Foley on Microsoft
Microsoft's Obsession with Apple
If left unchecked, Microsoft's Apple fixation could be the company's undoing.
Microsoft executives obsess over the competition. It's part of their DNA. They obsess when the competition has a commanding lead in a market that Microsoft wants to own (Exhibit A: Google). Redmond also obsesses when it owns a market and another competitor is a speck on its radar screen (Exhibit B: OpenOffice.org).
In the past year or so, it has become clear that Apple -- which falls into both of the categories above -- has become one of Microsoft's biggest obsessions. Microsoft's preoccupation with Apple in the PC market puzzles me. Actually, it's downright nutty. And if Microsoft doesn't come to grips with it, the 'Softies' Apple-PC fixation could be Redmond's undoing.
It makes sense that Microsoft's Entertainment and Devices Division brass focuses on Apple. Division President Robbie Bach and his cohorts are just about ready to give up on the Zune's pursuit of Apple's market-dominating iPod. On the mobile-phone front, Microsoft is hoping to catch up with Apple and its iPhone. However, Redmond likely won't be able to even really start chasing Apple here until spring 2010, when, as rumor has it, Microsoft will release its first Windows Mobile 7 phones.
Cut to the PC market. Windows PCs still have more than 90 percent market share. Apple has between 4 percent and 8 percent share and Linux has 1 percent or so, depending on whose numbers you believe. Apple has cornered the market on pricey PCs sold at retail in the United States, according to data from market research firm NPD Group. But in much of the developing world, Apple is a no-show.
When they're thinking clearly, Microsoft execs admit that Apple isn't a serious challenger in the PC space. In its fiscal 2009, Apple's gains against Windows were no more than "a rounding error," in terms of percentage points, CEO Steve Ballmer told Wall Street analysts attending Microsoft's annual Financial Analyst Meeting in late July.
"Apple's share globally cost us nothing," Ballmer told the Wall Streeters. "Now, hopefully, we'll take share back from Apple -- but Apple still only sells about 10 million PCs, so it's a limited opportunity."
If this is how Microsoft perceives its PC battle versus Apple, how can the Redmond bean counters possibly justify Microsoft spending more than $300 million on a Windows ad campaign that largely targets Apple, or who knows how many millions on the new Microsoft retail stores? The first Microsoft stores are due to open this fall in Mission Viejo, Calif., and Scottsdale, Ariz. Redmond is modeling them after Apple stores, right down to a Genius Bar -- like "Answer Bar."
Microsoft's premise in its "Laptop Hunter" PC ad campaign is that users looking to buy new PCs flit from store to store and are as ready to spend money on a Mac as they are on a Windows PC. This isn't how the computer buyers I know think. The vast majority of them seem to already be wired to buy either a PC or a Mac and have narrowed their search to one of those two camps before going shopping. It's also rare that users who have committed to the Mac are going to jump ship just because there's a new release of Windows, even a decent one like Windows 7. Once you go Mac, you seldom go back.
Microsoft execs cite "the consumerization of IT" as the biggest reason for their Apple madness. What they're talking about is the notion that users who love their Xboxes or Windows Home PCs will turn around and buy lots of Windows Server Datacenter and SQL Server Enterprise copies for the enterprise. I don't buy this whole consumerization theory. Instead, I think Microsoft management has realized that the company can't function well unless it's fighting an enemy. And in the computer market, there's only one competitor left: Apple.
Have Microsoft execs taken leave of their senses when it comes to Apple? Will they ever return to rationality?
Mary Jo Foley is editor of the ZDNet "All About Microsoft" blog and has been covering Microsoft for about two decades. She has a new book out, Microsoft 2.0 (John Wiley & Sons, May 2008), about what's next for Microsoft in the post-Gates era.