Will Google's Android Play DOS to Apple's iPhone?

Daniel Eran Dilger Today's broad array of smartphone operating system contenders are offering lots of potential answers to a problem that only requires one. It appears the market has two options ahead: either pool generic hardware makers behind a single operating system and deliver a smartphone marketplace that resembles the Windows PC market, or watch them fall to a dominant leader and have a smartphone market that resembles Apple's iPod ecosystem. This decision isn't going to be made by a class of intellectual elite, or by government mandate. it's going to be made by the market itself. Here are the factors that will influence the outcome, either marginalizing Apple's iPhone into a niche as the company has twice experienced previously at the hands of DOS in 1981 and Windows in 1991, or positioning it as the dominant leader as Apple has achieved for itself with the iPod since 2001. The third segment in this series looks at Google's Android and the Open Handset Alliance as a possible “DOS-attack” against Apple's iPhone. Subsequent segments will look at Nokia's newly opened Symbian and other mobile contenders challenging the iPhone. Will the iPhone Meet its Match from a Modern Day DOS? Will Windows Mobile Play DOS to Apple’s iPhone? Will Google's Android Play DOS to Apple's iPhone? Will Symbian Play DOS to Apple's iPhone? Google Acquires Android. In 2005, Google purchased a startup named Android, which had been in business for nearly two years. The secretive startup was known only to be working on software for mobile phones. It was being run by a who's who of mobile industry veterans, including Andy Rubin, the founder of Danger. Rubin had earlier worked at WebTV along with Chris White and Andy McFadden, both of whom had also joined Android. Richard Miner of Orange and Nick Sears of Tmobile also brought their mobile provider experience to Android. At the time of the acquisition, Google didn't announce any plans for Android and instead only told BusinessWeek, “We acquired Android because of the talented engineers and great technology. We're thrilled to have them here.” It appeared that Google was only going to be expanding its search services for mobile phone users, along the lines of the Google SMS answer system it had recently released. Google Buys Android for Its Mobile Arsenal - BusinessWeek Windows XP Media Center Edition vs Apple TV: The Fall of WebTV The GPhone Myth. As reports began to leak out about talks between Google and hardware makers throughout 2007, rumors began to fly about “the GPhone,” a competitive offering that was supposed to take on the iPhone. Some phone enthusiasts hoped Google would jump in to rescue the struggling OpenMoko project and turn it into a viable project that could attack Apple's new smartphone. In October 2007, I printed the Great Google GPhone Myth, taking apart the idea that Google would be directly competing against the iPhone, and describing that Google was really working on a free alternative to Windows Mobile as a conduit for getting its search and related services on a broader variety of mobiles. Google's services were already on the iPhone. In November, Google played its hand: it had organized a consortium of companies called the Open Handset Alliance to develop open standards for mobiles. The first product from the group would be Android, a mobile operating system built on the Linux kernel. Google wasn't getting into the phone handset business at all; it was only making sure that its mobile search products would not risk being marginalized by the threat of Windows Mobile on phones in the same way Microsoft had been working to leverage its PC monopoly to push Google search off the Windows desktop. The Great Google gPhone Myth Introducing Android: Leader of Linux. Two weeks later, Google released an early version of the Android software. On top of a Linux kernel, Android uses a specialized version of a Java Virtual Machine that takes Java language code and turns it into what Google calls “Dalvik bytecode” rather than Java bytecode as a standard JVM would. This allows Google to leverage existing and familiar Java language tools without paying Sun for a Java license. Like Mac OS X and its fraternal iPhone OS, Android includes a variety of open source libraries, including SQLite and WebKit. On top of that, Google developed a series of frameworks that handle the tasks Cocoa Touch does on the iPhone. Android also bundles a set of applications. While Apple adapted its existing Mac OS X to work in a mobile environment to create the iPhone OS, Android is more like a customized Java environment running on a specialized mobile Linux variant: elements of maturity in an otherwise experimental new platform. What is Android? -Google Android was by no means the first mobile OS using Linux. Both Palm and its amputated ACCESS software arm have Linux-based mobile platforms. Nokia has Maemo, which it uses in its Internet Tablets, and also recently acquired Trolltech and its Qtopia mobile Linux platform. Motorola has teamed up with MontaVista Software to use its Mobilinux. Intel created the Moblin project for mobile Linux, aimed at Internet devices. Google's OHA also isn't the first consortium to attempt to standardize a mobile Linux platform. The OSDL started the Mobile Linux Initiative to define requirements for hardware; the Consumer Electronics Linux Forum (CELF) then worked to define various phone profiles aimed at the Japanese market; the Linux Phone Standard (LiPS) Forum tried to do the same thing in Europe. In 2007, LiPS was folded into the new LiMo Foundation, along with the OSDL. All of these committees have had some overlap and some complementary features. Several of Google's OHA partners are also LiMo members, including NTT DoCoMo, Wind River, and Motorola. So why didn't Google just join LiMo? “LiMo, very candidly, wasn't moving fast enough,” OHA board member John Bruggeman told CNET. Google hopes to herd the Linux cats into a progressive, structured platform that can battle against Symbian and Windows Mobile to succeed as the new DOS of smartphones. Will Google fracture or unify mobile Linux? The Presumption of the Necessity of DOS. The previous segment examining Windows Mobile pointed out how the PC industry as a whole assumed that Microsoft's desktop Windows monopoly would easily take over dominance in the MP3 player market, pushing Apple into a niche position. This was expected because DOS had pushed Apple's early computers into a reduced role starting in 1981, and Microsoft had repeated this again in 1991 when the DOS world migrated to Windows, effectively pruning Apple's Macintosh into a Bonsai platform. The inability of one company to dominate any product category has been frequently repeated by PC industry pundits as a given, despite the fact that history is full of examples of this happening. Sony dominated personal music players for two decades under the Walkman brand even while equally large competitors tried to push it from this position; Nintendo has similarly owned handheld gaming despite ill-fated efforts to grab a piece of its pie by products running a generic platform such as Microsoft's WinCE (Gizmondo), Linux (GP32), and Symbian (N-Gage). In fact, outside of the Windows/DOS PC, there are actually few examples of a generic platform taking over an industry. Nearly every other consumer-facing product uses proprietary platforms: car makers, stereo equipment, appliances and so on typically all use designs custom to their maker. The paradox of the Windows PC market has been that Microsoft's broadly licensed software supposedly saves hardware makers from investing in software development while ensuring compatibility, when in reality it adds significant costs to PC makers while limiting their ability to differentiate themselves. That explains why PC makers have been perpetually merging together and going out of business while Microosft has rolled in money over the last two decades. Parallel efforts to copy Microsoft in broadly licensing an operating system have regularly failed: IBM's OS/2, Apple's Mac OS, Palm's PDA OS, even Microsoft's own efforts to duplicate Windows dominance in other markets, from copy machines to PDAs to smartphones to SPOT watches to music players. The closest copy may be Symbian, but its customers are partners, not simply consumers of a generic third party's operating system as Windows licensees are. That indicates it is not necessary to duplicate the dominance exercised by Microsoft over the PC industry in the smartphone market. Google's Android and Symbian exist more as technology sharing pacts among manufacturers, but both aspire to take Microsoft's DOS role among smartphones. However, the idea that Apple's iPhone must be dethroned by a modern-day DOS, whether Windows Mobile, Android, or Symbian, is not just debatable, but does not sync with the reality of more recent events. Apple's recent history of the iPod further refutes the idea that a software analog to Microsoft is needed. The iPod Emergence: Apple & Pixo vs IBM & Microsoft. Apple's iPod in 2001 made no effort to clone the DOS business model; it actually did the opposite. When Apple entered the market, there were a number of existing MP3 devices using custom software, hardware designs, and DRM codecs. The iPod used off the shelf components to deliver a custom MP3 player using third party software, but Apple also added its own technologies: easy to use sync with iTunes, a fast Firewire interface that made uploading music far faster than the prevailing USB 1.0, and an attractive industrial design. With the iPod, Apple played the role of IBM in 1981, using Pixo's embedded operating system to enter the market quickly, just as IBM had used DOS. The difference was that Apple didn't direct any market attention toward Pixo and added a lot of value on top of that core embedded OS. A modern day Compaq couldn't simply clone the hardware and license Pixo to run on it in order to compete against the iPod, because the iPod was much more than just generic hardware running Pixo software. As the iPod developed, Pixo's role diminished and was eventually displaced. Just like IBM, Apple jumped into a new market just as demand was beginning to explode. Apple made MP3 players far more attractive to a general audience by delivering greater playback capacity than most entry level devices offered, along with an ease of use that encouraged buyers to jump in at the higher end of the market. That left Apple with not only the lion's share of the market, but also by far the most profitable segments of the market. Two decades prior, IBM badly fumbled its play with the early PC and ended up irrelevant in the PC world by the late 80s, sideswiped by Microsoft's DOS and the cloners who were licensing it in parallel, notably Compaq and later HP and Dell. Steve Jobs had witnessed that happen, and was determined to not let it happen again to Apple. Rather than being manipulated by a software middleware vendor as IBM had, Apple worked to incrementally develop the iPod market itself. After consuming the hard drive-based player market, Apple took on the Flash RAM-based market with a tiny hard drive system used in the iPod Mini, and followed up with Flash-based devices of its own in the Nano and Shuffle. This allowed Apple to progressively serve an increasingly wider market, incrementally growing upon an established foundation. With the iPod, Apple became, in effect, an IBM with its own internal Microsoft. Microsoft's Failure Despite Features. In contrast, Microsoft entered the music player market by promoting music player hardware reference designs around WinCE. However, it was unable to ship a finished design until the iPod had become firmly established around 2005. Later branded as PlaysForSure, the devices were sold by various hardware makers and all purported to support the same DRM and the same music subscription services while also offering a broader array of hardware that presented video before the iPod did, supported wireless before the iPod, and so on. Despite these unique features, all of those PFS designs still failed. Microsoft blamed the failure of PFS upon its music store and hardware partners and decided to take Apple on itself in 2006. It relaunched a Toshiba PFS player as its own device under the Zune brand, adding WiFi music sharing features and a larger display than the current Pods had. It failed dramatically as well. Did Microsoft's attempts to float a new DOS among music players fail because of Apple's success, or due to Microsoft's own problems? The failure of the Zune, which followed the iPod model rather than the DOS model, seems to suggest that Microsoft itself was to blame. Consider too that Microsoft's Windows Mobile phones, which use the same underlying operating system as its failed PlaysForSure music players and the Zune, had similarly flopped even before Apple could release a charismatic phone equivalent to the iPod. Of course, when the iPhone was released, it hit Windows Mobile hardest. The iPhone made Windows Mobile Smartphones look ridiculous and underpowered, and made Windows Mobile Pocket PC phones look clumsy and awkward, despite the fact that they both supported a variety of features the iPhone didn't, including the ability to edit documents, capture video, send MMS, and so on. Simply adding on features did not enable Microsoft to compete against Apple. The only conclusion that can be drawn from all this is that competing against Apple requires more than just having a feature arsenal. Microsoft's failures in themselves do not necessarily mean that Google's Android will fail in its attempts to float its own smartphone platform. Why Microsoft’s Zune is Still Failing Microsoft’s Zune, Vista, and Windows Mobile 7 Strategy vs the iPhone Will Google Succeed where Microsoft Failed? Microsoft's demonstrated inability to successfully enter consumer markets for MP3 players and smartphones has given observers little faith that the company will somehow turn things around in late 2009 when its next generation of devices are expected to be released. However, prior to that the first fruits of Google's efforts to build its own smartphone operating environment will arrive. Will Google's Android take over Microsoft's crown as the “DOS vendor” among smartphones? Supporters of Google's Android project point to some parallels between Android for smartphones and Windows on the PC: Android will allow hardware makers to differentiate in ways that can offer features Apple can't (or doesn't want to); it should allow software developers to offer features Apple does not allow on the iPhone; it embraces open, hobbyist experimentation in ways that Apple currently isn't; and it opens the potential for content providers that Apple is not interested in allowing. Openness is Android's key competitive feature. Will all this openness allow Google to unseat the iPhone to become the primary platform developers want to participate in, and subsequently soak up the market for third party hardware makers that Windows Mobile serves? While Google currently has no market share due to the fact that no Android phones have yet shipped, it does have broad vocal support from a variety of the same kinds of hardware manufacturers that supported DOS and Windows and helped to make those platforms successful in the desktop PC market. HTC and Android. The first Android phone is expected to be the HTC Dream; Taiwan's HTC (High Tech Computer) also manufactures Palm's Treo Pro phone as well as many of the most visible Windows Mobile devices. In addition to models produced under its own name, HTC also sells Windows Mobile devices under the Dopod brand, as well as no-name phones branded by providers, such as AT&T, Orange, Sprint, T-Mobile, Verizon Wireless, Vodafone, and others. HTC will also be building the XPERIA X1 Windows Mobile phone for Sony Ericsson. HTC was quick to throw its support behind Android despite its long term alliance with Windows Mobile. Why would it so enthusiastically support an unproven platform from a company that has no experience in consumer hardware platforms? One can only assume that HTC is not happy with the current state of Windows Mobile, and desperately wants another “DOS” to succeed where Microsoft's has so spectacularly failed. As an Original Design Manufacturer for Palm, HTC watched as Palm adopted Windows Mobile in place of the Palm OS and subsequently fell even deeper into crisis. Palm's only successful phone since has been its Palm OS-based Centro. HTC undoubtedly sees Android as its ticket to becoming the next Dell, but without a similar dependance upon Microsoft. Android for mobile phones is essentially playing the role of Linux for PCs, except that it has the backing of a major company behind it. Can Android Take on the iPhone with Openness as its Feature? As great as this sounds, it's important to consider that Linux on the desktop has made no significant progress in eating into Windows dominance after a decade of trying. Being open, free, flexible, and decentralized hasn't been enough of an advantage to get consumers to migrate from Windows to Linux in any fraction of significance. Similarly, in the music business, Linux-based MP3 players have had no impact on the iPod, despite offering more features, flexibility, support for additional codecs, and so on. In the mobile phone area, Linux enjoys a sizable portion of the smartphone market, but this is almost entirely due to phones sold by Motorola in China, where the advantages of Linux' openness are void. Motorola's Linux phones offer nothing to users in terms of openness or flexibility, and are really no different in terms of features than other appliance 'feature phones' based upon closed operating systems. And again, a key problem with assaulting Apple in a feature war is that neither the iPod nor the iPhone became popular by being “highly featured.” They both delivered perhaps 80% of the functionality found in all other devices in the market. Rather than trying to match every feature and cater to every niche as Microsoft had with Windows Mobile, Apple's devices did a few things very well at launch, and incrementally developed into full featured devices that still lack some of the more unique features of their competitors. Further, in terms of openness, the demographic that embraces Linux' characteristic freedoms is not the same as the demographic that buys smartphones in quantity and then pays for data service. This is a critical fact to consider because a big part of the iPhone's success stems from the fact that it is being pushed by mobile providers who want to capture the cream of the market willing to pay a premium for data services. The Frankenphone. Combining the fractured aesthetic of HTC's Windows Mobile phone hardware with Android's software, based upon Linux' perpetually unfinished DIY openness and Google's Java-like development platform, will not result in a product similar to the iPhone. Instead, it will look a lot like phones that have already failed in the market. Apple's advantage comes from slick hardware