Apple's computer sales have been rising, and Vista is dogged by the notion that it has technical shortcomings and is hard to use. Apple's latest Mac vs. PC ads take swipes at Vista. Microsoft says early problems with Vista have been largely alleviated.

So that Microsoft has a problem seems clear, and Jerry Sienfeld is an iconic cultural figure who who can reach a wide audience.

My question is: why is Seinfeld doing it? Sure, he’s not a movie star (think Brad Pitt or Geoge Clooney) who refuses to do ads in the US but will sell himself overseas to the highest bidder. Beginning in 1992 — at the height of the popularity of his series — Seinfeld signed up to pitch AMEX cards.

Still, why is Seinfeld associating himself with a troubled brand? Is it just the money? He’s already pulling in $85 million a year, so the $10 million from Steve Ballmer (while significant) is not going to change his life.

One possibility I hadn’t considered is that spending hundreds of millions on ads and $10 million with Seinfeld) would establish Microsoft’s interest in style over substance. Certainly that was the reaction of the readers of the WSJ blog this morning.

Windows Vista has a lot of problems, with even Microsoft executives having trouble using it. One-third of business PCs are upgrading from Vista to XP, even though it’s extra work.

Microsoft is convinced the problems are one of image and not of substance (despite ongoing claims to the contrary). They seem to be ruling out the possibility that the world has grown tired of being forced to upgrade (by many firms) to bloatware, which seems like a risky assumption to make.

A new year

July 1 is the new fiscal year for most state governments. Alas, unlike Will Rogers’ firm hope, we get all the government we pay for in California, and so there are lots of new laws. But one law stands out — in terms of newspaper, TV, web coverage and even freeway signs. To quote the LA Times,

Unless you have been living in a cave, you are probably aware that California's hands-free cellphone laws go into effect at midnight.

However, the big July 1 news is up north in Redmond. Again, unless you’ve been living in a cave, you’ve probably heard that the IT industry’s richest billionaire is no longer at the firm he founded 33 years ago.

Finally, InfoWorld’s quixotic quest to save Windows XP has failed, despite 200,000 signatures for its online petition FedEx’d to CEO Steve Ballmer.

Intel wants to own mobile phones, too

This morning I saw an interesting tidbit about Sharp developing an Intel-based cell phone for the Japanese market, to be sold by operator Japan Willcom. With 4.6 million subscribers, Japan’s 4th largest mobile carrier has less than 10% of the share of market leader DoCoMo.

The D4 phone uses Intel’s Atom CPU of the Centrino family, and will run Windows Vista (and for some reason, not XP). It has a 1024x600 screen and a 40gb hard disk. UMPC Portal describes the keyboard as “quite useable in a Psion-5 kind of way.” As such, it fits into the UMPC/MID category rather than a true cell phone, and in fact Willcom doesn’t expect to sell more than 100,000 a year.

Will this be a beachhead for Intel’s diversification into dominating (and displacing ARM) as a mobile phone platform? Intel’s prior diversification efforts have had their share of missteps. Intel’s previous attempts at the low power chips Xscale were spun off to Marvel, while its vertical integration into circuit boards also failed to displace the Taiwanese makers.

Frankly, I think Linux (not Windows Vista) is the growth opportunity Intel in the mobile space, as with its Mobile Internet Devices and its (Nokia-derived) Moblin technology. With web browsers, e-mail and IM clients available for Linux-based tablets, about the only thing an ultraportable Vista has going for it is native support for Microsoft Office documents. And if OOXML is really a standard, then that will eventually be available on Linux too.

Mobile phone cuts

Just a few tidbits of news today.

Deutsche Telekom is cutting prices of the iPhone, from €499 to €99 (or to have a monthly bill of €29 with a €249 up front charge). This has all sorts of implications. It might reflect an abject failure of the iPhone in Germany, or it might be clearing out inventory for the 3G phone. Or it might reflect a shift of Apple’s strategy to have a range of price points and make the iPhone more widely dispersed.

Motorola is making another round of job cuts, axing 2,600 today. They will have 63,500 at the end of the cuts, versus 147,000 in 2000. Among the casualties is their Birmingham design centre (née the startup Sendo); alas, instead of half (60) of the workers, they are dumping all 120. Motorola has yet to bottom out: as with Apple a decade ago, it needs to come up with a way to increase innovation and top line growth, not just cutting costs.

Finally, (on an unrelated note) Microsoft has modified its plans to dump Windows XP on June 30. While that’s still the planned end date for the developed world, it will be keeping XP for cheap PCs in the third world.

Upgrading to XP

My first Mactel machine (the Macbook Air) is due any day, and with it I’ll install the first copy of Windoze that I’ve ever owned. This means that I’m at last following the whole Vista-or-not-Vista discussion that’s been going on for the last year.

