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Microsoft Businesses Cellphones Handhelds Iphone

Steve Ballmer Says Smartphones Came Between Him and Bill Gates (fortune.com) 114

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.
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Steve Ballmer Says Smartphones Came Between Him and Bill Gates

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  • by Anonymous Coward

    he now admits that he failed to anticipate carriers subsidizing the cost of the phone.

    Huh? How could he have failed to anticipate this? It was already widespread in the industry!

    • Re:Subsidies (Score:4, Interesting)

      by Tx ( 96709 ) on Sunday November 06, 2016 @07:04AM (#53222475) Journal

      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 [davidcaren.com]

      • apple tried the blackberry deal where the carriers kicked money back to blackberry depending on which data plan you chose. like if you wanted to connect to a corporate BES server for push it would be the most expensive one

      • by stang ( 90261 )

        had to pay almost full price ($500-600) for an iPhone AND had to sign a 2-year contract

        Not true, at least for existing customers. I bought the 8GB version the day after it came out and signed nothing.

    • 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.

  • by Anonymous Coward on Sunday November 06, 2016 @06:44AM (#53222433)

    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.

    • Re: (Score:3, Interesting)

      by Anonymous Coward

      You're aware that the portable versions of WinCE/WinMobile have been commercially available in third-party devices since 1996, right? And smart phones as early as 2003? That is exactly the tact that Microsoft first followed; they developed the OS as a series of components and allowed the hardware manufacturers to customize the image to the device. It was also a wide-open platform that allowed anyone with a compiler to write an application in a multitude of languages and frameworks and deploy that applica

      • by supremebob ( 574732 ) <themejunky@@@geocities...com> on Sunday November 06, 2016 @07:41AM (#53222575) Journal

        The problem there was that the early Windows CE and Windows Mobile devices were horrid. The UI sucked, the OS was buggy as hell, and the hardware designs were clunky. I gave up using mine after it crashed and lost all of it's data for the fourth time.

        • by gtall ( 79522 )

          In addition to that, I think Google looked at what Apple was going to do (Schmidt was on their board) and what MS was providing and decided they could screw MS out of a market and use MS's PC software strategy to screw Apple. However, they didn't do it just to screw the other two, they did it because Google knows its own revenue streams better than anyone. Having a dominant OS on phones when PCs were going nowhere or down due to be being an overmatch for what people actually used computing for, meant that t

          • by Rob Y. ( 110975 )

            I'm not sure Google really wanted to screw Apple. They must've (smartly) realized that eventually Microsoft would come up with something good enough to compete with iOS, and once the OEMs standardized on that, MS could use their mobile OS to grab search away from Google. They'd have been happy for Apple to continue on using Google's applications - but Apple got pissed off and tried to 'hurt' Google by removing their apps from iOS. Apple would've been in the same (or a worse) competitive position had Micr

            • by Uberbah ( 647458 )

              Sure, Google had bigger ambitions than were obvious at the time - but Apple's hubris and their sense that they're entitled to 'own' a whole category just because they got there first

              Hatorade Distortion Field. As the parent poster pointed out:

              I think Google looked at what Apple was going to do (Schmidt was on their board)

              It's one thing when another company gets into the same field you are in. It's another thing entirely when the other company's CEO is on your board, and their design suddenly switches from

              • Sure Google had knowledge of where Apple was going. But they didn't need any special access to know that Apple alone wouldn't control mobile. And the only other likely contender was Microsoft. The same Microsoft that was already trying to grab Google's business on the desktop. My point is that Android vs Apple was probably better for Apple than Windows vs Apple. There was going to be a cheap OEM smartphone OS one way or the other.

        • That's because win ce was designed by techies who to this day think phones need hardware keyboard buttons at the expense of screen size.

          The iphone wasnt the first all touch phone. but it was the first all touch phone with basically a full web browser installed. It also ditched most of the buttons in favor of the touch screen, and it made the touch screen keyboard smartly appear and disappear as needed.

