Devices! Devices! Devices!

Steve Ballmer, in an email to Microsoft employees today:

“Going forward, our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work, and on the go, for the activities they value most.”

Now that’s interesting.

The CEO of the world’s largest software company says Microsoft will focus on devices and services.

Translation: Ballmer wants to morph Microsoft into a mix of Apple (devices) and Google (services).

Where does Windows fit into Ballmer’s plans? Well, Windows is already running on Microsoft’s three primary devices: Surface tablet, Xbox, and Windows Phone. And the current head of Windows and Surface engineering, Julie Larson-Green, is now in charge of the new Devices and Studios group.

Microsoft still builds a crapload of other products. But none are as important as those Larson-Green is now tasked with growing.  Microsoft has seen clear success with the Xbox, and with the Xbox One on the horizon, should maintain their lead in the cutthroat console business.

But the Surface and Windows Phone are basically non-players in a game being dominated by Apple and Samsung. If Larson-Green can turn them around to become a bona-fide competition in the smartphone and tablet markets, then Ballmer should turn over the CEO keys to her.

How much are two well-known devices worth to Apple?

The iPhone, which Ballmer famously mocked, has been around since 2007 while the iPad didn’t show up until 2010. These two products now drive more revenue and profit than every Microsoft product and service combined. In fact, the iPhone, on its own, is larger than Microsoft in terms of revenue and profit.

Ballmer finally appears to realize that mobile is the future, even for the company that built the desktop.

Fact Checking the WSJ

About ten days ago the Wall Street Journal reported that “people familiar with the situation” said that Apple cut iPhone 5 component orders in half. According to their anonymous source, demand for Apple’s flagship phone “haven’t been as strong as anticipated”.

Luckily we now have Apple’s Q4 financials along with those from AT&T and Verizon to fact check the WSJ’s anonymous source. Two days ago, Apple announced they had sold 47.8 million iPhones during the last three months of 2012. I’m not sure what this anonymous person considers strong, but that sounds like strong demand to me. But that’s not all the data we have because today AT&T released its Q4 2012 financial report including the following smartphone sales figures:

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That gives Apple 84% of all smartphones sold on AT&T, which isn’t surprising given the iPhone has been available on their network since day one.

So what about Verizon, where the iPhone has been on sale a little less than two years? I mean, you can’t walk by a Verizon store without seeing wall to wall DROID ads. Surely, all those DROID and Samsung Galaxy ads must be driving massive Android sales at Verizon, right?

Well, let’s take a look at Verizon’s Q4 2012 financial report and see what we can find:

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So the iPhone is outselling Android and everyone else by a 2 to 1 margin on the network that pushes DROID on potential customers like Best Buy pushes extended warrantees.

And where are all those Samsung Galaxy phones being sold? At least once a week someone tells me it’s outselling the iPhone. Maybe it’s the nearly $12 billion Samsung spent on advertising, commissions, and sales promotions in 2012 that is clouding their judgment. I don’t know. They must be selling like hotcakes somewhere.

Just not on America’s two largest carriers.

I’m sure the WSJ will publish a follow-up story about how Apple needs to release a “cheaper iPhone” in order to remain competitive. Just like they needed to build a netbook.

Keep up the good work, WSJ!

I Bought an iPhone 5 at Walmart

Kim has been begging me to purchase a better camera than what she currently uses which is the camera on her iPhone 4. When I read online that Walmart was selling the iPhone 5 for $127, I decided the time had come.

I wasn’t sure if Walmart had phones in stock or if they were still running the promotion so I decided to call two stores in my area. Here is my experience:

1. Called, transferred to Electronics where nobody answered.

2. Called, transferred to Electronics where nobody answered.

3. Called, transferred to mobile services where nobody answered.

4. Called, transferred to mobile services where nobody answered.

5. Called, transferred to Electronics where a man answered but said I needed to speak with mobile services. He transferred me to mobile services where nobody answered.

6. I went to Walmart and made my way to mobile services which is located inside the Electronics department. Asked woman if she sold the iPhone 5. She said they were in stock but she could not sell them to me because, “the system goes down in five minutes" but I could return tomorrow. “What system?” I asked. “The system where you buy an iPhone.” she replied.

7. I went to the same Walmart this morning where four Walmart associates were helping customers. I asked if the system was up and the woman asked, “What system do you mean?” I said, “The system that lets people buy iPhones.” which resulted in a strange look on the face of the associate.