I long since decided that I’m going to run XP instead of Vista. Alas, the bookstore no long sells a copy of XP — but if I buy a copy of Vista for my Macbook, our computer tech can upgrade me from Vista to XP under the CSU site license policy.

To this I add a couple of tidbits. InfoWorld has mounted a likely futile campaign to slow XP’s inexorable march towards end of life on June 30, although the significance of that deadline appears to be exaggerated. Odds right now are only 46% that The SaveXP.com Petition Will Succeed.
The other relevant tidbit comes from this morning’s NYT, which I happened to be skimming to catch the latest political news out of NYC. I caught a cool column entitled “They Criticized Vista. And They Should Know”. And They Should Know” which talks about some really knowledgeable experts complaining about Vista problems.

As if dumping on Microsoft wasn’t cool enough, what’s even more cool is that the column is written by my coworker, Randy Stross. Even before I interviewed with SJSU in 2001, I was a fan of his work from his early Steve Jobs biography, which was a huge hit at Palomar among the staff (although today I’d recommend one or the other of the recent biographies). I also liked Microsoft Way although he seems best known for eBoys.

I’m tempted to skip Vista, go straight to “Windows 7” whatever that is. That reminds me of what my first boss after college said — every OS stops at 8.x because it gets so complex that they can never get the updates out. (The Mac doesn’t count, because it went 1.x, 4.x-9.x and then threw out the OS and started over again).

Software as a service is threatening to do away with the mega update model, anyway. If firms are not forced to come up with massive new changes to generate revenue, then resources could be taken off of Windows and put onto designing new applications or preparing for the (long rumored) post-PC world.

Does Windows need another browser?

This week is Apple’s annual developer conference. It used to be in San Jose (an easy trip from where I live now) but Steve Jobs prefers The City, so he switched the annual conference from San Jose in April/May to a small corner of Moscone Center in June. The first SF conference (2003) was my last WWDC — I went to most of the WWDC conferences from 1988-2003, and still have many of the old polo shirts.

Today in San Francisco Steve Jobs did his annual WWDC keynote. Tom Krazit of CNET has a good stream of consciousness blog from WWDC. After the expected OS X 10.5 (“Leopard”) demos, the keynote (as reported by Krazit) took an unexpected turn:

11:09--Safari: The Safari Web browser's got about 5 percent market share across the Internet, Jobs says. He'd like to make that number grow. How to make that happen? A version of Safari for Windows.

11:11--Safari 3 runs on Windows XP and Vista, and it exists today. Steve says Safari's HTML performance is twice as fast as IE using a benchmark Ina and I didn't catch. It's also faster than IE on Javascript performance, Jobs says, and it also beats Firefox (although not as much).

11:13--Jobs switches over to a Windows XP window. "This is strange," he jokes. He demonstrates the Windows Safari browsing through various sites, showing off a new tabbing feature. The benchmark we didn't catch is called iBench, and Jobs does a side-by-side comparison of Safari and IE 7 loading a bunch of Web sites. Safari's twice as fast, as you might expect during a WWDC demo. Try it yourself, he says.

11:15--Distribution is the next topic. There are over 500 million downloads of iTunes for Windows out there. Apple's going to have 3 editions of Safari, one that's for Leopard, one for XP, and one for Windows on Tiger. It's a public beta available today on Apple's Web site.

I must say, I didn’t see this one coming: I thought the browser wars were over almost a decade ago. However, in researching her update of IE and Mozilla plans, Mary Jo Foley (ZDNet’s excellent Microsoft blogger) found that Mozilla saw this coming.

Why did they do it? Here are some possible reasons:

• This causes the open source WebKit library for rendering HTML to be more widely used. Webkit is already available on the Nokia/Symbia S60 platform, while Swift is a struggling effort to bring WebKit to Windows. Raising the Safari/WebKit market share would mean more sites would care about Safari/WebKit compatibility. (For those who want to do first-hand research, the WebKit team is having a drinking party tonight in San Francisco.)
• As the TV ads make clear, the iPhone’s success is highly dependent upon Safari and a user experience comparable to a desktop. So maybe building Safari market share and compatibility has now become crucial.
• Windows-only shops can test for Safari compatibility without buying a Mac.
• As Foley suggested, maybe there are some Safari/iTunes integration opportunities.
• Many of Apple’s recent switchers are still running Windows, either at work or at home. So perhaps Apple is trying to give them a clean, consistent user experience rather than have them rely on Firefox (since IE for Mac is gone).

Still, running a Vista shop within Apple just to push Safari seems like a lot of expense; Microsoft has a whole Macintosh division, and they no longer maintain IE. There’s got to be another explanation; perhaps the iTunes for Windows programmers had time on their hands in between updates.

