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Summary:

Allow me to set the scene. It’s January 2007. The iPhone has just been announced and the tech world is going crazy. CNBC interviews Microsoft CEO Steve Ballmer. CNBC: “Let me ask you about the iPhone [...] What was your first reaction when you saw that?” […]

Steve BallmerAllow me to set the scene. It’s January 2007. The iPhone has just been announced and the tech world is going crazy. CNBC interviews Microsoft CEO Steve Ballmer.

CNBC: “Let me ask you about the iPhone [...] What was your first reaction when you saw that?”

Ballmer (laughs): “Five hundred dollars?!! Fully subsidized?!! With a plan?!! I said if that isn’t the most expensive phone in the world… and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good email machine. Now, it may sell very well…”

And sell very well it did — the estimated total is now 37 million and counting. OK, so Ballmer was never going to clap his hands and rave about the iPhone, but while laughing dismissively might have irked Apple enthusiasts, it likely reassured Microsoft’s shareholders. Ballmer, after all, must answer to them.

Culture

In another interview, this time with USA Today in April 2007, Ballmer said, of becoming CEO of Microsoft:

“…the CEO in a lot of ways becomes the icon for many things in the business. The CEO establishes culture.”

This from the man who heaved himself, sweating and scarlet-faced, across a stage screaming with unbridled joy over Microsoft. Well, you can’t fault him for being passionate. Sadly, it’s a passion he doesn’t seem to want to celebrate or promote amongst Microsoft’s customers.

“USA Today: People get passionate when Apple comes out with something new[...]. Is that something that you’d want them to feel about Microsoft?

Ballmer: It’s sort of a funny question. Would I trade 96 percent of the market for 4 percent of the market? (Laughter.) [...] There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60 percent or 70 percent or 80 percent of them, than I would to have 2 percent or 3 percent, which is what Apple might get.”

Let me take off my Apple Hat for a moment and consider his answer more carefully.

“It’s sort of a funny question.” Steve, how is it a funny question? It’s a very simple question. Would you like your customers to be as passionate, loyal and fanatical about your products as Apple’s customer base is to its?

If I were a Microsoft shareholder, sure, I want to hear you reinforce the fact that 80 percent market share is more attractive than 3 percent. But I also want to hear you acknowledge that customer enthusiasm — particularly of the Apple Fanboy variety — is at least desirable. I want to know that you’re pushing the boundaries everywhere, not just in the corporate world. You don’t seem to mind whooping and skipping when you want to share your passion for Microsoft. So why is it a “funny” question to ask if you want to engender that same passion in your customers?

Furthermore, according to Gartner, this is how worldwide Smartphone Sales by Operating System looked, first in 2007, the same year Ballmer dismissed the iPhone, and then again 12 months later.

2007 Worldwide Smartphone Sales by Operating System

2008 Worldwide Smartphone Sales by Operating System

When a Bad Economy is a Good Thing

In March, at the McGraw-Hill Companies’ 2009 Media Summit, Ballmer said of a slight downturn in Apple sales:

“The economy is helpful. Paying an extra $500 for a computer in this environment — same piece of hardware — paying $500 more to get a logo on it? I think that’s a more challenging proposition for the average person than it used to be.”

Superficially, this sounds like common sense. I mean, a laptop is a laptop, right? Whether it’s wrapped in plastic or aluminum, you’re talking a chip (probably Intel), a few gigs of RAM, a keyboard and a screen. To the blissfully unaware, to the Lauren’s of this world…the difference is little more than a glowing fruit on the lid.

What Ballmer is really saying here is distasteful, not just in what it implies but also because he didn’t even try to make the point subtly. He’s suggesting Apple’s sales dipped because customers are struggling financially, not due to any special marketing strategy or other efforts on Microsoft’s part. To hang a lantern on it and tacitly state “The economy is helpful” is crass and insensitive. I wonder how the marketing team in Redmond felt when they heard their boss say that?

The Numbers Don’t Lie

Fast forward to this week. Apple announced its latest quarterly earnings. In Apple’s own words, its “best non-holiday quarter ever.” So much for Ballmer’s ‘helpful’ recession. Also, the Wall Street Journal reported that despite accounting for less than 3 percent of the global smartphone market, Apple’s iPhone has taken 20 percent of that market’s operating profits. Predictions from Deutsche Bank for year’s end point to Apple and RIM sharing 5 percent of the smartphone market and taking almost 60 percent of its profit.

