Microsoft’s Long, Slow Decline

http://daringfireball.net/2009/07/microsofts_long_slow_decline

by tumult • 17 years ago

142 172 17 years ago

tumult• 17 years ago

Normally, I wouldn't submit something with what I might consider to be an inflammatory title, but I think John Gruber raises some interesting points on Microsoft's current situation. They're a huge company with products which register on my likability meter from "this is awesome" to "what is this crap?"

It will be interesting to see what happens with Windows 7. It's a good chance for them to turn around the bad image that became associated with Vista. This doesn't necessarily need any technical bearing.

Windows Mobile, to me, seems like a pretty dead platform. I've gone through a couple of WM phones and I have no intention of going back, either as a developer or a user.

tvon• 17 years ago

I'm picking on you a bit here, but "Microsoft's Long, Slow Decline" is about as gentle a title can be while indicating that the article is about the general decline of Microsoft. Inflammatory would be "Microsoft is Dead", "Microsoft has Jumped the Shark" or "Microsoft Causes Cancer".

mechanical_fish4• 17 years ago

I can't resist forwarding Gruber's most recent Twitter:

(The working title was ‘Microsoft Is Fucked’.)

Judiciously edited, I'd say. ;)

Arubis• 17 years ago

Or the working title, per Twitter: http://twitter.com/gruber/status/2940843840

I wish this all weren't the case. Competition benefits everyone, and Apple's had fairly free reign over the improving-your-consumer-OS space for quite a while now.

tjmc• 17 years ago

My personal prediction is that Windows 7 will be a big hit for Microsoft. I installed the RC on a 3yo media PC with 1GB RAM and it’s really been quite good – it found all the hardware including slightly obscure things like dual tv tuners and an IR receiver on install. The only thing it missed was the graphics card driver but it found it on the first update. The digital tv playback is smoother than XP and it “just works” as a PVR – you can fully control it with a remote from across the room. It plays Xvid and can burn DVDs out of the box.

Gruber’s right that MS have lost the enthusiasts and yes, they’re now a bit player at the top end of the market. But then again, so is Toyota. People who use Windows are like people who have a car to get from A to B. MS have always been about the mass market and that’s not changing. There’s still substantial advantages in being the dominant platform – especially as the default business desktop. I think Windows 7 is good enough that the great, unwashed hoards will switch from XP in surprising numbers. But we’ll see…

shin_lao• 17 years ago

I wholeheartedly agree. Windows 7 is an excellent operating system. People jump to conclusions too quickly.

The challenger of Windows Vista is not MacOS X or Linux, it's Windows XP.

dememarc• 17 years ago

Very good point to parallel MS to Toyota. However, unlike MS, Toyota has Lexus, a brand that does very well with consumers that are willing to pay a premium for a premium experience. MS has no such offering.

(see also VW/Audi, Nissan/Infiniti, Honda/Acura, etc)

adamhowell• 17 years ago

The 91% retail computers number is crazy. My guess is it has to do with several different factors, a few of which might be:

* Circuit City going under

* Best Buy now stocking Apple merchandise

* Wal-mart going almost entirely sub-$1000

* No one wanting a computer that comes with Vista (even my Mom bought a laptop the other day b/c it was $400 and came w/ XP)

* More Apple stores, meaning more free tech support (which is why Microsoft's going down that route soon)

Kadin• 17 years ago

I think it's probably due in large part to near-total destruction of the $1000-plus PC market. It's not that Apple has really gained there as much as the numbers would suggest, it's just that they've managed to hold on and get people to continue shelling out, while other computer manufacturers have been forced into a price war.

I suspect, if you were to go into Best Buy or Walmart, you would find only a handful of non-Apple PCs for $1k+, if any at all.

Apple is doing well in the high end because they've successfully resisted commoditization in a way that none of the other manufacturers have. (Sony has tried hard, but they're not half as cool as they want to be in the eyes of the average buyer.) Toughbooks are probably the only other brand that stick out as demanding a premium and being likely to get it, but they're a specialty product.

potatolicious• 17 years ago

This is something I've been saying all along - and Sony too. Last year someone at Sony lambasted the Eee PC, saying that netbooks will destroy the industry by causing a "race to the bottom". People fought against that idea - and many loudly proclaimed Sony to be a sore loser and sells overpriced crap.

Quote here:

http://news.cnet.com/8301-10784_3-9879798-7.html

And then it turns out they were right. The netbook has absolutely gutted the over-$1000 PC market to the point where Apple is now the only real player. Margins are thinner than ever and I would not be surprised if manufacturers start keeling over from selling too many netbooks.

I mean, that's what happens when you give up the business of selling kobe beef and get into the business of selling grade-D ground beef...

whatusername• 17 years ago

And don't forget Lenovo / Dell XPS / etc all being sold online / direct to businesses.

Hexstream• 17 years ago

I'm surprised at the lengths some people will go to save a few puny letters on "because" and "with" while otherwise using perfect spelling.

(Achtung!)

edw519• 17 years ago

Has OP ever been in one of the 6 million businesses is the U.S. lately? If he had he probably would have noticed that over 90% of the desktops running Windows. Many of them with ie locked down. With the server rooms full of Microsoft products. And those responsible for procurement unaware of much else.

Microsoft may be in a long, slow decline in the consumer marketplace, but you'd never know from those 100 million desktops.

Do you think that maybe Microsoft was smart enough to foresee this so that's why they're so locked in in the enterprise?

mechanical_fish4• 17 years ago

I also see a lot of office furniture when I look inside a business. But nobody cares much about office furniture. For most of the market, it's a boring commodity that is bought by professional office managers who care a lot about the price. It lasts a relatively long time and doesn't change very often.

It's also an intensely cyclical business, which is no doubt a big reason why Microsoft's financials are so screwed.

