Microsoft 10K warns of iPhone, Mac threats as iPhone nears 1.1% share

[AppleInsider]

A Microsoft filing with the US government reveals a newfound worry that the Windows developer's traditional stance of selling software alone won't work against an increasingly profitable Apple -- a concern that may magnify as iPhone 3G pushes Apple's cellular market share past one percent worldwide.

The 10-K submission to the US Securities and Exchange Commission for fiscal year 2008 dances around mentioning Apple or its products by name but makes it clear that the smaller company's practice of building both iPhones, iPods and Macs, as well as the software that drives them, has become a concern that wasn't present in the fiscal year that came before.

"A competing vertically-integrated model, in which a single firm controls both the software and hardware elements of a product, has been successful with certain consumer products such as personal computers, mobile phones and digital music players," Microsoft says in the filing.

The Redmond, Washington-based company notes that it already has some vertically-integrated products, including its Xbox 360 game console and Zune line of portable media players, but that jumping any deeper into that business model may "increase [its] cost of sales" and "reduce operating margins."

As a company involved in developing PCs only through software, Microsoft has typically had relatively little manufacturing overhead, with most of the cost behind software such as Office or Windows centering around research and development rather than the cost of goods. Both software platforms continue to form the backbone of the firm's business even as it expands into hardware.

While suggestive of a potential major shift in Microsoft's strategy, company CEO Steve Ballmer has already made clear in a leaked internal memo not just that Apple is a threat but also that Microsoft intends to fight back primarily by working more closely with third-party PC builders to create a more Mac-like union between hardware and software. A similar effort is also planned for Windows Mobile to improve its standing against the iPhone.

It's that last effort in the mobile arena that Microsoft may need to focus on the most, based on a new report by Strategy Analytics.

The research group notes that Apple's plummet in market share to 0.2 percent during the spring, when a premature sellout of original iPhones led the electronics company to sell just 700,000 devices, is a temporary blip that is already certain to change during the summer quarter. Taking advantage of a healthy cellphone market which appears to be avoiding economic gloom elsewhere, Apple's launch of iPhone 3G for a wider range of countries should push it to 1.1 percent worldwide market share in summer sales.

The figure is still just a fraction of what the top five phone manufacturers have claimed in the spring but would stand in sharp contrast to the relatively sluggish changes in market share for those companies over the spring. LG, Nokia, and Sony Ericsson all grew at considerably smaller rates, while Motorola and Samsung -- both of whom depend on Windows Mobile for smartphones -- slipped during the three-month period.

When shortages weren't a factor in Apple's first-generation iPhone sales, the company was already cited as the third-largest smartphone vendor and was only outsold by Nokia and BlackBerry maker Research in Motion, neither of which uses a Microsoft operating system for their handsets.

[ View this article at AppleInsider.com ]

[digitalclips]

And so the terminal illness begins in for the giant.

[anantksundaram]

This is an outstanding piece of 'detective work' by whoever dug up the story, since it is most likely in the boilerplate section of the 10K on potential business risks that no one reads (and lists every bit of proforma CYA chaff that you could possibly imagine).

Nice work, guys!

PS: Oh well, I just glanced at the 10K..... it was up front in the 10K in the discussion on business segments and competition, and not in the boilerplate portion....

[solipsism]

This is going to be fun.

[alansky]

The day that Microsoft-controlled PC's are "more Mac-like" is the day that pigs learn to fly.

[solipsism]

Originally Posted by alansky

The day that Microsoft-controlled PC's are "more Mac-like" is the day that pigs learn to fly.

"More" Mac-like is easy, actually being Mac-like is tough, but getting with hardware vendors to optimize the OS and the experience is a step in the right direction. I have to hand it to MS for at least understanding that aspect of it, but will hold judgement until I actually see what they come up with.

[zunx]

The day 25% of people use a Mac, Windows will be history in three years. Windows is maintained solely on inertia and user ignorance. Someone at Redmod must be nervous. Microsoft, do the Humanity a favor and get out of business! Let the technology evolve once and for all. Get lost! You have demonstrated that are pathetic. You are not worth it!