          That is the revolution that microsoft missed. instead of forcing an ugly mobile web, and tiny screens app

        • The problem there was that the early Windows CE and Windows Mobile devices were horrid. The UI sucked, the OS was buggy as hell, and the hardware designs were clunky. I gave up using mine after it crashed and lost all of it's data for the fourth time.

          And Microsoft never recovered from that even when they came up w/ an excellent phone OS. IMO, they should have named Windows Phone 'Metro', and run it as its own brand, w/o touching the Windows brand. That way, it wouldn't have been associated w/ Windows CE. Had Nokia run such a phone on its Lumias, it could have caught on on its own, w/o the Microsoft name being so visible. I had a Lumia 520, which was my first smartphone, and using it was a lot smoother than the old Moto RAZR as far as texting went.

        • The UI sucked, the OS was buggy as hell, and the hardware designs were clunky. I gave up using mine after it crashed and lost all of it's data for the fourth time.

          I gave up on mine after my wife wanted to argue with me over the phone and the phone kept hanging up on her. Seriously. Less, seriously, *I* should have been the one hanging up on her, not my phone.

      • Except that their software for devices was not very good. By that I mean, completely awful. The only reason anyone ever used WinCE was loyalty from Windows fans and a mistaken idea from some that it'd be easier to hire cheap commodity Windows developers without losing any quality. I remember my boss getting a Windows based PDA and bragging that it could do Word in color, and then a month later was bitching about it and wishing he still had his Palm V.

        For some reason there's a group of people who just ref

    • by gdshaw ( 1015745 )

      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.

      At the time a large majority of Windows Phone sales came from Nokia, but Nokia was incurring large losses as a result of this and it is doubtful as to whether they could have continued for much longer. Market share for Windows Phone was languishing around the 3% mark, which wasn't good, but at least kept Microsoft in the fight. Buying the smartphone division of Nokia was arguably just delaying the inevitable, but if Microsoft had not done that then Windows Phone would have failed sooner, more abruptly, and

    • most of the android phone makers operate at a loss or bare break even. apple takes home most of the money in the cell phone market

      • And Monster cable is the only HDMI cable maker making money, all others barely break even.

        That Apple makes so much money is good for them and their investors, but not for the consumers using their phones.

    • by Karlt1 ( 231423 )

      Apple is not "hurting itself" by not allowing other companies to license IOS. The purpose of any company being in business is to generate profit not to increase market share. All of the other phone manufacturers are either losing money or barely profitable. Do you really think that Apple could maintain its current profit margins by licensing its OS for sale on $50 phones?

      • Apple is not "hurting itself" by not allowing other companies to license IOS. The purpose of any company being in business is to generate profit not to increase market share. All of the other phone manufacturers are either losing money or barely profitable. Do you really think that Apple could maintain its current profit margins by licensing its OS for sale on $50 phones?

        Exactly. Even if Apple was crazy enough to license iOS, how much money could it make competing with free, as in Android? Furthermore, th

        • The history of Apple is replete with pundits who say, 'If Apple doesn't change what it's doing, then it will go out of business.'

          However this only seems to hold true when Jobs was the CEO. During the brief period when he was not they very nearly did go out of business...and sadly it seems to be happening again.

      • Precisely!!! When Apple terminated its cloning experiment for Macs w/ Power Computing, Umax and Motorola SPS, it was clear that they determined that getting the platform to eclipse Windows was not gonna happen. So it makes less sense for Apple to license iOS, when the fact that phone and OS is all owned by the same company is a big factor in its success
    • by Nemyst ( 1383049 )
      But Microsoft did allow hardware makers to make their own handsets running Windows Phone. There has been a few models from each vendor, the problem is that they generally sucked and they all had the same fundamental issue: the OS just came too late to the fight, making it have an insurmountable deficit in its app market compared to Android and iOS. Hell, Android, which trailed iOS in high availability by not very long at all, took years to make up that deficit. Developers get very attached to whatever ecosy
      • by c ( 8461 )

        There has been a few models from each vendor, the problem is that they generally sucked...

