How Microsoft blindsided vulnerable Apple with Windows 7

TGDaily ^ | Thursday, October 22, 2009 18:05 | By Rob Enderle, principal analyst, Enderle Group

[Swordmaker]

I think the saying goes that those that don’t learn from history are destined to repeat it.

This is likely to point with Apple this month as they sit stunned that Windows 7 is doing so well and they are left looking foolish with products priced out of the segment. Their big news this week was a couple of PCs, a new keyboard and a multi-touch mouse. This last will likely go down in history as one of the lamest devices yet as they should know, given the iPhone, that touch is connected to the screen and not anything else. They likely would have done better putting fir on the damn thing and building it to fart the star spangled banner at least that would have been patriotic.

Apple is clearly one of the strongest marketing companies in any industry and Steve Jobs is a considered to be a master while Microsoft in recent years hasn’t really seemed to be in their league. This goes to the core, no pun intended, of how Microsoft blindsided Apple and left the firm looking like they had given the PC market back to Microsoft. The other part is that Apple is now fighting on two fronts against two powerful companies for the first time since the 80s. Let’s talk about this while we think of that poor challenged Apple mouse.

Windows 95 and Historic Mistakes

Apple, back in 1995, while Steve Jobs was on his forced vacation from the company I met with them and suggested they needed to bring up their game because Windows 95 had a lot of positive buzz and they were in danger of being trivialized. The Apple executives, most of whom were let go in the following years or fired by Steve Jobs, told me they had it well in hand and that, after all, Windows 95 was simply a bad copy of the 1988 version of the MacOS.

A few record selling days, and lines around the block, later they felt differently but were unprepared to take advantage of Microsoft’s mistake and so began what was a slide into bankruptcy saved only by Steve Jobs return. The mistake that Microsoft made was they hadn’t budgeted for sustaining marketing. This allowed Apple a huge opportunity to point out Windows 95 problems and showcase their product in a favorable light. But they weren’t prepared and missed the opportunity.

However Microsoft made this same mistake every year following and Steve Jobs finally started to pick up on this with Vista and the Mac vs. PC campaign is his historic response to Microsoft’s classic mistake. But the mistake was in two parts, a product that had problems at release and an inability to market the product’s advantages because the Microsoft team had no money left.

Windows 7: A New Hope

Windows 7 is coming out of the gate with only one known issue and that appears to be tied to problematic Flash update Adobe did in August that most may never actually see. Not only is this a short problem list the issue should track quickly back to Adobe and not damage the launch much. In edition Microsoft didn’t blow their entire budget before the product actually hit the stores and has a substantial sustaining marketing budget. This means, this time, both the product and the marketing program is in relatively good shape and instead of being tired and vulnerable, Microsoft is ready for war.

Steve Jobs and Apple clearly planned for the same traditional behavior and were completely unprepared for both the quality of Windows 7 and the fact Microsoft has a war chest this time. Their near pathetic recent release of a couple slightly improved PCs and a couple peripherals showcases this. They figured they could easily skate through the next few months because, traditionally, Microsoft would be vulnerable and not able to fight back.

Second Front

However this isn’t their only problem. Verizon, Google and Motorola have opened a second front with the Droid iCan’t campaign (this is actually rather funny) that targets the iPhones weaknesses. None of these companies has any love for Apple. Verizon thinks Apple has been trying to blackmail them into a contract they don’t want to sign, Google’s CEO was just fired from their board and Apple booted Google Voice from the iPhone, and Motorola was burned by the ROKR joint venture with Apple. Each of these companies thinks of Apple as a firm they would like to squash and while separately they represent little risk, collectively they are the strongest carrier (in terms of size and customer satisfaction), the most powerful web company, and the firm who had the hot phone (Razor) before the iPhone.

This combination of the Microsoft budget and the Droid attack splits Apple’s resources and focus and makes it vastly more difficult for the firm to respond timely or well. The end result is an unprecedented exposure.

Wrapping Up:

Two good lessons here, even when you are on top it is very foolish to under estimate a competitor with Microsoft’s resources because they can actually get it right, and picking too many fights at once can take out the most powerful of entities just as it took out a nearly unbeatable Germany in the second world war.

With Steve Jobs in Apple the firm can respond to threats like this one very quickly but only if they see it coming in time. I think they are likely to repeat the 1995 mistake and that means they probably won’t be either quick enough or effective enough to dodge this bullet. However, this is Apple after all and this fight is still young, it would also be very foolish to count them out early.

Regardless of the outcome, we are seeing history made this week and it’s an amazing time to be alive.

Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.

The opinions expressed in this commentary are solely those of the writer.

[SunkenCiv]

MS’ lack of an ad campaign may be to keep the powder dry, as it were, for the nearly inevitable damage control. :’)

[Sequoyah101]

The reason I’m leaving Verizon when I can unless they change this situation. The Motorola Q just doesn’t cut it.

[SunkenCiv]

Same here. I saw the 13” Pro at the big box chain store the other night, very nice. I’ll have to try out the keyboard, and save a few pennies, pay off some other small debts here and there. I’d like a notebook computer next time out. I’ve not bought a computer in ten years, so...

[safisoft]

LOL. Many of these posts are so predictable. I am in IT and have used every version of Windows. I own a Mac too. Unlike many of the ignorant posters here, I have actually used Windows 7 on 4 machines for 4 months. It is SMOKING hot, and be WILDLY popular.