[Fast Fred 1]

Remember what the doctor said. "An Apple iPhone a day ...keeps the terminal illness going strong".

[wobegon]

Originally Posted by AppleInsider

...Microsoft intends to fight back primarily by working more closely with third-party PC builders to create a more Mac-like union between hardware and software.

Well, we've seen the effect of this with their most popular product outside of their monopolistic software business: the Xbox 360. Arguably the most popular thing they've ever made, with some of the tightest third-party hardware integration and what's the result? A near profitless venture that's cost them billions thanks to the console's historic +40% failure rate. Their original Xbox had less problems, but it came in a distant second place to Sony's less powerful PS2, just as the 360 has little chance of catching up to Nintendo's less advanced Wii and now Sony's PS3 is outpacing the 360 in monthly sales. Their other vertical system, the Zune, was a flop.

Seems more and more likely Microsoft will bring itself down before Apple does.

[digitalclips]

Originally Posted by zunx

The day 25% of people use a Mac, Windows will be history in three years. Windows is maintained solely on inertia and user ignorance. Someone at Redmod must be nervous. Microsoft, do the Humanity a favor and get out of business! Let the technology evolve once and for all. Get lost! You have demonstrated that are pathetic. You are not worth it!

Totally true and also remember the turn over rate for most PC users is high, once infested up to the gills they often give up repairing due to outrageous fees so called techies charge and buy a new one. Those 'new ones' in folks I know are fast becoming Macs.

[solipsism]

Originally Posted by zunx

The day 25% of people use a Mac, Windows will be history in three years. Windows is maintained solely on inertia and user ignorance. Someone at Redmod must be nervous. Microsoft, do the Humanity a favor and get out of business! Let the technology evolve once and for all. Get lost! You have demonstrated that are pathetic. You are not worth it!

Even among hardcore Apple enthusiasts I think you'll be hard-pressed to find people that think MS could go away so easily or that they even should go away. IIS is beating out Apache and their Exchange and other Server OSes also seems to to be holding strong despite the free Linux alternatives. Even if Apple had more than 50% of the of the consumer market there would still plenty of room for MS's well known OS to thrive. Their net income are 4x that of Apple and they have a higher profit margin, too.

I'm all for competition and hope that MS is actually taking notes from Apple's business plan. There is no reason they can't offer a specialized Windows machine and sell their standalone OS, the way people want Apple to open up OS X to everyone.

[digitalclips]

Originally Posted by wobegon

Well, we've seen the effect of this with their most popular product outside of their monopolistic software business: the Xbox 360. Arguably the most popular thing they've ever made, with some of the tightest third-party hardware integration and what's the result? A near profitless venture that's cost them billions thanks to the console's historic +40% failure rate. Their original Xbox had less problems, but it came in a distant second place to Sony's less powerful PS2, just as the 360 has little chance of catching up to Nintendo's less advanced Wii and now Sony's PS3 is outpacing the 360 in monthly sales. Their other vertical system, the Zune, was a flop.

Seems more and more likely Microsoft will bring itself down before Apple does.

It's not all that surprising either. A company whose products were researched and developed by others from who they stole them isn't a good basis to go forward from as a company needing to innovate to survive is it? They continue to simply try to copy others ... Zune!!! Give me a break ... :lol

[digitalclips]

Originally Posted by solipsism

Even among hardcore Apple enthusiasts I think you'll be hard-pressed to find people that think MS could go away so easily or that they even should go away.

(edited quote)

This time I beg to differ oh wise one . Since the early 1980's I have dreamed of the day

[801]

And how long has Bill Gates been gone now?
Looks like Monkey Boy is about to become Monkey See, Monkey Do Boy.

What is really wild is that all the education, big bucks, consultants, infrastructure and marketing geniuses that endless money can buy, and this is what they come up with. Heck, they could have gotten this advice for the price of a sushi dinner from just about anyone here.

How much do these guys get paid anyway, to come up this solution?

