RSSBallmer: Apple market share gains are a 'rounding error'
By Joe Wilcox | Published July 30, 2009, 3:42 PM
Microsoft CEO Steve Ballmer was in surprisingly good form this morning, as he kicked off the company's annual Financial Analysts Meeting. His presentation was one of the best in years. The economy may be cool, but Ballmer is hot.
Perhaps his most piercing comments were about Apple, a competitor that has nipped away Windows PC market share and proved to be a formidable opponent in mobile devices markets.
Ballmer dismissed Mac shipments of "10 million" units a year as being meaningless. He described Mac market share gains as "a rounding error." Ballmer emphasized: "Apple's share globally cost us nothing."
But what he didn't say: Microsoft gained much. In a later presentation, Robbie Bach, president of the Entertainment & Devices division, touted the revenue contribution from Microsoft consumer software, which Macintosh Office is the largest component. Increased Mac sales do benefit Microsoft.
Some advice to Ballmer: Perhaps FAM attendees should receive some Windows 7 netbook swag. Too many attendees -- or at least too many for Microsoft's CEO -- use Mac laptops. "We have lower share in the investor audience." he said looking out at attendees. "Don't hide them. I've already counted them," he joked. "Feel free, as long as you're using Office."
Ballmer laid out the philosophic differences between Microsoft's approach to personal computers compared to Apple. Microsoft's focus is high volume, high value and low price. By comparison, Apple focuses on high price and low volume. What he didn't say: High margin. Apple commands some of the highest, perhaps the highest, hardware margins in the computing industry.
High volume is essentially important to Microsoft's Windows business strategy, Ballmer explained. "You can't be high priced. That doesn't get us to the high volume that we aspire to." Value and volume are longstanding Microsoft corporate principles, which go back to the IBM PC era. Clearly, Microsoft has no plans to abandon value and volume principles.
Apple justifies higher pricing by asserting that "'at the end of the day we have the coolest hardware,'" Ballmer claimed. For holiday 2009, Windows PC manufacturers will release new hardware -- and that will wipe away Apple's hardware design justification, he asserted. "New PC designs -- boom -- we're going to have a heck of a Christmas."
COO Kevin Turner followed Ballmer and made a separate competitive attack. Turner reiterated Microsoft's "Apple Tax" claims, asserting that consumers pay more for Macs than PCs. He used an ad circular comparing Windows PC and Mac configurations and pricing. Typically this is true: Comparably configured Windows PCs often do cost less than Macs.
That said, there are hidden features not alway obvious on either side, such as extra-long battery life in new MacBook Pros or Blu-ray playback in some Windows portables.
The question I'd like to pose to commenters: Are Mac market share gains "a rounding error?"
rounding error?
like too many round zeros on the left side of the decimal point?
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|Ballmer Fiddles while Rome burns. This reminds me of the Khrushchev "We will bury you" statement. Fat chance!
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|"Typically this is true: Comparably configured Windows PCs often do cost less than Macs. "
No, this is pure fantasy. Sure, a lower spec, cheapo, virus infested, trojanized, cloner, Vista slug costs less than a Mac, but you get what you pay for.
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|"Perhaps FAM attendees should receive some Windows 7 netbook swag"
This is probably the most accurate item from this article.
Apple can market and they can influence markets better than almost anyone.
In the 80s they gave a lot of computers to Schools, stopping about the time Jobs left and when PC prices started sliding down to average people being capable of buying a home computer.
So in the 80s, the kids and their parents bought Apple because that is what their kids knew.
It was brilliant and worked well. It didn't mean the Apple II or Apple Mac was the best computer, it was just more 'common' for home use, even if the people used crappy PCs at work.
We will skip the 90s, as Apple was off track, and Microsoft was doing things right for a time, unseating the 'bad' companies of the time. They also created NT, which still is a good OS kernel architecture, while Apple Mac users were fighting with System 7-9 that was bad at memory management and didn't even offer pre-emptive multitasking, let alone more advanced OS features.
So comes the 2000 era, Jobs returns to Apple, they throw out System9 and replace it with an OK kernel technology to compete. They started to get some respect as their OS wasn't total trash in comparison to Windows NT or Linux.
This brings us to the modern Apple. They are back at doing what they do best, marketing and with this comes a lot of swag.
So if you wonder why there are so many journalists using Macs or write favorably about OS X and Apple, think back to the school campaign Apple used in the 80s, except now they target anyone in the press or journalism.
Having worked with many growing and established news and press industry companies, you would be freaking shocked how easy it is to get a free Mac from Apple, and how much free Apple crap gets sent to the companies and the journalists all the time.
One of my best friends works for a syndication and they turn down offers for free Macs on almost a daily basis. With the offers even more lucrative if they replace their main office and home pc with a free Mac, Apple would kick in extra computers for their kids and iPods, etc.
Smaller journalist probably don't get this attention, but the fact that plays the swag throwing and the press so well makes it easy to understand why you see so much positive Apple and Mac 'reporting'.