Ballmer’s assertion that it’s better to have massive market share suddenly deserves scrutiny. Apple and RIM don’t command 60 percent of the market (yet) but they’re soon going to command 60 percent of its profits.

The iTunes store continues to perform superbly (8 billion songs downloaded as of June 2009), while the App Store is a smash hit. Mac sales have remained strong despite the crippling economy Ballmer relies upon to keep the competition in check.

I’m Not Taking Shots

This article isn’t about taking an easy shot at Microsoft, or gloating about Apple’s recent successes. I know, so far it reads that way, and I won’t deny there’s a certain satisfaction to be had basking in Apple’s glow. I’ve brought you on this journey to make a serious point that’s more about leadership and vision than smartphones, laptops or market share. (But those facts are crucial to placing these final thoughts in the right context.)

At the Media Summit Ballmer was asked if he used any Apple products. “No, none. I don’t, my sons don’t, my wife doesn’t.”

Imagine you are a Microsoft shareholder with a vested financial interest in Microsoft’s success. Certainly you don’t want the CEO to promote the competition, but you do want him to demonstrate he’s in touch with the real world.

Surely the right answer should have been, “Yes, I have an iPod. I also have a Zune, of course, and a Zen. I have them all. It’s important to see how they work — see what choices our customers have. I want to experience first-hand where these products succeed, and where they fail. So, sure, I have an iPod. I have all the other music players, too!”

But, no. Instead we got Ballmer’s typical, speaks-before-he-thinks derision.

Ballmer said a CEO “establishes culture.” If Microsoft is looking to him for its creative and business leadership, no wonder Windows Mobile 7 is practically vaporware and the company’s next operating system is referred to by many not as an incredible new OS but instead as Vista “done right.”

Ballmer appears less relevant with each passing year. He’s not a man to respect or fear, despite chair-tossing antics. Rather, he’s becoming a sad and lonely figure, out of touch with the tech industry outside of Microsoft’s dusty old-boy network.

But why should it matter if Microsoft has crummy leadership? We don’t care, right? Good riddance to ‘em?

It matters because, if Microsoft does a lousy job it will ship lousy products. Apple will therefore face less vigorous competition. In any market, when competition is weak or lackluster, the dominant player becomes complacent. It’s hard to justify the R&D costs of constant, breathtaking innovation when the competition isn’t doing the same.

We need a creative, innovative Microsoft that today behaves with the same hunger for success it had in the 70′s. As long as we have that, we’ll have an Apple that stays one step ahead, delivering products Microsoft can only aspire to produce. We can’t get there with Ballmer in the driving seat. He’s out of his depth, and it doesn’t matter how much he sweats as he screams “Developers! Developers! Developers!”; he simply fails to inspire creativity or confidence — just as he fails to recognize opportunities in new/developing markets, such as mobile media or the rapidly-changing smartphone space.

We need a Microsoft as imaginative and exciting as Apple. If that could happen, just imagine what Apple would do to raise the bar ever-higher. I’ll leave you with one more excerpt from that 2007 USA Today interview.

“USA Today: You don’t find you’ve got a problem with people saying, “Sorry, but I really think you’re wrong here”?

Ballmer: That happens all the time. From 10 this morning until I came over here, I got more “Steve, that’s wrongs” than I got “Steve, that’s rights” today. It was two to one, “Steve, that’s wrongs.”

He’s just not getting it, is he? Maybe someone’s trying to tell him something…

  1. I predict he will be unemployed within three years.

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    1. I hope not. It is his solid guidance that has take Microsoft where it is today. I’d rather he stayed in place and continue to boldly lead as he has been doing than him being replaced with someone who has a clue.

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  2. Howie Isaacks Friday, July 24, 2009

    Ballmer is a stupid moron who looks like the monster on Young Frankenstein. Why does anyone even listen to him?

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  3. I only have Apple products at home and only buy Apple products, but still make a living in a Microsoft world.

    I wish I could praise this article as objective and interesting, but I can’t. It looks like it’s been written by a “fanboy” that needs to twist and turn what’s being said to make his point. I didn’t like it at all.

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    1. Well, that’s what opinion pieces are all about! We can’t always just do reviews and straight news, sometimes we have to stir the pot with personal opinion and editorial :-)

      BUT, even though you didn’t like it at all, it prompted you to comment, and that’s got us talking. So something good came of it in the end, I think!