The moral of this story is that the notion of Apple vs Microsoft is more stale than it has ever been. They aren't even in the same industry anymore. You could imagine investing in both of them at once and calling it diversification.

angstrom• 17 years ago

Apple has turned computer sales into a question of quality, much like the Japanese manufacturers gained control of the domestic car market by making it a question of quality.

Meanwhile, there are businesses that still want to run full screen 16-bit DOS programs in emulated Windows XP on 64-bit Windows 7. Windows has become a metaphor of the Russian Matryoshka nesting dolls.

netsp2• 17 years ago

Completely true about apple vs msft.

I'm not sure I agree about the furniture implication. Maybe practically nobody cares about furniture, but the suppliers do. If they sell 90% of all office furniture at a great margin, they are a successful company. Commodity implies close to perfect competitive markets. That is not the case here.

Anyway people buying servers care. They may not be cutting edge, but they care what they use.

fauigerzigerk2• 17 years ago

True. I'm not interested in the furniture that is hardware either. I'm interested in computing, not in computers.

gaius• 17 years ago

Tell that to Herman Miller.

jimbokun4• 17 years ago

"It lasts a relatively long time and doesn't change very often."

"It's also an intensely cyclical business, which is no doubt a big reason why Microsoft's financials are so screwed."

This is exactly why people staying on XP is such a huge problem for them. If people only "upgrade" when a computer breaks or buy another license when they get a new employee, then the the office furniture business fits Microsoft pretty well.

JunkDNA• 17 years ago

I think you bring up a very interesting point. Microsoft is indeed tightly embedded in the enterprise. If they ceded the home PC market to focus on the enterprise, I suspect they would see much better revenue growth. Enterprise needs often emphasize things that are not really high on home users' lists: remote installation & configuration, customizable user security policies, integrated calendaring and email, etc...

To be sure, MS is certainly doing a lot in the enterprise space: SQL Server, Sharepoint, Outlook, and IIS just to name a few. But little (if any) of that stuff translates especially well to average consumers who have no need for such products. In spite of that, MS persists in having all these consumer distractions that are money losers and sap time and resources to support and promote (see: Zune, Xbox). But frankly, that's not really what they're good at as a company. I mean that as no disrespect to the people on those teams, but the company itself is just not consumer oriented. The consumer side of MS products always feels "bolted on". It's just not part of the culture. They just need to start being OK with that.

If MS could realize that they don't need to dominate every corner of the computing world in order to be a competitive company, it would be a huge start to getting them back on the right path. Remember when they wanted to buy Intuit, and then came out with MS Money to compete against Quicken when that fell through? That sort of thing makes little sense, and collectively those small things distract a company from its mission (to be fair, they recently killed MS Money, so there is hope).

Here's hoping they turn it around. The marketplace needs competition, and a toothless Microsoft wearing a "kick me" sign is not helpful for the industry as a whole.

yankeeracer73• 17 years ago

Totally agree - the lack of focus is what I think is killing them. It's like a giant insecurity complex that they have to be in every damn market. Taking a page from Apple in the days where Steve would draw a quadrant in his presentations and just say, here are the 4 things we do. Period. MS should do the same, make those things world class, THEN start to diversify again where it makes sense.

twilightmoon5• 17 years ago

MS deal with Intuit did not "fall through" they tricked intuit into thinking there was a deal, got their internal lines of code then booted them out the door like a 2 dollar hooker, and wrote MS Money with the code. This was standard operating procedure for MS well over a decade past when it began and the list of victims is long.

mmphosis• 17 years ago

There are lies, damn lies, and statistics.

There are only 6 million businesses in the US?

I thought that the "over 90% of the desktops running Windows" is an old figure from the (Microsoft backed) Gartner Group. The large firm I used to work for was partially bought out by Microsoft, and so we used Microsoft. How about a more realistic (and up to date) figure of how many Windows machines vs Linux/phones/game-consoles/Google/Apple/etc machines?

As for "The Enterprise", beam me up because the majority of servers are Linux.

Tichy2• 17 years ago

The likelihood of the average business to adopt Non-Windows Computers seems extremely small.

The only reason to buy Apple would be to woe the employees, at a significant cost. Linux would probably not make many employees happy, and would not save that much money either. So which companies would make the switch? Except for designer shops, of course.

kgelner5• 17 years ago

"If he had he probably would have noticed that over 90% of the desktops running Windows. Many of them with ie locked down."

But think about how astounding that figure is. 10% of systems in a company being something else in an environment utterly hostile to non-Windows systems. That would have been 99% just five years ago...

Looking at Snow Leopard features, it's finally a desktop that I would prefer to use over Windows in a corporate environment just because of better exchange integration alone. Apple is doing things that enable that percentage to grow significantly, and that is aided by a push from within by many people that have started to use macs at home and now would rather they use them at work as well.

And that's where the metric of "people that love computers" comes to be of such importance, because those are the people that make macs work at work, then the casual users can and will follow.

Frankly I think the healthiest situation would be a good mix of a variety of desktops in the enterprise, the Windows monoculture is a dangerous thing and lets internal apps really get mired in overly targeted technologies that don't allow use from other platforms - which eventually leads to issues in upgrading the platform you do have down the road.

nazgulnarsil2• 17 years ago

microsoft is guilty of hubris. their corporate culture has convinced itself that because it supplies the OS it needs to compete for your attention with every aspect of computing. Microsoft could benefit greatly from shrinking and gaining some focus.

