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Steve Ballmer: Apple's Proprietary Hardware & Software Will Lose to Microsoft

Steve Ballmer: Apple's Proprietary Hardware & Software Will Lose to Microsoft

by , 1:15 PM EDT, September 26th, 2008

Apple's business model of offering proprietary software combined with proprietary hardware will lose out to Microsoft's licensing approach in the smartphone market, and keep the company from gaining any more share in the personal computing and enterprise markets, according to Microsoft CEO Steve Ballmer.

Mr. Ballmer made his remarks at the Churchill Club in San Jose, CA Thursday during a dinner/discussion moderated by noted venture capitalist Ann Winblad.

Smartphones

Concerning the smartphone market, Mr. Ballmer posited that all cell phones will be so-called smartphones in five to ten years, and that the vast majority of them would be Windows Mobile devices. That is, according to Mr. Ballmer, because the market will mature into one with separate software and hardware businesses, the model by which Microsoft came to dominate the personal computing market.


Steve Ballmer
(Photo courtesy of Microsoft)
For any company to do well in this future market, they'll have to follow Microsoft's business model -- a model that the company already tried to ditch with its own answer to the iPod when it started selling Microsoft branded Zune digital media devices (that lag far behind Apple's proprietary iPod line).

Looking at Nokia's smartphone market leading 30% market share, The Standard reported that Mr. Ballmer said, "If you want to reach more than that, you have to separate the hardware and software in the platform."

When it comes to that business model, Mr. Ballmer said that his company's Windows Mobile platform was more mature than the competing Symbian OS, various flavors of Linux, and Google's new Android platform.

As for Apple and RIM? Mr. Ballmer said they'll be relegated to niche status. "That doesn't mean Apple and RIM wont make lots of money," CNet reported him as having said, but, "[Microsoft is] kind of battling for the big part [of the market]."

Macs & PCs

"Apple's a good company," he also noted. "I won't take anything away from them, but they have a certain kind of strategy. They believe in putting the hardware and software together, they don't believe in letting other people make it."

This will hold Apple back in the personal computing space, too, from Mr. Ballmer's point of view. According to The Standard, Mr. Ballmer said that Apple won't increase its market share for Mac computers because of its closed model.

Apple has been making steady gains in market share for the last three years, rising to 6.6% of the U.S. market in the first quarter of 2008, up from the 2% range earlier in the century.

Internet Search

Mr. Ballmer's most audacious comments came up when he was asked about his company's Internet search business. "You don't really brute force your way into any market," he said, a comment that caused CNet's Ina Fried to report, "I looked around, but I didn't see anyone choke on their water over that one."

Microsoft as a whole and Steve Ballmer in particular spent several weeks blustering over an attempt to buy Yahoo's search business, an effort that included multiple threats of a hostile takeover and an attempt at a proxy battle lead by Carl Icahn on Microsoft's behest.

In the end, all of Mr. Ballmer's bluster amounted to a withdrawal of its offer and a rejection of Mr. Icahn's proxy battle.

In any event, with Microsoft's newfound wisdom about brute force and new markets, Mr. Ballmer said that Internet search was a priority for his company, and that he was willing to lose "5 to 10 percent of total operating income for several years" to improve that business.

Observer Comments

Show: Subjects Only | Full Comments
Close Name:dlstarr7 Posts: 119 Joined: 12 Jul 2001
Subject: Whoa

I think Ballmer has been taking advice from Karl Rove.

Close Name:Guest
Subject: Great news for Apple

Give Ballmer's track record at predicting Apple's fate, this latest variation on his criticism of the Apple business model all but guarantees their success. As long as Mr. Ballmer remains the CEO at Microsoft, Apple will continue to thrive. Time to buy Apple stock.

The irony is that Microsoft is already dead. They're just so huge that you can't tell yet.

Close Name:noworryz Posts: 7 Joined: 15 Nov 2007
Subject: OK, then

OK, then, it's settled. Microsoft is so successful in the small device market (e.g., Zune) that we should all give up and buy Vista.

Close Name:Guest
Subject: You would take advice from Steve B

Microsoft should buy back a large block of their own stock. It's real cheap right now.

Close Name:Guest
Subject: The Iraqi Information Minister has a new job...

Writing speeches for Ballmer...

And why do i always have to fill in the captcha on two pages!!

