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Microsoft Businesses Apple

Microsoft CEO Claims iPhone Will Be Bust 463

Posted by Zonk
from the biased-source-just-maybe dept.
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.'"
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Microsoft CEO Claims iPhone Will Be Bust

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  • by jonnythan (79727) on Tuesday May 01, 2007 @12:03PM (#18942011) Homepage
    You just absolutely guaranteed that the iPhone will be a huge success.

    Nice going.
  • marketing genius (Score:5, Insightful)

    by sir 8ed (207862) on Tuesday May 01, 2007 @12:04PM (#18942033)
    yeah, go for the 85 year old demographic, lots of money in music downloads to be had there.
  • by F34nor (321515) * on Tuesday May 01, 2007 @12:06PM (#18942077)
    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/ [engadget.com]
  • by BoRegardless (721219) on Tuesday May 01, 2007 @12:06PM (#18942081)
    If you are #1 in your field with a monopoly, you should not be talking about (read advertising) your small competitors.
  • by Space cowboy (13680) * on Tuesday May 01, 2007 @12:06PM (#18942093) Journal
    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 [valleywag.com] tell us [youtube.com] 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.
  • by hirschma (187820) on Tuesday May 01, 2007 @12:08PM (#18942119)
    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.
  • by thestudio_bob (894258) on Tuesday May 01, 2007 @12:13PM (#18942205)

    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

  • 85-year old Uncle (Score:3, Insightful)

    by necro81 (917438) on Tuesday May 01, 2007 @12:16PM (#18942231) Journal
    But my 85-year-old uncle probably will never own an iPod, and I hope we'll get him to own a Zune.

    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 /. 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.
  • by nick_davison (217681) on Tuesday May 01, 2007 @12:25PM (#18942367)

    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.
  • Re:Dang... (Score:1, Insightful)

    by ackthpt (218170) on Tuesday May 01, 2007 @12:29PM (#18942419) Homepage Journal

    Even Balmer's family isn't buying Zunes? I knew they weren't exactly a hit, but that's just sad.

    Doesn't it just bug you, a guy can be CEO, so stupid and yet worth billions?

    Here I am with my multiple degrees, driving around in a 1986 Volvo.

    It's not what you know, it's who you know. If Steve was suddenly working my job, could be get his current job? I don't think so.

    He may be able to toss a mean chair, but I don't accredit him any extrordinary wisdom or business insight. He's just a ruthless business man who ensures Dell will not be offering customers a choice between XP and Vista. With the leverage Microsoft have, they don't have to be smart and have shown how bloody minded stupid they can be on many occasions. Zune being just one of the latest. If they made a phone it would be a dud, just like the Zune.

  • by Edward Kmett (123105) on Tuesday May 01, 2007 @12:29PM (#18942425) Homepage
    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.

    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.Q1.07/9E F16A95-278E-40ED-9E00-FBEBD75207FB.html [roughlydrafted.com]

    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.
  • by Shivetya (243324) on Tuesday May 01, 2007 @12:31PM (#18942471) Homepage Journal
    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
  • by Col. Klink (retired) (11632) on Tuesday May 01, 2007 @12:36PM (#18942561)
    I thought Apple only expected about 1%. They don't feel this grade-schoolish desire to completely dominate everything, they just want to make a profit and they will do so with only 1% of the market. Apple will only "fail" if they use Microsoft's definition of success (complete monopoly). Apple's definition of success is to walk into a market and immediately make a profit, and they will do that.

    What Apple won't get is the mass market of crappy phones that carriers give away for free. I wish I only had rich customers with money to burn!

    Meanwhile, Balmer would *like* to have Windows on "60% or 70% or 80%" of the market, but he doesn't even have that (or a strategy to get there). Plus, whatever Apple does get will come DIRECTLY from people who would otherwise have bought a phone with Palm or Windows.

    As for the "end of the line of innovation," does Balmer really think Apple is going to plop out the iPhone and be done with it? And if he's so down on subsidies, I'd like to hear his opinion on Xbox subsidies.