8. The associate was courteous as she took down my account information. Two other associates, standing less than five feet from me, were talking potential customers out of any phone that wasn’t a Samsung Android phone. I had a difficult time keeping my mouth shut when one of the male associates told a customer who had inquired about the iPhone that one “couldn’t do anything with an iPhone until it was jailbroken”.

9. After my account information had been entered into the system, the printer decided to crap out. The women asked me to wait a few minutes until she could figure out the problem. She tried turning it off and back on again. Nothing.

10. All the while, several more customers came to the counter to inquire about the iPhone 5. When the male associate couldn’t talk them into an Android phone, he asked them to stand in line behind me.  At one point, he flashed his Samsung Note at a couple and said, “I have an iPod and an iPad, but I won’t buy an iPhone. This here is the phone you want.” Around the time where he pulled out a stylus, the couple had seen enough and got in line behind me.

11. The printer was still refusing to print. The women helping me was getting frustrated and began clicking around her screen. When I was about ready to ask if I should come back later, the printer came to life!

12. I signed my name and dated four sheets of paper.

13. The woman handed me off to one of her coworkers who offered to help setup my phone.  By now, there were at least a dozen customers waiting to put their details into the system that would allow them to buy an iPhone. “I can set it up at home.” I told her.

When I got home, I plugged the new, white iPhone 5 into Kim’s PC and restored her applications and settings. That took less than 10 minutes.

Is it any wonder why Apple wisely decided to build their own stores?

Changing of the Guard

In just two years, mobile went from about 5% of all Black Friday purchases to 24% according to a report from IBM. And of that traffic the iPad dominated with 10% of all shopping traffic and a whopping 88% of all mobile traffic.

Think about that for a minute.

A device that didn’t exist 3 years ago is now responsible for 10% of shopping traffic.

A few of my friends say the PC will be around forever, and they are probably right. Engineers, designers, and many professionals will still require the processing and graphical performance found only on a workstation. I work for a company that designs and builds these type of systems, and the demand continues to be strong.

But the following slide should scare the crap out of Microsoft and Intel. From the mid 80’s still 2009, they were the dominant computing platform. If you owned a PC during that time it likely ran a version of Windows and was powered by an Intel processor.

But today Android + iOS comprise 45% of all computing operating systems while Windows is down to a 35% share from nearly 90% just five years ago.

 OS_Marketshare

With the massive growth of smartphones, Windows is no longer the dominate platform, and this is the first chart I’ve seen that visually shows what’s happening. No wonder Microsoft is willing to spend billions to push their Windows Phone 8 platform into a market that has so far ignored it.

More people are now using a phone or tablet running Android or iOS than Windows. Many analysts see that PC sales are slowing, yet upwards of 350 million will be sold in 2013. That seems impressive until you hear that 1.5 billion smartphones will be sold during the same time frame.

We’re witnessing a changing of the guard.

Some will see that 24% mobile shopping traffic and disregard it. “PCs are still king!” they will say.

And they are right.

But for how long?

*Graphic taken from Internet Trends presentation from Mary Meeker.

Can Microsoft create killer hardware and software?

What if Microsoft pulled a page out their early playbook and created software for the most popular platforms, be it desktop, tablets or mobile?

What if Microsoft  was less concerned about owning the entire mobile ecosystem and instead was a player on all platforms? I can’t imagine owning an Android tablet or phone. But because Google brings apps to iOS, they have my businesses. I wouldn’t hesitate to pay for premium versions of GMail and Google Docs. I run Chrome and use Google Search multiple times each day. Too much of my life runs through Google apps. No way am I switching to a competitor at this stage.

I understand that Microsoft hopes to sway me into buying a Surface tablet and Windows Phone by getting me accustomed to the look and feel of those products through Windows 8. But the train has left the station, and I’ve already committed to another tablet and phone, that when combined, are used more often than my Windows PC.  And that delta continues to grow each year as my tablet and phone perform more of my day to day tasks.

This year, Microsoft will get $39 from me for a Windows 8 Pro upgrade and $60 for an Xbox Live Gold account. That’s better than nothing but still a fraction of what I’ll give Apple for games, apps and music among two iPhones, two iPads and three iPod Touch. 

Why does Microsoft continue to toss hundreds of millions into Windows Phone when the best they can do is take 3rd place? Why not create best of breed apps across Android and iOS and offer them to billions of customers instead of a few million Windows Phone owners?

Some may point to the success of Xbox to show Microsoft can make their own hardware and own the end-to-end experience. Sure, Xbox can be found in millions of living rooms, but it adds very little to the bottom line for Microsoft. Microsoft still derives most profits from Windows and Office. They dabble in entertainment, and search and business software, but if you look at what drives profits to the bottom line, it’s Windows and Office.