DrJokepu• 17 years ago

Agreed. I wouldn't be very surprised if we were seeing Bill Gates returning to the cockpit again to sort things out in five years or so.

itgoon• 17 years ago

I could see him doing it, but I don't see him actually sorting anything out. His last years were not stellar. He did a fantastic job building the company, but I don't think he's the right person to rebuild it.

joechung• 17 years ago

If you ignore the global economy, the magnitude of the sub-$1000 PC market relative to the $1000+ PC market, and the fact that you can run Windows on an Apple PC, then this article makes sense. Otherwise...

markerdmann• 17 years ago

You make a good point, joechung, and I've been trying to find the related statistics. This is what I've been able to come up with so far:

Apple had 14% of the US retail PC market in Feb. 2008 -

http://www.appleinsider.com/articles/08/03/17/apple_snags_14...

This article claims the number was 8.7% in the 2nd quarter of 2009 -

http://www.appleinsider.com/articles/09/07/15/single_digit_g...

According to this article on theappleblog.com, Apple has 4% of the global PC market as of July 2009 -

http://theappleblog.com/2009/07/25/does-apple-have-a-91-perc...

If anyone has more, I'd be very curious to see them (especially the ratio of sub-$1000 retail PC sales to $1000+ retail PC sales).

trapper• 17 years ago

Listening to "statistics" from people who quote percentages is really dangerous.

Percentages are really, really, easy to lie with. And for people who only quote percentages, this is usually what they are trying to do. Spin.

eli4• 17 years ago

4% globally could be right. Keep in mind that retail is just one slice of the pie. PCs dominate overwhelmingly in the enterprise.

iamelgringo• 17 years ago

The article makes even more sense if you ignore hardware geeks, PC gaming enthusiasts and case modders. I don't see tons of teenage gamers lining up to buy new motherboards and 3 PCIx graphics cards for their Mac Pro.

ref: http://www.anandtech.com/ http://www.tomshardware.com/us/#redir http://www.overclockersclub.com/ http://images.google.com/images?client=opera&rls=en&...

jonny_noog4• 17 years ago

I used to be a case modder, put together my last three PCs myself. Got sick of it. Now I have a Mac Pro.

bdotdub• 17 years ago

I think a lot of people who buy Macs are the opposite of hardware geeks and case modders. I bought my MBP because I got tired of dealing with hardware, picking out parts, etc. I just wanted a nicely designed and built computer that let me do what I wanted (in my case, programming).

To me, having to deal with hardware just gets in the way of letting me do what I want, which I feel many people can relate to.

eli4• 17 years ago

They're easy to ignore because they're in the minority. The vast majority of computer buyers don't care at all about that stuff.

carbon8• 17 years ago

Specs don't matter like the used to. 6/7+ years ago an upgrade or a better performing machine was actually a big deal even for regular users. These days it's almost the opposite. Components perform at such a high level that consumers are willing to buy worse-performing machines because the experience just isn't any different.

twilightmoon5• 17 years ago

The magnitude of the $1000+ PC market in terms of # of widgets sold, or in terms of revenue?

In case you were not aware, Apple's market cap is higher than Dell and HP combined who together sell over 50% of the domestic units in the US, which is Apple's strongest market.

Businesses are ultimately formed to create revenue and profit, not shift widgets. Microsoft has apparently taken their eyes off this fact after 2 decades of easily collected fat profits, but monopolies can be lost if you sit fat and happy on them.

People often talk about Apple's "market share" in terms of widgets, but how often do you hear the media talk about Apple's "market share" of the total revenue in the computer market? I've never heard it mentioned once* in decades of following the computer industry. Profit is what matters, not widgets.

*by mentioned once I mean the main stream media, I've heard it mentioned on Mac blogs. But I've never seen the media show a break down of the exact % of the profit Apple pulls out of the computer industry. I'd love to see one.

froo4• 17 years ago

I think the OP is completely ignoring Microsoft's previous years financials (strong consistent growth since before Vista and after) and instead basing his argument on two data points (and not the whole data set) and pointing and saying the sky is falling.

It appears that Microsoft can blame their quarterly's on the global financial thing as that is a valid reason, when you take all other financial data points into account. Saying it is all Vista's fault is a straw man argument, given ALL of the data shows otherwise.

If anyone cares to look at the actual financial data, rather than making wild claims, you would notice that Microsoft's Growth alone last year was about half of Google's total revenue. Sure, Google is doing fantastic, but that's not to say Microsoft is completely F-ing it up (like the Author claims when comparing the two).

Secondly, I won't dispute the figures that Apple are outselling Microsoft in the >$1000 market, because I don't have access to all the figures but I personally would expect that would be the case given that is the market Apple targets. I would suggest that if the Author wants to take a realistic view of Microsoft's position in the computer market, he should look at TOTAL machines sold, not just one market segment.

It would be like arguing that Ferrari dominate every other car manufacturer worldwide because they make the most cars that are red that come from Italy...

[Disclaimer: Not a Microsoft Employee or Fanboy, just sick of propaganda]

EDIT - fixed an error with Google/Microsoft revenue/growth comparison

nwjsmith2• 17 years ago

You are wrong to call this propaganda.

The core of Gruber's argument is that Apple's market share (not Google's) is growing quickly, whereas Microsoft's is falling.

Gruber also acknowledges that the numbers don't take into account the whole of the PC market, and he brings up a couple of important points you need to consider before thinking that Microsoft is making up for its losses in the sub-$1000 PC market. Quotes:

"What is particularly alarming about Microsoft’s numbers is that revenue from its Windows PC division suffered an even greater year-over-year revenue decline than the company as a whole: 29 percent."

"Even given that NPD’s numbers represent only retail sales, is there any reasonable doubt that Apple’s share of the non-retail market for $1,000+ computers is also growing?"

Also, it's misleading for you to suggest that Gruber implies that Microsoft is "completely F-ing it up" when comparing them to Google. His 'working title' aside, the purpose of the comparison was to demonstrate that other companies in the industry are not falling short of projections, as Microsoft has. He is suggesting that blaming the revenue decline on the economy isn't a strong argument.