Close Name:Guest
Subject:

Boy has he been drining the juice. People are so upset with "proprietary" Office 2007, I know of several seriously considering switching to open-source for their next office productivity suite. Balmer better wake up and smell the coffie.

Close Name:Guest
Subject:

that guy is clearly an f-tard. Microsoft gets their ass handed to them on everything they try that's outside of PCs. Their phones are doing alright, but with the iPhone and RIM continuing to gain ground, and Android about to hit the market, MSoft is probably going to get burned out of that market as well.

Close Name:cramar Posts: 98 Joined: 21 Jun 2007
Subject: Just watch, Mr. B.

"Mr. Ballmer said that Apple won't increase its market share for Mac computers because of its closed model."

I predict that the trend of the past few years will continue and Apple will eventually double its market share.

What you don't understand Mr. B. is that people want to buy something that just works the way it should?not something that works the way you think it should work.

Close Name:Guest
Subject:

Seriously, I would like some of what Ballmer is smoking. He had made fun of the iPhone and said no one will use the touch screen coz ppl want keyboards. And look where the iPhone is at now. With the delays of Win Mo 7. I'm not too excited about Microsoft's Mobile Division.

Close Name:tbone1 -   TMO Staff Posts: 3981 Joined: 13 Jul 2001
Subject: A Question

In the PC market, the dominantly successful model is one person providing software for commodity hardware makers, without tight integration.

Is there another electronics-related business where this works? I can't think of one. I mean, there are common (if not open) formats like the music CD, the DVD, the audio tape, etc, but that's not the same thing as the software all being the same.

The point being, they found a business model that works for PCs, but when they try to go into other, related areas, that business model doesn't work, so they have trouble leveraging their strength [sic].

Close Name:Guest
Subject: CEO - Can't Engineer an OS - Ballmer

Yes, we all should listen to the ramblings of an unsuccessful Ballmer. Isn't he the one responsible for not delivering a single, stable software product since he was promoted to CEO. I guess that since I don't have to reboot my MacBook Pro but once every 30-45 days, I should run out and replace it with Microsoft's almighty, Never Can Boot Vista.

Close Name:Guest
Subject: lessons from history

I'm not necessarily a Microsoft fanboy and Ballmer is mixing issues here when he says closed model and packaging hardware and software together but he is right when he says "Apple won't increase its market share for Mac computers because of its closed model."

History has already proven him right. If Apple had any brains they would have followed Microsoft's example back in the late 70's but instead they wanted to do the closed model thing so no other company could help propel them into the lime light by making generic hardware that could run their software like Microsoft was doing. Microsoft didn't make itself successful. The hundreds of companies who saw the opportunity to make a buck by manufacturing hardware that met the open standard and was thus easy to do did so and so millions more PCs running Windows flooded the market while stupid Apple was left in relative obscurity because they would not open up their model to let other companies propel them into the public eye.

The last few years of Apple increasing their market share is similar to stocks going up and down, this time because Vista was not terribly impressive at launch, but they will never become as monolithic as Microsoft is because of thier closed mentality.

The funny thing is that they really aren't closed anymore. They used to be and they want people to continue to think that because it makes it easy for them to convince people that they make better products because of it - when in reality they are using standard third party vendors just like DELL, HP, or any other OEM.

Don't believe me? Open up your Mac and look up the serial numbers you find on the MoBo, RAM, HDD etc.

Apple is just another DELL that happens to write its own software - 80% of which they actually stole from BSD UNIX anyway.

Pathetic. Truly pathetic.

Close Name:bb-15 Posts: 20 Joined: 21 Aug 2007
Subject: another view of PC-OS history

I think that Ballmer is half right about Apple's potential with personal computer market share. I don't see the Mac having more than 10% in the U. S. and about 5% worldwide. Like it or not Windows is the PC OS standard for big business and for governments. That creates a scale of production which allows Windows PCs to dominate the bottom (pricewise) of the market.

As for whether Apple should license its OS and try to compete directly with Windows, that opportunity ended in the mid-80s. Once IBM and Microsoft agreed that MSDOS and later Windows would be the standard OS, Apple's chance to be the standard OS ended. The PC OS market leads to a natural monopoly which Microsoft has and will not let go of.

But in the area of MP3 players Apple could continue to remain dominant. And as for smart phones, RIM and Apple have much more potential in having a large market share. Tight integration between software and hardware with small devices is preferred by most customers. And Apple excels in a kind of integration. Apple just needs to keep its prices competitive and it will be fine.

