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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 PinkPanther (42194) on Tuesday May 01, 2007 @12:06PM (#18942087)

    I don't know why ... is it the bash kernel?

    No it is not. BSD kernel, bash shell, but not the bash kernel.

    ;-)

  • by SiO2 (124860) on Tuesday May 01, 2007 @12:13PM (#18942203) Homepage
    Maybe so, but Jobs was right.

    http://slashdot.org/article.pl?sid=06/11/18/155821 3&from=rss [slashdot.org]

    SiO2
  • by kjart (941720) on Tuesday May 01, 2007 @12:32PM (#18942483)

    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.

    Except, you seem to be wrong [consumerist.com] (unless something has changed since then). I'm sorry that Steve Jobs isn't the revolutionary that you want him to be.

  • by flydpnkrtn (114575) on Tuesday May 01, 2007 @12:35PM (#18942545)
    Actually, if you really want to get technical, no it is not.
    Darwin is the BSD-based OS, XNU is the kernel, not the BSD kernel. :)
  • by kjart (941720) on Tuesday May 01, 2007 @12:54PM (#18942865)

    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.

    Ahh, that's what is meant by a "subsidy". Ever notice that phones are cheaper when you get a contract? That's because the carrier will cover part of the cost of the phone to get you on a contract (usually 50-100/year, here in Canada at least).

  • Market Share (Score:3, Informative)

    by norminator (784674) on Tuesday May 01, 2007 @12:57PM (#18942923)

    He did make a good point- who cares if it is recognizable if it only has 3% of the market?

    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.
  • by Anonymous Coward on Tuesday May 01, 2007 @01:07PM (#18943093)
    RTFA. He's obviously making a joke about Ballmer's "there are no CEO schools" comment.
  • by Dan Ost (415913) on Tuesday May 01, 2007 @01:10PM (#18943135)
    Every road warrior I've talked with recently is planning on getting an iPhone.

    Do they care that it's $500? No. And why should they? They're going to expense it anyway.

    Time will tell exactly how big the market for the iPhone is, but if I had to guess,
    I'd say the Apple will do very well.
  • by radtea (464814) on Tuesday May 01, 2007 @01:24PM (#18943379)
    But if you calculate the amount of profit per employee Apple might be doing much better than MS.

    Speculation of this kind is passe' in the Internet Age. Google "microsoft number of employees" and find some helpful Wikipedia articles:

    Microsoft: [wikipedia.org] $12.6B/71712 employees = $177,035.91/employee

    Apple: [wikipedia.org] $1.73B/17787 employees = $97,262.05/employee

    Note the reporting periods are slightly different (MS is 2006, Apple is 2006Q1 TTM), but the numbers are essentially comparable.

    So while is might be that Apple has higher productivity, and in fact I fully expected that would be the case, a naive reading of these numbers (ex MS perma-temps etc) suggests otherwise.
  • by dal20402 (895630) * <dal20402.mac@com> on Tuesday May 01, 2007 @01:25PM (#18943397) Journal

    Your MacBook is almost five years old? Impressive, considering they first came out about a year ago [macworld.com]... Perhaps you meant "iBook."

    Agree with your analysis, though. While I might consider a Win/Lin desktop, I have just not seen laptop offerings competitive with Apple's. The closest in terms of build quality and design is Lenovo, and even their offerings are thicker and uglier (while not offering DVI or FireWire 800). Others may be more feature-complete but are huge, heavy, criminally ugly monstrosities next to a MacBook Pro.

    Even if I needed to buy a Windows laptop, given the choices I have today, I'd buy an MBP.

  • by Lazerf4rt (969888) on Tuesday May 01, 2007 @01:31PM (#18943473)

    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?

  • by frdmfghtr (603968) on Tuesday May 01, 2007 @01:53PM (#18943851)
    I find it interesting that Ballmer is projecting that the iPhone will get a bigger chunk of marketshare (2-3%) than Jobs predicted in the MacWorld keynote...didn't he state that the target for iPhone sales was 1% of the cellular market?

    1% of a giant shitload of phones (and there is a GIANT shitload of phones in use today, with over 230 million subscribers [twice.com]; where does Ballmer get the 1.3 billion from, world market?) is still a big number; and sometimes keeping things small and manageable can be more profitable and more fun than being the biggest, baddest company out there.

    Success isn't just a matter of the bottom line (too bad too many CEOs don't see that).
  • by john82 (68332) on Tuesday May 01, 2007 @03:51PM (#18945839)
    Saying Apple has 2-3% of the cell phone market (hardware+software) compared to MS's 60 to 70% (software) is ridiculous

    Not only that, it's untrue. According to a Q4 2006 survey by Canalsys [symbian.com], Ballmer inflated Microsoft's penetration in the smartphone market by at least an order of magnitude:
    Symbian - 72.5%
    Linux - 16.9%
    PalmSource - 2.0%
    Microsoft - 4.6%
    RIM - 3.8%
    Others - 0.2%

    There's considerable difference between 60-70% and 4.6%.
  • by mattr (78516) <mattr.telebody@com> on Tuesday May 01, 2007 @04:25PM (#18946517) Homepage Journal
    According to a Bloomberg News article [iht.com] 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 [answers.com]$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.

  • by mkiwi (585287) on Tuesday May 01, 2007 @11:52PM (#18951315)
    I would correct you in this, seeing as the wikipedia entry is old and new earnings for both Microsoft and Apple have just come out this quarter. Let's play devil's advocate, assuming Apple adds 5000 employees and Microsoft adds zero, MS would have ~71,000, Apple ~23,000

    The numbers go as follows. For the same fiscal quarter, Apple had revenue of $5.26 billion.
    MS has more revenue at 14.40 Billion.

    These numbers are from the companies' own SEC filings and press releases, NOT wikipedia (probably not a good place to get financial information).
    You can find them at:
    http://www.apple.com/pr/library/2007/04/25results. html?sr=hotnews.rss [apple.com]
    http://www.microsoft.com/msft/earnings/FY07/earn_r el_q3_07.mspx [microsoft.com]

    Now let's redo that calculation with our worst case scenario (for Apple) numbers.

    Apple 5.26 x 10^9 / 2.3 x 10^4 = $230K per employee (with 5000 added employees)
    Microsoft 14.40 x 10^9 / 7.1 x 10^4 = $203K per employee

    Those are your real numbers. Don't rely on wikipedia for everything- it's not a Bible.

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