Steve Ballmer’s Nightmare Scenario

ScreenHunter_10 Feb. 24 10.41BusinessInsider recently published “STEVE BALLMER’S NIGHTMARE: How Microsoft’s Business Actually Could Collapse”. And while you may think that this is an extreme scenario used as linkbait (and by all means read their entire post as well), here are some data points that show that some of the pieces of the puzzle have already been falling into place:

1) Windows Phone 7 isn’t really going anywhere, and Nokia’s new Lumia 800, etc. offerings don’t feel (price) competitive enough to make much of a dent in either that trend, or Nokia’s own downfall.

2) While Android tablets have failed to make any meaningful inroads against the iPad thus far, at least they have sold somewhere between 1-2 Million (U.S.), and shipped many more (sitting in inventories, waiting for drastic price cuts…).

But Microsoft won’t even be in the game until some time later this year (what will the actual date be? Q3? Q4?!), when tablets with Windows 8 are expected to ship in quantity. So Microsoft is starting from way behind in third place.

3) More importantly, there are no guarantees that the tablet/touch-centric bet of Windows 8 is going to pay off. In fact, it could well be that because the touch UI (User Interface) is bolted onto a relatively heavy-weight, resource-intensive Windows NT OS base, Win 8 will require too-expensive, high-end spec’d tablets, while as a standard desktop/laptop OS, few consumers and companies will see a true need to upgrade to Win 8 from 7.

It’s just a few years after 7 was introduced, and for all apparent purposes, it is running everything anyone would need on a Windows laptop/desktop just fine. So why spend money on 8 in a difficult/uncertain macro-economic environment?

4) Windows developers have been relatively unhappy about having to massively retool for writing apps for Windows 8, so there could be trouble brewing here as well.

5) While all of this still doesn’t spell immediate collapse for Microsoft’s business, legacy sales of Windows 7 upgrades, MS Office upgrades, and various enterprise software is not going to suffice in the long run.

6) It is also telling that Windows 8 was being completely overshadowed by… just about everything else thus far at CES, including Google’s Android 4.0 version “Ice Cream Sandwich”. Keep in mind that CES had until now been Microsoft’s showcase, even though it is now withdrawing from the event for the future.

(This apparently due to the timing creating a mismatch with Microsoft’s own internal launch calendar, which may explain the long history of relative vaporware coming out of Redmond at CES.)

But this has got to smart: Windows 8 is Microsoft’s major bet on a unified OS to run “on all three screens”, desktop/laptop, tablet, and smartphone. It is a bet so large, one might say Ballmer is betting the farm on Windows 8 being a hit, and that if it isn’t, Microsoft is in real trouble.

7) As Robert Scoble recently stated in the discussion on his Google+ thread here, Windows Phone might already be done:

…What matters is the PRODUCT THAT SHIPS TODAY. Microsoft is missing 450,000 apps TODAY and NOTHING you say can make that go away. Microsoft knows it’s in a deep hole. So do most consumers. …the problem is that THE MICROSOFT PRESS thinks it’s doomed. It’s not just one guy, either. It’s people who cover Microsoft for a living and live in Seattle and they think Microsoft Mobile sucks. So you’re on the wrong side of the line. It’s not getting better, it’s only getting worse. Android and iOS aren’t standing still, you know.”

So if Windows Phone (WP) isn’t catching, and Microsoft is actually indirectly telling developers with the Windows 8 unified strategy that WP (7 or higher) is going away sooner rather than later anyway, where are the Windows 8 prototype/show/reference phones at CES?

Even the CES-announced (promised for March) LG phone featuring the new Intel (!) “Medfield” CPU for smartphones will be running, wait for it… Android!?

8) The Q4 sales figures tell the tale that Microsoft is running behind on a PostPC Era that appears to be upon us (and them) a lot faster than just about anybody predicted:

From GigaOm’s Macs sales growing, but U.S. PC market stagnates:

Things were so bad, IDC has dubbed 2011 the “the second-worst year in history” for the U.S. PC market. The overall 5 percent contraction of the market since 2010 is second only to the 12 percent decline after the Y2K buildup and the dot-com bust of 2001.

