Microsoft executives discuss Apple competition: preventing Apple from leveraging iPod success

“On Tuesday, September 13, 2005, Microsoft announced to its employees and that it was reorganizing the company into a simpler organization in which executives much further down the chain would have direct decision-making capabilities, allowing the company to move more quickly in this ever-changing market and compete better with companies such as Google and Apple. The reorg was announced publicly a week later, with Microsoft also announcing that group vice president Jim Allchin would retire once Windows Vista ships in late 2006. Succeeding Allchin is Kevin Johnson, who will oversee the new Platform Products & Services division. Jeff Raikes, the head honcho of the unit previous responsible for Microsoft Office, was named president of the Microsoft Business Division. And Xbox’s Robbie Bach was named president of Microsoft Entertainment & Devices Division, which will combine the Xbox with Microsoft’s other hardware products,” Paul Thurrott reports for Internet-Nexus.

“To explain this change to employees, Microsoft hosted an internal event with CEO Steve Ballmer, chairman Bill Gates, Johnson, Allchin, Raikes, and Bach. Most of the discussion and Q & A that happened that day is largely irrelevant to Nexus readers, but the company did take one impromptu question about competition with Apple Computer that I thought you’d enjoy. Here’s a transcript of that portion of the session, and some photos taken from a video of the event,” Thurrott reports.

Q: Everyone wants to talk today about Google as a competitor, but Apple is resurgent as well and is doing some interesting new things, and moving over to the Intel platform. I’m curious about your perspective on Apple as a competitor, and also our Macintosh Business Unit is squirreled away in our games division, and, uh…

[Laughter from both the executive panel and the audience]

Q: … And I’m interested in that as an architecture. So what’s your perspective on Apple as a competitor and on our Macintosh business?

Steve Ballmer: [looking sideways down the panel and laughing]: Who wants to go first?

[Hearty laughter as everyone on the panel basically points at each other, offering choices other than themselves.]

Steve Ballmer: We’ll let Jim talk about Apple in general as a competitor, and then we’ll go from there.

The full spectacle, complete with the guy they’re firing forced to answer “the Apple question” first, and pictures that prove conclusively that we thought wrong: Uncle Fester actually can continue to get balder and fatter here.
Nervous laughter, condescending laughter, or just silly laughter? You decide. Does one part of Ballmer’s answers foretell a Microsoft ‘iPod?’ According to Thurrott, Ballmer said, “…obviously one of the keys for us in music and video is to make sure we have an integrated and strong portable device … [shrugs] business.”

After reading the whole exchange, it just never seems to end: Microsoft still wants to “deliver the same kind of end-to-end experience that Apple is able to deliver by being so vertically integrated,” but they never do. You can’t deliver a seamless user experience when you have too many cooks in the kitchen and you care more about controlling “ecosystems” that line your company’s pockets than you care about your customers’ user experience.

It’s too bad they weren’t asked about key employee defections, China, Microsoft’s flatlined stock price, and the company towel service. We’d have loved to see Balmer’s already-abused chair go sailing and the f bombs they’d drop en masse like a bunch of drunken sailors.

Related articles:
Microsoft’s Ballmer: It’s true, some of Windows Vista’s features are ‘kissing cousins’ to Mac OS X – September 19, 2005
Microsoft suffers from malaise, key defections, Windows Vista struggles, lack of towels – September 16, 2005
Microsoft’s Bill Gates’ prediction of Apple iPod market share decline fails to materialize – September 18, 2005
PC World: Microsoft innovation – an oxymoron – September 15, 2005
Microsoft debuts Dashboard Widgets, er, ‘Microsoft Gadgets’ – September 13, 2005
Microsoft appropriates Apple’s ‘brushed metal’ look for Office 12 for Windows – September 13, 2005
Microsoft CEO Ballmer: Apple’s moved to Intel? Ho hum – June 07, 2005
Bill Gates: ‘I don’t believe the success of the Apple iPod is sustainable in the long run’ – May 12, 2005
Bill Gates jokes about Mac OS X ‘Tiger’ and calls Apple ‘the super-small market share guy’ – May 03, 2005
Windows czar Allchin says Apple copying Microsoft’s Windows Longhorn – April 27, 2005
Microsoft employees leaving due to (and blogging about) malaise smothering company – April 25, 2005
eWEEK Editor Coursey: Longhorn so far ‘looks shockingly like a Macintosh’ – April 25, 2005
Due in late 2006, many of Windows Longhorn’s features have been in Mac OS X since 2001 – April 25, 2005
Microsoft’s new mantra: ‘It Just Works’ ripped straight from Apple’s ‘Switch’ campaign – April 22, 2005
Apple CEO Steve Jobs on Microsoft’s Longhorn: ‘They are shamelessly copying us’ – April 21, 2005
Microsoft’s Windows Longhorn will bear more than just a passing resemblance to Apple’s Mac OS X – April 15, 2005
Microsoft CEO Ballmer: ‘Apple iPod users are music thieves’ – October 04, 2004
Microsoft CEO Ballmer on the digital home: ‘There is no way that you can get there with Apple’ – October 04, 2004
Bill Gates’ sarcasm regarding Apple iPod: ‘Oh, wow, I don’t think we can do that’ – September 07, 2004
Silicon Valley: Apple CEO Steve Jobs previews ‘Longhorn’ – June 29, 2004
Apple CEO Steve Jobs: Mac OS X Tiger ‘is going to drive the copycats crazy – June 28, 2004
Apple’s CEO Steve Jobs previews Mac OS X 10.4 ‘Tiger’ to ship in the first half of 2005 – June 28, 2004
Apple takes dead aim at Microsoft, ‘Longhorn’ with WWDC Mac OS X 10.4 ‘Tiger’ ads – June 28, 2004
PC Magazine: Microsoft ‘Longhorn’ preview shows ‘an Apple look’ – May 06, 2004
Microsoft concerned that Longhorn’s look and feel will be copied if revealed too soon – August 25, 2003
Windows ‘Longhorn’ to add translucent windows that ripple and shrink by 2005 – May 19, 2003
Apple leads; Wintel follows as usual – November 11, 2002