Unfortunately, Windows and Office take a backseat to tablets and smartphones in terms of growth potential, two areas where Microsoft had a head start, but got shoved aside by RIM, Apple and Google. They are trying to crawl back into the game with products like the Surface and updates to their Windows Phone platform. And, both seem like decent products, but they spotted Apple and Google a three to four year head start, and it doesn’t appear that carriers or customers are looking for a third alternative. Developers already have a huge audience developing for Android and iOS which explain why Microsoft is having to pay developers to build apps for Windows Phone and new Windows Store.

Why does Microsoft believe they need to become like Apple?

Some of my favorite software products came from Microsoft but have been abandoned like Windows Live Writer and Digital Image Pro. I used to love Windows Messenger and Live Mesh until they started changing their names, and morphing into other products.

I’ve been running Windows 8 Pro for just over and month. With one exception (older Creative soundcard), it’s been a easy transition from Windows 7. Microsoft can put an army of talented software engineers behind a product like no other company can.

I just wish they spent more time creating excellent software across all platforms.

Tax on the Brain

“The PC is over. It will linger, but increasingly as a relic.”

Those are words from from MG Siegler, a noted fan of Apple products, writer and investor.

When I come across anyone predicting the demise of the PC I immediately take interest because I make my living helping people select custom computers. Many of these people make their living using professional software tools such as Adobe Photoshop or Premiere. The computer power they require can’t be found on a tablet or smartphone or even a laptop on many occasions.

I would guess that many from this group are longtime PC users and laugh at the idea of PCs becoming relics. Not a week goes by where someone tells me the view tablets like the iPad as “toys” and can’t imagine being productive on them. They are viewed in same light as the Nintendo DS: fun toys, but useless when it comes to serious work.

We have Windows PCs, iPads, iPhones and three iPod Touch in our home. This past Christmas we finally got a big screen TV that’s hooked up to DirecTV, a Nintendo Wii and the Xbox 360.

Watching how my children use each of these devices has been interesting and not what I would have predicted.

The PC is used to play Roblox, which is a simple (and goofy) Flashed based game. Occasionally Lincoln will watch a YouTube video or Luca will edit a paper for school on the PC. To them, the PC is a place where I do my work. It’s for old people who have to use these primitive input devices called a keyboard and mouse. It’s big and clunky, and requires frequent patches and reboots. In short, it’s a hassle.

The TV is used to consume shows they watch together like So You Think You Can Dance. They seldom watch anything live. To them, TV is what’s on Netflix or recorded to the DVR. They idea of having to sit through commercials is foreign to them.

For everything else, they default to their iPod Touch. It’s the only device they own and don’t have to share with anyone else. They can select which apps are on it as well as customize the screen the way they want. They use the iPod Touch to play games, send texts, watch movies, and stream Netflix. It’s what they turn to first. I’m still surprised when I see one of them curled up on the couch in front of a turned off TV watching Spongebob through Netflix on the iPod Touch.

And yet I do the same thing now with my iPad. I watched all five season of the Wire on my iPad because I could do so from bed. I often sit on the couch and watch ESPN highlights when I could be watching them on a 52-inch screen. But when I’d have to locate three remotes and then fuss with each of them. In that same time I can watch the highlight on my iPad.

When I wanted to watch HBO on my computer I had to download a bunch of plugins that weren’t initially compatible with my browser. But first I had to lookup the model number of my video card to make sure it was on the “approved list” because I guess someone is worried I possess the skills to pirate Game of Thrones. Given the number of technical hoops I had to jump through, I’m sure many people would just give up. Even once I had the plugins installed, I would get an error telling me my graphics card wasn’t compatible with their service.

The same thing happened when I my PC upgraded to Silverlight which is required to stream Netflix on the PC. Searching for a solution online brought up many people having the same problem. Some suggested I revert back to an older version of Silverlight while others recommended making a few changes to the registry. Two weeks later, a user on a technical forum suggested I run a command from the command line that magically fixed it.

At least until the next Silverlight upgrade.

The fact is PCs are still incredibly complex. They require far too many updates. They are not easy to backup, and many of the backup services are difficult to use. Have you installed a PC game lately? Get ready to spend a few hours making everything work right. The hoops the gamer must jump through would be inconceivable to many who play those same games on the Xbox or Playstation. The patience required is still enormous.