You use the term 'propaganda' pretty loosely. Many things written on Daring Fireball are sarcastic and overly-dismissive when it comes to Microsoft, but it's clear that John Gruber put a lot of thought and work into this essay. Try to do the same with your criticism.

froo4• 17 years ago

"Try to do the same with your criticism."

You know, I still disagree with you but I think you're arguing from a completely biased standpoint.

I looked through your all of your previous comments and noticed that ~85% of them were on Apple related submissions.

So while I'm not going to blatantly call you a Fanboy, but... where there's smoke...

As for Microsofts revenue decline, they had a bad product with Windows Vista.. they did the same thing before with Windows ME and I'll hazard a guess that they'll probably screw up several OS's in the future.

The fact is, sometimes top tier companies make products that don't gel with consumers.

Recent examples? Microsoft with Vista, Apple and the Apple TV, Google with Knol...

While we're looking at company's failures, lets just ignore Apple's track record when Jobs wasn't there shall we? I mean, its not like they've had any bad products before </sarcasm>

Even still, Vista was released in January 07 (source: Wikipedia) and Microsoft managed to have at least 1 full year of high growth during that time, which is assumed to be during the "bad time" of Vista. So you could realistically argue that this years numbers were a result of recession.

(I'd suggest that Microsoft's OS and the budget PC market is more sensitive to financial downturns than Apple given it's marketed towards people who have smaller incomes than your typical Apple consumer, thus people are less likely to buy Windows based PC's when times are tough. That's just conjecture on my part though)

Microsoft isn't on a long slow decline, it's a bump in the road, plain and simple.

This article was nothing but propaganda (or blatant fanboyism, take your pick).

"The core of Gruber's argument is that Apple's market share (not Google's) is growing quickly, whereas Microsoft's is falling."

He compared Google's revenue growth to Microsoft's (6th paragraph), so I figured it was fair game to compare the two. I never compared Apple's revenue to Microsoft's simply because I haven't bothered to look recently.

I just know these figures when I looked to verify or disprove a Google fanboy's comment previously on HN

http://news.ycombinator.com/item?id=671770

ajg1977• 17 years ago

Hey guess what - I'm one of those 91% consumers who bought an Apple computer (a Macbook pro to be precise) this year. Now, guess what OS I'm running? Not OSX that's for sure.

I'm also not really sure what DF's aim is here beyond recycling the favorite talking points of Apple fans.

Vista sucks - check. Windows 7 is a do-over - check Consumers love Apple - check Mac's can run Windows - check Laptop hunter Ads are lame - check PC's are $700 pieces of crap - check

There's nothing really new here. Just some viewpoints with questionable objectivity while conveniently ignoring the fact that a) The vast majority of computers sold do not fall into the "$1000+ at retail" category and b) The majority of users are perfectly happy with both Windows and their sub $1000 machines.

s3graham• 17 years ago

Agreed here. I don't know how common it is, but since OSX purchases can't really be separated from hardware, and the hardware is basically vanilla x86 in a snazzy case, it (theoretically) doesn't prove anything.

ptomato• 17 years ago

Anecdotal evidence from a single source does not a compelling argument make.

b) "They still dominate in terms of unit-sale market share, yes, but not because people don’t recognize Windows as second-rate, but because they don’t care, in the same way millions of people buy metric tons of second-rate products from Wal-Mart every hour of every day."

a) Well, honestly, did you even read OP?

mechanical_fish4• 17 years ago

There's nothing really new here.

Did you notice the part about the financial results? The historic financial results? The point of the entire article?

Microsoft's year-over-year revenue has gone up since before I or Gruber knew what a computer was. So this is big news. Maybe not as big as the terrifying numbers would suggest (the last year did also feature the worst possible coincident timing of business events in Microsoft history) but still big.

erlanger2• 17 years ago

> Now, guess what OS I'm running? Not OSX that's for sure.

I'm actually curious. BSD? Linux? The only things that have kept me on OSX for so long (steep decline since Panther) are Finder and Photoshop. Well, those and that I'm hopelessly tied to the  key since I've only used Macs...+Option+O will never cease to please me.

But mainly it's Finder. Why won't other desktop environments copy Apple's excellent combination of +Tab and +`, opting for the inefficient, app-flattening Alt+Tab?

GeneralMaximus3• 17 years ago

Don't get me wrong here. I love my Mac, and I'm probably going to buy another one later this year (waiting for SnoLeo).

I hate Finder with a passion. Finder and iTunes. It's clear that both these apps were built carefully so that your average PC user wouldn't get confused. Problem is, most Apple users are not what you'd call average.

The Finder team still hasn't figured out whether they are building a spatial file manager or a browser-based file manager. The tree view sucks (and that's putting it mildly). Moving files around is a pain because (1) there's no cut-paste and (2) no "Move to ..." or "Copy to ..." context entries. Do Apple seriously expect that I'll open multiple Finder windows and then drag and drop my files between those?

I'd never even dream of using Finder for complex file management tasks (like reorganizing a photo collection). I usually drop into a Terminal when I have to do something like that.

Of course, I might be prejudiced. I used Linux for almost all my life before switching to a Mac one year ago. Also, I use Haiku on my PC, where navigating by right-click is not just a feature, but the recommended way of navigating the filesystem (if you've used BeOS or Zeta, you probably call this feature the "Z-Snake").

madars• 17 years ago

> PC's are $700 pieces of crap - check

Ever tried a ThinkPad? The only thing ThinkPad's haven't got, I wish they had is MagSafe.

blasdel4• 17 years ago

The Thinkpads that don't suck tend to cost as much or more than Apple laptops.

dougp• 17 years ago

Every ThinkPad I have ever had at work has emitted this super high pitched whine from the left side.

zmimon• 17 years ago

Yes. I would have liked to see in that 91% figure how many of those Macs ended up with Windows on them in some form. I would bet it is large if only for gaming.

godofbiscuitssf2• 17 years ago

"Not OSX that's for sure."

