[x0x0]

(I think) it's not hard to understand where microsoft went wrong. Ballmer just doesn't seem to get where the industry is going. As evidence, this quote from the article:

   Indeed, Ballmer seemed to have no intention of leaving when he announced a 
   massive reorganization of the entire company in July 2013. Behind the scenes 
   he had also begun negotiating an acquisition that was meant to transform 
   Microsoft. He had become convinced that the company had to make hardware 
   too. The reason why goes back to his chart. The two companies which have 
   seen the greatest increases in the share of profits they take are Apple and 
   Samsung, particularly Apple, whose share of the technology industry’s 
   profits leapt from 7 percent in 2008 to 21 percent in 2013. To Ballmer, the 
   message was clear, and so, in December 2012, he began talking to the Finnish 
   smartphone-maker, Nokia, whose C.E.O., Stephen Elop, had worked at 
   Microsoft. There was a defensive reason for the deal as well as an offensive 
   one. Nokia was pretty much the only company left that was making Windows 
   phones. If Nokia went under, what would happen to Microsoft’s phone business?

Apple and Samsung's phone businesses are entirely different. Apple is selling ios to the high and middle end market. Samsung is getting devoured from the bottom, because there is very little difference between android oems, whereas Apple doesn't need (or want!) the bottom. It's pretty amazing that someone like Ballmer wouldn't see that coming, given that Xiaomi and the other chinese competitors are running a classic competitive playbook on Samsung.

Stratechery has written about this at length, though I don't recall if it was clearly discussed in a single article or my mental synthesis from a collection. Either way, differentiated companies -- apple -- require completely different strategies than nondifferentiated -- samsung.

[latch]

That might be one of the mistakes, but it isn't the start of the problem. Tangibly, it's either United States v. Microsoft Corporation or Longhorn / Vista.

Intangibly, it's the attitude that permeated the company that said "we are right because we are Microsoft." There were few people you could talk to who'd think you had anything to offer someone who worked at Microsoft. You still see this today around products like Bing, IE, Xbox and Azure (I know the last 2 are popular, but the xbox has been a loss leader (and what it's leading too isn't clear yet) and Azure, like everyone else, is being crushed by Amazon (it really is, they spend a ton more money and get a fraction of the market (that's Bing-style success!))

I remember a story from the only time I was on their campus. An employee (I remember his name) was telling me how they wanted to make IIS great, so they hired an expert Apache consultant to learn more about apache. I'm listening, thinking "wow, this is great, they're really interested in bettering themselves." He then proudly went on to tell me how the Apache expert had an amusingly outdated understanding of IIS and by the end of the gig they'd convinced him of how great IIS was. They'd literally rather pay people to tell them how great they are, then admit they might have something to learn.

This perfectly encapsulated my time as a .NET developer. Lucky this was at the start of an MVP conference, so I took the hint, skipped most of the conference and visited Seattle (oh, but I did attend 1 talk where the speaker said Visual Studio would add a color picker and people applauded him).

[bambax]

This rings true. I had some relations with Microsoft last year and it's incredible how inward-looking they are. They spend most of the time telling you how great everything Microsoft-like is or will be, and don't seem to be well aware of the outside world.

They know there are things like iPhones and Android devices, but they appear truly baffled that anyone would want one. They think it's some kind of conspiratory rebellion, that the world uses those out of spite for Microsoft.

[HillRat]

Yeah, the coldest summer I ever spent in Seattle was hauling an iPad around meetings at Redmond. One L69 had this very pointed way of staring at the tablet, then at the big red clock, then back again. Keep in mind, I was part of a team coming in as a prospective customer. Just very weird.