designs with a close attention to detail, combined with software that purposely does less so that it can do what it does better. Even Apple's own conservative attempts to broaden its software capabilities with iPhone 2.0 have resulted in instability problems that can be blamed upon both Apple's early releases of its phone operating system and software from inexperienced third party developers new to the platform. Would the current frustrations with iPhone 2.0 be somehow mitigated by additional openness that also embraced all kinds of variables from different hardware makers with less quality control than Apple, a loose committee of additional cooks working to serve up operating system features targeted at every possible conceived need, and a wider third party software group with fewer constraints on illegal behaviors? The Failure of Open. While it is politically unpopular to criticize the well meaning efforts of open source contributors, the failure of Linux on the desktop, the failure of the vaporware Indrema game console, and the failure of the OpenMoko project to deliver a workable phone within a year of its deadline all underline the serious problems open development faces in the world of consumer oriented devices. Open has simply failed to deliver on its promises in the world of consumer hardware. OpenMoko was supposed to release its first mobile phone to consumers for $250 several months in advance of the iPhone. When the iPhone shipped, the group then announced new plans to get its phone out by the end of 2007. Instead, this spring the group announced new plans to move to an entirely different development platform, and ship its phone mid year for $400 with limited functionality and incomplete software outside of basic GSM phone features. Linux's notable successes, from Motorola's Linux phones to the Tivo DVR to Linksys Routers, have often come without any associated openness or freedom, and were instead delivered simply to provide their manufacturer with a free kernel to build upon. This indicates that while Linux may find its way into an increasing number of smartphones, it will likely not be accompanied by the glorious freedom of an open development environment Google has said it would offer with Android. Apple iPhone vs the FIC Neo1973 OpenMoko Linux Smartphone Can Google Succeed Where Open Has Previously Failed? Despite “openness” being Android's strongest competitive feature compared to Apple's iPhone, Google recently revealed that its wide-open development model is intentionally gravitating towards a closed association of top tier partners due to practical considerations. In July, Google accidentally sent out a notice that revealed that it had been seeding private SDK updates to only a subset of its contributors, angering those who believed that Android would be as open as Linux on the desktop or the OpenMoko project. Further, Google has restricted initial development to higher level APIs just as Apple did, further indicating that Google itself realizes that being wildly open to impress a minority of hobbyists will not result in the commercial success of its new platform. That serves to neuter Android's primary advantage over the iPhone. Without delivering on the premise of being wide open, Android is really just a less mature set of Java libraries used to create a specialized binary that runs on a Linux foundation. Unlike Apple's iPhone, Android phones won't have a slick user interface developed by professional artists, nor the iPhone's legacy of mature software development frameworks crafted over the last thirty years, nor the iPhone's tightly integrated hardware with award winning industrial design, nor its marketing power tied into the iPod and Apple's retail stores. Android won't be an open iPhone, it will only be a Windows Mobile phone with a better kernel that runs specialized Java software instead of Win32 or .NET code. Don't expect consumers to be impressed by that. The Biggest Missing Feature. There is one remaining factor that strangles to death any last remaining hope that Android might assassinate the iPhone and assume the crown of the “DOS of smartphones.” That is: Android delivers zero price advantage to consumers. In 1981 and 1991, consumers who wanted Apple computers faced the sticker shock of a somewhat arrogant price tag. Apple sold its computers, as it still does, at the higher end of the market, but there was simply far more range in prices available. In 1981, that meant the Apple II was $2600 and the new Apple III was $3500, even before you added a monitor. On the low end, Commodore sold its far less powerful, but “still a computer” Vic-20 for $300, while IBM entered the market with the IBM PC at $3000. Over the next few years, Apple focused on delivering additional sophistication at the same price, releasing the $10,000 Lisa and then the $2,500 Macintosh. IBM continued selling PCs in the same $3,000 to $10,000 range, but other DOS PC vendors began selling machines at prices that ranged as low as $1500. That left Apple with a roughly $1000 price premium over low end PCs. The products weren't really comparable, but consumers only saw the huge price difference. In 1991, Apple was still selling moderate to high-end Macintoshes for $3,800 to $10,000; the crippled Mac LC was $2500, and obsolete-at-birth Mac Classic ranged from $999 to $1500. Windows allowed PC makers to ship a functional $1500 PC and claim a rough approximation to Apple's $2500 entry level system, maintaining that apparent $1000 price premium. Today, pundits are lucky to find a Dell or HP system that is even a couple hundred dollars less than a comparable Mac. However, in the smartphone business, the iPhone 3G is now the same price, if not less, than generic competing phones on the market. Even more significant is the fact that the price of the phone hardware is nearly nothing compared to the cost of the service plan. This fact simply eases any price premium that could cause buyers to flock to a smartphone running a generic operating system over buying the iPhone 3G, regardless of whether it runs Windows Mobile or Android. 1990-1995: Planting Software Seeds Android Partners Have Already Failed. That same pricing principle similarly prevented buyers from considering many of the alternatives to the iPod. While Apple's original iPod models were more expensive than many of the first MP3 players on the market, they were price competitive with models offering similar features. By 2004, it was Apple who was undercutting MP3 competitors on price. Microsoft offered zero price advantage when it began selling the Zune, a major factor in its failure, but Microsoft simply couldn't out-price the iPod; it was already losing money offering the Zune at the same price as the iPod. Apple now has tremendous market power in buying RAM and other components that will prevent any competitors from being able to offer a huge discount over the iPhone's $199 price tag. Even if competitors were to give their phones away, they would only offer a $200 discount to users who would then still need to pay the same mobile fees to use the phone. Android's other partners, including Samsung and LG, have already failed to capture any significant market share in the music player market. Are they going to maintain their position as smartphone makers now that they face similar competition from Apple, its iPod ecosystem, its iTunes Music and Apps Store, Apple's retail store experience, and other factors that are pushing the iPhone? If they can, it is not obvious how partnering with Android will help. Other Problems for Android. Android was announced in early November 2007 and was followed with an early preview SDK within a couple weeks, a month ahead of Apple's initial announcement of the iPhone 2.0 SDK. However, between March and July 2008, Apple delivered nine progressive releases of its SDK, opened its App Store, and sold 60 million apps, raising $30 million to support iPhone software development in just the first month. It has since released three more SDK updates to developers related to iPhone 2.1, which is expected next month. Android just published its first open SDK beta update earlier this week, warning developers that “applications developed with it may not quite be compatible with devices running the final Android 1.0.” Additionally, Android still has no phones available. By the time the HTC Dream is expected to launch, Apple will have an installed base of around ten million iPhone (and iPod touch) users supporting software development through iTunes. The business model for selling Android apps is no better than that for selling jailbreak iPhone apps: there is no iTunes Apps Store to promote them, so users will have to track them down on their own. Android developers also have no real freedom that jailbreak iPhone developers lack. The only difference is that there are ten million iPhones to sell jailbreak apps to, and currently zero Android phones. If selling a jailbreak iPhone app sounds like more trouble than its worth, imagine trying to sell Android apps to a non-existant audience. Now add the official iPhone App Store into the mix, where publicity, promotion and profits are booming. What platform is going to have the most applications? How many users will flock to a smartphone platform with no apps? The wisdom of releasing a desirable phone and achieving a significant installed base before releasing an SDK makes a lot more sense in retrospect. Additionally, while Apple has a decade of experience in shipping regular updates to Mac OS X and its Xcode developer tools, Google has only shipped a random assortment of web-oriented SDKs (a number of which have been abandoned) as a tangent to its core business of selling advertisements. When the Android SDK 1.0 is finished later this year, developers will not only lack an installed base to sell their apps to, but will also have no high profile market for selling their apps in, and subsequently no financial incentive to develop applications that add value to the Android platform, just like Linux on the PC desktop. Around the same time, possibly within the next month, Apple will be shipping its second major OS release: iPhone 2.1. Apple will also be upgrading its entire user base to the new software so that developers will have a cohesive platform to target. This mirrors the efforts Apple has taken to upgrade its Mac OS X users to the same reference release. Mobile developers will be seeing money pouring in via iTunes while crickets chirp in the Android section of various mobile online stores. Apple’s iPhone Vs. Other Mobile Hardware Makers: 5 Revenue Engines Same Same, But Different: DOS Model Problems. Android developers will also have a series of other problems to manage. Like Windows Mobile, Android is intended to support everything, from BlackBerry-style keypad phones with a small touchscreen to the simple Windows Mobile Smartphone form factor lacking a touch screen to iPhone-like full size touch screens. Also like Windows Mobile, Android phone makers will have the option to leave off Bluetooth, WiFi, GPS location services, graphics hardware acceleration, and so on. Each Android phone will also have unique camera hardware, support for different video and audio codecs, and varied support for other differentiating proprietary services demanded by mobile operators. This will force developers to to make complex decisions regarding the lowest common denominator they choose to support. So while the iPhone will have a cohesive feature set, a managed software environment, and a functional market, Android will be a loose federation of hardware makers selling the same random features found on Windows Mobile today, with a chaotic development environment that lacks any central market for users or developers. And it will be run as an experiment by a company with no experience in consumer hardware or platform development. The Missing Tap. One specific example of the “DOS model problem” is that Android currently does not support multitouch. It's not touched on in the API, and Google quietly tap dances around its omission. Why no multitouch? Because multitouch screens are expensive, and most OHA hardware members are more interested in making a profit in a competitive phone market rather than impressing consumers as Apple did with the iPhone. Most existing smartphones, even those trying to directly rival the iPhone, use a stylus driven, pressure sensitive tap screen or a simpler, cheaper touch technology that lacks support for sensing multitouch. The iPhone's screen can actually sense up to five fingers at once, but the primary feature multitouch offers on the iPhone is the two fingered tapping and the pinching effects everyone associates with it. Android could certainly support multitouch if there were a demand for it, but that's the point: Google knows that its hardware partners are cheap and unlikely to put out hardware that actually competes with the iPhone. Instead of using expensive technologies that deliver clever yet largely invisible functionality, OHA members, just like PC makers, are far more likely to add flashy, impractical gadgety fluff that's cheap to tack on, such as slide out keyboards, neon tubes, and scratch and sniff stickers. That's how you impress gullible nerds on the cheap. Google itself is blowing smoke and erecting mirrors to distract from the reality that it being a “DOS vendor” means supporting bargain basement hardware from penny pinching duplicators. Android has been demonstrating some “wow” features such as a Street Maps app that pans around based on an internal compass in the demonstration phone. The problem is that that kind of thing only makes for a fun demo. Nobody needs to twirl around their phone in the air to see a view of the other side of the street, but everyone who has used an iPhone will wonder why they can't pinch to zoom out. Even worse, most Android phones aren't going to have a compass built into them, so Google is demonstrating features most Android users won't be able to use. That Sounds Like Microsoft… Google's design decisions are beginning to look a lot like Windows Vista; rather than actually working to make laptops boot faster, Microsoft came up with the idea of adding a small screen to the back of Vista laptops so users could check their email without having to wake the system up. But this was a stupid idea for a number of reasons, the most obvious being that most users just want a laptop that boots up quickly. Few laptops got the mini screen, but every user who tries Vista on their laptop will wonder why it doesn't boot up as fast as Mac OS X Leopard. In the same way, Google is advertising features for Android that most users won't ever see in their actual phones while ignoring things people will expect based on their exposure to the iPhone. Android is simply selecting the wrong features. Android will offer the advantages of supporting MMS, recording video, and the list of other features Windows Mobile already supplies. Those features didn't stop Apple from firing past Microsoft in the smartphone arena however, just as the Zune's highly touted WiFi and screen didn't phase iPod buyers. Incidentally, just months after the Zune, Apple had not only demonstrated a larger display but a higher definition multitouch screen, and not only WiFi, but functional WiFi that could be used to browse the web or check email. This suggests that Apple, with its faster release schedule, won't stay behind any of the leading features potentially offered by Android for very long. Android partners, however, will find it as difficult to catch up with Apple's unique features, just as Microsoft has been stymied to keep up with Mac OS X, the iPod, and the iPhone. The underlying reason: both Google and Microosft are tasked with maintaing support for a huge variety of hardware options demanded by all their partners. Apple has the unique circumstances to do only what it needs to do itself. Android in Windows Mobile's Shoes. Like Windows Mobile, Android faces a difficult market. In the US, it competes against the popular BlackBerry in corporate markets and the iPhone among consumers. Worldwide, it competes against entrenched market leader Nokia. The difference is that Google, unlike Microsoft, has no in. Windows Mobile was adopted by Windows-bound IT shops despite its weaknesses. Nobody has any preexisting reason to try an Android phone apart from hobbyists and open software enthusiasts, a demographic that has done little to move Linux on the PC desktop. Google also lacks Microsoft's installed base; it's starting from zero. The smartphone industry initially doubted Apple's chances of making much progress with the iPhone, despite the company having the Mac platform, the iPod, retail stores, platform development experience, marketing savvy, industrial design prowess, and so on. Google doesn't have any of those things. Mobile Providers vs Android. Apple also started with an exclusive partnership with AT&T, a three legged race that demanded effort from both. Google is hoping that hardware makers handle the hardware details and that mobile providers will be excited to sell its Android phones. While hardware makers such as HTC clearly appreciate having found a free alternative to Windows Mobile, it's not obvious why providers would be excited about Android, as it promises an openness that most mobile providers strongly oppose. AT&T took a big risk in getting behind the iPhone, as the phone encouraged users to use email rather than fee-based SMS and MMS, it supported WiFi for data access, and it bypassed AT&T's MEdia Net services to plug into iTunes instead. Verizon refused to parter with Apple and grant it those kinds of concessions. Is AT&T going to take a similar risk to partner with a phone that is not exclusive to it, and is Verizon now going to open its arms to support phones that do not exclusively support BREW, VCast and its other proprietary services? While Android may well eat into Microsoft's Windows Mobile business by stealing away its hardware makers, it seems unlikely that Android will ever serve as more than free alternative to Windows Mobile in a market where Windows Mobile is increasingly irrelevant. Android may have the dubious distinction of swallowing Microsoft's mobile business the same way Microsoft ate up the Palm OS, but even if it accomplishes that goal, Google will likely find itself unsustainably hungry immediately afterward. It will also find itself swimming in a shark tank of hungry rivals, including Nokia's Symbian, RIM's BlackBerry, and Apple's iPhone. Symbian is the final generic platform vying for the opportunity to play DOS in the smartphone market. The next article will examine Nokia's chances in its bid to match Microsoft's PC dominance in the mobile market while setting out in a new venture to copy Android's open software model. Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast (oh wait, I have to fix that first). It's also cool to submit my articles to Digg, Reddit, or Slashdot where more people will see them. Consider making a small donation supporting this site. Thanks!