Such revulsion! I bet you didn't climb up on the dinner table Christmas day and take a big ol' steamy dump on the just-carved turkey, either!

Such manners, such propriety! No pooping, no OSX!

ryanwaggoner4• 17 years ago

Today, though, Microsoft is increasingly left only with customers whose priority is price.

Yeah, but that's probably like 95% of people and companies. Computers may not be commodities for the types of people who frequent HN, but they are for almost everyone else.

thenduks• 17 years ago

He's saying that the kind of people who frequent HN are indicators of what the future might be like:

Regular people don’t think about their choice of computer platform in detail and with passion like nerds do because, duh, they are not nerds. But nerds are leading indicators.

ryanwaggoner4• 17 years ago

Nerds are leading indicators for some things, but not everything. Once something has become commoditized, nerds may be leading indicators of what a small niche will prefer, but most people will compare that commodity primarily on price. Reversing commoditization is difficult and rare.

jwhitlark4• 17 years ago

What will never be commodities to people are their time and happiness. When my wife was looking for a new computer, she didn't even consider Windows; she looked at my Linux and her friend's Mac, eventually deciding on the latter for its physical looks and quality, as she didn't have any real experience with the software.

mrshoe• 17 years ago

I think Gruber makes a lot of great points here and I agree with most of what he says. However, I think he's missing one important point.

Microsoft doesn't think "it is sitting pretty because Best Buy has a 17-inch Dell for $650." I can assure you that internal talks at Microsoft include very worried discussions about how they're going to deal with Apple's quickly growing market share.

Microsoft's response to "Macs are better" is "PCs are cheaper", not because they think more PCs will sell because of these ads, per se, but because they want computers to be cheaper. They want to frame the buying decision in terms of price so they can drive prices down further. Oddly enough, this kind of worked. Apple lowered their prices.

As Joel Spolsky says, "Smart companies try to commoditize their products' complements... Microsoft's goal was to commoditize the PC market." (http://www.joelonsoftware.com/articles/StrategyLetterV.html)

Microsoft does not think that it's OK to be inferior to Apple as long as they're cheaper. They just really really want computers to be cheaper. They always have. That's how they've made billions of dollars over the years. They tie the success of their software business directly to falling prices in the computer hardware industry. If they see any hint of that trend reversing (rising prices in hardware), they're going to fight it tooth and nail.

I think what they really need to understand is that the race to the bottom in the computer hardware market is generally over. We've arrived at (or near) the bottom. People can afford just about as many computers as they could possibly want now. If they want to further commoditize the personal computer, they should be doing what Google is doing and writing a stripped-down OS that runs on much weaker hardware but relies on the web for processing power. Insisting on machines that are both cheaper and more powerful than the PCs of yesteryear has reached the point of diminishing returns.

nopassrecover2• 17 years ago

Excellent points about commoditisation. I don't think Microsoft wants Macs to be cheaper (though they still probably see increases in windows sales to mac users if there is more money left over) but they do want this to be a price argument because right now that's where they win.

I think Microsoft should do two things:

1. Push Windows 7 as superior. In my experience and that of others who have used it, so far it really is. (NB: The people that have used it were not die-hard fans either way, so naturally there will be Mac fans who disagree but this isn't the point).

2. Offer a Mac-Only version of Windows at a cheaper price to get more windows installs on mac (price of Windows OS for someone using it as a second OS is quite prohibitive).

jwhitlark4• 17 years ago

I think the main problem for MS is that while Apple makes a premium product, and is oriented around consistently turning out products that deserve their reputation, MS is not. Lose the perception that running Windows is Inevitable, and they don't have to turn out good products just once in a while, but almost every time.

When you add Linux snapping at their heels with a free desktop, I think they've got real problems. Especially when Shuttleworth is calling on Linux developers to make something prettier than OSX. They won't necessarily succeed, (although I hope we do), but simply playing in the space greatly complicates Microsoft's issues.

twilightmoon5• 17 years ago

On point 1, are you arguing Microsoft should say that Win 7 is superior to Mac OS X, or to previous versions of Windows?

The first argument would be terribly hard for them to win, but the second they might be able to credibly argue. I don't think there are many who dispute that Win 7 is better than Vista, the only issue is if it's better than XP. That likely depends partially on the hardware you run it on.

dasil003• 17 years ago

They want it to be cheaper insomuch as it causes people to buy more computers. However they don't want them to be so cheap that the OEM price becomes significant where people can buy a $100 Linux PC or a $300 Windows PC with the same specs.

dant• 17 years ago

Good point. I think Microsoft have failed to spot that the computer market is going the same way as the car market. You can buy a car very cheaply if you just need to get from A to B. But people who have more money choose to buy BMWs or Mercedes. It's an aspirational purchase.

StrawberryFrog2• 17 years ago

the race to the bottom in the computer hardware market is generally over. We've arrived at (or near) the bottom

And the computer at the bottom are netbooks and smartphones, markets that MS is not strong in.

chollida1• 17 years ago

> And the computer at the bottom are netbooks and smartphones, markets that MS is not strong in.

Was that a serious comment?

From http://en.wikipedia.org/wiki/Netbook

> As of January 2009, over 90% of netbooks are estimated to ship with Windows XP[52]

gatormax2• 17 years ago

I agree, there are some nuggets in here. But I think it's more written for people who want to see why Microsoft is declining than for people who want to see if Microsoft is declining. It doesn't seriously entertain alternative explanations for Microsoft's revenue dip and Apple's >$1,000-market surge, and in turn, I have a hard time seriously entertaining Gruber's thesis.

twilightmoon5• 17 years ago

Perhaps you have your own theory to explain this shift? Instead of sniping at Gruber, for trying to explain a very real shift in the market, if there's a better explanation, then link to it or share it.