The key note ended a half hour ago. For those who want the new Safari (Mac or Windows), Apple’s download site is now active.

Photo credit: James Martin/CNET News.com

Technorati Tags: Apple, iPhone, Safari, web browser, Windows

Addicting the starving masses

One of the things I recalled from my childhood was grownups (especially my parents) talking about helping the “starving people in India” or the “starving masses of China.”

Of course, the story has changed considerably in intervening 40 years. Particularly in the past two decades, elements of both Indian and Chinese society have enjoyed rapid economic growth and (in some cases) a developed country standard of living, driven in varying degrees by exports of software and electronics, respectively. Still, with billions in rural poverty between the two countries, the mean GDP in both countries remains low ($3,700 & $7,600) relative to more developed countries (e.g. $24,200 in Korea or $30,900 for Singapore).

One of the problems for Western (particularly US) firms has been the high level of IP piracy: people are consuming the information goods (software, movies, music) of more advanced companies, but they’re not paying for them. The issues are complex (as I discussed in a 1995 article). There is also the prospect of change: Japan has dropped from 67% in 1994 to 27% in 2006.

Still (potentially biased) industry estimates place “business” software piracy rates as 82% in China and 70% in India. As with teenagers and music, the motivations boil down to two. One is they can’t pay (or don’t want to). The other is that they don’t have to, because free, copyright-defying alternatives are available.

One response has been to try to export US-based tactics, like seizing bootleg CDs and DVDs. While this may work in Silicon Valley or Los Angeles, developing country enforcement officials haven’t made it a priority. After China joined the WTO in 2001, the hope was that the TRIPS agreement would be enough to force cooperation from WTO countries. And at one point I heard (second hand) that an industry executive working in piracy in China did not feel safe living in China, but instead lived in Hong Kong and only visited China when the authorities were willing to conduct a showy seizure.

Microsoft in particular faces a difficult set of choices. As elsewhere in the world, they want people to get used to using their software, both to create switching costs/lock-in and also a supply of complements (software, books, training, etc.). On the one hand, using the software without paying gets consumers (as with Napsterized US college students) accustomed to never paying; on the other hand, saying “pay or else” could create millions or billions of Linux users.

The problem is particularly severe in China, where Linux is being promoted by Red Flag Linux (a local champion) and widely used for embedded products. In India, there are many companies servicing the global IT industry, and for these companies ignoring Windows is not an option.

Earlier this month, Microsoft introduced its latest strategy, a license for XP and Office in developing countries that goes for $3. (Of course, as Infoworld notes, Google apps are free, and Microsoft has a few conditions).

This particular initiative seems designed to pre-empt any official government endorsement for competing operating systems. One impetus is the One Laptop Per Child announcement last week that its $176 computer is due later this year — and appears to now run Windows. OCPLC is a big deal, because if millions of young kids get hooked on some alternative (like Linux), that’s millions that won’t be hooked on Microsoft product.

Back in the 19th century, other Westerners wanted to get the Chinese addicted to their exports, and the result was two wars. (I’ll admit, the parallel is a stretch). Many scholars of Chinese history would argue that in the past 150 years, the top goal of the Chinese government has been to become independent of such foreign control or influence. Microsoft’s prices are attractive, and they have the WTO on their side, but they clearly are swimming upstream.

Technorati Tags: China, Microsoft, platforms, Windows

Microsoft’s Anti-Competitive Motivations

With some time on my hands, I hope to catch up with blogging this week.

Microsoft’s antitrust problems are back with two items in the news. For one, it’s failure to comply with terms of a prior case; for the other, it’s new evidence of Microsoft’s naked assertion of its market power.

Europe and the Windows APIs

Last week, European competition authorities said Microsoft is not complying with the terms of the 2004 ruling ordering it release its WIndows server APIs to competitors. You won’t find me a one-handed economist on this one, because I have seriously mixed feelings.

Microsoft is saying that it’s a simple patent case — it has intellectual property and its competitors aren’t willing to pay a fair price. Its general counsel says: “we believe that we have been fair and reasonable in setting the proposed protocol prices.”

On the one hand, Microsoft’s competitors complain that its terms of providing the technology are unrealistic, because Microsoft wants to charge royalties for use of the APIs, including royalties on open source software. As a result, no firm has licensed the APIs — clearly the EU edict is not having its desired effect, and the lack of takers suggests Microsoft is charging an unreasonable price.

On the other hand, should the government decide? Yes, if I were French or Swedish, I’d feel differently about aggressive government intervention in the free market. But for a capitalist system, government coercion should only be used to correct a “market failure”. Much as I dislike Microsoft’s predatory practices, it’s not clear this is one. Perhaps the competitors aren’t negotiating in good faith, but instead are waiting the EU to beat Microsoft over the head again.