• RoughlyDrafted Magazine on August 24, 2008
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Why Dan Frommer and Scott Moritz Are Wrong on iPhone Sales

Daniel Eran DilgerSilicon Alley Insider's Dan Frommer says Apple's announcement of reaching its million mark goal in iPhone sales three weeks early is actually bad news for Apple and is convolutedly "below plan." He also says the announcement only props up the speculative conjecture by Scott Moritz of the Street that Apple's iPhones sales are somehow woefully below expectations. They're wrong, here's why.The PremiseFrommer wrote that Apple isn't selling iPhones as fast as planned and is set to only sell around half of its 2008 goal.His premise revolves around the idea that if Apple were selling iPhones at "a constant rate," a million phones in 74 days would be five million per year. However, because it sold over a quarter of those in the opening day and a half at the end of June, Frommer calculates that sales of the remainder in the 72 days since the first of July mean that Apple is only hitting a "3.6 million annual run rate."By the end of 2008, that would only result in 5.8 million units instead of the ten million goal Apple. [Silicon Alley Insider: Apple's iPhone: 1 Million Is Below Plan]Strike One: The Run Rate Myth.The most obvious problem with that idea is the fact that devices don't sell at a constant “run rate." Apple's iPhone sales took off at launch much faster than the original iPod due to the fact that a swell of early adopters were ready to buy it after being convinced over six months of anticipation. At the same time, many potential buyers held off on plans to buy the iPhone until they could read reviews and get a real sense of how it worked. Many were also locked into contracts with Verizon or Sprint. With only six months of advanced notice, it will still be a few more months before the majority of buyers who want an iPhone even get the chance to buy one without having to pay outrageous fees to cancel their existing mobile contract. iPhone sales are also now taking on the network effect of the iPod, as early adopters show their friends. All these factors have difficult to estimate impacts upon sales that make trying to figure a static “run rate�? a very simplistic and pointless exercise.However, there is another factor that simply blows the entire idea of a static “run rate�? out of the water. Last November, I predicted that sales of the Zune would bomb that winter because Microsoft had failed to critically examine Apple's historical sales patterns. Sure enough, the Zune was thrown against the rocks by Apple's riptide. Frommer's idea ignores that same reality by imagining that iPhone sales will schlep along at a linear pace. Had Frommer tried to calculate an "annual run rate" for the iPod based on a portion of third quarter sales at any point over the last half decade, he would never have been close to accurate. That’s because Apple’s iPod sales roughly triple every winter quarter.In 2002, it sold nearly as many iPods in its winter quarter as it did the first three quarters combined: 219,000In 2003, it actually sold more iPods in its winter quarter than in the first three combined: 733,000In 2004, it again sold more iPods in its winter quarter than in the first three: 4,580,000In 2005, it sold more than 4 million units every quarter, but still sold nearly three times as many in the winter: 14,480,000.In 2006, it sold more than 8 million units every quarter, and then sold over 21 million in the winter quarter.In 2007, it has maintained quarterly sales between 10.5 and 9.8 million per quarter.[Strike 3: Why Zune will Bomb this Winter]Strike Two: The Have it Both Ways Myth.One particularly annoying bit of analysts' talk about Apple's expectations is that they can't seem to decide if Apple's projections are bad because they are conservative lowballs, or if they are bad for being overly enthusiastic figures the company won't be able to reach. They often try to describe them as both, loading contempt on both sides of the scale. This makes them look very foolish. Do they think we have no memory, or are they just changing their stories back and forth in sheer desperation?Frommer tried to argue both sides at once in the same article. Recall that Apple only ever gave two iPhone sales goals: one million by the end of the first quarter of sales, and ten million by the end of 2008. In his piece, Frommer suggests Apple will only be able to sell 5.8 million iPhones by the end of 2008, based on that fallacious "run rate." That would be just over half of Apple's ten million goal. However, he then says that Apple's immediate short term goal was an unimpressive low ball, no doubt because Apple reached it three weeks early.Apple's stated goals must be a greatly frustrating logical conundrum for Frommer, because even at a “run rate" of one million in a quarter, Apple could only ever hope to sell six million iPhones by the end of 2008, another five quarters later. No wonder he's faced with trying to say that the immediate goal was too low and the longer term one is too high! Frommer needs to stop trying to pound round facts into square holes just so they can be stacked up like bricks the way he would like them to be.Strike Three: The Market Bearing Price Myth.While Frommer and Moritz are enamored with the idea that iPhone prices could only be cut if sales were in crisis, a variety of obvious market realities don't support that simpleton idea. Between now and the end of 2008, Apple has just two holiday seasons. If it wants to dramatically exploit its historical potential for selling roughly three times as many gadgets during the winter season, it makes sense to trade off unit pricing for volume sales, even if it could perhaps sell fewer at a higher price and make more short term profits doing so.Such a strategy isn't unique. Microsoft and Sony currently lose money on their new game consoles in desperate bids to establish their gaming and HD video playing platforms. Even so, this year they both cut prices again to accelerate volume demand. Nintendo purposely aimed low to capture volume sales using a more attractive price point. Given high demand for the Wii and extremely constrained availability, Nintendo "should" seemingly raise its console price and profiteer. It hasn't. While prices are clearly linked to demand, it is a common fallacy to think that the "right price" is always the highest the market will bear. Jobs' 99 cent pricing in the iTunes store is clearly not the top price consumers will pay for downloads. Music labels are fuming that other licensees such as Verizon will collect $2.50 or more for portions of a song sold as a ringtone. Jobs wants media prices low to induce volume sales and attract buyers to the legitimate market for music and movie downloads. Labels and studios want "market pricing," in part so they can jack up the price of popular music to exploit consumers, and in part so they can exploit artists by threatening to release their work at lower tiered prices and signal to the market that their careers are over.[Universal vs Apple in the iTunes Store Contracts][Nintendo Wii vs Microsoft Xbox 360 and Sony PS3]This All Happened Before.Dial back the clock twenty years, and you'll discover that Steve Jobs also fought with Apple CEO John Sculley over the price of the original Macintosh. The desire to use an expensive but pioneering amount of RAM and a futuristic new processor had inflated the price of the Mac, but the design team was still able to deliver it at a fairly attractive price point of $1,995. Scully determined that the Mac would still sell at $2495, delivering high profits to fund splashy advertising. Nothing on the market was really similar to the Mac apart from Apple's $9,995 Lisa. VisiOn for the PC similarly cost nearly $10,000 and did far less. Sculley thought that the market would bear anything Apple might charge. Andy Hertzfeld recalled on Folklore.org that in October 1983, "Steve Jobs strode into the software area one evening, looking angry. 'You're not going to like this,' he told us, 'but Sculley is insisting that we charge $2495 for the Mac instead of $1995, and use the extra money for a bigger marketing budget. He figures that the early adopters will buy it no matter what the price. He also wants more of a cushion to protect Apple II sales. But don't worry, I'm not going to let him get away with it!'"Jobs fought Sculley over the price increase, but Sculley prevailed. Sure enough, Macs did sell well out of the gate to early adopters at the higher price, but sales then began to stall. While Jobs couldn't cut the price for the original Mac to induce wider adoption in the mid 80s, he could choose to cut the price of the iPhone early and use interest in the iPod Touch to ramp users toward the iPhone. That price cut will dramatically boost sales this winter, just as iPod price cuts and feature refreshes do every year.Apple will earn less profit on individual hardware sales of the iPhone, and may even earn slightly less money overall this quarter than it might have selling the iPhone at $599. However, a $399 iPhone will dramatically boost the company's sustainable subscriber revenues and devastatingly cut into stationary rivals like Palm and the Windows Mobile licensees, giving them little opportunity retool and strike back with copycat products.  [Price Fight - Folklore.org][Office Wars 3 - How Microsoft Got Its Office Monopoly]Strike Four: The Myth of Unlimited Availability.Another problem with idea that iPhone sales were in crisis--and that a price cut is a conspiracy to hide the truth--is that Apple sold out of iPhones in many of its retail stores throughout the first three weeks on sale.Carl Howe of Blackfriar's Communications tracked iPhone availability every day through July, and then animated the results in a movie that depicts just how constrained iPhone inventories in Apple's retail stores were. So not only did Apple meet its 94 day goal 20 days early, but it did so despite having no or few iPhones to sell in many of its stores during the first 21 days. Price isn't just related to demand, but also to supply.That also demonstrates the fallacy of Scott Moritz' assertion that Apple secretly planned to sell a million iPhones in a day and a half, and was sorely disappointed after failing to do so. How could Apple have planned on selling a million units in one day when it didn't even have a million units on the shelves of its stores during the first month? Remember, Moritz wasn't saying Apple had a delivery problem in getting enough units to stores as Nintendo is experiencing with its constrained supplies of the Wii. Instead, he tried to suggest that interest in the iPhone was far below Apple's estimates, and buyers were leaving it on the shelf like Windows Vista. The result, he claimed, was that "rivals were rejoicing."The only real rejoicing by rivals was that Moritz was volunteering to repeat the talking points handed to him by Verizon shill Roger Entner of IAG Research. Just hours before Apple announced it had sold a million units, Moritz tried to get some traction out of the idea that Apple had dropped the price in desperation to find another half million or so customers over the next three weeks. Apple isn't the typical tech company being run by visionless bean counters. It it were, it would have continued selling $600 iPhones at least through the end of September and then announced that it had sold its million. Apple had to push out new iPods in early September and fit the iPhone into the price range because next month it will be rolling out Leopard and a series of new software updates. Apple feeds the press in small, consistent, and regular feedings so reporters know what to write. If Apple were a big stupid company such as, say HP, it would parade out a mix of dozens of consumer and business products all together in one big event, and nobody would ever hear about any of it. HP did.[Why a million iPhones in 74 days is better than you think- Blackfriars][HP's marketing this week: fashionable but ineffective - Blackfriars][Unraveling Anti-Apple Panic: the iPhone Launch Success] [More on Scott Moritz and the Jim Cramer Misinformation Engine]Strike Five: It's Too Late to Deny the iPhone.The most comical part of Frommers’ analysis is that he’s trying to stuff a cat back into a bag and explain that there was never really any cat, long after everyone in the room heard the purr and pet the thing. Sorry, but the windows of opportunity to doubt the iPhone have long since closed.Real Windows Enthusiasts were aware of the need to deny the iPhone well before its release. They all chimed in with reasons why the iPhone wouldn't work, wouldn't offer what consumers want, and wouldn't sell well, all hoping that their non-stop misinformation campaigns would act as a self-fulfilling prophesy. They failed miserably.John Dvorak began his smear campaign immediately, appearing on CNBC to say that the iPhone was "trending against what people are really liking in phones nowadays, which are those little keypads.�? He explained, “The BlackJack, the Samsung, the BlackBerry obviously pushes this kind of thing. The Palm, all of these. I guess some of these stocks went down on the Apple announcement, thinking that Apple could do no wrong. But I think Apple can do wrong, and I think this is it." Reader Jim Barrow sent in a link to a MarketWatch article from March, where Dvorak scribed a rambling diatribe entitled "Apple should pull the plug on the iPhone." He offered no factual basis for worrying that the iPhone might not work out apart from the offhanded comment that "there is no likelihood that Apple can be successful in a business this competitive," words which echoed Dvorak's 1984 observation that "the Macintosh uses an experimental pointing device called a 'mouse.' There is no evidence that people want to use these things."In April, Dvorak inflamed his 'pull the plug' rhetoric further in a TWiT podcast, where he reported to an audience of hundreds of thousands that the iPhone only delivered "40 minutes of talk time" and "the interface fouls up constantly.�? Dvorak said that his inside information on the iPhone came from a "guy at Cingular who’s testing the product," adding, "he’s telling me confidentially and I shouldn’t be telling anybody."[John Dvorak: How Wrong Can One Guy Be?][Readers Write: Don't Write About John Dvorak Anymore]It'll Be the Death of You.Dvorak was joined by Rob Enderle, who called the iPhone “damned�? and “not a very good phone�? at every opportunity in the months before its launch, despite not really knowing anything about it, or even ever offering any rational criticism. Instead, Enderle appealed to fantasy fears of sexual assault, murder, and the violent death of children, all of which he suggested might somehow be related to the iPhone. Unaware that a password protected iPhone--or even a unauthorized unit without a configured service plan--can still be used to make emergency phone calls, Enderle wrote about, "an emergency situation where, say, a woman was being raped and couldn’t call for help because she didn’t remember her iPhone password." As I understand, with a Windows Mobile phone, even if the unit crashed while trying to place the call, at least the victim could use it like a brick as a blunt weapon. Enderle also feared that being unable to take out the battery would somehow making recharging it impossible, resulting an a scenario where one might end up on “the wrong side of town�? with a dead iPhone and be murdered because of it. Being on the wrong side of town was apparently the source of most murders prior to the arrival of the cell phone, which somehow made it safe to be in bad neighborhoods. For those who unfazed by the prospect of one's own own grizzly death in relation to the iPhone, Enderle appealed to his readers to please think of the children, particularly the potential for their brutal decapitation in an iPhone-related collision. "If you are buying this phone for a child or another member of your family," Enderle warned, "please emphasize that entering data on this phone while driving is dangerous." In contrast, operating the slide out keyboards of an HTC brick phone, or using both hands to thumb type on a BlackBerry may or may not save your children as they drive off an embankment, but at least you'll know they didn't die at the hands of Apple's "damned" iPhone.[SCO, Linux, and Microsoft in the History of OS: 1970s][Mac OS X vs Linux: Third Party Software and Security]Pure Concentrated Evil with a Multitouch Screen.Brian Lam of Gizmodo published an impassioned plea to boycott the iPhone shortly before its launch, due to the fact that Cingular had purchased the AT&T name, a brand Gizmodo's writer correlated with "monopoly tactics" in the late 70s. Gizmodo hasn't ever called for the boycotting of Verizon Wireless, which is well known for its anti-consumer tactics and which shares just as much blood with the old AT&T as its Baby Bell sibling Cingular, nor has it ever urged the boycott Microsoft products due to "monopoly tactics." Gizmodo also failed to boycott any other GSM phones that are tied to AT&T.Gizmodo's Lam and Enderle then teamed up with Slate's David Sessions in an article purporting to expose Apple's rated battery life for the iPhone. Sessions complained about the attention the iPhone was getting, and tried to dismiss Apple's announcement of a two fold increase in battery life over what was originally advertised. Unbelievably, Sessions and friends could only explain away the iPhone's jump in talk time by crediting its glass screen, saying that "glass transmits light more efficiently than plastic." That and some witchcraft.However, all of these individuals sharply reduced their squirt rate of false information after the iPhone's successful launch. In day and a half, Apple sold 270,000 iPhones compared to the 500,000 Palm OS Treos, 1.03 million RIM BlackBerrys, and 1.51 million Windows Mobile phones that were sold worldwide in the first 90 days of 2007.Apple has since nearly matched highflying RIM in sales during July, despite being limited to a single carrier and only offered for sale in the US. At this point, denying the iPhone is like saying the Earth is flat. It might be fun to do at a Renaissance Faire, but pretending to seriously doubt reality is not a good career move unless you work for the Street--or perhaps Rupert Murdoch, as Dvorak does.[Secret iPhone Details Lost in a Sea of Hype and Hate][iPhone Sales vs Zune, Palm, RIM, Symbian, Windows Mobile]And Now: a Warning.Let it be known that anyone who publishes further misinformation or blows out similar inanity will risk being instantly awarded a Zoon on the spot. No complicated voting, no tedious application process. New Zoon nominees will be rubber stamped with the same effortless fast tracking as the ECMA declaring Microsoft technology as an international standard.In fact, I’m going to totally Zoon Dan Frommer and Scott Moritz right now, as well as John Dvorak, Rob Enderle, Brian Lam, David Sessions, and even Roger Entner. And John Sculley. And while I’m handing out an intellectual property construct that costs me nothing to distribute, I will also award Steve Jobs with a Zoon for the whole two month “just kidding�? iPhone pricing situation, although I might take half of it back if I get a $100 coupon that doesn’t force me to spend $500 to actually use it. So let that be a warning to you out there on the Tubes thinking about how to linkbait an article at the expense of the progress of technology. I have a rapid firing gun full of Zoons and I’m not shy about cranking them out. Be sure to post any nominees.What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast! Submit to Reddit or Slashdot, or consider making a small donation supporting this site. Thanks!