Zancarius• 17 years ago

Regardless of whether Mr. Gruber is right or not, I think there is a very slight bit of irony if he is indeed correct.

Microsoft has been pushing the xbox to game studios like crazy. In effect, that move alone might help in their decline; if individuals who would otherwise play games on Windows have no real need to play games on Windows (they have a console), they have no need for Windows, either!

So, perhaps MS' game division is culling the OS division.

frosty• 17 years ago

you seem to be missing a very critical point in using financial projections.

Yeah, apple will keep gaining share in US but guess who will win in the emerging markets like China, India and Brazil. Microsoft will now start reaping rewards for its years of giving OS for free to these markets (basically by not cracking on piracy).

In these countries, its not about coolness or design. Its about the price.

Want an example? Guess how many iPhones sold in India?

jemmons2• 17 years ago

Do you even know? Or are you really keen to make us guess?

blasdel4• 17 years ago

I've seen numbers stating it's under 20k to date. The midtown Manhattan Apple store probably sells that many in an average week!

GeneralMaximus3• 17 years ago

iPhones are not sold here because they cost about $700. If they were as cheap as they are in the US, everyone would have an iPhone. In India, even the people who don't have the resources to feed themselves own mobile phones.

And people do buy Macs here (mostly computer enthusiasts or programmers). You can find many Macs at FOSS conventions (I know, ironic).

vetinari2• 17 years ago

The iPhone is not cheap in US. Yes, you don't pay $700/€500 upfront, but you will pay the amount through duration of the contract and by losing the option to switch carriers during the next year or two. The cost is the same, just hidden.

kgelner5• 17 years ago

"but guess who will win in the emerging markets like China, India and Brazil."

The one with the best mobile OS?

Unless Microsoft buys Palm, it's not Microsoft.

Sure iPhones are expensive now - but older ones will start reducing in price for markets like India/China - and the iPhone has very good internationalization support, along with a virtual keyboard that is far better at adapting to languages like Chinese for input.

You speak of long term but you are only looking at iPhone prices today instead of the fundametals.

brisance• 17 years ago

Microsoft is making the same mistake that Creative made with respect to the iPod as an MP3 player. They are still stuck in the "hard disk size, amount of RAM" rut. When was the last time you bought a computer (other than for gaming) that really required that extra 0.2 GHz?

Even then, MSFT makes an disingenuous argument since they make no PC hardware. So it is all spin.

People are buying solutions, not hardware. This is partly why the iPhone is so successful even though there are literally hundreds of cheaper phones on the market.

quantumhobbit• 17 years ago

Agreed. Comparing something like a laptop on just memory and hard drive is ignoring a huge list of other aspects which affect the quality of the user experience such as battery life, keyboard and trackpad, and heat(Apple is just as bad here if not worse than some).

To extend the GM analogy, it is like comparing sports cars based on horsepower alone. You can get an American muscle car with a ton of power cheaply but it will handle like crap or you can get a more expensive sports car with less power but is actually pleasant to drive.

jwhitlark4• 17 years ago

"That’s the business Wal-Mart wants to be in — selling a zillion cheap low-margin items and turning a profit on volume. That’s not the business Microsoft is in."

It should be noted that one of Wal-Mart's greatest advantages is that it manages it's resources more efficiently than it's competitors. Being always willing to risk that you can do a satisfactory job cheaper than anyone else is a great attitude for a company that can out innovate its opponents. I can't think of MS in those terms with a straight face.

jtfc• 17 years ago

Apple (and Steve Jobs) has never tried to market anything in it's product line to all consumers, they concentrate on the mid-high and highend market.

I don't want to sounds like a snob, I use macs for 20 years (I am a designer) and I never go to Wal-Mart, but we have a Prius. Low price is never the first priority for my family to choice any kind of product, and we try to not purchase anything influence by marketing/advertising.

I do use VMWare with XP on my mac. Honestly I was very happy when Apple switched to Intel so I never have to buy those not so well make hardware again.

There will always be people that shop everything at Walmart, and people shop at target/traderjoe, and another group shop only at Wholefood. We all different but I am happy that we have different choice.

Can you imagine if Apple died in the 90s and nongeek like me now have to choice between Windows and Linux?

csomar• 17 years ago

windows will remain dominant in OS shares at least for the next 15 or 20 years; after that something new need to be made.

Like the jump from Dos to win 3.1 or win 3.1 to Win95; Microsoft needs to make something more spectacular than an upgrade to 7; something more innovative and productive.

if it does, than there are another 30 years for msft life.

Mark20002• 17 years ago

Srsly? 15-20 year? I think Windows will be dead in 7-10 years. It shouldn't still be alive today. Windows is an OS for physical media. It wasn't built for networking and security. Windows'core needs to be scraped and MS needs to come up with something fresh from the bottom up.

Actually, they don't need to do anything. Others have already. MS just needs to bow out. You can't be on top forever.

fauigerzigerk2• 17 years ago

So when was Microsoft successfully competing in the market of fashionable consumer gadgets?

If you're looking for Microsoft's decline you must look at the sectors they actually dominate. And considering this whole question by way of intense californian navel gazing is not going to predict anything in a world where 100% of growth happens in Asia.

Personally I don't get the kind of collective, almost supremacist, enthusiasm for the quality of Apple products. I've been using some Apple products pretty intensively (MacBook/MacOS X, iPod, Xcode) and I remain largely unconvinced.

I love computing. I love what I can make computers do in terms of analysing and transforming data. But I don't like computers.