BB



Last edited by bb-15 on Fri Sep 26, 2008 3:02 pm; edited 1 time in total
Reply | Quote
Close Name:Sir Harry Flashman Posts: 792 Joined: 08 Feb 2007
Subject: He is effective

Quote
dlstarr7 wrote:
I think Ballmer has been taking advice from Karl Rove.


Like the results or not, Karl is effective at what he does for a politician.

As to Steve Ballmer said. It is kind of like what sports team coach says when asked by a reporter how they will do in the upcoming game; The truth may be "We don't have a chance against that team, they are much better players than us. If we weren't getting paid to show up at the stadium I would just as soon stay at home."

Macs, iPhones, and iPods work so well because Apple does both the OS and the hardware. With Windows Mobile you could have a round peg that you are trying to fit into a variety of shaped smart phones. You might be able to pound it in, reshape the hole or the peg, or have a loose fit, but it isn't as ideal as parts that were made for each other.



Last edited by Sir Harry Flashman on Fri Sep 26, 2008 3:53 pm; edited 1 time in total
Reply | Quote
Close Name:Guest
Subject: "Lessons" from history

Soooo... let's disect your little diatribe. Your first thought line is basically 20/20 hindsight. However, history does not always repeat itself.

Microsoft makes money on every sale from the various manufacturers. Millions of PCs did not "flood the market". There was, and is, competition to sell PCs, but it wasn't as if there was a massive closeout sale. It also wasn't a license to print money. Competition brings down selling prices, increasing sales, but MS still gets their share. Customers, however, receive "just good enough" products, as everyone knows. Businesses love this, but a good share of consumers don't. That is why Apple sales are rising, and are trending upwards. That's not a cycle, it's simply consumer response to what they feel is a better product. Businesses, surprisingly, are also taking notice. It's amazing what quality, reliability and interoperability can do for sales.

As for your very first statement, "I'm not necessarily a Microsoft fanboy" - yes, you are.

Close Name:Guest
Subject: PCs may dominate overall market share...

...but ask any person younger than 30 what kind of computer they purchased for school/home use, and they'll tell you it was a Mac. The reason? Probably because all of Apple's peripherals work flawlessly with one another, and these days, personal computing is becoming more than just that big box stuffed somewhere in your house. I actually hope Apple remains non-dominant in the PC market - part of what makes Apple great is that most viruses target PCs since they dominate market share. Apple will probably never make its way into the corporate or government market, but I don't think they need to. How many of those PC-owning corporate/government employees own iPods or iPhones or some Apple peripheral? Apple basically let MS dominate PC sales while they developed peripherals and now Apple dominates the music business. And I don't care how many PCs MS sells, I'll still never buy another one as long as I live. Why does MS sell so many inadequate PCs? Ignorance is bliss and consider that close to 25% of this country is legally retarded.

Close Name:wilf53 Posts: 41 Joined: 18 Oct 2007
Subject: "Lessons"

Well, nothing to comment on, actually, since others have said it. What happened in the 80s does not apply to the present situation.

But what I find interesting is when Ballmer mentions Nokiaʼs market share of 30-40 % and says that they wonʼt get any further from that, because they also follow Apple?s closed strategy.

Well, from a userʼs perspective, that is just about as successful a company should get before it starts to hurt us, the users. Lessons from the history of Microsoft should have taught us that.

But Ballmer is of course correct in assuming that Apple can never become as dominant as Microsoft, with its model. If they would be so after all, just the sheer thought of it makes me shudder! That would mean they would squeeze out all hardware competition as well, just like MS did in the OS-market, and to some extent on the rest of the software market as well.

And I do not know of any other markets in which this is the situation - globally. To me, it seems like a monstrosity and an absurdity and it will hopefully end as a grotesque parenthesis. That is not the same as to say that I want MS dead and gone - no, they might perfectly well continue with, say, 30 % market share and that would be OK. But that you should have one company producing the one and only OS in the world, which would then be touted as the "open" standard, is a nightmare. One that we live in, alas.

It is weird that so many do not realise that it is a sick situation. There should be standards, yes, and all producers of hardware and software should respect those - as long as they do not actually hinder development, which I think few standards do. But when you let one company "set" standards the way MS has attempted to do, throughout its history, there will certainly be obstacles to development.

Without the dominance of MS, I suspect that we would have been years ahead from where we are now in this segment.