• RoughlyDrafted Magazine... on September 12, 2007
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Apple's iPhone Coming to the U.K. (UPDATE)

UPDATE: Britain's Carphone Warehouse, which had just won the coveted right to sell the iPhone in the U.K., is up sharply in midday trading on news that U.S. electronics retailing giant Best Buy (BBY) has purchased a 3% stake in the company. See here. Meanwhile, Piper Jaffray analyst Gene Munster estimates that U.K. sales of iPhones will add 78,750 units to his previous projection of 2 million iPhone sold worldwide in the upcoming Christmas quarter. See iPhone in Britain: 3 weeks early, 34% more expensive. - - - - - - - With about 100 journalists assembled at Apple's (AAPL) big Regent Street store in London -- and after tea and cakes had been served -- Steve Jobs� announced the terms under which the iPhone will be sold in the U.K., the first country outside the U.S. to get the device. The 8 GB model running on the EDGE network (not 3G) goes on sale Nov. 9 for £269 ($537), including VAT, and will be carried by O2. "We picked the best one, the most popular carrier," Jobs said, according to Thomas Ricker, who covered the event live for Engadget. "I've seen hundreds of devices every year, and within a few minutes of playing with the iPhone I knew it as a breakthrough product," said O2 UK CEO Matthew Key. According to a report in The Guardian yesterday, O2 may be paying Apple a kickback of as much as 40% of its iPhone revenue for the privilege of carrying the phone. Jobs declined to discuss the terms of its revenue-sharing plan. O2, which will be partnering with Carphone Warehouse to sell the iPhone, is offering three 18-month plans -- £35 ($70), £45 ($90) and £55 ($110) a month -- each with nearly unlimited data (although there is a limit of 1,400 Internet pages per day). In the Q&A, Jobs defended the decision to use the slower EDGE network and Wi-Fi Internet access where available rather than the 3G networks that are widely deployed in the U.K. and Europe. "The 3G chipsets are real power hogs" that cut into battery life, he said, repeating the rational he used in the U.S. But he held out the hope that 3G iPhones could arrive in 2008. "3G needs to get back up to 5+ hours, something we think well see later next year," he said. Key said O2 has been building out its EDGE network and now covers 30% of the U.K. He added that Wi-Fi access for the iPhone will be provided at some 7,500 hotspots by The Cloud, which bills itself as Europe's leading wireless broadband network. Based on earlier reports, it is expected that Orange will be providing iPhone service in France and T-Mobile in Germany, Austria, the Netherlands, Hungary and Croatia. (See Apple's iPhone Heads for Europe and European iPhone Update.) [Thanks to Engadget's Thomas Ricker for the on-scene reporting.] [Photo courtesy of netdog via MacRumors]

• on September 18, 2007
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European iPhone Update: 02's "Mad" Terms, T-Mobile's Expanded Empire

With an Apple (AAPL) press conference set for 10 a.m. London-time tomorrow (see Apple's iPhone Heads for Europe), new details are emerging about the� company's plans for rolling out the iPhone across the pond. The most intriguing revelations come from Richard Wray in The Guardian, who tells the story in this morning's paper about how Steve Jobs played the four major European network operators against each other -- signing contracts for the U.K. market with three of them and even dispatching Apple technicians to help configure their networks to work with the iPhone -- only to extract terms from O2 at the last minute that one source describes as "madly money-losing." According to Wray, O2 is sharing its retail sales business with the Carphone chain and kicking as much as 40% of its iPhone revenue back to Apple, an arrangement he says is raising eyebrows in The City (London's version of Wall Street). Meanwhile, Financial Times Deutschland, sister paper of London's FT, reports that T-Mobile is holding a press conference on Wednesday to announce that it has secured the rights to sell the iPhone not just in Germany, but in Austria, the Netherlands, Hungary and Croatia as well. The terms of this deal are said to be less onerous and more in line with the 10% revenue sharing model mentioned in earlier reports. Finally, TechCrunch France reports that Apple and Orange will wait until next Tuesday -- the day before the opening of the big Apple Expo in Paris -- to announce the terms of their deal (contradicting The Observer, which had the Orange press conference set for Thursday). According to TechCrunch France, which ran a blurry photo of a French-language iPhone screen, the device will be available in France on Nov. 29 and sell for 300 euros ($416) without 3G service or an unlimited data plan. (See here for the English-language version.)

• on September 17, 2007
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Office Wars 3 - How Microsoft Got Its Office Monopoly