So when the first thing Apple tells me on their homepage is that some hardware thingy is now "unibody" they get blank stares from me. I guess people are just very different in that regard.

jsz0• 17 years ago

Microsoft is getting its first taste of reality for a variety of different reasons. I don't think there's any evidence to suggest they are in for a slow bell curve style decline. Their business model will change of course but probably won't decline much or at all. Eventually the economy will recover and enterprise PC sales will pickup. On the consumer side it's probably inevitable that Windows revenue will continue to shrink as consumers move more of their computing online and to mobile devices.

The one area they can build on is the Xbox platform as a general purpose set top platform that might serve some of the same functions as a traditional desktop PC. For example: It could be a file server, print server, home automation controller, media store, shopping front end, etc, etc. No other company is in a good position to control the living room. Apple isn't interested, Sony is patiently waiting to die, and Nintendo is firmly a gaming company completely incapable of making a general purpose platform. Most importantly the Xbox is one of the only new Microsoft products in the last decade that has really caught on with consumers. Eventually they can probably build on the success of the Xbox platform into mobile devices.

tybris2• 17 years ago

The legacy will make sure Microsoft is still the #1 Software company in 10 years and Windows the #1 Operating System.

lallysingh• 17 years ago

Meh. Windows boxes are a bit of a pain to maintain. For legacy, it's not hard to imagine a small number of citrix servers for legacy software.

olefoo2• 17 years ago

This is what IBM kept telling themselves in 1986.

The installed base of a legacy platform is not a guarantee of the health of the platform owner. Other companies that made this mistake; DEC, SUN, AOL.

In ecological terms, MSFT has overshot the carrying capacity of it's niche, and has not been able to exploit or create new habitat as an operating systems company.

tybris2• 17 years ago

Are you referring to "the IBM"? The company with a Market Cap of $150 billion, larger than Google, Apple, Cisco and every other IT company except Microsoft? There's a big gap between what is true on the web and what is true in reality. IBM is very much alive and kicking, still building mainframes and whatnot.

cturner• 17 years ago

When I buy a linux server at work, or one of those Linux Dells home machine (not sure if they're still around - I got this end of last year), I feel like I get a raw commodity. I wipe whatever crap the idiot manufacturer put on it, install my OS on it with ease, and then it does what I want for the rest of time. Server or desktop. Or both if I want. Multi-user from that moment, apt-get takes care of my problems. When I buy a mac it's about the same. It's a little harder to get new packages and some of the unix decisions are brainless but it's better with drivers.

The commodity feel is not remotely the case with Windows. The manufacturer may have left all sorts of crap over the install (toolbars and the like). I'll need to download or even buy a bunch of stuff to get it to do stuff that for a geek is basic (a pdf viewer and all of them stink, expandrive to be able to mount drives effectively, virus protection in case I get compromised but this makes my system less nice to use, putty so I can get to a real console). It doesn't come with anything approaching an adequate text editor or basic development tools. If it's a reinstall on a Dell the driver situation is very painful, and product activation might require me to make phone calls.

lamnk• 17 years ago

"Even without turning the machines on, anyone can see the difference in design and build quality. In fact, you don’t even need eyes — just pick them up and see which one squeaks. Apple is selling more MacBooks every quarter."

Give me a break ... Design ? Yes. Build quality ? Hardly. The Macbook (not pro) is a plastic toy. Its quality is just the same as of those Dell's Inspirons. The Macbook Pro unibody may made a difference in build quality, but definitely not the Macbook.

aichcon• 17 years ago

There are 13" unibody Macbooks (not Pro). I have one.

http://www.apple.com/macbook/

allertonm3• 17 years ago

Not anymore - the 13" unibody became a "Pro" after the recent refresh.

cwilson• 17 years ago

I'd have to disagree with this. Have you owned one of the plastic Macbooks? Regardless of it being plastic it was still the toughest notebook I had owned to date. Yes, the Pro's are MUCH tougher and I'm glad I upgraded when I did, but I had no complaints or issues with the build quality of my plastic Macbook. It was a great machine.

My comparison was HP's, Dell's, and even an IBM that all ended up falling apart with only a few years of regular use. With the Macbook this was not so.

GQB2• 17 years ago

Picking the (legacy) white MacBook as representative of the entire line is disingenuous. 100% of the modern line is unibody and does indeed represent superior design, from battery life to multi-touch trackpad.

donw• 17 years ago

I have a plastic, black, 13" Macbook, and the quality is much, much higher than any Inspiron or Latitude that I've ever owned. The case is visibly seamless, and the system doesn't rattle if I shake it. The little touches like a battery-level indicator on the battery, and the MagSafe adapter, are also rather nice, as is not having a laptop that looks like it was designed to appeal to ten-year-olds.

If you want a PC manufacturer that's comparable, look to Lenovo, not Dell.

krschultz2• 17 years ago

I prefer the keyboard & touchpad on the regular Macbook to the price equivalent Dell.

RichardBronosky• 17 years ago

The pre-unibody MacBooks were more sturdy that the pre-unibody MacBook Pros and PowerBooks.

lg• 17 years ago

A few months ago I spilled a full mug of coffee all over my white macbook keyboard (no cream or sugar, tho). I didn't notice I'd knocked the mug over (it was behind me) but after a few seconds the monitor went black and the light on the power cord died. After a minute or so of me dabbing at it with a tissue like an idiot, my coworker told me to take out the battery; I picked it up and coffee spilled out the battery bay. But I took it out and set the machine on my desk to dry over the weekend.