The editorial page of the Wall Street Journal feels no ambivalence. Today it weighed in (registration required):

Brussels no longer acts as merely prosecutor, judge, jury and executioner in antitrust cases; it now claims the power to assess the worth of patents, too. …

EU antitrust officials make no secret of their preference for the open-source business model practiced by the companies behind all the complaints against Microsoft, among them such heavyweights as IBM, Sun Microsystems and Oracle.

Microsoft vs. Apple

The second piece of news is a byproduct of the disclosure from Microsoft’s recently-settled antitrust case in Iowa. While the settlement was portrayed as a happy compromise, Microsoft got the plaintiffs to close the website with 3,000 documents discovered in the case, while the plaintiffs got to add to their millions in fees gained from suing Microsoft.

Apparently some of the interesting documents have been mirrored before they were pulled. One document (“Plaintiff’s Exhibit 6060”) related to Microsoft’s plans for Office 97 for Macintosh. The Mac press finds it interesting that the internal MS memo promises to ship lousy Mac software, but I think there was a more important revelation, consisting of an e-mail from the general manager of the Macintosh business unit to Bill Gates:

From: Ben Waldman
Sent: June 27, 1997 1:56 AM
To: Bill Gates
Cc: Jon DeVaan; Greg Maffei
Subject: RE: Moving forward with Mac Office 97

I am writing to argue for making a final decision to FINISH Mac Office 97, and detach this issue form the current Apple discussions.

… The threat to cancel Mac Office 97 is certainly the strongest bargaining point we have, as doing so will do a great deal of harm to Apple immediately. I also believe that Apple is taking this threat pretty seriously. …

Regardless of the outcome of these discussions, though, I believe we should ship Mac Office 97. Furthermore, I believe we need to decide this immediately … as we are not only close to shipping coding externally, but need to finally start press and customer communications, especially with MacWorld a month away.

and the CEO’s reply:

From: Bill Gates
Sent: June 27, 1997 9:37 AM
To: Ben Waldman
Cc: Jon DeVaan; Greg Maffei
Subject: RE: Moving forward with Mac Office 97
…
I have 2 things I need to understand

Realistically, when do we think we would ship this product?
Can we avoid Apple knowing how are along we are for the next 30 days?

Although Microsoft made $300 million a year (sales) off Mac Office, it threatened to destroy Apple’s ability to sell to the corporate (and university) market. The threat worked. Six weeks later, Gates had a deal which included Apple dropping Netscape (effectively killing it) in exchange for Internet Explorer, and Steve Jobs could announce that with Gates’ help, he had saved Apple. The announcement was so unreal (with echoes of the famous 1984 “Big Brother” ad), that it provided the conclusion for the 1999 dramatization (i.e. TV docudrama) about the two men.

Technorati Tags: antitrust, Apple, intellectual property, standards, Windows

iPod & Windows: Tail Wagging the Dog?

I don’t know if anyone saw this blurb [registration required] on the stock pages of the Wall Street Journal this morning:

The Dow Jones Industrial Average crept higher, helped by Hewlett-Packard but hampered by Microsoft. … Microsoft shares slid 1.9% after Apple warned that iPod users might experience compatibility problems with Microsoft's new Vista operating system.

The story didn’t say it, but Apple shares also fell 0.96% on Monday to 83.94.

The implication is that Microsoft Window Vista (henceforward Windows V) needs the iPod more than the iPod needs Windows V. Music playing is an important part of the reason that teenagers and young adults use a PC, and several hundred million iPods hold a majority of the U.S. market. It must really hurt Steve Ballmer’s feelings to know that this key part of his consumer ecosystem is controlled his OS rival, who’s using the iPod to raise (if ever so slightly) Macintosh market share.

To add insult to injury, during Christmas season the Zune earned barely 3% of the US market (less than that, actually, since it’s not counting Wal-Mart or Apple stores). Bryan Lee fell on his sword but that doesn’t solve the problem.

Apple and Microsoft have different roll-out strategies, however. Apple’s PR-driven strategy depends on making a big splash the first time, while Microsoft has enough money to pay for as big a roll-out as it wants. Apple (at least under Jobs) tries to come up with something “insanely great” to build momentum. Microsoft has released a few duds over the years (think Windows 1.0, 3.0), but uses its wealth and market power to keep making it better until it’s pretty good. Windows 95 nearly put Apple out of business, so it would be foolish to assume that there won’t be a much better Zune every 6 months or so for the next few years.

Technorati Tags: Apple, iPod, Microsoft, Windows