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Apple vs. Microsoft since Balmer's Bold Statement
graph via Google Finance
An article I read today included the author's speculation that:
“the Verizon iPhone is expected to add a few more billion dollars to Apple's bottom line”
“A few more billion dollars” would be big money to me, but it's probably not all that big a deal to a company the size of Apple (the 2nd largest company in America). Still, it brought to mind something Microsoft CEO Steve Balmer said in April 2007, a couple of months before the iPhone was released. In an interview with USA Today, Mr. Balmer said:
| “ | There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get. |
| —Microsoft CEO Steve Balmer | |
This bit of hubris is pretty funny, especially with the luxury of hindsight, but most of what he says is actually correct. Let's look....
“They may make a lot of money” — Check. Apple can't rake it in fast enough. It's #1 in smartphone revenue. Stock is at an all time high.
“... the 1.3 billion phones that get sold...” — Right on track. According to Strategy Analytics, 327 million phones were sold in Q3 last year, making for 1.3 billion per year. (A quarter of those, by the way, are “smartphones”, which is the only kind of phone Apple has.)
“I'd prefer to have our software in 60% or 70% or 80% of them” — Sure, of course, no one could doubt Balmer's wishful thinking; who wouldn't want that kind of market penetration?
“... 2% or 3%, which is what Apple might get” — Not too far off, relatively speaking. According to the same report as the previous bullet, Apple's Q3 sales last year accounted for 4.3% of global handset (all phones, “smart” and simple) sales.
But of course, it turns out that Microsoft didn't get anywhere close to “60% or 70% or 80%” penetration in the global handset market, or any other phone market, and so Balmer's hubris comes back to haunt him.
Even in the (much smaller, but higher-margin) “smartphone” market that the iPhone completely redefined, Apple is already the worldwide market leader. In the US smartphone market, Microsoft, who was passed by Apple in the fall of 2009, now doesn't even get mentioned in this article yesterday about US smartphone market share: Android and Apple are about equal at about 25% of the market each, behind RIM (makers of the BlackBerry) at 34%.
In the global handeset market that Balmer was talking about in the first place, Microsoft seems to not even rate a footnote.
Hubris is fine if it buys you something, such as a politician spouting confidence despite trailing in the polls in order to “rally the troops”, but it seems pretty stupid for Balmer to have been so proactively publicly confident in this case. The downside to being wrong (being made to look like a total doofus in his capacity as head of Microsoft) seemed pretty steep compared to the possible upside.
Anyway, I think the Balmer quote is funny and I've been looking for an excuse to highlight it, so this Verizon iPhone thing (which makes no difference to me in Japan, of course) seems a good enough time as any. Since that quote, Microsoft's stock has dropped a bit, but Apple's has almost tripled. Can you guess which I have at the moment? 🙂
Balmer was obviously quite myopic in his statement. However you have to look at that quote in the full context of the original iPhone, no apps, and it costing $500. Yes, the original iPhone was a hit and it was quite the phone. However the iPhone didn’t really go gang busters until the price dropped, it had an app store, and it was available internationally.
Had it stayed as a $500 web app only ATT exclusive non 3G device, he probably would have been proven correct.
(But that is why you don’t say such stupid things)
When Apple came out with the IPOD it was very similar to the Toyota Prius (in the U.S.). This device represented what so many people were waiting for. In terms of music it was the complete package: (accessible, fashionable, elite and practical). In the U.S Honda was the 1st provider of the hybrid car but it was a quirky 2 seater with ‘niche’ item written all over it.
While the iPhone & iPad are/have been tremendously successful, Apple/Jobs allowed some of that ‘niche’ quality to creep back into the Apple offerings. The iPad/iPhone are very fashionable and elite but Apple missed the opportunity to make these devices the ONLY solution to consider as was the case with the iPOD. Abandonment of ubiquitous web components, single (inadequate) mobile provider, omission of obviously necessary components (ports, camera etc). These choices allowed the competition to basically “catch up”. With the iPod, only the anti-apple fanboys, nerds and fringes were opting for iPOD alternatives. With the iPAD and iPHONE, there is a larger portion of people that are choosing Apple alternatives.
Although I’m an HTC/Android phone user I also own Apple stock, so I’m happy about the Verizon news. However, if Apple/Steve Jobs is not careful they will find themselves in that same, “what me worry?” position that Balmer was in.
Well…as a Verizon Wireless customer(who just so happens to be due for an upgrade), and a fan of Apple products, todays iPhone to Verizon announcement is what I have been waiting on for a long time.
Now for that 27″ iMac I have my eye on…
“Tripled” has one “p”
Oops, thanks. —Jeffrey
That graph overrates Ballmer’s performance as CEO. Stretch it back to 2000 when his reign began.
I wasn’t intending for it to represent his performance as CEO, but if that’s what you want, looking at the stock price alone is perhaps not fair because it doesn’t account for the tide of the market (and January 2000 was a really bad time to be getting into anything with stocks… I so wish that I spent 2000 selling YHOO instead of buying it, for example). Since then MSFT has lost about 50% in value, but to allow for the tide it might be more charitable to compare with the S&P 500…. or maybe not: it’s lost only 13%. So yeah, it sucks to be a MSFT shareholder with Mr. Ballmer as CEO. (For reference, AAPL is up 1,185% during the same span, and the YHOO that I bought is down 82%, though I’ve long since dumped it.) —Jeffrey