Monday I came in, put in the battery, turned it on, and everything worked fine. And I mean everything, even the CD drive. I'm typing on it now. For comparison, a guy I know had the same thing happened to his thinkpad with a cup of plain water, and it just died.

mcarlin• 17 years ago

I have a Macbook, and I love it to death, but I also know a guy who had this happen to his thinkpad, and it was actually fine. It turned out the keyboard was hermetically sealed from the rest of the machine, and it had drain holes through the middle of the laptop. He let the water drain, let the whole thing dry, and turned it back on, and it was in perfect shape.

budman• 17 years ago

This guy is a tool. I stopped reading once I read this blanket assumptive statement: People who love computers overwhelmingly prefer to use a Mac today

Really? Did he go door to door? Because he missed my house and MANY other people I know..

kgelner5• 17 years ago

Go to any modern technical conference (except the Microsoft specific ones of course) and you can see the truth in what he is saying.

atacrawl• 17 years ago

Better yet, go to an airport. Every time I go to the airport, any airport, I see a higher percentage of Apple logos staring back at me than I did the previous visit. It's kind of amazing. It wasn't that long ago that you almost never saw any Apple laptops. Now they're everywhere.

hcschmid• 17 years ago

Seems to me, whatever problems Microsoft has, they'd do a lot better to not give Apple an attention or comment. They should stick to the ignoring Apple. Answer questions about "We do not comment on competitors or their products".

It certainly won't fix their products, but it would reduce the chances of them putting their foot in their mouth, and that might be a starting point for turning their image, then, their products around.

pbsteve702• 17 years ago

Funny how this devolves into Apple v. Mac. Apple has gained share but I don't believe Apple has much to do with MS' decline. The real cause is the internet... it has slowly busting MS' monopoly power. It might have been inevitable but I think MS helped cause it. Way back in the 90s, every time MS saw a profitable Windows developer, they saw an opportunity to grow their own software business. They would even advise Venture Funds not to invest in certain areas. (Guess what.. venture investors want to make money, not battle MS.)

Funding and innovation for desktop development (read: Windows development) plummeted. Sure existing companies continued with their product lines and hobbyists built a huge shareware market. Meanwhile MS got fat dominating the market for software on their own platform, and with the increased PC sales for the ultimate killer app--the internet. They looked brilliant.

BUT... innovation didn't die. It moved to the web. And today, while most computers still run Windows, the dominant platform is NOT windows, it's the internet itself. Cloud computing has some real advantages but real disadvantages as well. But one of the advantages is that it was a workaround for the 80 billion pound gorilla, when every business analysis started with: Does this compete with MS?

Ironically, I see hints of Apple repeating the same mistake in its iphone... a platform that really has the legs to dominate in a way the mac never has. Financially and short term they're doing everything right and making billions. And they'll grow much more, just like MS in the 90s. But their whole app store/review approach is hostile to developers. In fact they're building a market that resembles the modern Windows market--only its 99c instead of shareware. Professional developers and capital and innovation is going away. The PageMakers and Photoshops of this stage of computing are going to happen on another platform. And Apple, like MS, a huge successful company with a strong embedded culture is unlikely to see the cause and effect and change its ways..

In the iphones case it won't take 15 years. But it will take a while. The iphone's current momentum is daunting. However, when you're a platform, your most valuable long term asset is your developers. But when your platform is a runaway success it appears to be too tempting to abuse those developers for short term gain. The absurdity of the Apple case is that Apple would seemingly make more money if they loosened up on the app restrictions. MS at least made serious money putting its developers out of business...

kgelner5• 17 years ago

I write iPhone applications for a living.

I don't see the App Store process as being developer hostile, at all. Yes there are a few specific areas where it's basically a hostile environment for development. But there is a far wider range of categories where the space is wide open. And that space is wider still now that Apple is finally letting people go hog wild with live video overlays in 3.1 (augmented reality stuff). You only see the contractions, but it's more than offset by expansion... and the contractions we do see, are bound to be temporary if other phones end up having compelling things the iPhone does not because of them (and the inevitable loss of AT&T exclusivity). That's far sooner than the 15 years you give them...

pbsteve702• 17 years ago

I'm actually a long time developer trying to write iphone apps for a living. In app review purgatory for a simple app that can't possibly offend or harm any one (including Apple, AT&T or the user's batteries). I'm glad you've found your green fields. I'm having to play the game of "what do I need to do like xxx who got approved so maybe I can get approved?" instead of "what is best for the user?" I know from the web that I'm not alone. I'll also admit that I'm biased... the last 35 days in app review, while the product closest in functionality has 4 updates approved, has been emotional hell for this once=lifetime-apple-fanboy. If Apple is only abusing me, obviously, it will not hurt them. But I stand by my point that successful platforms that take their developers for granted will one day regret it.

kgelner5• 17 years ago

This new quote from Gruber underlies exactly where the decline really matters most:

"It’s not that they need those customers, but that they used to drive the industry’s technical agenda, but now they don’t."

Where is Microsoft really driving anything at this point? It's not on the desktop. It's not in the mobile space. It's not even really in the enterprise.

The whole video tag argument in HTML 4 for example, is really between Apple and Mozilla. Microsoft is not really even a consideration.

If Microsoft is not really driving anything anymore, then they are just another company trying to comply with standards - and that means the inevitable (although slow) end of dominance they once enjoyed. For the computer industry, this is a good thing...

Mark20002• 17 years ago

Could someone PLEEEEAAASE tell me what makes 7 better than Vista? Please??!!! The taskbar is changed to icons and there is a preview for each one. That's really about it. The interface is still a mess with menubars hidden sometimes and not others, there are still several hundred control panels, and the system is still based on DLLs and a registry. Network navigation is a total joke. Built in media viewing is not even a joke. And, yes, I've used 7 quite a bit for my gaming needs so I know what a turd it still is.

It's a fundamentally confusing, unsafe, and bloated OS with the slightest amount of polish added.

Microsoft’s Long, Slow Decline

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