Ouch!

This while Apple managed to sell about 300,000 more Macs and grow 18% to a U.S. market share of nearly 11%. But I consider that more of a Halo-Effect from the mindshare captured by the iPhone and iPad. Yes, the 2011 Macbook Airs were really sexy which is why everybody copied them since late last year and at this CES as (Wintel) “Ultrabooks”.

But that doesn’t explain how U.S. PC shipments dropped by nearly 1.4 Million in the quarter Y/Y, or even more with the Mac growth factored back out. Despite some macro-economic headwinds, the only thing that explains this is the “iPad effect”:

Apple has likely sold around 40 Million iPads in 2011 globally (just under 15M in 2010). Let’s say half of those are U.S. sales, so 5M per quarter on average. And the actual numbers for the Q4 Holiday Shopping quarter should be a good bit higher than say Q1/2011 where additionally the iPad 2 wasn’t even shipping yet, so 5M for Q4 is actually pretty conservative. [UPDATE: Apple announced 15.4M iPads sold globally in Q4 at their earnings call. So my 5M number for the U.S. sales estimate still feels conservative.]

That would mean that Apple has taken 5M of 23.5M (18.5M PCs + 5M iPads) = 21.2% share with the iPad alone! Add to that the 11% (of the 18.5M) Mac share and Apple is at about 29%. It’s not that COMPUTER sales are really dropping, it’s that a lot of iPads and other tablets are replacing a lot of new PC purchases for the mainstream user.

And this phenomenon is only expected to grow, analysts think Apple might sell 55M total iPads in 2012. One must wonder if there so much pressure on Windows 8 on tablets to be a success that it is setting it up for failure?!

Recent Ads Betray The Secret To Microsoft’s Branding Confusion

After the first two salvos in a $300 Million ad campaign, launched to soften and redefine Microsoft’s image, failed to connect despite making use of comedian Jerry Seinfeld and former Microsoft CEO and world’s richest geek Bill Gates, Microsoft has been pushing a slew of new ads in recent months. And arguably, not one of them has hit the mark.

I wrote a while ago that the attempt at humor had fallen flat precisely because Microsoft’s “The Powerbroker” archetype had been so deeply entrenched, almost literally burned into the mind of the consumer for decades. Did things get any easier from there?

The next salvo a few months ago featured the “I’m a PC” ads which cast Microsoft (by way of its supposed users) as a strange mixture of proud/aggressive and defiant/sulking. It was pointed out then that “Microsoft as Victim” just doesn’t really work. And again, the archetype branding explains why: You cannot be “The Powerbroker” and still garner much sympathy for supposedly having been wronged.

This same theme was picked up once more recently with the “not cool enough for a Mac” ad featuring a girl named Lauren, which really was meant to focus on price as an angle to attack the notoriously premium-priced “Mac” products. In theory the idea of highlighting one of your competitor’s weaknesses (price) is workable, especially during a severe recession. But you cannot do it while violating your core archetypes.

If Microsoft had said something like, “we are the largest software company on the planet, and because of that we can create economies of scale in the production of PCs and their loading with software that much smaller competitors like Apple just cannot match, thus saving you money”, it would have made some sense.

But not with this passive-aggressive jabbing built in. It confuses people. Instinctively, no one takes it seriously when the 800 pound gorilla complains about having “unfairly” been called “not cool enough”.

And then Microsoft recently launched another ad in the series that went all wrong yet again. Silicon Alley Insider explains why:

Jackson [the kid] mentions offhand he wants “a good gaming computer.” This is a fantastic line of attack for Microsoft: The Mac has a tiny library of professionally produced games compared to what’s on PCs […] But Microsoft fumbles the ball, and doesn’t follow through with what’s arguably their best anti-Mac selling point after “PCs are cheaper.”