Daniel Eran DilgerOffice Wars 1 - Claris and the Origins of Apple’s iWork Office Wars 2 - Microsoft’s Outrageous Office ProfitsOffice Wars 3 - How Microsoft Got Its Office MonopolyMicrosoft’s Office monopoly gives the company more revenues and delivers nearly as much profit as its Windows software. How did it gain such a powerful position in productivity applications? The history of Office is rooted in decisions Apple made in the 80s with the Lisa and Macintosh, and also has an interesting correlation to Apple’s iPhone strategy today.The Origins of Office.While Microsoft has overwhelming power in desktop productivity applications today, it entered the market late. In the early 80s, Microsoft principally sold language software and struggled to license copies of AT&T’s Unix under the name Xenix. In 1981, Microsoft teamed up with IBM to license a copycat version of CP/M as the DOS for IBM’s new PC. Microsoft didn’t really get started in applications until Steve Jobs approached the company that same year with a proposal to develop for Apple’s new Macintosh.Entrusted with prototype Mac hardware and inside access to Apple’s development tools, Microsoft made an agreement with Apple in 1981 not to ship any mouse-based products of its own until a year after Apple introduced the Mac. In exchange, Apple promised to give Microsoft a rare opportunity to enter the competitive desktop applications market using its entirely new Mac platform as a launching pad.[SCO, Linux, and Microsoft in the History of OS: 1970s][SCO, Linux, and Microsoft in the History of OS: 1980s]Software Sells Systems!Prior to the Mac, Apple had released the Lisa as its first graphical desktop computer. Since developing new graphical apps for the Lisa was very different and required special training, Apple delivered its own complete productivity suite for the Lisa. It planned to open up the Lisa platform to third party development at some point after the initial launch, but the immediate focus had been to deliver a unique set of applications to demonstrate the power of Lisa’s new graphical interface.Recalling the software focus of the Lisa development team, reader Jim Hoyt emailed me several months ago in response to “Why Apple Bounced Back,�? an article crediting Apple’s recent internal software development efforts with a large role in the company’s turnaround over the last decade. Hoyt wrote, “In 1979, John Couch, the soon-to-be head of the Lisa project, was in charge of all software at Apple Computer. He commissioned this poster: Software Sells Systems.�? I’ve been meaning to publish the otherwise long since lost to history poster, so here it is, belatedly. Thanks Jim![Why Apple Bounced Back]Apple Delivers Lisa Suite Seven Years Ahead of Microsoft Office.The poster’s premise was obvious: the Lisa wasn’t going to sell itself; it needed practical software applications to usher in the future of the graphical desktop. Apple developed an entire suite of seven productivity applications that shipped with the Lisa system in 1983, including word processing, spreadsheet, database, drawing, graphing, project management, and terminal emulation programs. It was seven years later before Microsoft would first package its Word, Excel, and PowerPoint applications together as Office 1.0 in 1990. In his February 1983 review of the Lisa for Byte magazine, Gregg Williams concluded: “As you can tell, I am very impressed with the Lisa. I also admire Apple for deciding to make the system without being unduly influenced by cost or marketing constraints. The Lisa couldn’t have been developed without such a deep commitment, and no other company I can think of could afford such a project or would be interested in doing it this way (the Lisa project reportedly cost over $50 million and used more than 200 person-years of effort!). In terms of the actual, as opposed to symbolic, effect it will have on both the microcomputer and the larger-computer market, the Lisa system is the most important development in computers in the last five years, easily outplacing IBM’s introduction of the Personal Computer in August, 1981.�?A year later, Lisa ended up being replaced by the much less expensive Macintosh, which delivered much of the Lisa’s functionality at a quarter of the price. However, the Mac did not include the Lisa’s expensive megabyte of RAM, its hard drive, or its productivity application suite. The Mac only shipped with a word processor and painting tools.Why Apple didn’t port its Lisa applications to the Macintosh is a confounding riddle, because it had more than a half decade of opportunity to do so. The main reason for this was a paranoid fear of alienating outside developers, along with jitters related to IBM’s rapid poaching of the desktop computing world after the arrival of its PC in 1981.[“The Lisa Computer System�? Reprinted from Byte, issue 2/1983] [The Lisa, Apple's First GUI-Based Computer System - VAW][How Apple Keyboards Lost a Logo and Windows PCs Gained One]Apple’s Lisa vs the Third Party Mac Platform: 1980 - 1984.Competition inside Apple between the Lisa development group and the Macintosh team led to a different software strategy for the Mac. Since the smaller Mac group didn’t have the resources to develop a full suite of applications in advance of its launch, it planned to leverage third party development in the same way as the Apple II had.Sales of Apple II computers had exploded in 1979 with the release of Dan Bricklin’s VisiCalc spreadsheet software. That success was a large reason why IBM decided to get involved in the microcomputer business with the PC in the first place. It wasn’t until 1984 that Apple began making lots of money selling AppleWorks, its word processing, spreadsheet, and database package for the Apple II. It continued to sell the software with only limited updates well into the early 90s.Apple management failed to see the potential for delivering its own suite of Mac applications as it had on the Lisa, and as it very profitably would later do for the Apple II. Instead, it became increasingly enamored with the idea of partnering with third party software developers and delegating away the work--and the profits--of creating its own Mac software. Motivated by fears of inhibiting a third party software industry like the one that had grown up around the IBM PC, Apple intentionally stifled its own internal software development efforts and later spun them off into the Siberian gulag of Claris. That move would prove to be a devastatingly expensive mistake that would nearly destroy Apple over the next decade.Incidentally, three of the most important products Apple would release during that decade of decline were software products: the profitable AppleWorks for the Apple II in 1984.the free 1987 HyperCard for the Mac.the free 1991 QuickTime for the Mac.[HyperCard: Apple and the Origins of the Web][1990-1995: Planting Software Seeds][QuickTime: The Secret Weapon Inside iTunes]A Fearsome Future VisiOn for the PC: 1981 - 1983.Another contributing reason for Apple’s rush to embrace third party developers on the Macintosh may have been related to the fear of VisiCorp’s new mouse-driven VisiOn graphical desktop environment. VisiOn originally appeared on the Apple III in November of 1981, but the complete commercial failure of that new machine after the delivery of IBM’s PC prompted VisiCorp to announce moving its support to the PC in 1982, with a promised release target of mid-1983. Apple was still scrambling to release the Lisa and the Mac, both of which had slipped repeatedly.While clumsy, slow, and expensive--the base VisiOn software and a mouse cost $790, each application cost between $250 and $400, and it required a $5000 hard drive upgrade on top of a $2000 PC--VisiOn was backed by the legendary VisiCorp, the company that had helped launch the Apple II to fame with VisiCalc. VisiOn also tapped into IBM’s “up is down�? PC, which despite its high price and low level of performance and innovation, had cut deeply into Apple’s business expansion plans, almost entirely due to IBM’s reputation and its monopoly position in business computing. After witnessing its first big failure with the Apple III, and then seeing a tepid response to the $9,995 Lisa in 1983, Apple was no doubt very concerned about IBM’s PC being converted into an ugly frankenstein Mac knockoff with that $7,500 VisiOn upgrade bolted on, cheered on by a press giddy at the prospect of being bamboozled by IBM’s overpriced and under delivering PC.The only way to compete with the threat of such a graphical system for the PC would be to deliver the new Macintosh as quickly as possible at a much lower cost with lots of applications from a variety of third party developers. Fortunately for Apple, VisiOn also slipped several months and wasn't delivered until the end of 1983. Right up until it completely fizzled, the press hailed VisiOn as a promising competitor to Apple’s Lisa and the forthcoming Macintosh.By 1983, VisiCorp had fallen apart; its star development manager Mitch Kapor had left to found Lotus Development. Kapor’s new spreadsheet product, Lotus 1-2-3 for the DOS PC, destroyed the remains of VisiCorp and its VisiOn.[VisiCorp Visi On - Toasty Tech][1980-1985: 8-bit Platforms]Frying Pan to the Fire: Apple Runs to the Arms of Microsoft: 1981.Finding developers willing to commit to investing in Apple’s next new platform was difficult after the failure of the Apple III and the wildly successful launch of the PC. Apple later found that its developer relations would suffer at the release of the “no other software needed�? Lisa. For the Mac, Apple decided to copy the PC model by directing the majority of its efforts into courting third party developers and downplaying its own software releases, which were only intended to serve as basic placeholders. Even so, many PC developers planned to take a ‘wait and see’ approach to supporting the Macintosh.Hoping to prime an early and explosive business success for the Macintosh in the same way VisiCalc had launched sales of the Apple II, Steve Jobs made plans with Microsoft to deliver a graphical Mac interface for its struggling Multiplan--a VisiCalc spreadsheet clone--and a new Chart application.Microsoft had also secretly begun another Mac app initially called MultiTool Word, based on the Bravo word processor developed by Xerox PARC’s Charles Simonyi and Richard Brodie; Microsoft hired both in 1981. The company didn’t tell Apple about its new word processor project because the Mac team had already started developing a word processor for the Mac called MacWrite.[A Rich Neighbor Named Xerox - Folklore.org][An Office User Interface Blog - Microsoft’s Jensen Harris]Apple’s Problematic Partnership with Microsoft: 1981 - 1985Next to IBM, Apple was among the first companies to realize that getting into a business partnership with Microsoft was a really bad idea. Throughout 1983, Microsoft employees began intense discussions with Apple about how the Mac system software worked internally, involving issues unrelated to desktop application development. The reasons for this became obvious when Microsoft made a surprise pre-announcement at the Comdex trade show in November 1983 of a clone of Apple’s Mac environment for the PC called Windows, along with the release of a text-based Word for DOS using a mouse. Apple had previously worried about VisiCalc’s independent VisiOn appearing for the PC, but now its own partner had taken its internally developed graphical desktop work to deliver a competing product on IBM’s platform. Microsoft had discovered a loophole that allowed it to ignore its exclusive agreement with Apple because the contract had tied the year-long waiting period to the Mac’s planned ship date in 1982; that contract date wasn’t updated as the project slipped into 1984.It turned out that Word for DOS wasn’t very popular, since DOS PC users didn’t see much benefit from only using a mouse with a single application. It also turned out that Microsoft couldn’t deliver on its promise to ship Windows 1.0 by early 1984; it wasn’t actually available until 1985, and even then was a complete joke of a product and fully unusable. However, the problems Apple would suffer for trusting Microsoft were only just getting started. Windows 1.0 wasn’t much to look at, but it did offer an advancement beyond the neanderthal text interface of Word for DOS. Apple also had reason to worry when it found Microsoft was directly collaborating with IBM in 1985 to deliver a new DOS replacement called OS/2. [1990-1995: The Race to Deliver The Next New Platform][Mac Office, $150 Million, and the Story Nobody Covered]Apple Grows Dependent upon Third Party Software: 1985 - 1990.Apple’s partnership with Microsoft continued to worsen. Microsoft finally shipped its spreadsheet for the Mac in 1985, but threatened to also release it for the PC as well, prompting Apple CEO John Sculley to sign away rights to a variety of Mac system software details to Microsoft in 1985 in exchange for exclusive Mac development of the graphical Multiplan for two years. Microsoft’s Multiplan and Chart applications for the Macintosh were among the strongest software features Apple touted in its 1984 advertising. (Click to view full size).A very young Bill Gates appeared next to Mitch Kapor of Lotus Development in Apple’s Mac ads to observe, “To create a new standard takes somethings that’s not just a little bit different. It takes something that captures people's imaginations. Macintosh meets that standard.