        Well, they didn't suck, really, but aside from the Lumia they were mostly just second-tier Android phones with Windows and a new label. OEM's weren't stupid enough to put a lot of design and development effort into flagship Winphones, and as Microsoft got more desperate and cozied up to Nokia they cared even less.

        The only standout Winphone's were the Lumia series, and in the end Microsoft was stuck with the choice of g

  • What Microsoft needed to do, and failed, was to get a big chunk of the new market called "mobile". Microsoft surface division with its much touted billions of marketshare is not mobile. It's 100% pure PC: PC hardware with PC software. Not a single sliver of a new market there at all. So the surface division as it stands right now is totally irrelevant to this.
    Even if you want part of the mobile market, it's debatable if you need to build your own hardware. Google steamrolled this market and now owns it like

    • Microsoft's major mistake under Ballmer was mucking w/ the Windows OS. Windows 7 had attained a point where it was just good enough, and simply changing the flag to a window, and the underlying kernel, and adding a few Aero themes and then calling it Windows 8 would have been rather adequate. Also, they could have packed VirtualPC supporting every preceding version of Windows - from 3.1 to XP.

      Instead of that disaster called Windows RT, Microsoft could have released a very specific ARM based OS (preferab

    • Microsoft made a mistake in assuming its customers were locked in and could never abandon ship. So they could spend the billions and assume they'd make double that back, since no one would dare leave and use something else. Microsoft also had an arrogance that made them think they could dominate any market no matter how late to the game they came or how inept their were. Since they had essentially a Windows monopoly they wanted to make use of that to force their way into other markets and lock them down.

    • Re: (Score:2, Insightful)

      by guacamole ( 24270 )

      This is a great post. Microsoft and its followers have created some kind of a cult following around the Surface Pro "tablets", and they actually claim it is a good "tablet", actually the best out there. But in reality the Surface Pro is basically an PC Ultrabook, with a detacheable keyboard. It's very lousy as a tablet, when used in tablet-mode without keyboard, and it's a lousy laptop too, because it's pretty awkward to use this thing as "LAPtop". Most Surface Pro users, use this device as a PC ultrabook,

      • Here's what it boils down to. Microsoft looked at Apple pulling in 30% of every app in their app store and got a raging hard-on for that kind of revenue and basically sacrificed everything good about Windows to try to achieve the same thing. Of course, they totally failed and we ended up with the ugliest version of Windows in 20+ years as a result.

    • It's funny you should mention MIPS because Windows NT used to run on MIPS, back when it was more flexible. It seems every generation of Windows becomes less flexible in some way. Nowadays, Windows can't even render the "Windows classic" skin from Windows 2000 (the only Windows theme I ever liked), which was removed from Windows 8. I guess Windows isn't powerful or flexible enough to do that kind of thing any more.

  • Will generate $4 billion in sales and about $187,000 profit... HEY PROFIT IS PROFIT OK?
  • by Anonymous Coward

    Developers! Developers! Developers!
    Smartphones! Smartphones! Smartphones!

  • Microsoft has never had the competence to develop something you'd want to use as a phone. I've owned a couple Windows Phones and several Windows PDAs and they are simply not capable of developing an operating system sufficiently reliable or usable for that purpose. But they are capable of producing a decent general-purpose computing device. Windows Phone is dead last in the market, and it always will be. Ballmer was right.

    • Apple and Google have decided to throw away any compatibility with computers when they developed their mobile OS. You can't run the same application on your iPhone or an Android phone and on your computer.

      Microsoft has decided to go the other way, sacrifice usability but maintain the compatibility. You could technically take an application from your computer and run it on your tablet or phone. They own most of the desktop OS market, so why throw it all away and make a completely incompatible device? Let's m

      • Well, you can't take the application and run it elsewhere easily, but you could take the data files. So there were two mistakes; first trying to make the applications portable. Microsoft knows this is a problem because whenever they create a "simple" or "home" application they don't use the absurd Office formats.