      Thanks for the feedback, much appreciated :-)

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    2. Howie Isaacks Friday, July 24, 2009

      This is an Apple fan site!!! What do you expect?

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    3. I think that there is a valid place for fanboys in a Mac world, no pun intended. I think they keep the business fun. Further that’s what separates and magnifies the Apple user-base compared to that of Microsoft. When I think Microsoft, that name doesn’t evoke, “fun” and equally practical for day-to-day life. But when I think of the Apple brand I do think fun, practical, and dare I add economical (when product features and offerings from Apple are closely taken into consideration in the long term).

      Just sayin’.

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  4. Hey Liam,

    You write well, but unfortunately with little deep thought. The irony of how wrong you are in this post amuses me. Yes, on the surface you can mock Ballmer, and he has made himself an easy target at times. But you are wrong so many times in the post, I don’t even know where to begin…

    Guess I’ll just go from the top and slog through it.

    First, about building passion for the Microsoft brand. ONE brand strategy is to build a cult, as Apple has done. Would you recommend that Wal-Mart follow that strategy? I sure wouldn’t – they have executed brilliantly as the low cost leader, another great brand strategy. But you imply that Apple’s strategy is the defacto strategy that all businesses should follow. And Ballmer can’t say something like “yeah, it would be great BUT” because that “but” is the kicker, and he couldn’t get away from tipping his hand or looking like a moron.

    Second, saying the economy is helpful is not distasteful at all. Did you ever think to imagine that the marketing department also is aware of the market trends and has taken action? Oh wait, you linked the laptop hunter ads, so you do! No, this was not a sly dig on the MSFT marketing team, it was a high five that the winds of the economy turned in Microsoft’s favor and they are making the best of it. In fact, as you no doubt know, Apple’s hopping mad over the success of those ads and tried some legal shenanigans to step the tide! Also, in case you hadn’t noticed, MSFT was doing just fine before the recession, so Ballmer isn’t “relying” on the economy. He’s just saying it helps his firm’s market strategy.

    Third – I can’t believe how incredibly popular it is among Apple fanboys to harp on Windows 7 as evolutionary, instead of revolutionary. HAVEN’T YOU BEEN BUYING EVOLUTIONARY UPGRADES SINCE OSX HIT THE MARKET? And the best part is that Snow freaking Leopard is chock full of “under the hood” improvements! It has less feature upgrades than Win7, yet you Apple fanboys continue to use this tired line of argument.

    Finally (although I could go another few points if I had the time), the fact that Ballmer hears 2 “you’re wrongs” for every “you’re right” could also mean that he fosters and encourages an open dialogue with his C suite and employees. I know how hard it is to say to my boss “you’re wrong”, so I would suggest that if he has good dialogue, that’s far superior to him being “right” all the time, as, perhaps, Steve Jobs is…

    Try to think a little more before you drink that Apple Koolaid, mmmk?

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    1. Hi Sam, thanks for your feedback.

      I don’t *think* my article implied/inferred there is only one great defacto business strategy MS should follow. If it did that, it wasn’t my intention. I was pointing out Ballmer seems to disregard or dismiss the value of customer enthusiasm/loyalty when he is asked about it. Perhaps I didn’t make it clear, sorry.

      As for the economy – I happen to think it *is* distasteful acknowledging people’s financial distress as being ‘helpful’ to ones own business. I guess it’s a matter of personal opinion though, and ours differ.

      I didn’t make any broad claims about Windows 7 vs Snow Leopard since that wasn’t the focus of the article, I only made reference to the very openly-shared opinions of the online tech community and tech press. But, since you raised the matter, I’ll make my opinion as clear as possible; neither Snow Leopard NOR Windows 7 happen to be revolutionary in my opinion. Both are evolutionary upgrades/refinements to previous competant and enjoyable operating systems. That Apple charges a little for their upgrade and Microsoft charges a lot for theirs is, perhaps, worthy of a different article. But definitely worth thought.

      I enjoyed reading your comment, thanks for your input and for reading. Even if you didn’t enjoy it or agree, it got us talking, and that’s always a good thing in my book. :-)

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    2. James Bailey Friday, July 24, 2009

      @Liam

      Again, if Balmer’s comments about the economy was a “high 5″ his marketing team, that shows a lack of vision. The laptop hunters ads are not working very well. Apple had a extremely impressive quarter and Microsoft had one of the worst quarters in their history. Where is the laptop hunters upside? Are you saying without that ad campaign, Microsoft would have done even worse?