�? Were he not trying to sell Windows Mobile today, he might say the same of the iPhone!Sculley had been arrogantly dismissive of Bill Gates’ July 1985 suggestion that Apple work quickly to broadly license its Mac technology to Northern Telecom, Motorola, and AT&T. Instead, Apple sought to retain control of the unique Mac desktop as a way to sell its hardware.At the same time, Apple grew increasingly reliant upon Microsoft to deliver updates to its applications for the Mac, and worried about threatening any of its third party Mac developers with its own internal application software efforts.However, in 1984 Apple had released AppleWorks for the Apple II. That program rapidly became the top selling software title of any computer platform, despite Apple’s minimal efforts to market it. It was nearly an embarrassment for Apple, which wanted to push the graphical new Macintosh, not a text-based 8-bit program. By 1987, Apple had spun off its own apps--including AppleWorks, MacWrite, MacDraw, and MacPaint--into the Claris subsidiary. Claris went on to profitably develop and acquire a suite of Mac productivity apps, but operated at an arms’ length distance from Apple. By 1990, Sculley realized the vast profit potential in application software. Apple had two solid platforms: the Apple II and the Mac. The company’s minimal efforts to market any software for them was clearly a huge mistake. Sculley subsequently decided to retain Claris as part of Apple rather than spinning it off, but that late decision shattered the subsidiary because its employees and managers had been given the expectation that a Claris IPO would make them rich. Many left in disgust.[Office Wars 1 - Claris and the Origins of Apple’s iWork]Microsoft Becomes an Applications Company: 1985 - 1989.At the same time, Microsoft’s graphical Multiplan for the Mac--which ended up being combined with the Chart app and renamed as Excel in 1985--became a huge seller for Microsoft. In contrast, the textual DOS version--which retained the Multiplan name--couldn’t compete with the top selling Lotus 1-2-3 on the PC side.Two years later in 1987, Microsoft’s deal with Sculley expired and the company released Excel 2.0 for the PC, along with Windows 2.0, which copied more of the Mac desktop, including the basic ability to display overlapping windows. No OEMs shipped Windows 2.0 on their PCs, but anyone buying the new Excel got a copy of Windows and a taste of the graphical Mac environment, albeit with Microsoft’s garish colors and its horrific MDI-style interface.Apple Sues to Stop Graphical Copycats, But Only On the PC: 1985 - 1988.While a number of companies delivered graphical environments in the pattern of VisiOn for various computer systems of the time, Apple was only threatened by those that promised to deliver the Mac look on the PC.For example, Apple ignored Berkeley Systems’ mouse-based, windowing GEOS environment, offered initially for the Commodore 64 and later Apple’s own Apple II systems.However, when CP/M maker Digital Research introduced its GEM/1 for the DOS PC, Apple sued and won an injunction that forced the company to remove certain features Apple had originally developed for the Mac, the most obvious of which was its use of graphics regions to draw sophisticated overlapping windows. At the same time, GEM/1 was also being sold for the 1985 Atari ST, but Apple completely ignored that product, enabling Atari to deliver a system so similar to the Mac it was commonly called the Jackintosh, after Atari CEO Jack Trammell. Apple also ignored overlapping windows in the 1985 Commodore Amiga, and a similar graphical desktop in the 1987 RISC OS developed by Acorn Computers. Apple was certainly aware of the British Acorn’s RISC OS, as the two companies had partnered to form ARM in order to develop a new generation of RISC based processors powering Acorn’s RISC PC and later, the Newton. Those same ARM processors now power iPods, the iPhone, and the vast majority of all mobile devices. [Origins: Why the iPhone is ARM, and isn't Symbian]However, Apple went ballistic upon the release of Microsoft’s Windows 2.0 in 1987. One reason was that Microsoft was pointedly using the product as a way to move its Mac applications to IBM’s PC, a move Apple correctly feared would quickly erode the unique value of the Macintosh. Additionally, Microsoft was also describing Windows as the basis of a new interface for IBM’s promised OS/2. Apple was livid that the trusted partner it had launched into the applications business would immediately sell it out and migrate those same applications to directly benefit its main hardware competitor. Despite the fairly insignificant sales of Windows 2.0, Sculley’s Apple sued Microsoft in 1988 over the use of Mac software details it had taken from Apple in its 1985 agreement. It also sued HP over a Windows 2.0 add on pack called NewWave, which supplied additional Mac-like features to the PC. Meanwhile, sales of Excel on the PC gradually began to grow and Microsoft worked increasingly hard to replace its Mac partner and then destroy it, using Windows as a tool to port its Mac applications to the PC instead. [Apple's Billion Dollar Patent Bluster: Patent vs. Copyright]Apple Loses Jobs, Opportunities: 1986 - 1988.In 1986--as Apple’s panic over Microsoft moving its Mac apps to the IBM PC was just getting started--Steve Jobs’ plans to rapidly move the Macintosh into the business and server arena were getting shot down by the more conservative minded Sculley. Apple’s board feared that increased investment in the Macintosh might spread the company too thin.[Steve Jobs and 20 Years of Apple Servers]Jobs subsequently left Apple in frustration to form NeXT, Inc, and develop his own ideas for business oriented workstations. Sculley replaced him with Jean Luis Gassée, who shared Sculley’s vision for dabbling in impractical technology ventures like the Newton and keeping Mac models configured for high end markets.Apple continued to make outstanding profits from increasing sales of the Mac and continued sales of the Apple II, but the company had made a grave mistake in ignoring and avoiding the software business. Even worse, it was now dependent upon a rival company to maintain key software titles for the Mac.Apple was also losing key engineering talent to Jobs’ NeXT, which by 1988 was delivering the first release of what Apple itself should have been working on: its next generation of hardware and software. [Newton Lessons for Apple's New Platform][Why OS X is on the iPhone, but not the PC: The History of NeXT]Sculley’s Apple Bungles Office Applications.While Sculley’s Apple fought Microsoft’s Windows in the courts, it did little to effectively compete in the marketplace, either with the Mac as a platform or in the applications arena to take on what would become the Microsoft Office suite in 1990. To deliver Office, Microsoft simply paired Word and Excel with PowerPoint, a Mac presentation application Microsoft acquired in 1987. Had Apple simply ported its Lisa applications to the Mac, it would have had a head start of several years to develop and refine its own applications suite, and could have maintained them as unique to the Mac without giving away its crown jewels to Microsoft in 1985. After ten years of trying, even Microsoft could eventually deliver a good enough copy of the Mac with Windows 95 in late 1995. After that, Microsoft pulled the plug on Office development for the Mac and didn’t release another update until 1998.[Office Wars 1 - Claris and the Origins of Apple’s iWork]Apple’s Squandered Opportunity in Software Sales.The bizarre thing was that Apple was making money selling AppleWorks on autopilot, and continued to do so from 1984 into the early 1990s. Additionally, the new ClarisWorks for the Mac easily captured the top spot in Mac software sales from Microsoft’s Works within its debut year in 1991. Even so, Apple did little to capitalize upon the discovery that software would indeed sell systems, just as Couch had foreseen back in 1979. Apple had a printing press for creating money, but simply left it idling while Microsoft delivered low innovation software titles and raked in millions of dollars in Mac software revenues. Sculley’s Apple essentially sat back and granted Microsoft full opportunity to clean out its entire business model without a fight, hoping that the law would rush in to correct the inequities at some point in the near future. Instead, the court deliberated for a tech eternity until 1994, and then threw out Sculley’s “look and feel�? lawsuit, largely on the basis that Sculley had earlier granted Microsoft limited rights to Mac ideas back in 1985 in his desperate bid to keep Microsoft as a Mac developer. The bitter irony was that between 1985 and 1995, Microsoft needed the Mac at least as much as Apple needed Microsoft. Even in 1997, Steve Jobs could get Microsoft to agree to a half decade of continued development of Office for the Mac by simply adding Internet Explorer to the Mac desktop. Jobs turned down the hardball demand that Apple kill QuickTime, and even got a public relations coup out of the deal by having Microsoft announce a $150 million investment in Apple.Sculley’s penny wise, pound foolish conservative greed destroyed Apple and directly transferred the vast potential wealth of value Apple had originated at great expense for its 1983 Lisa graphical office suite to Microsoft, which subsequently ran with it and deserted the company. [Mac Office, $150 Million, and the Story Nobody Covered][Apple’s NeXT Server Offensive on Microsoft]Microsoft Betrays IBM and Uses Office Against OS/2.Apple wasn’t the only partner Microsoft exploited, turned on, and then tried to drive out of business. The earliest and most obvious example was IBM, which had launched Microsoft into significance as a reseller of DOS. Microsoft betrayed IBM in the development of OS/2, first by pulling out of the operating system partnership, then by canceling Office for OS/2 after shipping an initial version for it in 1992. IBM later bought up Lotus and worked to compete against Microsoft’s growing influence with Office. Microsoft responded by using its new monopoly positions to punish IBM in various moves documented in the Microsoft monopoly trial. That story follows in Office Wars 4. Using the Office Monopoly Against NeXT.Jobs carried lessons learned from watching the implosion of Apple under Sculley to NeXT. His initial goal for NeXT was to build a software platform. However, nobody was shipping hardware up to the task of running an advanced operating system, so NeXT began following the business model of Apple, selling new hardware with advanced software.While Jobs had found it challenging to find software partners for the Mac at Apple, the task was even more difficult at NeXT, which Apple had forced into the ultra high end of the workstation market using a non-compete agreement. NeXTSTEP pioneered advanced rapid development frameworks to make it easier for third parties to deliver software for the new system. When Jobs discovered that Lotus was working to deliver a new spreadsheet paradigm for OS/2, he gave the Lotus team a NeXT system and got involved in refining the software to show off the features of his new platform. In contrast, Microsoft used the productivity applications monopoly it had been handed by Apple to impede adoption of NeXT. When asked about writing software for NeXTSTEP, Microsoft’s Bill Gates famously fumed, “Develop for it? I'll piss on it.�? Gates also announced plans to immediately deliver his own advanced operating system with object oriented development frameworks called Cairo, which turned out to be a vaporware lie Microsoft repeated from 1991 until NeXT was acquired by Apple in 1997.[1990-1995: Microsoft's Yellow Road to Cairo]Microsoft’s Murderous Partnerships.Microsoft helped to ensure that neither NeXT nor OS/2 could acquire a broad enough computing platform to drive a self-sustaining software business. Apple was able to maintain a struggling niche platform on the Mac, but fears of stepping on third party developers’ toes actively prevented the company from actually building on that potential until the late 90s. Ironically, Microsoft did just that, by developing its solo PC platform with Windows and then using it to destroy third party developers it viewed as competitors. By tying its Windows and Office products together, Microsoft could strangle its own former partners--the top developers of MS-DOS applications--including WordPerfect, Lotus’ 1-2-3, database and developer products from Ashton-Tate and Borland, and really every major developer on the PC that in any way challenged Microsoft.Microsoft’s coldly calculated murder of every rival DOS application developer and later many of its Windows developers, from Novell to IBM and Sun to Netscape, is an oddly public fact treated as a taboo secret by Windows Enthusiasts, who avoid all mention of it as they talk about how Apple “can’t work with partners�? in the rich, supportive way Microsoft supposedly has. Any competition between Apple and third party developers--even with shareware programs--is paraded through the insufferable blogs of ZDNet and the pages of IDG’s InfoWorld/PCWorld/Computerworld and described as unconscionable conduct. This is from writers who all witnessed first hand Microsoft’s massacres of any and all “partners�? the company decided no longer suited its fancy. Have these wags all been brainwashed, or are they just lying for money? As a side note, the Office Wars and Microsoft’s monopoly position in applications provide interesting insight into how Apple is deploying its iPhone software strategy, which the next article will examine.What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast! Submit to Reddit or Slashdot, or consider making a small donation supporting this site. Thanks!