Instead, Jackson’s mom makes an incredibly off-target anti-Apple smear: Checking out the Macs, she says “they’re kind of popular with this age.” Umm, no. Kids can’t afford Mac prices or appreciate Mac build quality. Far better for Microsoft to stick with […] Macs are kind of popular with hip adults, but expensive.

So the theme of hurt feelings clouding Microsoft’s positioning and marketing continues. In truth, as the incumbent and still near monopolist (85-90% share despite Apple’s recent inroads) in the personal computer market, Microsoft would do better not to mention “Mac” at all.

“The Powerbroker” archetype by definition can choose to ignore the much smaller competitor. Reacting to any perceived slight only makes people wonder what is going on.

But the branding confusion gets even more pronounced with the recent launch of a new series of Microsoft ads featuring a strange mixture of low key scrap-booking and CEO interview voice-overs, punctuated by a slogan of “Microsoft – The People Ready Business”:

Continue reading “Recent Ads Betray The Secret To Microsoft’s Branding Confusion”

Apple Pricing Strategies: The new MacBooks not as cheap as some had hoped

Apple launched a completely refreshed line of MacBooks and MacBook Pros last week, to the by now predictable fanfare and guessing-game imbroglio in the blogosphere. I have written previously how this is a deliberate, well-designed Archetype Branding strategy on Apple’s part, using aspects of "The Enigma" archetype among other things.

The MacBooks’ launch did contain the familiar elements of Steve Jobs’ magician stagecraft, though there was a clear attempt to build up several other high-ranking Apple managers in the process, due to recent concerns and rumors regarding Jobs’ health.

But the biggest overall focus in this difficult economic environment seemed to be expected price-cuts and the overall pricing strategy. Specifically, whether the lowest-end MacBook would go below $1,000, or even down to $899.

While the latter hope didn’t materialize, the most entry level "old" MacBook (in white) was indeed lowered to $999, but not the new line of anodized aluminum housing, all-around-upgraded MacBooks. However, you shouldn’t underestimate what Apple has done here:

1) They have now "Air-ized" (after the aluminum housing of the ground-breaking MacBook Air) the entire MacBook/MacBook Pro line except for the close-out model "MacBook White". As Steve Jobs said, they should see some cost reductions from ramping up the novel unibody aluminum frame production in the next few quarters. So taking the entry-level Alu MacBook to $999 might happen sooner than some think.

2) While the cost for the new entry-level MacBooks for now has been kept at $1299, there is a lot of new technology that got pumped into it: iPod Touch multi-touch glass touchpad, led-backlit screen and longer battery life from the MacBook Air, a high-end graphics accelerator, etc. etc. So they’re establishing it as the "must-have-this-thing" item FIRST, in line with their branding as "The Creator/Innovator" archetype among other things, plus their high-end image.

3) The new MacBook line thereby becomes "aspirational", so that even if you can’t afford one right now, you still know you want one (if you were ever open to it at all). Then, when the prices get dropped further (see the iPhone price point development), everyone will think it’s a bargain by comparison.

But to do this you have to first credibly build it up at the higher price levels. I would NEVER expect Apple to forgo their brand equity and introduce brand new technology PLUS lower prices for that new technology at the same time.

With a consumer recession already going on or imminent, the 60+% of people who are truly affected by affordability aren’t Apple’s primary target market. AND they would be likely to delay purchase of ANYTHING right now regardless of price point (ask yourself if they all would buy the new aluminum MacBooks at $999 this instant – I doubt it).

Apple doesn’t need to be in the $400-700 notebook market for now, and if they want to be down the road, it is still advantageous for them to have established the higher price point value proposition. The price "anchor" this creates in the consumer’s mind is worth the somewhat reduced volume now. Then when you "drop in" the price cut at the point of maximum desirability (again, as was done with the iPhone), you are likely to create a feeding frenzy.