[solipsism]

Originally Posted by digitalclips

(edited quote)

This time I beg to differ oh wise one . Since the early 1980's I have dreamed of the day

Is is that you wish them to go away or think that they will go away? As for the former, I'd much rather have MS change their business model to better compete with Apple than to vanish. I think we'd see Apple get lazy very quickly if there wasn't a dominate* force like MS to contend with.


* By dominate I mean financially and with marketshare, not quality.

[wobegon]

Originally Posted by digitalclips

It's not all that surprising either. A company whose products were researched and developed by others from who they stole them isn't a good basis to go forward from as a company needing to innovate to survive is it? They continue to simply try to copy others ... Zune!!! Give me a break ... :lol

Yeah, I mean the original Xbox was very much patterned off the PS2's business model and took a number of the failed Dreamcast's games. The Zunes were found to have identical parts to Apple's iPods. And more recently at the E3 game convention, Microsoft knocked off Sony and Nintendo's ideas left and right: Avatars (Nintnedo Mii look-alikes that feature functionality similar to Sony's Home), Live Vision Cam games (uses the camera in the same vane as Sony's EyeToy), Lips (a Sony SingStar look-alike), and a new UI that borrows not only from Nintendo and Sony's menu systems, but Apple's CoverFlow interface as well.

[digitalclips]

Originally Posted by solipsism

Is is that you wish them to go away or think that they will go away? As for the former, I'd much rather have MS change their business model to better compete with Apple than to vanish. I think we'd see Apple get lazy very quickly if there wasn't a dominate* force like MS was gone.


* By dominate I mean financially and with marketshare, not quality.

Good questions... I think they will actually go down in the not so distant future regardless of my personal wishes to see them go. This loosely based on the concept of the bigger they are the harder they fall lol. The personal desire is based on the history (mine and theirs ).

I have far less fear of a monopolistic Apple as long as SJ is around simply because I don't think he is driven to compete in the normal sense. He is driven to create 'insanely great stuff' for its own sake. After SJ you might have a point and Apple may become another lumbering giant. However I would expect others to fill a void left my MS or even parts of MS would most likely split off a rotting carcass and possible survive and do well. So hopefully Apple will be kept on their toes so to speak.

[digitalclips]

Originally Posted by wobegon

Yeah, I mean the original Xbox was very much patterned off the PS2's business model and took a number of the failed Dreamcast's games. The Zunes were found to have identical parts to Apple's iPods. And more recently at the E3 game convention, Microsoft knocked off Sony and Nintendo's ideas left and right: Avatars (Nintnedo Mii look-alikes that feature functionality similar to Sony's Home), Live Vision Cam games (uses the camera in the same vane as Sony's EyeToy), Lips (a Sony SingStar look-alike), and a new UI that borrows not only from Nintendo and Sony's menu systems, but Apple's CoverFlow interface as well.

The R&D department at MS must be staffed by people with sunglasses and trench coats

[probably]

Normal people don't have beef with Office products, and Exchange is pretty powerful.

They have plenty of good business oriented stuff; it's really just consumer computing that they are burning themselves away with.


About the above:
That *will* potentially suck in the future of more immense Apple platform marketshares: it won't keep evolving at the same 'wow'-rate because no one within will respect/fear/worship the next guy quite as much as Jobs.

[digitalclips]

Originally Posted by probably

Normal people don't have beef with Office products, and Exchange is pretty powerful.

They have plenty of good business oriented stuff; it's really just consumer computing that they are burning themselves away with.


About the above:
That *will* potentially suck in the future of more immense Apple platform marketshares: it won't keep evolving at the same 'wow'-rate because no one within will respect/fear/worship the next guy quite as much as Jobs.

You are probably correct on all points. Maybe MS will end up moving up market and stay in the corporate end for a long time to come and relinquish the consumer market over time.

[BuzDots]

Originally Posted by probably

That *will* potentially suck in the future of more immense Apple platform marketshares: it won't keep evolving at the same 'wow'-rate because no one within will respect/fear/worship the next guy quite as much as Jobs.

Well, I don't know, they might just lure the massive, internet-inventing mind of Al Gore off the Board.

