Microsoft's Sobering Realization: It Can Never Win, Place or Show in the Hardware War

Microsoft has struggled over the years to develop its own hardware. The Xbox has been the only notable success, and even that product has had its share of struggles. One has to wonder, how long can Microsoft endure without getting its mobile hardware right? A strategic retreat seems in order.


First, the bad news about the Microsoft Surface tablet just keeps rolling in. First, in this report by Gregg Keizer at Computerworld, Microsoft reported US$409 million in Surface revenue. That's probably about 500,000 units. (Compare that to Apple's 13.3 million very profitable iPads in the same quarter.)

Worse, however, is that Microsoft may well have lost money overall thanks to the cost of bringing in that revenue. Mr. Keizer continues....

But unlike the past two quarters, Microsoft has not revealed the cost of revenue associated with the Surface for the June period, at least in the 8-K document filed with the U.S. Securities and Exchange Commission yesterday.

Even so, Microsoft did admit to losses in the prepared remarks read by chief financial officer Amy Hood during the call with Wall Street analysts yesterday, as well as in the 8-K.

In essence when your manufacturing and operations for a product can't generate profitability and when customers aren't buying the product in any serious numbers, it's usually time to kill the product and build a new hardware vision. How long it will take CEO Nadella to force that decision will be interesting to watch. Maybe he's just buying time (and losing money) while Microsoft rethinks its tablet strategy.

Microsoft is in a similar pickle with Windows Phone. For a different but similar set of reasons, Robert "Google Glass" Scoble, a former Microsoft employee, has urged his former company to ditch Windows Phone. Later, Matt Rosoff, the editor-in-chief of CITEworld chimed in with some elaboration that's worth a look. "But really -- what IS the point of Windows Phone?" They both make good points.

What's becoming clear is that Microsoft's historical tendency to load agenda into its products instead of building hardware products people just love continues to haunt its mobile hardware business.

On the other hand, over the years, Microsoft has developed significant strength in its software: the knack for helping customers build their business and their wealth. That's where I think the future of Microsoft is, and so I explained at The Street: "Microsoft's Similarities to Apple Will Be Its Salvation."

Next: the tech news debris for the week of July 28.: dubious PC sales reports, the most popular programming languages, iOS developer woes, and teaching kids to understand what they see on the Internet.

Page 2 - The Tech News Debris for the Week of July 28


I have observed, for a long time, the agenda and gotchas included in reports by companies that track the sales of PCs, Macs, tablets, etc. What they report is often newsworthy, but even then, the reporter has to be very careful. Even Tim Cook will occasionally refer to IDC in an earnings report when it suits him, but one must also be aware, in general, of who these companies are beholden to and why they report the numbers the way they do.

Daniel Eran Dilger put it more bluntly this week. "IDC, Gartner and Strategy Analytics have a long history of presenting carefully contrived data in press releases clearly designed to flatter their clients and denigrate their clients' competitors, with Apple being a common target."

In this article, Mr. Dilger lays out his case for that claim: "Apple, Inc's double digit U.S. Mac growth contradicts IDC & Gartner reports of a Mac sales slump." I know you'll find it interesting.

From time to time, over the years, I have written about either the most popular programming languages or the ones beginners should learn first. So I was interested to see this report on the "Top 10 Programming Languages" compiled by IEEE Spectrum.

It syncs well with my observations of my wife's career as a professional Java developer for the government. The ranking also identifies the fading of Perl and the rise of Python. If you are building software for iOS, of course it's Objective-C (and Swift), but if your intentions lead towards enterprise, government or military software development, the top nine items on this list should be your focus.

There's been some whining about customer disinterest in 4K UHDTV sets, but that's par for the course when a new technology emerges. UHDTVs are still too expensive for the average consumer, and the only way to get on their radar is to lower prices first, then seize opportunities. Waiting for customers to over spend is never a good option.

If you're curious about the state-of-the-market and what issues Apple might face as part of its TV future, here are some numbers. "IHS: UHD TV Having Minimal Market Impact."

There have been some lamentations in the iOS Indies development market lately. It's getting rough out there, and I think a large part of it is that, unlike previous Macintosh business models, it's hard, thanks to Apple's App Store structure, for indie developers to both curate a devoted sub-market and maintain a healthy, enduring relationship with those customers. The result is that discoverability drives the economics.

One seemingly obvious but not so effective way for a developer to get the word out is to send email blasts or engage (and pay) a PR firm. I know because I get about 30 requests each and every business day from individual developers or small PR firms to review this or that iOS app. Many are repeats of other apps, children's games, or fanciful social media concepts. No one I know in this business has time to honor even one of those review pleadings. So, it's a problem.

Along those lines, here are some thoughtful observations: "More on iOS Indies" by Brent Simmons and "App Rot," by Marco Arment. Plus, I saw some research by a mobile analytics company, Adjust: "Birth, life and death of an app: A look at the Apple App Store in July 2014." Discoverability is also mentioned in that report.

Apple likes to mention that there are over 1.2 million iOS apps available, but how any one indie developer can rise above the crowd and make a living is a sobering prospect. Especially in light of how Apple has constructed the structure of the App Store. The good news? "Apple has paid out over $20 billion to developers thus far."

One more thing ....

Of all thing things we teach our kids in this Internet era, the one glaring omission is how to size up and diagnose what they find in the Internet. Those who grew up before the Internet know how to do that; our kids generally do not.

Another way of saying this is that the intellectual tools one needs to evaluate what's found on the Internet cannot be found on the Internet.

Yes, but what are they thinking?

For example, we teach kids how to memorize. We teach them English, history and math. Some may explore science and the scientific method. A lot of that can be done on an iPad. But few students are fortunate enough, by the time they graduate from high school, to develop what I call a strong Carl Sagan-esque sense of critical and suspicious thinking. So when they fire up Safari on their iPads, their minds become mush.

Kids need that suspicious nature because the current art and science of generating wealth is to fool people, but do it with a straight face and faux-plausibility.

And so I was pleased to see one of my favorite writers, Annie Murphy Paul, write: "Freedom Online Is an Illusion." In that article, Ms. Paul talks about the invocation of indignation about being exploited as a mechanism to allow teenagers to think defensively. It's a great read.

As for Apple? There's not much that can be done. The problem, I am told, is that teachers, being people oriented people, aren't taught (or allowed to exercise) the technical skills to, in turn, teach their students how to think when exposed to the Internet. It's out of Apple's area of expertise, but it's something to ponder anyway. Perhaps someday ....

All the above should keep you busy. Time to make another cup of tea and explore those links. They're all great.


MacBook Air image credit: Apple

Particle Debris is a generally a mix of John Martellaro's observations and opinions about a standout event or article of the week (preamble on page 1) followed by a discussion of articles that didn't make the TMO headlines, the technical news debris. The column is published most every Friday except for holidays.