Close Name:Guest
Subject:

Quote
in five to ten years, and that the vast majority of [ phones ] would be Windows Mobile devices


So now Monkeyboy is adding "delusions" to the list of maladies from which he suffers (uncontrollable aggression against walls and chairs, profuse sweating, shouting incoherently, bizarre movements and physical activity, etc.).

Someone help him, please...

Close Name:Guest
Subject:

Blah Blah Blah


if your a Mac user,,, Shame on you!!! you and me know that OSX can be an ass too.

i dont use the "just works" argument anymore when trying to make ppl switch, cause simply its not like how it was with Tiger or even older OSX releases

Close Name:Guest
Subject:

Quote
cramar wrote:
"Mr. Ballmer said that Apple won't increase its market share for Mac computers because of its closed model."

I predict that the trend of the past few years will continue and Apple will eventually double its market share.

What you don't understand Mr. B. is that people want to buy something that just works the way it should?not something that works the way you think it should work.


Blah Blah Blah


if your a Mac user,,, Shame on you!!! you and me know that OSX can be an ass too.

i dont use the "just works" argument anymore when trying to make ppl switch, cause simply its not like how it was with Tiger or even older OSX releases

Close Name:Guest
Subject: Ballmer is a sure guide

Ballmer is a sure guide to developments in this field. I mean that sincerely. Whatever he says is going to happen, the opposite happens. He was right off target when he said the iPhone would never sell, and he hit the nail right on the thumb about Vista.

Ballmer suffers from the common misimpression that Apple is a software company. It isn't. It is a hardware company that happens to manufacture software to sell its hardware. There is absolutely no benefit to Apple to license its software. However, with Bootcamp, it has essentially licensed its hardware.

Ballmer also plans to lead Microsoft forever.

So, putting it all together, since the inverse of what he says is what's going to happen, we can be confident that Apple will become a big success in the enterprise, Microsoft will suffer severe market-share losses as PC manufacturers adopt Apple's business model and put out their own OSs, and the Microsoft board is going to fire Ballmer as soon as all that starts to happen.

See? Ballmer is uncannily on target, if you go by the inverse of what he says.

Close Name:Guest
Subject: Once again the monkey boy is dancing

Lets face it he said all the right things to make venture capitalists feel comfortable about MS. Ballmer needs to put his stamp on MS. So far all he has done is talk.

Close Name:JonGl Posts: 113 Joined: 12 Jan 2006
Subject:

Quote
dlstarr7 wrote:
I think Ballmer has been taking advice from Karl Rove.


No, more like James Carvell. He also looks more like James.

As to Ballmer's comments, well, I would just say that he doesn't get it. To MS, it's all about market share, but for Apple, it's about selling the best, and making the most. You can't both make the best hardware and software, and sell the most. Apple needs only enough market share to attract the best developers, and it will continue to roll in the profits because it can charge a premium. Microsoft, on the other hand, by lowballing, must have market share. Between the two schools of thought, I choose Apple's.

-Jon

Close Name:Guest
Subject:

[Illiterate incomprehensible rubbish deleted]

Close Name:Guest
Subject:

Ballmer said "that Apple won't increase its market share for Mac computers because of its closed model".

That's funny because Apple's market share is up to 8% and still climbing. With Vista's failure and Microsoft working on Windows 7 that will remove more standard features. Apple should be able to keep increasing its market share steadily while Ballmer sits in his little fantasy state of mind. Windows 7 has already been delayed to, so Snow Leopard will probably be out before Windows 7 or hopefully Microsoft will blow it again and release that early enough to where it will completely fail again like Vista. Mean while Apple will keep getting better at the iPhone and much more. With 20 Billion dollars in the bank and debt free Apple isn't that niche company that Ballmer is still fantasizing about beating. Keep it up Ballmer you are helping Apple everyday you open your BIG FAT STUPID MOUTH!

Close Name:Guest
Subject:

Quote
Anonymous wrote:
Ballmer said "that Apple won't increase its market share for Mac computers because of its closed model".

That's funny because Apple's market share is up to 8% and still climbing. With Vista's failure and Microsoft working on Windows 7 that will remove more standard features. Apple should be able to keep increasing its market share steadily while Ballmer sits in his little fantasy state of mind. Windows 7 has already been delayed to, so Snow Leopard will probably be out before Windows 7 or hopefully Microsoft will blow it again and release that early enough to where it will completely fail again like Vista. Mean while Apple will keep getting better at the iPhone and much more. With 20 Billion dollars in the bank and debt free Apple isn't that niche company that Ballmer is still fantasizing about beating. Keep it up Ballmer you are helping Apple everyday you open your BIG FAT STUPID MOUTH!