[VisualZone]

Originally Posted by solipsism

Even among hardcore Apple enthusiasts I think you'll be hard-pressed to find people that think MS could go away so easily or that they even should go away. IIS is beating out Apache and their Exchange and other Server OSes also seems to to be holding strong despite the free Linux alternatives. Even if Apple had more than 50% of the of the consumer market there would still plenty of room for MS's well known OS to thrive. Their net income are 4x that of Apple and they have a higher profit margin, too.

I'm all for competition and hope that MS is actually taking notes from Apple's business plan. There is no reason they can't offer a specialized Windows machine and sell their standalone OS, the way people want Apple to open up OS X to everyone.

IIS beating out Apache? I say bull. See the link below.

http://news.netcraft.com/archives/we...er_survey.html

[wobegon]

Originally Posted by probably

Normal people don't have beef with Office products, and Exchange is pretty powerful.

If that were true, there'd be a majority of abnormal people.

Originally Posted by probably

They have plenty of good business oriented stuff; it's really just consumer computing that they are burning themselves away with.

Yeah, and that's a pretty major problem considering that's a niche market compared to the consumer market.

Originally Posted by probably

About the above:
That *will* potentially suck in the future of more immense Apple platform marketshares: it won't keep evolving at the same 'wow'-rate because no one within will respect/fear/worship the next guy quite as much as Jobs.

You don't know that. Cook or the young Forstall could push Apple harder. At the same time, Apple could do better without Jobs' hectic pace.

[solipsism]

Originally Posted by VisualZone

IIS beating out Apache? I say bull. See the link below.

http://news.netcraft.com/archives/we...er_survey.html

I wasn't clear, but I was referring to rate of adoption. From about April 2006 to just couple months ago IIS was rising fast while Apache was falling.

[jasonfj]

Originally Posted by WidnowsGuy

The day 25% of people use Mac will be 10 years after Microsoft get's out of the OS & Software Market.


Even Graphic's software is being released on PC's first. That's because even Graphic houses are converting to PC's.

Get real here. As long as the Microsoft corporation exists they will rule the PC OS software Market.

I've been working in the industry for 20 years in both the US and UK and in my experience very few design or production companies run PCs. There's an aesthetic that such companies appreciate and value over cost.

[EyeNsteinNo]

MS has already invented a pig that can fly code-named SBFUD (e.g., reverse BS)

[solipsism]

Originally Posted by WidnowsGuy

Apple has a VERY small market share and FanBoy's giggle when you gain .001% over 30 Years.

Your argument is better served by not making hyperbolic comments like "0.001%" The OS X marketshare is considerably higher in the US and worldwide.

Apple has the Market on 1 item. IPOD
1% of the phone market with the competion quickly learning what an end user wants.

They also have the market in notebooks, $1000+ PCs, AIOs, and perhaps even in consumer market altogether when you compare them to other HW vendors in the US.

Here is one chart from February with Apple getting 14% of the consumer market for that month and getting 67% of the nteobook market, which is impressive considering that the cheapest MacBook is $1099 and you can readily get an HP or Dell notebook for under $400.

[VisualZone]

Originally Posted by solipsism

I wasn't clear, but I was referring to rate of adoption. From about April 2006 to just couple months ago IIS was rising fast while Apache was falling.

http://news.netcraft.com/archives/2008/07/overallc.gif

Okay, I'll forgive you for that. Just kidding. As for IIS rising, there's some questionable reasons why but I won't get into that.

[solipsism]

Originally Posted by VisualZone

Okay, I'll forgive you for that. Just kidding. As for IIS rising, there's some questionable reasons why but I won't get into that.

I'm curious to know what you think happened. The graph seems to show a direct correlation between Apache falling and IIS rising. The site you posted is the same site that Melgross posted last week (the July stats weren't out then) which showed that IIS was gaining ground. I was surprised too by the adoption

[VisualZone]

Originally Posted by solipsism

I'm curious to know what you think happened. The graph seems to show a direct correlation between Apache falling and IIS rising. The site you posted is the same site that Melgross posted last week (the July stats weren't out then) which showed that IIS was gaining ground. I was surprised too by the adoption

This could be one of the reasons:

http://www.thewhir.com/marketwatch/0...rver_Swing.cfm

[solipsism]

Originally Posted by VisualZone

This could be one of the reasons:

http://www.thewhir.com/marketwatch/0...rver_Swing.cfm

Could? Now you're just being modest, that is definitely a major reason for that shift.