I still have hopes for Nadella -- maybe just because I'm an old Sun warhorse -- but it's going to require a big rethink of MSFT, which right now is basically just a cash pile in search of a market. Changing the burn rate is just playing at the margins (layoffs are not a strategy), and if there's a big plan underlying the Mojang acquisition it's incomprehensible to me on both strategic and financial levels. Likewise, mass-producing Perceptive Pixel displays, while undoubtedly cool, is both fiendishly difficult (PP was basically a garage manufactory, so this is a software company figuring out how to scale up a product that has never been mass-produced) and not something that can push market dominance. Buying Nokia kept MSFT in the mobile space at a very high price, but really only purchased time and space, not a turnkey strategy.

Having said all that, it seems to me that there are two companies on the auction block right now that could give Redmond the germ of a strategy. Both Xamarin and Unity would fit very comfortably in what is arguably MSFT's wheelhouse -- software development tools -- while giving the company a way to seamlessly increase their mobile app ecosystem.

[ScottBurson]

> the coldest summer I ever spent in Seattle was hauling an iPad around meetings at Redmond

> [from the article] “[Ballmer's] view was that anyone in the company who used the iPhone was a traitor,” says this person. “His dad worked for Ford, and that meant you had Ford in your garage.”

This attitude drives me nuts. The best thing Ford and GM could have done in 1985 would have been to buy Civics and Corollas for 10% of their employees so they could see for themselves what was so good about them. But no, instead they had this adolescent "be true to your school" thing going on.

The same clearly applies to Microsoft. I hope Nadella gets that business is not a repeat of high school.

[throwawaymsft]

Beautifully put. Used to work there and the inner navel gazing was painful. People assumed loyalty meant blindly ignoring competing products under the guise of "dogfooding". They would dismiss competitive products almost in disbelief that people would use them (without ever have tried!).

[redler]

With most companies, the center of gravity is obviously on the customer side. The customer, and the market, is ultimately the boss. With the customer lies the product/market fit, the fickle and life-giving revenue stream, the demand that drives features and product and ultimately existential corporate strategy.

But when you achieve the dominance and size and cash hoard of Microsoft, that center of gravity shifts -- the company becomes so powerful and massive that it generates its own gravity. There is the luxury of a cushion so large that it recedes to infinity, distorting strategy to the point where the necessity of its convergence with the customer may no longer be explicitly contemplated. The wooing of the customer is supplanted by an eternal dance of indoctrinated partners in the ecosystem ballroom. The objective financial success of the arrangement trumpets it to become ever more like itself, unfettered and unfed by the market forces and demand that anneal smaller and more nimble competitors.

And so, numbly disconnected from the healthy signals of the natural customer-centric gravitational pull, this dominant entity finally reaches the ballistic apex of its trajectory, unpowered by the thrust of customer focus, and begins its gradual descent. Maybe the law of large numbers, with respect to enterprise growth, is really more of an inward-looking organizational behavior problem than one of stock market psychology.

[curiousDog]

Just curious, do you work for Microsoft? Last I heard, Azure was doing pretty well, considering Office 365, TFS and a host of other internal services are hosted on it. They seem to be the most formidable competition to AWS right now (and I believe that, I tried all GCE, AWS and Azure over the weekend and while AWS was the best, Azure was a close second while GCE was just slow and buggy).

[latch]

No, I don't. Also, my view of Azure pretty much comes from experience with it long ago and a year-old Gartner analysis [1]. I can easily accept that Azure is very different than it used to be. I can also easily accept that it's doing better against AWS than anyone else.

But I'd need hard numbers to refute that Gartner analysis. Spending 50% more than your competitor and having a market share less than 1/5 (probably a lot more, since the 1/5 is 15 providers combined), is something I struggle to call "success". I'd be less harsh if this didn't fit a pattern. And I know spending more and having less is the price that challengers face, but again, not being an incumbent (and failing to mount a real challenge) is a pattern we've seen before.

[1] http://readwrite.com/2013/08/21/gartner-aws-now-5-times-the-...

[curiousDog]

Ah, I believe this is what I came across and is more recent: http://www.fool.com/investing/general/2014/06/05/heres-why-m...