• RoughlyDrafted Magazine... on September 10, 2007
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Will Nokia Rescue Microsoft's Zune? Haha No.

Daniel Eran Dilger Windows enthusiast blogs are atwitter with the news that mobile giant Nokia is considering a partnership with Microsoft to install the Zune Marketplace software on its phones, a move they hope will pull Microsoft's MP3 player out of its doldrums and make it a contender that can rival the iPod. There's a few bricks missing from this load however. Make. Believe. The reports all hinge on a post made by Zune fansite Zunescene, which cited an anonymous, “well placed source within Microsoft” as the basis for its suggestion that Nokia was not just considering a partnership, but already working with the Zune team to get Microsoft's Zune-only music storefront working on its mobile phones. Neither Microsoft nor Nokia have officially made any comment on the idea, and the Zunescene site has never before presented any credible insider information from Microsoft employees. Cited comments from the source sounded suspiciously like a Magic 8 Ball. The development timeline? “It's too soon to say!” The main problem with this story is that Microsoft doesn't exactly keep secrets. The original Zune was unveiled many months before it was made available; the industry knew it was going to be a rewarmed Toshiba Gigabeat long before it hit the shelf. Details of the second model were also leaked out months in advance, as was its new software features, which were leaked so forcefully that there wasn't much left in the can once it actually appeared. The simple fact is that Microsoft and Apple have completely opposite strategies for launching their new products. Apple uses the media to build anticipation through secrecy, while Microsoft uses the press to blow out vapor to hide reality. Microsoft doesn't have secrets, it has optimistic roadmaps enshrouded in nebulous clouds of vapor. Apple is to Secrets as Microsoft is to Vapor. Apple characteristically refuses to provide any advance details on new products and then creates dramatic launch hype by pulling the curtain off products that exceed most observers' expectations. That's why Apple has earned a reputation as being cantankerous and antagonistic with rumor sites; Apple sues to stop advanced leaks because they destroy its ability to launch surprise attacks. When details leak, critics can feign being wholly unimpressed by what they knew to be in the pipeline, and simply reset their expectations to something well beyond unreasonable. In stark contrast, Microsoft typically floats vaporware concepts for new products months or years in advance of their actual launch. These often suggest capabilities that will not actually be delivered. It then allows and encourages its sprawling 'burbs of pundits to make giddy predictions about the low, low price and amazing features this new promised concept will bring to the market. Once the obscuring power of the vapor is completely exhausted, Microsoft typically rolls out an imitative, expensive, unfinished product that the pundits then have to make excuses for until it either suffocates the competition (as its new products often did in the 90s) or falls out of sight and into oblivion (as about half of its products did in the 90s, and as most do today). Microsoft's Cloud isn't Servers. For a list of examples of Microsoft's vapor-billowing train to oblivion, look no further than the last several years of CES announcements: 2000: Microsoft TV, WinCE smartphone 2001: Xbox, Ultimate TV, and Windows Powered, an umbrella term for various WinCE devices 2002: Mira Windows Powered Smart Displays and Freestyle (aka Windows XP Media Center PCs) 2003: Media Center PC, Tablet PC, SPOT watches; the “Video iPod” Media2Go is delayed until mid 2004 2004: Windows XP Media Center Edition 2004, and Portable Media Center devices announced the previous year 2005: Digital Entertainment Anywhere vapor 2006: Xbox 360, Windows Mobile-based Portable Media Center devices 2007: Windows Vista, Windows Home Server 2008: HD-DVD (scrubbed last minute), Surface, Zune, more Windows Home Server. CES: Fear and Loathing in Las Vegas Scratching the Surface of Microsoft's New Table PC Lessons from the Death of HD-DVD Origins of the Blu-ray vs HD-DVD War The Spectacular Failure of WinCE and Windows Mobile Searching for Success The only successful product that can be salvaged from Microsoft's consumer shipwreck of the last decade has been the Xbox line, which has cost Microsoft many billions every year, and is now approaching obsolescence and a sharp downturn in sales before it can even turn any profit. There's no evidence of secrets anywhere, just lots of vaporware concepts that either never made it into the real world (Mira), roam the earth as undead zombies (Windows Mobile, Windows Media Center, WHS, Vista), died after being exposed to realities the market (Microsoft TV, SPOT, HD-DVD), or linger on as incomplete vaporware ghosts (Surface). One can also make lists of Microsoft's abandoned software offerings and service plans, most of which were imitations of the competition. Microsoft pulled the plug on its Live Search Books and Live Search Academic programs (copycats of Google's Book Search) in May after scanning millions of works. And of course it did something similar after finding out it couldn't earn a quick return on its efforts to clone Apple's QuickTime with ActiveMovie, Surround Video, DirectShow, and then Active Authoring Format. Microsoft's Plot to Kill QuickTime Video Game Consoles 2007: Wii, PS3 and the Death of Microsoft’s Xbox 360 Behold: the Apple clone two years behind. The Apple-rumor report on Microsoft's supposed partnership with Nokia is ridiculous simply for the fact that if Microsoft had any sort of announcements that might possibly create any glimpse of good news for its stillborn Zune music player, it wouldn't be holding them back. Microsoft desperately needs some distractive vapor to obscure the fact that it has been trailing Apple by at least two years at every step of the game. Games: Microsoft advertised the concept of Zune gaming well over a year ago, and there's still nothing to show. Apple launched iPod games in 2006. It's now offering console games downloadable over the air from major developers on its mobile WiFi platform. If Microsoft released gaming today, it would already be more than two years behind. But it hasn't. Podcasting: Microsoft released its Zune podcast listings so late in the game it had to call them… podcasts. That term was invented in 2004 by publishing pioneers, and the technology was added to iTunes in 2005. Apple announced it had no trademark claim on the term in late 2006, and Microsoft launched its own podcast directory for the Zune in November 2007. Two years behind (and some change). Partnerships: Apple pioneered links with Nike, Starbucks, Audible, all the major music labels and movie studios, indie distributors, and hardware accessory makers, even including MP3 rival Creative. Microsoft has yet to forge any significant partnerships with the Zune. And who'd want to marry a cad who formerly beat up its PlaysForSure wives and left them for dead (including Creative)? That was just two years ago! WiFi Music Store: Back in March, Francois Ruault, directeur de la division grand public of Microsoft France, was unashamed in leaking to the press the story that Microsoft would release its third generation Zune player in Europe at the end of 2009, along with a WiFi music store like Apple's. That's two years behind, and frankly, WTF? Video: Apple's fourth generation iPod gained the ability to do video output in 2004, and the subsequent model could actually play back full motion video on screen. The original Zune, released a year later with a larger screen purportedly intended for watching video, lacked the ability play most standard video formats, requiring an ages-long transcoding process first. The following year, Microsoft's new flash based Zune was released without video output at all, driving Microsoft years back into the past compared to the video Nano that shipped at the same time. Touch: Microsoft's enthusiast minions tried to equate the $10,000 Surface bathtub of scanners and projectors with the consumer-priced, handheld iPhone last year, but Microsoft is only officially promising to copy some of the iPhone's software features in its Windows Mobile 7, also scheduled for the end of 2009. That's well beyond two years behind. Zune Sales Still In the Toilet Why Microsoft’s Zune is Still Failing From Vista to Zune: Why Microsoft Can’t Sell to Consumers Microsoft : vers un portail de contenus mobiles Zune But I Digress! Is it perchance possible that Microsoft could leverage Nokai's dominance of the international phone market to get its Zune Marketplace running in more places than Apple's WiFi iTunes Store, and subsequently pole vault its Zune failure and its iPhone-humbled Windows Mobile platform into a premier spot? Apart from being too tasty of a concept for Microsoft to keep under wraps, there's additional reason for laughing at the idea. The most obvious is that Nokia is a Microsoft competitor! Yes, sometimes companies do deals with their seeming arch-rivals. Apple and Microsoft have forged agreements and partnerships on Office, OOXML, and Exchange ActiveSync. Microsoft licensed Adobe's Flash for Windows Mobile, a direct competitor to its own (albeit unfinished) Silverlight. And Nokia is already joined at the hip with rival Sony Ericsson in the Symbian software partnership. However, each of those partnerships is an example of a give and take deal. Nokia is already trying to establish its own Ovi portal as a mobile music store. It needs Microsoft's Zune Marketplace as much as it needs another Symbian virus. Not only is the Zune Marketplace a sleepy, deserted mall with no customers and scant merchandise, but it has absolutely zero traction (or attraction) in Europe or other markets where Nokia sells its phones. The Zune is only sold in the US, where Nokia has minimal uptake. Adding the Zune Marketplace to its phones would do nothing for Nokia apart from making its own store look sidelined and associating the company with another megafailure brand. Nokia already has NGage for that. Further, Nokia's Symbian OS is a direct competitor to Microsoft's Windows Mobile, and there is no love lost between them. Nokia can only be irate over Sony Ericsson's jumping into bed with Windows Mobile in an attempt to deliver the XPERIA X1 as its heir to take on the iPhone. Nokia itself has also taken clear steps away from Symbian, but in the direction of Linux, not Microsoft. So why would Nokia be at all interested in promoting Microsoft's rival mobile operating system at its own expense, with nothing to show in return apart from some embarrassment? It isn't of course. There is however, another mobile platform that is interested in teaming up with Microsoft's Zune to advance the prospects of both. The next article will take a look at this white knight, and whether it's likely to actually offer any help. Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast (oh wait, I have to fix that first). It's also cool to submit my articles to Digg, Reddit, or Slashdot where more people will see them. Consider making a small donation supporting this site. Thanks!