Uh, ~90% vs 8% market share does indeed make The Apple "niche"...

Close Name:Guest
Subject: 1st Order Cheesedick

Ballmer is a classic asshole of the first order.

Close Name:salparadise Posts: 17 Joined: 02 Apr 2008
Subject: Messages.

For "calmly wandering about the stage dissin' the opposition" read "badly scared with no product able to even come close".

Close Name:Guest
Subject: Commodore

History has proven that closed computers provide a better user experience and people can choose a platform they are comfortable in knowing will provide the most compatibility and ease of use for products within that eco system.

The commodore 64 was the most successful home computer of all time. It was a closed system. The problem with Microsoft is that they do not realize they got into the market with Windows 95 at a time when all of these other competitors were in slumps. It wasn't necessarily that they were "open". They had a product that was revolutionary at the time. They came in through the back door. I was there through all of it to see it.

What makes a platform successful is the company backing it.

Microsoft should focus on making great products. They do make some great software, for business. Focus on this. That is the key to success in any industry. It isn't about being open or closed.

Close Name:Guest
Subject: Who oh why...

...is Apple's share price down to about $128 (Sept 27) and Microsoft's is up (relatively speaking) to $27.40??? WTF?

Close Name:Guest
Subject: Ballmer is like a politician

He won't admit his company is loosing until the elections are over.

Microsoft is in deep $#!%. They are missing the boat, not only in the smartphone area, but also in the applications.

Computing is moving away from de-centralization back to centralized computing. Applications like Office will run on the network. The personal computer will eventually become a terminal to access the applications and data on the network. This will allow for better distribution of software, and better access to data from a variety of devices.

Whoever controls the network will control the future. So far, Google is winning. Unless Microsoft makes significant moves towards moving their apps into the network, they will loose the battle. This will happen within the next 5 to 10 years, which isn't really that much time.

Close Name:macmikey Posts: 22 Joined: 18 Feb 2005
Subject: Re: Whoa

Quote
dlstarr7 wrote:
I think Ballmer has been taking advice from Karl Rove.

Yeah, except Karl Rove's guy got elected. Twice. Guess he was doing something right.

Back to issues that are germane: when it comes to technology forecasts, has Steve Ballmer ever been right on anything? Ever?

If I were a Microsoft shareholder, I'd be wondering why the board doesn't Michael Eisner-ing this clown with a no-confidence vote.

Close Name:Guest
Subject:

Steve Ballmer is the Uwe Boll of the software world.

Close Name:Guest
Subject: Re: Uwe Boll

"Steve Ballmer is the Uwe Boll of the software world."

OK, so I just Googled Uwe Boll. He sounds like the Teutonic Ed Wood. Good one. Thanks for the reference!

Close Name:Intruder -   TMO Mac Specialist Posts: 3149 Joined: 07 Jul 2004
Subject:

Political rantings have been moved to where they most belong.

Let's stick to the subject, folks.

Close Name:Guest
Subject: iPhone just works

I guess the iPhone does work the way it should, not the way I think it should. I don't expect safari to just quit and take me to the home screen, but I guess that is what it should do. There are many features I would expect from a simple phone, not to mention a smart phone. Picture text messages anyone? If someone sends me one, not only do I not get it, but I have no idea they tried sending me one. If they mention it to me and ask if I got it, I have to tell them I can't get picture mail on my phone. Really? On the iPhone? There is a huge list of simple things that most all phones do that the iPhone doesn't. I have never had an apple device, but I thought I would give it a shot with the iPhone. It's fine, as long as you understand it "just works" they way it should, and not the way you expect it to. I guess that is not what I expected. I am still trying to love it, really I am. There are alot of things that are great, but don't be fooled by all the Apple hype.

Close Name:tbone1 -   TMO Staff Posts: 3981 Joined: 13 Jul 2001
Subject:

Quote
Guest wrote:
Ballmer suffers from the common misimpression that Apple is a software company. It isn't. It is a hardware company that happens to manufacture software to sell its hardware.


Apple is not a software company, nor a hardware company, nor even a services company. It is a solutions company.

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