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

Posted:
in iPhone edited January 2014
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.
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Comments

  • Reply 1 of 115
    MacProMacPro Posts: 17,175member
    And so the terminal illness begins in for the giant.
  • Reply 2 of 115
    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....
  • Reply 3 of 115
    solipsismsolipsism Posts: 25,726member
    This is going to be fun.
  • Reply 4 of 115
    alanskyalansky Posts: 235member
    The day that Microsoft-controlled PC's are "more Mac-like" is the day that pigs learn to fly.
  • Reply 5 of 115
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by alansky View Post


    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.
  • Reply 6 of 115
    zunxzunx Posts: 620member
    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!
  • Reply 7 of 115
    Remember what the doctor said. "An Apple iPhone a day ...keeps the terminal illness going strong".
  • Reply 8 of 115
    wobegonwobegon Posts: 764member
    Quote:
    Originally Posted by AppleInsider View Post


    ...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.
  • Reply 9 of 115
    MacProMacPro Posts: 17,175member
    Quote:
    Originally Posted by zunx View Post


    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.
  • Reply 10 of 115
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by zunx View Post


    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.
  • Reply 11 of 115
    MacProMacPro Posts: 17,175member
    Quote:
    Originally Posted by wobegon View Post


    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
  • Reply 12 of 115
    MacProMacPro Posts: 17,175member
    Quote:
    Originally Posted by solipsism View Post


    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
  • Reply 13 of 115
    801801 Posts: 271member
    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?
  • Reply 14 of 115
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by digitalclips View Post


    (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.
  • Reply 15 of 115
    wobegonwobegon Posts: 764member
    Quote:
    Originally Posted by digitalclips View Post


    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.
  • Reply 16 of 115
    MacProMacPro Posts: 17,175member
    Quote:
    Originally Posted by solipsism View Post


    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.
  • Reply 17 of 115
    MacProMacPro Posts: 17,175member
    Quote:
    Originally Posted by wobegon View Post


    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
  • Reply 18 of 115
    probablyprobably Posts: 139member
    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.
  • Reply 19 of 115
    MacProMacPro Posts: 17,175member
    Quote:
    Originally Posted by probably View Post


    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.
  • Reply 20 of 115
    buzdotsbuzdots Posts: 437member
    Quote:
    Originally Posted by probably View Post


    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.
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