Another point of interest for July 2008's stats is that Apache gained 2.2M and IIS gained 1.4M which is a 2.6% increase for Apache and 2.3% increase for IIS.

On another note, I wonder how many of those Apache web servers are being run on Windows.

[wobegon]

Originally Posted by VisualZone

This could be one of the reasons:

http://www.thewhir.com/marketwatch/0...rver_Swing.cfm

So it wasn't a real movement to IIS by choice so much as a buyout by MS of a major domain registrar. Big surprise.

[VisualZone]

Originally Posted by wobegon

So it wasn't a real movement to IIS by choice so much as a buyout by MS of a major domain registrar. Big surprise.

Well I didn't want to get anyones panties/boxers/shorts in a knot by making any unsubstantiating claims. It's just that, from that time on, Apache started to decline.

[DCJ001]

Originally Posted by alansky

The day that Microsoft-controlled PC's are "more Mac-like" is the day that pigs learn to fly.

Dude. I'm looking out my window and I just took this picture:

[aplnub]

Originally Posted by WidnowsGuy

The day 25% of people use Mac will be 10 years after Microsoft get's out of the OS & Software Market.

Apple has a VERY small market share and FanBoy's giggle when you gain .001% over 30 Years.

Yes, Apple OSX is great but name one bank, large corporation or Auto Dealership that uses Macs.
90% of Business is done on PC's that run Windows. By default most home users buy the same thing so they can work at home.

Since Microsoft has given in to the fact that people like a better user experience it will only nibble on the pathetic % of users that run Mac's.

Even Graphic's software is being released on PC's first. That's because even Graphic houses are converting to PC's.

Apple has the Market on 1 item. IPOD
1% of the phone market with the competion quickly learning what an end user wants.

Get real here. As long as the Microsoft corporation exists they will rule the PC OS software Market.

I didn't read this entire thread but caught your post. You raise some good points but don't be so sure that 25% is not attainable.

When I replaced all of our PC's with IntelMac's, it was a disaster at first. People were ready to shoot me. 1 week later, they were calmed down. hehe 3 months after the swap they loved them, and now they are stating their next home purchase will be a Mac. You would be surprised what exposure can do for a product. The more small businesses that opt in for the Mac experience, the more computers will get sold for home use. I doubt I see 25% within 10 years but stranger things have happened. In this case, a lot of strange things would have to happen starting with people and we all know how the mass populous is (PC or Mac).

I would also like to say that if Verizon had of made the agreement with Apple regarding the iPhone, the market share would be over 5% right now and skyrocketing. I believe that to my soul. AT&T has more bars in more places, just not this place.

[Xian Zhu Xuande]

Originally Posted by solipsism

I'm all for competition and hope that MS is actually taking notes from Apple's business plan. There is no reason they can't offer a specialized Windows machine and sell their standalone OS, the way people want Apple to open up OS X to everyone.

Microsoft's partners will not be pleased at all if they wind up in competition.
(Note that Microsoft has a history of doing this, and the only people who lose are their former partners).

[AHeneen]

Originally Posted by zunx

The day 25% of people use a Mac, Windows will be history in three years. Windows is maintained solely on inertia and user ignorance. Someone at Redmod must be nervous. Microsoft, do the Humanity a favor and get out of business! Let the technology evolve once and for all. Get lost! You have demonstrated that are pathetic. You are not worth it!

...and then Apple will be slammed by the SEC & EU's anti-trust laws. While I am no expert, Apple's high profit margins, limited selection, & integrated software(product bundling) would clearly (if Apple controlled most of the market) resemble price-rigging & product bundling: prohibited anti-competitive practices. While I would certainly love to see the day Apple controls the whole computer market and Microsoft withers away, Apple certainly needs to change a few of its policies. First, they'd need to widen their product selection, lower prices, start charging for some of their integrated software (I know we all hate this idea, but maybe have 2 OS X flavors), & allow other companies to install OS X on their computers (another dreaded idea). Yes, they would have to open up and allow OS X to be installed on other makes of computers...we must admit that Apple's integration of hardware and software would be monopolistic and unobtainable should they gain the overwhelming majority of the market share.