There are ethics lines that are crossed, especially with hard line journalists, and Apple even has a few clever tricks to get past them. As they don't 'give' the computers, they are sent to journalists to 'evaluate' with no return date scheduled. Clever, and sadly deceptive at the same time.
So ya, Microsoft should be more nefarious like Apple and shove streamlined PCs and Zunes at more journalists, as it would help flip the public preception.
However, as you point out, Microsoft makes as much off of a Mac user on average as Apple does because of Office for Mac, and copies of Windows purchased for BootCamp or (insert your favorite Windows VM software).
So why fight it? Heck even let Windows go up in smoke, Microsoft will still be around making something someone wants and running it on Linux or OS X, just as they existed before the Windows revolution of the 90s.
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|"One of my best friends works for a syndication and they turn down offers for free Macs on almost a daily basis. With the offers even more lucrative if they replace their main office and home pc with a free Mac, Apple would kick in extra computers for their kids and iPods, etc."
Precious! :)
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|ya def.
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|Rounding Error?!!! LOL, Balmer is on fire again. This is exagurated, but puts things into perspective...
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|Oh man, another hidden comment from our Apple fanboy. Too bad.
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|What i don't get is the negative connotation with an "Apple Tax", apart from stretching the poor word 'tax' beyond it's meaning. Sure there's an Apple tax if that's what you want to call it, but guess what, just like the taxes in the real-world they pay for important things - that's why we have taxes...
For me personally my Apple Tax pays for a rugged slim form factor, IPS TFT panel for good colour reproduction and gamut, high speed, high speed-after-i've-owned-it-for-12-months-and-installed-approx-100-apps-unlike-any-windows-machine-i've-ever-owned, long batterylife and iLife fucntionality.
The beauty of this taxation is that you can change "countries" without lengthy applications, just buy into another ecosystem which has a better services for tax ratio to your needs.
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|Funny how he does not mention the "Microsoft tax" you pay on every PC. Then the super expensive upgrade "Microsoft tax" you pay to get the patches to Vista, then the super expensive "Microsoft Tax" you pay for Office, then the super expensive "Microsoft Tax" you pay for anti-virus, intrusion detection, anti-spyware, etc... Not to mention the vendor lock in to Microsoft.
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|LOL. Monkey boy here is the REAL reason Microsoft is in decline on all fronts and needed the Yahoo! deal to try and breath new life into it's dying brand. I mean seriously, what else would you expect this ape to say?
Microsoft cannot innovate so all they do is copy all things Apple and they still can't get it right! Give me a break, Microsoft will soon be the next Netscape.
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|You SOB STFU
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|As much as I may disagree with Internetworld7, there is no reason for the hostility from shellcodes.
As for copying, they both do it to each other and also from other companies.
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|For holiday 2009, Windows PC manufacturers will release new hardware -- and that will wipe away Apple's hardware design justification, he asserted. "New PC designs -- boom -- we're going to have a heck of a Christmas."
....Oh Balmer you kill me! Mac disciples will never give in, I assure you ;)
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|Apple have made quite an impact in the U.S.A. and to a lesser extent elsewhere in the world. The impact may not cost Microsoft much overall, but in mindshare, it costs them plenty. People want Apple hardware and software, while people will use Microsoft Windows because they (especially in third world countries) can't afford anything else.
Steve Ballmer talks (as does Steve Jobs) to the positives of what they sell and ridicules the other. The thing that saves Microsoft is that most people don't notice the details.
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|"People want Apple hardware and software, while people will use Microsoft Windows because they (especially in third world countries) can't afford anything else."
How's so? How are you going to back that claim up? At the least, serious gamers use Microsoft Windows. They certainly can afford something else and they use Windows, since that's where the best games are.
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|A man who refers to the free Linux operating system as a "[…] cancer that attaches itself in an intellectual property sense to everything it touches." is without a doubt a nut.
And as for the market share, Ballmer is in the cloud cuckoo land. There's clear evidence of Mac share increasing for the last 2 years. Leopard outsold Vista in Japan as it came out in 2007: http://tekkie.flashbit.n...outsells-vista-in-japan
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|See microsoft is now running scaried
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|The cost of computers in general is falling so low that the whole "Apple Tax" and "Apple Premium" makes no sense anymore. $1,000 is not "premium" for a device you use every single day for hours on end. People pay $1500 easy on an LCD TV, which does nothing but display a picture.
Computer pricing has fallen so low that the difference between a low-end machine and a high-end one is $500. 5 years ago the difference was $2,000.
So yeah, Apple computers cost more than Windows, but who cares? $500 extra for a much nicer experience over the duration of 2 years (assuming you upgrade every 2 years) comes out to around $21 per month. I'd pay that in a heartbeat.
And that's what Microsoft needs to be worried about. It might still control the low-end of the market, but the different between low and high when it comes to price is quickly blurring.
I'd like to see Windows computers get better hardware to go along with Windows 7. But it hasn't happened yet. The closest hardware competitors to Apple still sell plastic sub-par machines.
Today's rounding error is tomorrow's market leader. Google was a "rounding error" in 2001.