[jsolson]

I'd be curious to know what issues you ran into with GCE. I work on the team, and external reports of performance or stability issues are helpful.

[trentnelson]

IIS has a fundamentally technically superior architecture to Apache, thanks to Windows having a technically superior architecture for doing high performance multi-threaded asynchronous I/O (overlapped I/O and I/O completion ports).

[personZ]

Either way, differentiated companies -- apple -- require completely different strategies than nondifferentiated -- samsung.

How is Apple differentiated? To a user that wants a smartphone to send emails, visit websites, play fantasy football, take pictures, etc, Apple is every bit in competition with Xiaomi as Samsung is. To many, many users, smartphones are effectively a commodity now.

Which is why Apple devices feature some of the best screens, the best cameras, the best processors. Any illusions that Apple isn't fighting the competitive fight, and hard, is just contrived nonsense. They are fighting damn hard to make a compelling case for their devices, and doing a good job at it.

whereas Apple doesn't need (or want!) the bottom

Apple still makes and sells the iPhone 4S, a three year old device. You can get this in the $200-ish range. Further most of Apple's pricing has been contingent upon the scam that are cell phone contracts, where right now you can get the iPhone 5, for instance, for "$0". That is, by most definitions, the "low end".

[beagle3]

Apple stopped selling it on their website. I heard they've stopped producing it and what you see in stores now is the remaining stock - what's your source that they're still making it?

Furthermore, the virgin mobile link you gave is for no contract - but locked phone. While it's not comparable to $200-with-a-2-year-contract, it is also not comparable to an unlocked phone.

[personZ]

Apple stopped selling it on their website.

Most competitive makes don't sell their devices on their website at all. That really doesn't demonstrate anything.

Not only does Apple still manufacture the 4S, they recently restarted production of the iPhone 4 (sans S) for the developing world. I would cite this, but you can find references everywhere and with ease, so that hardly seems necessary.

[beagle3]

> Most competitive makes don't sell their devices on their website at all. That really doesn't demonstrate anything.

And yet, Apple does, so it's a hint. They've been selling 4S on their website up until a month ago.

> I would cite this, but you can find references everywhere and with ease, so that hardly seems necessary.

It took you longer to write this than it would have to google a reference and post it. But then you would have noticed that (a) it is all rumors, and (b) it is from February - 8 months is a long long time in manufacturing.

[personZ]

And yet, Apple does, so it's a hint.

Markets have segments. Apple decided to sell their 4S through other channels in the US (they still sell it on their site in Brazil, which I guess by your logic proves that they still manufacture it. That is a country of 200 million), likely to continue this absurd and so easily disproven myth, repeated in here, that they only chase the high end.

But then you would have noticed that (a) it is all rumors, and (b) it is from February - 8 months is a long long time in manufacturing.

It actually isn't hard at all, nor are they rumor sites. I'll give you a hint -- Apple moved all iPhone 4s and 4 production to a manufacturer called Pegatron. And before you implore me to provide the research for you, how about you demonstrate a single credible source that Apple ever stopped manufacturing it?

[beagle3]

http://en.wikipedia.org/wiki/IPhone#Model_comparison says it is discontinued. If it's so easy to cite a credible site that says it is still in production, why don't you just do it?

No, wikipedia isn't credible. Can you find a source that says the 2007 first generation iPhone is no longer in production? By your logic, it is still in production.

It's possible that you are a party to non public knowledge. All power to you. But the public knowledge I was able to find does not support your assertion.

[anewcolor]

have a reference that isn't a rumor site?

[vinceguidry]

> Apple still makes and sells the iPhone 4S, a three year old device. You can get this in the $200-ish range. Further most of Apple's pricing has been contingent upon the scam that are cell phone contracts, where right now you can get the iPhone 5, for instance, for "$0". That is, by most definitions, the "low end".

No, the consumers on the real low end of the cell phone market can't afford or can't get approved to have a contract. Most phone makers chase this market in some way, Apple doesn't.