[SunkenCiv]

That happens because the sociopaths all use Windows. :’)

[SunkenCiv]

Thanks johncatl. Microsoft is lucky in that way, because they don't have a fan base, just a number of individuals like the author of the op-ed. :')

Software to add "PC capability to a Mac" is under $100. The OS may or may not be needed, let's see...

They're still there. I'm sure anyone still feeling the need to run Windows apps on a Mac will be overjoyed to lay out the cash to purchase MS' overpriced, proprietary OS.

[SunkenCiv]

Ballmer knows how to write?

:’) He has no need to do that, just has to hand off an envelope of cash once in a while.

[seastay]

I first used a mac in 1979, thought is was the coolest thing ever but even then out of the price range for a college student. Cool however, compared to having to use punch cards and submitting data to a mainframe. Apple has always been ahead of the cool curve, but - eventually grew up and switched to IBM and dos Microsoft when I grew up to find there was a price to pay for cool. Microsoft user for 20 years now, and sure it has all sorts of problems, but the hardware is cheap, just get new stuff when it doesn't work anymore, newer stuff has better features and so on. I still use mac on occasions, but given I work in engineering, there is not that many scientific number crunching apps for mac, science is not cool, and cool of course is what the mac is all about. Every has to be cool though, so the Ipod was and is a great invention, yet my experience with the 4 or 5 that I have owned they all had reliability problems, only one actually works. Like Microsoft computers ipods are cheap, so when one breaks or becomes out of date I can get a new one. However, I still am not inclined to switch back to a mac, its not a throwaway like an IPOD or a windows computer, and I don't even need to be cool anymore with a thin white monitor or whatever the latest thing is, middle aged has tainted me, I confess. One thing though, - can still keep up with my teenager with phone texting, and to that end why anybody would want an I phone with a touch screen keyboard when they can have a blackberry with keys is beyond me, but then maybe its just the apple cool hype over being practical that I just never have grasped in my old age. And as they say you can't teach a old dog new tricks, so the trick I learned (from apple) in 1979 that a keyboard for data entry is way better than punched cards I guess I will take to my grave along with my blackberry and virused windows PC which in all likely hood will be the reason I end up in the grave.

[SunkenCiv]

I’ve been a little mystified with the descriptions of the new mouse. Haven’t tried it yet, may head to the Apple store this morning just to gander at the 27” iMac. One impression I’ve had from Apple’s own stuff about it is, the mouse is more like those scratchpad things on the laptops (everyone uses those on laptops, as a mouse substitute) and/or the iPod interface. I’d have to try using it for a while before making any kind of purchase.

[SunkenCiv]

I first used a mac in 1979

That's pretty good, because the Mac wasn't introduced until 1984. :')

[SunkenCiv]

:’)

[vox_freedom]

Dear Mr. Enderle,
Your MS check is in the mail for "consulting."

best regards,
Steve Balmer

[ReignOfError]

My question for you is; How is it that you idolize and revere a company that contributes vast amounts of money and energy into ultra Liberal/Marxist agendas?

You could ask Microsoft fans the same question.

[seastay]

I used a apple in 1979, ok, it was not a mac, they came out few years later , it was apple though believe me or not. whiper snapper, any thing else?

[GOPJ]

I'm waaaaaay past the point of caring if Microsoft makes a better computer. I want them to answer those damn Apple TV Ads.

[Wright Wing]

Enderle is on the Microsoft payroll. If this hasn’t been made clear since his lunatic ramblings on HD-DVD than I don’t know what can make it any clearer. This is Microsoft propaganda, plain and simple. As soon as I saw the name Enderle, I stopped reading.

[VeniVidiVici]

I just bought my MacBook 17” for less than $1800 and notice that the entry level 17” PC with W7 is $1500.

Not sure what you consider "entry level" but here is an entry level Dell laptop with a 17" screen for $799. And that includes 4GB DDR2 Dual Channel and a 500GB SATA Hard Drive.

Damn. I may have to look at that myself :-)

[vox_freedom]

I first used a mac in 1979, thought is was the coolest thing ever but even then out of the price range for a college student.

Well, whatever kind of machine you used in that year was out of the price range for almost anyone, not just a college student. I was at a Microsoft presentation just yesterday that showed a Tandy PC from 1979 that had a price point of $8400+. Anything else we didn't know?

BTW, my MacBook Pro 15.4" 4g memory, 160g hard drive ain't just "cool" it performs better than just about any PC laptop around. And coupled with my iPod Touch 32g that I use for email, contacts and music plus a couple of dozen great apps (weather, news, stocks, games, etc.) is more than "cool" it is functional and the best around. Oh, and the Blackberry is no comparison to the iPhone.

[BunnySlippers]

I’ve always thought Steve Jobs was the true innovator, genius if you will. And Bill Gates the better businessman. For those of us who are fans of “Pirates of Silicon Valley” and “Triumph of the Nerds” and the like.

[MAD-AS-HELL]

Ah yeah...I forgot to mention that an Mac owner can run Windows on his/her Mac with Bootcamp or Virtual OS software. Unfortunately, one has to BUY Windows 7 (unless you got it for free from MSFT and can use it for a year).

Interesting note is that PSYSTAR is now offering software that allows one to convert an intel running PC (with proper components) into a MAC. Software allows one to install AAPL’s Snow Leopard. I believe it will sell for either 49 or 69 bucks.

http://store.psystar.com/featured/rebel-efi-preview.html?SID=i088np3iafcad35ktc0dmc3s92