      • by rtb61 ( 674572 )

        You just do not get it. For some people, a minority, say 1%, cheating is most emphatically winning. Winning for them is all that counts, Ballmer scammed everyone including Gates, the smarmy insurance salesman, who brought nothing to M$ except smarmy manipulative sales tactics. Did Ballmer win for taking credit for other people's efforts, did Ballmer win for blaming others for his own mistakes, as far as Ballmer is concerned, he is rich, he won, everyone else is stupid for no recognising his true genius at l

    • by nomadic ( 141991 )
      I thought the Windows Phone had the best phone OS around. It was perfectly reliable and useful, and had a better interface than Android or iOS and better performance. The problem was just the apps weren't there.
  • by Rosco P. Coltrane ( 209368 ) on Sunday November 06, 2016 @07:21AM (#53222505)

    Fine example of selective memory...

    • Well, it's the only thing he does regret. There's plenty more he should. And probably would if he was smart.

      • He made plenty of mistakes (but so does every CEO as you can't predict the future perfectly), but on the whole he was extremely successful CEO that increased profit and revenue throughout his tenure. He certainly missed the smartphone boat, but he got the Surface right (after the initial dud that was RT).
    • by Anonymous Coward

      This really isn't surprising though. He can't remember anything from the half of his time he spent on the right side of the Ballmer peak [xkcd.com].

  • "Steve Ballmer once said .. that he failed to anticipate carriers subsidizing the cost of the phone. "

    Any actual hard facts that the only reason the iPhone succeeded was that the carriers subsidised it. Or is this yet another example of Microsoft respectively rewriting historical facts to present itself in a better light.
  • wake up, Ballmer (Score:4, Insightful)

    by ooloorie ( 4394035 ) on Sunday November 06, 2016 @08:34AM (#53222715)

    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.

    • by Lumpy ( 12016 )

      What? sorry but the Blackberry and Palm Treo was the defacto standard in the smartphone world before apple. Windows CE phones were an utter mess and purchased by very few. Business communications was OWNED by blackberry back then.

      • What? sorry but the Blackberry and Palm Treo was the defacto standard in the smartphone world before apple.

        No, not really. Worldwide, in 2007, "Symbian" had the largest market share, followed by Microsoft, RIM, and Palm. But Microsoft and Palm were really the only ones that had anything like a modern smartphone and app experience. Microsoft was also widely used for PDAs, tablets, and verticals.

        You can quibble about whether "dominant" is the right term for that market situation; the point is, however, that M

    • by djbckr ( 673156 )

      ... because their product sucked.

      True. I had the unfortunate experience of owning a Windows phone for a while. About every other call I got would crash the entire thing. Worthless. When I would use the features of the phone (browser, mostly) it would crash regularly.

    • by g01d4 ( 888748 )
      The reason Microsoft lost in the smartphone market was because there wasn't enough of a corporate legacy they could leverage like they could with personal computer software after filling the vacancy left by IBM. Smartphones were an open, mostly consumer market where they had to compete on more of an equal footing.
    • by Tablizer ( 95088 )

      The problem with Microsoft's phone effort wasn't that Microsoft didn't invest in it soon enough...The reason Microsoft lost in the smartphone market was because their product sucked.

      So the real debate was over how to suck.

      MS has traditionally thrown essentially beta editions out at relatively low prices or as part of bundles, and then let the market and time debug it. But that doesn't work well with hardware.

      With software, a bad product doesn't keep you from using your computer for other things. But bad har

  • by Lumpy ( 12016 ) on Sunday November 06, 2016 @09:53AM (#53222951) Homepage

    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.

  • Who cares what Fat Skeletor has to say?

  • phone subsidies (Score:5, Insightful)

    by mixed_signal ( 976261 ) on Sunday November 06, 2016 @11:10AM (#53223239)

    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.

    • by PPH ( 736903 )

      "I wish I'd thought ...." [Ballmer] said.

      Pretty well sums up his time at Microsoft.

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