  1. Hm… fat, non-stylish, bald old men versus… hot young stylish hipsters at apple? You tell me about competition.

    As far as Microsoft going into Hardware… well theyd need to change their name for one… and 2. No one would buy one, they already all have apple iPods. No one is waiting for a Microsoft MP3 Player, Sony and Apple have it covered.

  2. Jim Allchin:“I have to tell you that I did [get] the iPod nano the first day it came out and it only worked one day. [Pauses for emphasis] True story. I think they have a moisture problem.”

    So Jims Nano only worked for one day. Maybe he has the moisture problem.
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  3. The pictures of Ballmer really remind me of Goering.

    The overall impression, after reading the article and looking at the photos, is one of having listened and looked at a bunch of loosers.

    We’re all about the same age: Steve Jobs, the MS loosers, and me; but Steve Jobs and I look much younger.

    Perhaps being an Apple ‘mensch’ keeps you young!

  4. lets think about this people. windows will be for a long time the most used products in PC’s. It is sad but true. everyone who has any apple products usually love it. and we love to tell people about it. how many people do you hear talking about their latest microsoft products? not many. but the fact is people fear change, and now people have it in their heads that they have to be fighting spam, viruses, etc. companies can not switch over simply because of the money issue. a great deal of companies are still running windows 2000. so as much as people fight between the two, microsoft will win out in profit, but lose out in dedication, usability, and design.. like i said people fear change because they are to stupid to adapt to new things. the average person uses microsoft therefore the average person is stupid.

  5. From TFA: Bill Gates: “I always get a kick out of the periods [of time] where people underestimate us. I’d definitely say this is one of those periods, partly because they [the people who are underestimating Microsoft] haven’t seen the [upcoming product] pipeline, partly because other companies are in what I call the Honeymoon period, where their me-too products are considered, you know, more innovative [throws hands up]. You know, that’s OK, we’re going to have lots of people [competitors?] who are viewed as being perfect, and we just simply have to come up with something that’s better.”

    Wow. In the context of discussing Apple (iPod/iTunes/iTMS) this is a hysterical comment. Microsoft has an iPod/iTunes/iTMS killer in the works? I know so many people use Windows Media Player 9 as their default jukebox with their PlaysForSure device … oh wait, no i don’t.

    Also, to refer to Microsoft’s competitors as offering “me-too” products is highly anachronistic. Both Google and Apple have beaten MS to market on so many products (iPod, most features in OS X [pick whatever version back to Jag], Google Search, Maps etc.)

    Finally, MS’s answer to this competition is to try to “come up with something better.” I suppose with so many examples from their history where a competitor has had a strong product which they have bested this seems plausible … damn crickets …. i’ll be back.

  6. Warning!!
    Leaked to the press intentionally.
    I don’t buy any of it.
    Internal MS meetings are guarded like gold
    I know, my wife worked there till July and she couldnt even take tissue paper into those meetings

  7. Bloody anoying isn’t it. You decide to talk to the workforce and they put you on the spot. Where’s the company loyalty ?

    Seriously, it read like someone had asked Ballmer why the board were walking around naked – perhaps the employee hadn’t heard about the exciting new clothes they had just released – invisible window dressing.

  8. Never underestimate Microsoft. People don’t give up lives of comfort and power without a fight. And Microsoft will fight. Hard. Apple is going to be in the middle of it. Let’s see how the XBOX 360 launch goes. If it goes well, and they may have first mover advantage, Sony could be in a lot of trouble. AOL as an XBOX 360 service. That would certainly shake a few heads.
    AN animal is never as dangerous as when they’re cornered.
    And those guys looked cornered

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