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|Excuse me but that is B.S.: If consumers in general were OK with $1500 LCDs, then why do we have 1080p, 32+ inch TVs being sold in the neighborhood of 500-600? Obviously, this is not because people are OK with paying $1500. See... if there were enough TVs being sold at $1,500, there would be absolutely no incentive for TV makers to lower the prices.
You are trying to use the $1,000 as a magical threshold that separates premium from non-premium as far as computers are concerned, but this is purely artificial. The only reason why Apple sells computers at less than 1,000 is because the cost of computers has dipped so low, than any other price point would mean "no sales". If I pay 1,000 dollars for a product that has less RAM, smaller Hard drive space and a slower processor, than one priced $500 to $600, but I'm doing it because of the neat design and OS, I am paying a premium tax, because I'm mostly paying for brand and aesthetics, not true hardware value.
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|No, my point was that $1,000 is not premium.
Back when Macs cost $2500 compared to $1000 Windows machines, that's premium. But $700 vs $1000 is not. The cost difference now is so much lower now that it's really not that much more expensive, especially when amortized over the course of 2 years.
My point is that spending an extra $300 or $500 for a much better experience is very reasonable, and that's why you're seeing Apple's market share ticking up. What was once "premium" is now the standard. Especially when you compare it to other devices -- you'll easily spend $500 outfitting a Wii, or $1000 on a TV. $1500 for a high-end computer is now in the range of many more people.
And it's not just about aesthetics, it's about the experience. People pay extra because they enjoy using a Mac more than they do Windows, not because of pretty colors. And if $21 extra per month makes your life that much better (after all, most people use their computers all day long), then it's more than worth it.
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|It's rather impossible to replace the display and graphics hardware with higher resolution/higher density bits and pieces that Apple have in their machines. Comparing such hardware at the start, you find that there aren't any inexpensive machines.
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|You're assuming that everyone prefers pretty over functional. This 'experience' you talk about is completely false. It's made up by Apple to justify charging more for machines that cost the same to make as other PC vendors do, but are sold for more than PC makers sell their versions for. I'm completely sick and tired of this Mac vs. PC business but the argument for spending more on a "BETTER" experience to me, is not valid at all whatsoever.
You spend more for a BMW or a Mercedes over a Kia or Chevy. You don't spend more (BMW/Audi/Mercedes 'more') for a Pontiac Vibe than a Toyota Matrix because guess what? Same on the inside. Different look, so you may pay a little more for one over the other depending on color/build/interior etc. but technically speaking they are the same car.
And I don't agree either that people pay extra because they enjoy using a Mac more....much of the time, it's keeping up with friends/family/the Jones' that nudge people into getting the more expensive thing. I have experienced this personally.
Women buy shoes that don't fit them and walk in pain to model these cutting edge looks, going out or to functions. Example, Sex and the City - yes a TV show, but very true in certain circles.
We squeeze into clothes 2 sizes too small to model our figures, etc.
The point being, we live in a very superficial society and Apple capitalizes on that VERY well. So as I've mentioned before, just say you prefer it because it's pretty and you prefer the Mac OS and leave out the rest.
I do agree with everything else you've said though. Spending an extra few hundred for what you like is fine, but I don't think anyone is arguing about that. Most people are thinking opposite sides of the spectrum, like comparing this Gateway (http://www.gateway.com/s...s/product/529668286.php) with this Apple (http://store.apple.com/u...family/imac?mco=MTE3MDQ), for $2199. Yes, the Gateway doesn't come with a monitor, but you can buy a 24 inch monitor for just around $200-300 max.
It outclasses the Imac for $2199 in every way, but someone will justify getting the Apple machine with "Vista Sucks", "Vista gets viruses", "Cheap parts", "Apple Experience makes the Apple worth it", etc.
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|and i pay extra (don't buy the cheapest PC) because i enjoy using Windows? what the f*ck is the point here... back and forth back and forth, enough with this bulls*** all over betanews already
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|LOL nate are you saying that $500 is meaningless? Yea...I believe you're playing into the whole "apple is for snobs" role quite nicely. :)
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|Its not meaningless, but it's a lot less than $1500 or $2000.
$500 over 2 years is $21 a month. People spend that on Starbucks coffee in a week.
For those of us who enjoy the much better experience (and less hassle), that's well worth the added expense.
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|Well, like Neoprimal showed, a gateway for $900 is superior in every way to the $2200 apple...that's a $1200 saving and you get a better machine for it.
I've used OSX and Windows 7...my experience was better with Windows 7, and it did everythin gI needed it to do while with OSX some things needed a tweaking to work..I'll take a $1200 saving or even a $500 savings for what I consider a superior experience with a Windows 7 PC.
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|Nate, your 21 dollars a month point is moot because we unfortunately don't get to pay a Mac in 21 dollar installments. Usually what goes through the mind of the consumer is: do I have the cash flow available needed to pay it now? They will hardly say: "gee, this orgasmic experience is well worth 21 bucks a month."
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|The question I'd like to pose is to the commenters, will you take the bait?
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