[personZ]

Most phone makers chase this market in some way, Apple doesn't.

Except that they still make and sell the iPhone 4s. That is absolutely and undeniably chasing the "very low end" market (it's $199 no contract, which is pretty bottom tier).

http://www.virginmobileusa.com/shop/cell-phones/iPhone4S-8GB...

Now I suppose we can just keep arguing this down, but historically Samsung was "Chasing the low end" because their devices were $0 on a contract (ergo, in the $600 range. The iPhone 5s is currently $0 on a contract). Now that floor keeps falling, Apple is selling a $200 device, and we're still going to argue that they super don't care about the low end, and they're some sort of exclusive device despite burger flipping teenagers buying it?

[blinkingled]

>How is Apple differentiated?

Don't forget marketing. I don't think anyone plays the marketing game better than Apple. They are essentially marketing themselves as different and the fact that it works is nothing short of miraculous in the face of actuality!

[mwfunk]

Samsung spends significantly more on marketing their mobile devices than Apple does. Not just a little more, a lot more [1]. Not just advertising, but deals with carriers to pay bonuses to retail staff for selling the devices. Microsoft doesn't spend quite as much promoting Windows Phone and the Surface, but it's still a lot more than Apple [2].

Marketing, at best, gets customers in the door. It doesn't generate brand loyalty or repeat customers, and marketing alone certainly doesn't sustain a company or product line for years (or decades!) on end. The "Apple is all marketing" trope is usually invoked in discussions that are more about tribalism than analysis, by otherwise-rational people making a conscious decision to not accept the fact that there are other rational people in the world who see value in things that they don't.

I'm sure there's no shortage of people who will read this and immediately have a knee-jerk reaction along the lines of, "yeah, OK, maybe Apple spends way less on marketing than those other companies, but that just proves that they have magically effective marketing, because there's no other possible explanation for their success!" If there is a litmus test for rationality, they just failed it. A more plausible explanation is that success in business is a combination of a lot of different things- every company/tech/device/platform has a unique fingerprint of pros and cons that help it or hurt it in different market segments, and there is no perfect combination of any of those things. It's the ability to say, "I don't see value in this, but I can see how other people who care about different things might like it". This is an incredibly valuable ability to have, and people should be actively cultivating it if they want to make a positive difference in the industry.

[1] http://online.wsj.com/news/articles/SB1000142412788732409640... [2] https://twitter.com/asymco/status/396253597551570944

[personZ]

Samsung spends significantly more on marketing their mobile devices than Apple does.

Samsung is estimated to have spent, in total, $364 million in 2013 in the US. Apple is estimated to have spent $350 million. Is that really "significantly more", especially given that Samsung's total mobile device market is wider than Apple's (e.g. feature phones and so on).

Indeed, thinking in terms of purely smartphones -- I see at least four Apple ads for every one Samsung ad I see. Maybe it's just my market (Toronto area), but there is absolutely no question that Apple's conventional ad spend, and their partnerships with carriers (that pollutes the numbers a bit), absolutely dwarfs Samsung's.

But of course Apple succeeds because they achieve excellence in all areas. As I mentioned elsewhere, they sure as hell are trying to compete, and anyone that argues that they live on some other plane, free of competition, is deluded.

The "bonuses to retail staff" thing, as an aside, seems to be some invention that appeared to justify Android sales, which clearly had to be caused by nefarious interference than consumer choice.

[IBM]

Marketing isn't just advertising. The last chart illustrates the massive difference in marketing spend between Apple and Samsung.

http://www.asymco.com/2013/04/02/the-cost-of-selling-galaxie...

[personZ]

The number I gave was Samsung and Apple US spend for promotions on mobile. The Asymco link you gave is for Samsung Electronics, which is the whole that makes televisions, cameras, printers, semiconductors, and so on. That number is a garbage comparison, but somehow, and conveniently, it is the one that is always referenced when pushing the "Samsung advertises so much more" angle.