      As for Apple asking for Microsoft to update the ads to reflect current pricing, that seems just to me. If Microsoft wants to take credit for forcing Apple to lower prices, that would be a reasonable conclusion–probably wrong but at least arguable. But Microsoft seems to want to argue that Apple is losing customers or profits or something because of those ads. That argument is going to be very hard to justify.

      Ultimately what the laptop hunters ads are doing is telling customers that Apple doesn’t sell a laptop for under $1000. So if you are only going to buy a laptop for $700 or so, then Apple can’t be on your list of choices. This is correct but from Apple’s perspective, irrelevant since they are not planning on making an under $1000 laptop anyway.

      So how do these ads negatively affect Apple? Instead they just reinforce the idea that Windows computers are cheap junk for those who can’t afford something better–a Mac. And given the current financial results of both companies, it appears like that is exactly what is happening.

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    3. James Bailey Friday, July 24, 2009

      That last comment should have been directed @Sam, doh, no edit button.

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  5. At this moment, Wall Street values Apple at $142 billion and MS at $207 billion. How is it that a company with only 4% of the market is worth more than 2/3 of the company with 85%+ of the market? Balmer should hang his head in shame at the horrible job he’s doing. The board of directors should demand his ouster. About the only person more in error than Balmer is Rob “Never Right” Enderle.

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    1. Howie Isaacks Friday, July 24, 2009

      Don’t forget that moron John C. Dvorak. He’s the one who said that Apple should ditch the iPhone before it was even released. He also predicted that the Apple stores would be a dismal failure. These “analysts” are morons just like Ballmer.

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    2. unfortunately Howie, it seems that even Dvorak is calling Microsoft on just these points. Hell may not have frozen over but I think there is some snow falling:

      See http://brainstormtech.blogs.fortune.cnn.com/2009/07/25/apple-vs-microsoft-sticking-to-ones-knitting/
      this article which was published this morning.

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  6. Well Sam has proven that there are Microsoft fanatics indeed, drinking the Steve Ballmer koolaid.

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  7. Ballmer is a one trick pony. When the conditions are right, he does really well. However, when things change, he doesn’t know what to do. Not knowing what to do, he says it’s something else doing it. It’s the economy, etc. There are those who can create a business out of nothing and turn things around when the company is doing a nose dive, whatever is happening with the economy. Ballmer is not one of those.

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    1. James Carroll Saturday, July 25, 2009

      I think Ballmer is the wrong person to run Micro$oft. Mayber they could bring back Paul Allen as out of Gates, Ballmer and Allen I believe Allen was the brightest anyway.

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  8. Ballmer simply ISN’T the right visionary for M$FT’s future. I don’t want anyone to lose their job, but I simply can’t believe that M$ shareholders don’t hold him accountable for anything. They make billions on Office and Windows combined, but how many more versions and features can they come out with that people will continue to upgrade. I’m sorry, but dividends simply aren’t enough for such loyalty…right now loyalty is getting shareholder nothing. Apple has always placed HARDWARE first that uses their intuitive software secondly. iTunes show they’ve had a long term vision and plan for such a long time. M$ has the cart ahead of the horse and no vision in sight and no product line that is interesting. Bing may bring in some pocket change, but they are again late to the party…how much more can search engine be upgraded also?
    We are going to see Apple’s market cap surpass M$ sooner than most people think,
    and we don’t even know what is in store with Apple’s next new product release. Their ducks have been in a row for a long time. We won’t really know how long term Steve’s vision for Apple really was until way after he is gone and in history books. His contribution to society is going to be unreal to our grandchildren. He will be alongside Edison, Franklin, Ford when all is said and done. He’s got billions…it simply ain’t about money and never has been…meanwhile, Ballmer is paying for a massage. Ballmer is going to tarnish Gates name and accomplishments down the road.

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  9. This guy and Kevin are extremely unpopular inside of MS… but yet they live long and long…. :(

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  10. Ballmer may have had a long life span at MS. But that won’t be worth one iota if at the end of it all his reputation is trashed.

    Bill Gates’ smartest ever decision, above anything else, is likely to be regarded as the timing of his handover.

    And I’d like to say to Sam, above, that you have some incredible nerve to call the writer lacking in deep thought – your comment is the tritest drivel on this page.

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