Apple and Microsoft prepare for another war; MS biding time waiting for Jobs to go

Apple Store“Apple Computer Inc., with its easy-to-use iPod handheld and iTunes Internet store, has staked out an impressive market lead using the former,” John Shinal reports for MarketWatch.

“Now Microsoft Corp., with its upcoming Zune player and broad online media push, is about to turn up the stakes using the latter,” Shinal reports. “It could take years before we know whether this contest will turn out differently than the first one between the companies, which ended with Microsoft’s Windows running nearly all of the world’s personal computers and PC pioneer Apple relegated to a niche player.”

“But it’s clear that things are about to get more interesting,” Shinal reports. “While Microsoft hasn’t come out and announced exactly when Zune is coming or exactly what it will do, it’s given enough clues that it’s strategy can be easily deduced. Think ‘Xbox Live,’ but with music and videos.”

Shinal reports, “Jobs is busy shepherding the next version of the iPod to market. Ever secretive, the company is saying nothing about what features it may have or how many songs it will hold — even though the absence of a new iPod release at the company’s confab in early August has the industry buzzing with speculation. Microsoft, on the other hand, seems to be biding its time, even though it’s decision to build its own player rather than license its media software to handheld makers is a dramatic strategic reversal.”

“It’s as if the company’s victory in its first war with Jobs, which came even though Apple’s operating system repeatedly beat Windows to market with key capabilities like a graphical user interface, taught the Redmond, Wash.-based giant that there are more important things than feature sets,” Shinal reports.

Shinal reports, “Consider this comment from Dan’l Lewin, the Microsoft vice president in charge of its software developer tools efforts and the company’s point man in Silicon Valley: ‘We tend to take the long view. There’s a flash of brilliance in the iPod, but what will they do after Steve is gone, when it will be about massive scale?’ Lewin asked me as we sat on Microsoft’s Mountain View, Calif. campus. It’s an interesting question, one that suggests the software giant is betting that sooner or later, Apple will stumble, if and when Jobs’ vision and determination are no longer driving it.”

“Now, with Zune, [Microsoft] has decided to compete against the makers of MP3 players that have been using its software. In truth, Zune will be evolutionary rather than revolutionary, since it will actually be built by Toshiba, which now makes a Microsoft-based player,” Shinal reports. “The Zune product will have a wireless Internet link to enable users to download music anywhere, rather than be tethered to a PC. That’s a good thing for Microsoft, because a venture capitalist at a prominent Silicon Valley firm told me this week that Apple has sent reference designs for a new wireless iPod to some potential component suppliers.”

Shinal reports, “RealNetworks Chief Executive and former Microsoft executive Rob Glaser had a different opinion. He called it ‘an over-reaction’ to the iPod’s success and said it will mean that any market share gains Microsoft makes in the digital music market will come at the expense of its former partners.”

Full article here.
Contrary to Shinai’s description, reports we’ve seen have indicated that Microsoft’s Zune will not enable users to download music anywhere, untethered from a PC (see: Microsoft to sell single Zune model this fall, rumors of Wi-Fi capability were greatly exaggerated).

Steve Jobs was not with Apple when Microsoft Windows overtook Mac. Blame Jean-Louis Gassée, Sugar Water Sculley, and Al Eisenstat’s bad contract, not Steve Jobs. If Microsoft hopea to wait out Jobs, we pray that they’re left waiting for at least a decade.

Zune is too late. It makes a juicy story for the media, but it’s a canard. Zune is really a nonstarter. It’s just a bad management decision by Microsoft’s Ballmer, perhaps an ego-driven mistake, to go ahead with Zune. Even if, by some miracle, Microsoft’s Zune ever began to take hold, Apple could kill it simply by licensing FairPlay to either device makers or online content services or both. They’d all jump at the chance to tap into the huge iPod+iTunes economy. Microsoft would then be left all alone, boo-hoo, incompatible with the rest of the digital content world. “Xbox Live, but with music and video” wouldn’t matter a whit, it’d instantly be “Game Over.”