    The bottom line is that if Ballmer really thought Apple was making a mistake, he would shut up and let them make it. The reality is that he just looks scared.
  • by Mattintosh (758112) on Tuesday May 01, 2007 @12:37PM (#18942571)
    Oh, that's not a subsidy. That's just Cingular/AT&T wanting to give it to you in the pooper. In other words, business as usual.
  • by kjart (941720) on Tuesday May 01, 2007 @12:38PM (#18942603)

    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.

  • by UnknowingFool (672806) on Tuesday May 01, 2007 @12:56PM (#18942887)

    Q: Let's broaden this a bit then. What type of future does MSN have? It's in third place, and that's a tough place to be in the search market.

    A: Well, in a way it is and in a way it isn't. Online activity is really quite fractured. Microsoft has the most visitors. Yahoo actually has people spending the most total time with them. And Google makes the most money.

    The real question is what's going on in the commerce and advertising side. That is not very fragmented. Most websites rely on DoubleClick or Google or Yahoo for our stuff to run.

    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.

    Q: People get passionate when Apple comes out with something new -- the iPhone; of course, the iPod. Is that something that you'd want them to feel about Microsoft?

    A: It's sort of a funny question. Would I trade 96% of the market for 4% of the market? (Laughter.) I want to have products that appeal to everybody.

    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.

    Now we'll get a chance to go through this again in phones and music players. There's 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.

    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.

    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.

    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.

    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.

    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.

  • Also, I'm going to hazard to guess that, if Apple does get a 2% market share, some of that share is going to be taken out of Microsoft's share. I mean, right now, Microsoft's market is "people who are willing to buy expensive smart-phones instead of the free comes-with-service-contract phone". Where do you think Apple's 2% will come from?
  • So what? (Score:5, Insightful)

    by gillbates (106458) on Tuesday May 01, 2007 @12:58PM (#18942939) Homepage Journal

    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.

  • by Speare (84249) on Tuesday May 01, 2007 @12:59PM (#18942947) Homepage Journal

    Yeah, go for the 85 year old demographic, lots of money in handheld video game devices to be had there.
    http://www.google.com/search?q=sales+figures+%22br ain+age%22 [google.com]

    I mean, I agree with your skepticism about his choice of example, but there's plenty of new markets to tap and it's silly to dismiss any demographic outright.

  • 60% of what? (Score:2, Insightful)

    by cshbell (931989) on Tuesday May 01, 2007 @01:16PM (#18943247)
    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."
  • by cowscows (103644) on Tuesday May 01, 2007 @01:32PM (#18943481) Journal
    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.
  • by Waffle Iron (339739) on Tuesday May 01, 2007 @01:37PM (#18943575)
    What was the last big American company to focus its marketing efforts on 85 year old uncles... wasn't it Oldsmobile?
  • by illumin8 (148082) on Tuesday May 01, 2007 @01:47PM (#18943753) Journal

    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.
    Sure, the first one will cost $500, just like the first iPod did. Do you think people were lining up around the block to pay $500 for a 5GB music player that was about 3 times the size of the current iPod? No, but the early adopters bought them, then the rest of us saw how well the worked, and the rest is history. All Apple has to do is make a sexy, innovative product that, most important of all, actually fucking works as intended and is easy to use. They seem to have a history of that and that is why their products do sell. Sure, only a million or so "early adopters" will buy the first ones, but pretty soon they'll be $99 with contract and everyone will want them. I give it 1 year from the first model is out, to when they have a smaller, more powerful model that is selling for at least a couple hundred less.
  • by @madeus (24818) <slashdot_24818@mac.com> on Tuesday May 01, 2007 @01:48PM (#18943767)
    Well, it's true that some people think ITV's Pop Idol (aka American Idol) is better TV than the BBC's Planet Earth.

    I bring that up because, personally, I really do think it has a lot to do being able to appreciate a classy product when you see one, a question of taste (for want of a better way of describing it).