In other words...for Apple to control the market, they'd loose what we love most about our beloved Apple. They'd need to become a (not completely) different company.

[wobegon]

Originally Posted by WidnowsGuy

PURE SPECULATION AS MOST OF THE MAC BOARDS ARE.

If you are going to quote percentages then back them up with data not speculation.

And...

Originally Posted by WidnowsGuy

The day 25% of people use Mac will be 10 years after Microsoft get's out of the OS & Software Market.

Apple has a VERY small market share and FanBoy's giggle when you gain .001% over 30 Years.

Yes, Apple OSX is great but name one bank, large corporation or Auto Dealership that uses Macs.
90% of Business is done on PC's that run Windows. By default most home users buy the same thing so they can work at home.

Since Microsoft has given in to the fact that people like a better user experience it will only nibble on the pathetic % of users that run Mac's.

Even Graphic's software is being released on PC's first. That's because even Graphic houses are converting to PC's.

Apple has the Market on 1 item. IPOD
1% of the phone market with the competion quickly learning what an end user wants.

Get real here. As long as the Microsoft corporation exists they will rule the PC OS software Market.

99% of what you've said isn't backed up by anything. Why waste your time pretending to be objective in this Apple forum when you'd find many more people in agreement with your own speculations on some Windows board?

[penchanted]

Originally Posted by WidnowsGuy

Giving a link from an article on AppleInsider with no backup link to the data is not very responsible and typical of a FanBoy

June 2008 Numbers show OSX is 2.11% Market share of Operating systems.
Here's a link to the article that doesn not have an arbitrary link to AppleInsider

http://www.palluxo.com/2008/07/03/wa...re-32-percent/


Don't twist the numbers. Apple's Total Market Share is Pathetic in the OS arena.

You should be a bit more careful when you take others to task for providing accurate backup. The 2.11% market share you cited was apparently the market share shown for Windows 2000 shown in the graph. The graph shows Mac OS market share for June 2008 at 2.69% but the first paragraph states:

According to Net Applications monthly data, Mac OS X enjoyed 7.94% of the market share in June and is steadily growing.

Then you gloss over the major point being made which is that Mac OSX is growing at a significant rate while Windows is losing market share:

...However, Microsoft Windows market share has declined more than 3% in the last 10 months.

In August 2008, Microsoft Windows dominated 93.06% of the online operating system’s market share, but over a 10 month period, that figure was reduced down to 90.89% of the market share. Considering that a year ago, Mac OS X enjoyed only 6.03% of the market, the latest data represent 32% gain in the market share for Mac OS X in just one year.

Then again, I am not sure what to make of an article dated 7/3/08 which is peering into the future according to the above.

I think it is silly for people to predict the imminent demise of Windows as a viable platform but you are clearly dismissive of the fact the Apple has, in fact, had significant (and accelerating) market share growth and will likely hold a substantial share of the computer market.

[penchanted]

Originally Posted by WidnowsGuy

Yes, Apple OSX is great but name one bank, large corporation or Auto Dealership that uses Macs.
90% of Business is done on PC's that run Windows. By default most home users buy the same thing so they can work at home.

I am guessing that what you really meant to say is "that uses Macs exclusively" since it is pretty common knowledge that Macs are often found in Fortune 500 businesses. This is just more of your hyperbole.

By the way, here is at least one auto dealership which is using Macs:
http://www.computerworld.com/action/...ticleId=298043

Added: Here are some additional links that relate to Macs in enterprise:
http://www.computerworld.com/action/...ticleId=298043
http://www.itbusinessedge.com/blogs/dcc/?p=346
http://blogs.cisco.com/collaboration...rise_near_you/
http://news.idg.no/cw/art.cfm?id=ABF...72942D3877FB58

And, in fairness:
http://www.informationweek.com/blog/...e_mac_gai.html