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53 Comments

  1. The Zune will be a turd like MS operating systems.

    However he did mention something interesting. MS could fight until Job leaves. That may not happen anytime soon but MS certainly has the cash and hold in in the enterprises to last. Apple has never functioned well w/out Jobs

  2. “Apple has never functioned well w/out Jobs”

    The last time he was kicked out. When he leaves this time, he’ll make sure the right people are in the right places. If the post-Steve Apple that comes takes a fall, it will be years after Steve actually retires.

  3. You say Apple has never functioned well without Jobs, which is true, but then the last time he was ousted from the company it was doen very quickly, and he had no time to prepare a successor.

    At whatever time in the future he himself decides to go, you can be sure there will be a leader/team in place to fill his shoes (and black turtleneck…)

    He won’t leave Apple in the hands of incompetants, and Apple (the company) now know they need his input/preperation to survive and florish post-Jobs.

  4. M$ believes it can eventually win the overall market from Apple in 3 – 5 years time….

    Fat chance.

    Let’s do the math:

    – By the end of September, there will be 70 million iPods sold to Zero Zune’s (most likely). Just to catch Apple’s numbers, M$ must more than 50/50 split sales with Apple in the next 3-5 years, but absolutely crush Apple in sales figures. M$ must roughly outsell Apple in a 5-1 ratio to catch Apple’s overall share/install base.

    – To make matters worse for Redmond, the MP3 market is entering the top of the adoption curve, heading quickly towards the late majority phase of the market. Product will start morphing and moving in new directions – but the install base to establish a platform for these devices has been taken by Apple’s iTunes.

    – M$ is targeting the $300 and up MP3 market with the 30 GB Zune. This price range represents only 15% – 20% of the overall MP3 player market.

    – Apple holds 90%+ of the $300+ MP3 player market…

    – If M$ were to capture 25% of the $300+ market within it’s first year of sales, this represents only 5% – 8% of the overall MP3 market…

    – Being that iTunes/iPod is a closed ecosystem, all M$ looks poised to do is eat away at it’s own technology partners in order to establish a base – something it seems to be comfortable in doing – which could be very, very, dangerous in a year or two, and play very well into Apple’s strategy…

    – M$ will expand their product line as time moves on, but is likely to take 2+ years to achieve the lineup Apple will have in by the same timeframe. If M$ is wildly successful with Zune, they may have 20% of the overall MP3 market two years from today – but be massively behind in overall install base and reach.

    The Rub: The MP3 market is largely driven by popularity, and that popularity is initially driven by the innovators and early adopters. It is these two groups that set an overall market direction through choosing the superior market product.

    If Zune does not become wildly popular with these two groups, Zune will not become wildly popular with the the mass majority of people who have not yet jumped into the market for an MP3 player…

    Getting users to move off their iPod/iTunes investment in order to rabit-hole themselves in an untested, but highly branded, solution in Zune does not look historically favorable for Microsoft, but is rather arrogant or wishful thinking from Microsoft leadership…

    Bottom Line: There is virtually no way M$ can ever overtake Apple in this arena, even after five years time of losing hundreds of millions.

    Speculation: It would seem that in five years if xBox, Zune and some other livingroom solution are continuing to bleed profits away from Windows and Office, the shareholders should have Balmers head on a lance – and that’s putting it midly. To be completely rational, they should have had Balmer’s and Gates head years ago, as the company has been able to nothing but camp out on it’s past successes.

  5. Apparently Shinal can’t recognize a stumble; if he did he would have spent his time asking Lewin about the last five years for Microsoft and the past 12 months in particular. I’ve got Windoze users all around me asking about Mac, and they are excited about what I tell them.

  6. “any market share gains Microsoft makes in the digital music market will come at the expense of its former partners”

    oh yea, isn’t this the way MS always plays, why would anyone be a developer on the PC platform when MS steals anything that looks cool or the slightest bit profitable

  7. I’m sure that if Microsoft must wait for Steve Jobs to depart Apple before Microsoft can accomplish something of any significance that they may be in for a big disappointment. What if Job’s replacement is actually better than the Jobster himself? Does this mean that Microsoft will have to wait another one to three decades before they can hope to reinvigorate themselves? Rather than Microsoft hope that Apple fails or stumbles to gain some relevancy, why doesn’t Microsoft take the initiative and act now?

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