• RoughlyDrafted Magazine on August 8, 2008
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Apple's iPhone Price Cut Unleashes Complaints

Daniel Eran DilgerWhile introducing the iPod Touch as a version of the iPhone lacking cellular mobile features, Bluetooth, and an integrated camera, Apple also set a new price on the 8 GB iPhone and discontinued the 4 GB model. That move angered some buyers, who felt the $200 price cut after just ten weeks on the market was too much, too soon. Jumping on Price Cuts.Along with the irritation of price conscious consumers, pundits known for delivering a negative spin on all things Apple also seized the opportunity to suggest that the iPhone's price cut was based on flagging sales. Among them was Scott Moritz of TheStreet, who earlier announced that Apple had “missed a 1 million unit sales target�? and that rivals were "rejoicing," failing to point out that analysts had really only set targets between 150,000 and 300,000 for the iPhone's opening weekend. John Gruber of the Daring Fireball declared Moritz "Jackass of the Week" yesterday for saying that the iPhone price cut “will add more evidence to the speculation�? that the iPhone "may not be selling as rapidly as some optimists had expected."Gruber noted that Steve Jobs publicly stated Apple was on track to sell a million iPhones in its first quarter, and that independent reports said that the iPhone had outsold every other smartphone on the market in July. He linked to a Reuters article citing iSuppli's report that Apple had grabbed 1.8% of the US mobile market, based on consumer surveys of two million US participants. [Daring Fireball][More on Scott Moritz and the Jim Cramer Misinformation Engine]Competitive Pricing.A number of readers asked why Apple would drop the iPhone's price so dramatically after just a little more than two months, and whether such price cuts really as unprecedented as some pundits suggest they are. In other competitive markets for consumer electronics, aggressive price drops are typical. Over the last two months, Sony dropped the price of the PlayStation 3 by $100, and Microsoft responded with a $50 price cut on the base price of the Xbox 360 and additional price cuts on its external HD-DVD player option.Neither Sony nor Microsoft make money selling game console hardware; both are competing on price to establish a large user base and expand their gaming platforms. Sony is also working to push its new Blu-ray HD disc format over Toshiba's HD-DVD, which is supported by Microsoft. [Origins of the Blu-ray vs HD-DVD War][Blu-ray vs HD-DVD in Next Generation Game Consoles]Why Cut the iPhone Price?However, Apple is making money on the iPhone. Why would it cut the iPhone's price while the phone is currently selling at the top of the smartphone charts? Jobs said the new price was intended to make the phone more attractive during its first holiday buying season. However, it's also facing new competition from Apple's own new iPod Touch.Priced at $299 for the 8 GB model and $399 for the 16 GB version, the iPod Touch delivers the iPhone's splashy, multitouch Coverflow iPod features and its “breakthrough Internet device�? functions via WiFi and the mobile Safari browser. It's nearest competitor is Nokia's N800 Internet Tablet, which costs $399, only provides a quarter of a GB of Flash RAM, and requires a stylus to use. The iPod Touch is also gunning to replace the hard drive based “iPod Classic.�? Apple could have left the iPhone priced $300 above the 8GB iPod Touch, but by dropping the price, it makes it very difficult iPod users tempted by the Touch to not simply spend the extra $100 to gain a phone, Bluetooth, and a camera. Since Apple's iPhone also earns the company a share of service revenues from AT&T, pushing as many iPod Touch users toward the iPhone as possible makes a lot of sense.For Those Who Can't iPhone.However, there are a large number of people who can't buy the iPhone. Some are tied to existing mobile contracts and can't or don’t want to move to AT&T. Among them are millions of iPod users overseas. Since Apple won't be able to get the iPhone set up with providers around the world within the next year, it makes sense to sell them the portions of the iPhone that it can market worldwide. That strategy is highlighted by the fact that the iPod Touch is already localized in a dozen and a half languages, including French, German, Japanese, Dutch, Italian, Spanish, Portuguese, Danish, Finnish, Norwegian, Swedish, Korean, Simplified Chinese, Traditional Chinese, Russian, and Polish. The US-bound iPhone lacks any localization or support for alternative language keyboards. That indicates Apple is aiming the iPod Touch at foreign markets. Apple has also de-emphasized its hard drive players, only leaving a physical disk inside the iPod Classic, at its previous price points. That aggressively targets iPod buyers toward the iPhone, while still allowing them a variety of different models and prices to choose from. In order to keep sales of iPhones from being eaten up by iPods, its price had to be highly motivating, and the iPod Touch had to be competitive as well.[Curious Stuff about the New iPods]Apple’s Worldwide, Preemptive Strike on High End Smartphones.Reader Neil Adamson points out that the iPod Touch will also help Apple cut into the high end market for smartphones in a preemptive strike. “People will be able to keep their existing mobile phone (with built in camera) and buy a Touch to add video and WiFi networking. Just go and buy a WiFi data plan and you have in effect a two component iPhone. So now there is less incentive to buy a new expensive Nokia smart phone in non iPhone countries.“Of course, this is also why the iPhone prices had to come down in the US, otherwise people would keep their Motorolas and opt for the iPod Touch. The other part of this is that the Apple iPhone user experience is about to go global via the iPod Touch. That means that Apple will have deployed that patented technology everywhere. It just became a whole lot more difficult for other companies to introduce iPhone clones into non iPhone markets.�?Adamson also noted, “Today Apple cut the price of its iPhone by $200.00 and apparently thousands of people feel betrayed. What a lot of nonsense. I would say that you should not spend $600.00 on anything, unless you can justify the expense. I stood in line on June 29, and I got my iPhone.
“For me it was money well spent, it is the best phone I have ever owned. I delayed upgrading my old phone for almost 2 years, just on the rumor that Apple would enter the phone market. I have not been disappointed.�?Is A Lower Price A Bad Deal?For iPhone buyers who already purchased the iPhone however, that price drop might seem severe. However, even at $600 the 8 GB iPhone was a better deal that other smartphones. Adding in the price of service, the iPhone cost less over two years than even phones that appeared to be priced at $99 like the nearly worthless Windows Mobile Motorola Q. The hardware cost of the iPhone is really insignificant compared to its service plan. While incendiary bloggers have latched onto Apple's iPhone price cut to parade out a handful of steaming mad consumers threatening to form a class action lawsuit to ameliorate their frustration with being stuck in a market economy, the reality is that Apple set a fair price on a premium product, and is now lowering the price further to broaden its appeal. iPhone customers who recently bought an iPhone have 14 days to return it, and many credit cards come with "price protection" programs to refund the difference, but the idea that products won't or shouldn't change in price--particularly at the intersection of the bleeding edge of high technology and fashion--is highly unreasonable.What that $200 price drop means for existing iPhone users is a bit less exclusivity but the potential for a much greater user base, resulting in more iPhone savvy websites and more interest from third party developers of hardware and software products. That will make existing iPhones more valuable, not less. Any frustration at the lower price pales in comparison to an alternative scenario where Apple could have announced a new iPhone model that made the existing ones appear obsolete.[Phony Rage About iPhone Price and Profits]Unprecedented Discounting?Last month, Apple introduced new iMacs that were priced $200 less than the models they replaced. However, when compared to past models with equally configured features, the price drop was closer to $600. Nobody appealed to violence or the courts to right this perceived “wrong.�?One reader posting to a heavy breathing, sensationalist blog report on Apple's iPhone price cut noted, “I bought a Sony Ericsson P800 for $1050 when it first came out (same day). Two months later the price was around $800, six-seven months after that around $600 - same difference as the iPhone.“Apple did not lower the price because they felt charitable - they lowered the price because they want more people to bite and go get the phone. The early adopters bought it, most of the consuming public didn't because of the price - drop the price, get more people - simple economics. Early adopters know what they are in for - the time span does not matter. It can be 1, 2, 6, 12 months, price will drop. Who is to say that after x time it's fair for a price to go down?�?  Similar price drops are common in the disposable world of mobile phones, where even the newest technology is commonly worthless within two years. The Motorola RAZR, Palm Treo, and even the simple LG Chocolate feature phone all debuted at $500 or more, only to rapidly drop below $100, often within just a year. Bills of Materials and Manufacturing Costs.Part of that rapid price drop comes from the continual discounting of component parts and the economies of scale that drive production costs down as manufacturing ramps up. For most mobile phones, hardware prices are obscured behind the illusion of subsidized pricing. Apple's retail prices aren't. Further, Apple's customers watch prices and set expectations based on past pricing; however, the iPhone is a very different product compared to the company's existing portfolio of computers and iPods, which tend to follow regular and predictable cycles of upgrades and price changes.Of course, whenever Apple is involved, threats of class action lawsuits are bound to occur. Since the early adopters who shelled out the money to buy an iPhone reported being very happy with the product, it's hard to see how a minority can now behave as if they are somehow owed a refund for the "real price" of the iPhone. [Kevin Chang, iSuppli and The iPhone Nano Myth]What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast! Submit to Reddit or Slashdot, or consider making a small donation supporting this site. Thanks!

• RoughlyDrafted Magazine... on September 6, 2007
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Microsoft's Zune, Vista, and Windows Mobile 7 Strategy vs the iPhone

Daniel Eran Dilger What secret partner has Microsoft discovered to bail water from the deck of Zune and its Zune Marketplace music store in a last ditch attempt to take on Apple's iTunes, the iPod, and iPhone? Microsoft's own Windows Mobile, of course, with some help from Windows Vista! Who Else Will Help Zune? Certainly not Nokia, as one Zune fansite tried to suggest last week. Nokia has nothing to gain by promoting the Zune. A more credible sounding rumor, as long as we're inventing stuff, would be to instead suggest that it could be Sony Ericsson that is interested in putting the Zune software on its new phones. At least Sony has already demonstrated its complete failure at selling music on its own, and actually has a Windows Mobile phone in the works. The simpler reality is that Sony Ericsson may have no choice in the matter. Microsoft is clearly out to wed the Zune with Windows Mobile in a effort to get the two failures to prop each other up in its “I'm not dead yet!” fight against the iPhone. Microsoft is likely to make inclusion of its Zune Marketplace a mandatory feature that its Windows Mobile partners will have to swallow, just as it forced its PC licensees to bundle its Internet Explorer browser and later Windows Media Player, while prohibiting them from seeking their own bundling deals with other companies. Microsoft took quick steps to block Compaq's licensing of QuickTime, for example. Those deals were bad for HP, Compaq, Dell, and the other PC makers, bad for competition within the tech industry, and subsequently bad for consumers. However, they did enable Microsoft to use its powerful Windows monopoly position to push proprietary standards and or anti-interoperable technologies designed to expand its monopolized control, while making big money selling Windows in a market that lacked any alternatives. Will Nokia Rescue Microsoft’s Zune? Haha No. Apple in the Web Browser Wars: Netscape vs Internet Explorer Microsoft's Plot to Kill QuickTime A Lot Has Changed. This time around however, all Microsoft has to leverage is Windows Mobile, a struggling platform with little respect in the industry, now in a distant third place. Further, the technology Microsoft is trying to push is essentially its Windows Media DRM, which has already been swept up and trashed by Apple's iTunes, QuickTime, and the iPod. The dismal fate of Windows Media was sealed with the failure of PlaysForSure. The Zune's new, albeit incompatible, reincarnation of Windows Media DRM never stood any chance of making any headway. However, the most problematic part of Microsoft's strategy of pushing its Zune Marketplace store on its Windows Mobile partners is that music stores don't make money. Apple's iTunes Store is the biggest online music store on Earth, and does tremendous volumes of sales. Still, Apple reports minimal profits from the store. It recently warned its investors that it's now selling so much through iTunes that the low profit, high volume venture may have a negative impact on the company's overall profit margins. As problems go, that's certainly a nice one to have. Apple is not at all worried about turning a big profit with iTunes because it runs the store exclusively with the intent of ensuring new content for the iPod, iPhone, and Mac. That in turn sells its hardware. However, Microsoft doesn't have hardware sales to nurture. It has barely sold two million Zune units, many at fire sale prices (compared to 150 million iPods, 93 million of which have been sold since the Zune's release). It now faces impossible odds in tilting against the momentum of iTunes' rapidly spinning windmills, with no possible upside in terms of eventual music store profitability. There's simply no way that any amount of investment in the Zune Marketplace could deliver profits, because Microsoft is competing against Apple's non-profit motivation behind iTunes. Further, Windows Mobile is similarly a big loser with no potential because Microsoft has little ability to profitably license its mobile software. It's competition is the iPhone OS, which Apple develops for free to sell iPhone ha