    I'm quite serious and I'm really not trying to be snooty (and I know how this sounds and that it could be mistaken for flamebait) - simply not everyone can do that (they can look at something hideous and think it looks 'fine', they can eat terrible food and notice it's awful, can write terrible documentation and think it's "really clear" (or for that matter, write terrible code and have no idea how hideous and nasty it is).

    I'm with Steve Job's on this one, Microsoft just make crass software. They don't even TRY to get it write until they are embarrsed into doing so, and even when they do the result is half assed (compare the IE7 to Firefox or Safari's - it's not only technically worse than either of those two, but the UI is worse).

    I've used plenty of OSes, and prior to FreeBSD, for me and my uses, Windows was the best OS
    I do kind of wonder about that TBH, Mac OS 6 & 7 where so far ahead of Windows 3.1 from everything from CAD, to software development to even word processing.

    Despite the email address, I'm not a fanboy. There are plenty of technical reasons why I also like Gnome desktop (it's really nice, very flexible, and Nautilus has evolved into a better file manager than the Mac OS's current Finder). I think Windows is a terrible choice though (technically, and artistically) - and only worth using when the software you want to use is only avalible on windows, or if your writing software on it (but then, you are getting what you deserve :-).

    I have a Windows system, but it's purely for games (Apple hardware *still* doesn't support SLI, nor Mac OS a wide range of cards - specifically it doesn't support many high end cards, which is totally put be off getting a mac desktop). Windows is actually pretty good at games though, largely due to optimised drivers from vendors, but DirectX itself is certainly to Microsoft's credit (even if it does mean many developers are less likely to use Open GL).
  • Re:So what? (Score:2, Insightful)

    by cybereal (621599) on Tuesday May 01, 2007 @02:08PM (#18944105) Homepage
    The iPhone is anything but unencumbered. You can't even use all of its features outside of the Cingular network due to requirements of proprietary support for the Cingular network's voicemail sysem.

    And since it's not even out yet, and nobody has answered the question, you still don't actually know if the phone will be sim locked to Cingular, which it most definitely will be. And even better, it has little chance of being unlockable.

    Also, there is nothing "standards" based about this phone above and beyond any other handset. Just vendor lockin for media, and OS X-like software interfaces, with a questionable touch screen interface.

    Now don't get me wrong, I'm very interested in the device. But as a cell phone enthusiast, I can say with affirmation that you have no idea what you're talking about, and you should not be surprised when the product does fail as Ballmer is suggesting. Apple doesn't seem to understand the cell phone market at all. The price is way too high for the feature set.

    That said, I hope it does succeed to some degree, just enough to convince apple to do a more open and logically designed second revision. The only nice thing about this phone is the 8gb iPod built in. Everything else is just eye candy on top of the same old features, and no third party software (not even J2ME, apparently) to boot.
  • The 640k quote is a total myth.

    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.

  • by Anonymous Coward on Tuesday May 01, 2007 @02:31PM (#18944491)
    The more Ballmer tries to talk the iPhone down, the more I start to believe that Microsoft is scare. VERY SCARED!

    Microsoft missed it with search, missed it with portable music/video players, and it knows it will lose it on cell phones. Apple is coming on strong in all departments.

    What does Microsoft have to show for the last 5 years? More "functionality" in Office that no one will use; Vista, the OS that was a last minute scramble because Longhorn was a massive failure and is so buggy and has so many security holes they are having a tough time selling it; and their crappy search engine. Microsoft is only pulling in money because of the locked in legacy market they have.

    As for subsidizing the iPhone. What is Microsoft doing with the XBox? It is sold at a loss. Let me think, what is that called? Ohh yea! SUBSIDIZING!

    Bravo Mr. Ballmer!

    I don't know what is wrong with Microsoft these days. They can't innovate (not that they ever did) and they can't evolve existing products in smart ways (something they were actually not too bad at, at one time). And now, even their lies are obviously lies.

    I remember a time when Gates and friends could come up with good lies that you could halfway believe. Some you even wanted to believe. Now they just seem desperate.

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