I grew up using a PC. It’s all I had. It’s all I knew for most of my computing life. I’m willing to put up with the many quirks and idiosyncrasies that try my patience. I know my way around the registry, and have torched so many computers that I got accustomed to making them work again by breaking them open and futzing around with them for hours. 

My kids will grow up using devices that don’t require that level of dedication and know-how. Hand an iPad to a child and watch them master it in just minutes. It’s simple and intuitive. Compare that to Windows 8 which is best described as a “tax on the brain”.

Many kids in elementary school have no need for a PC. They will have experienced the instant-on, no fuss nature of the smartphone or tablet. Try telling them they can’t type on a small screen and watch them laugh. Many of them can type more words per minute on their tiny screens that you can type on your full-sized keyboard. Don’t tell them they need a PC to edit photos or video either. The tools are already there in the app stores. Tell them about Patch Tuesday and watch them double over in laughter.

For the time being, PC sales remain strong as least at my employer. We don’t sell sub $1000 PCs which have been decimated by the rise of the iPad. We’ll soon witness a wave of new tablets running Windows 8. We still sell a lot of PCs to people who just need a reliable platform to browse the web, write emails, and edit the occasional Office document. If you’re like me and you’re used to doing those activities on a PC, you’ll probably stick with the PC for a while and maybe forever.

But for kids who grow up using smartphones and tablets to accomplish those same tasks, only time will tell if they even consider a traditional PC.  Most of the killer apps are on mobile devices. When’s the last time someone told you to check out a cool program for the PC?

Time will tell, but I don’t believe my children will have a need for a PC in same way I did. I’d say the odds are against it.

The iPhone 5 and the Porsche 911

Every few years Porsche rolls out a new 911, arguably the most iconic sports car ever created. Yet, like clockwork, the new 911 looks a lot like the previous version. In fact, unless you’re a Porsche aficionado, you may not  recognize the differences even if you knew what to look for.

The first 911 was released in 1963 by Dr. Ferdinand Alexander Porsche, and its teardrop shape looks remarkably like the 2012 model available today. That’s nearly 50 years in which the basic design hasn’t changed.

911Generations

With each new generation, a number of small, incremental design tweaks have been made to the 911. The fascia continues to evolve giving the car a more aggressive stance. The rake of the windshield has become more flat while the rocker panels have become more pronounced in later models.

Although these and many other seemingly minor design changes are debated at length by the enthusiasts, they are often overlooked by the rest of us. Dr. Porsche flat out nailed the design at conception. But he didn’t rest on his laurels. He continued to make changes under the hood, often implementing new materials and technology into the car as long as didn’t detract from its purpose and soul.

After using air-cooled engines for 32 years, Porsche switched to water-cooled units found in today’s models. Powerful engines, ceramic brakes and Xenon headlights were added. New models run on a wider track, and offer a mind-numbing array of safety features. Aluminum is now used in place of steel to reduce weight and increase fuel economy.

But the essence of the 911 hasn’t changed. Dr. Porsche infused the first model with a soul that can still be found in today’s 911.

I liken the Porsche 911 to the new iPhone that was announced today.

Some of my friends were disappointed that the iPhone 5 isn’t doesn’t look dramatically different from the iPhone 4/4S. The iPhone 5 looks like someone stretched the older model just enough that one more row of icons will fit on the screen. If that were the only change Apple made I would have been disappointed as well.

iphone5vsiPhone4

But that’s not the case. Apple made a number of Porsche-like under-the-hood changes that will prove to be more important than a major design change would bring. The new iPhone is lighter, thinner, includes a new “twice as fast” chip, higher resolution screen and upgraded camera. But the biggest change is support for LTE which is geek for “it downloads data so fast it will make your head spin.”

The iPhone is a fraction of the age of the 911, and I don’t expect the design cues of a portable computer to remain as consistent as those found in a sports car. But Jonathan Ive, the designer of the iPhone, got so much right in his initial creation that wholesale changes are not needed.

"A coherently designed product requires no adornment – it should be enhanced by its form alone."

That’s not a quote from Steve Jobs, although I could see him saying that. No, that’s from Dr. Porsche and it’s as relevant today as it was in 1963.

Dark Sky

Have you ever wanted to know if it’s going to rain soon?

Until I started biking to work, I didn’t give it much thought. Dark Sky is an app that tells me what the chances it will rain within the next hour. It won’t give you a 5-day forecast of conditions and temperatures, but it has this uncanny way of predicting precipitation.

Sure, you can view a full-days worth of predictions, but the focus is on the next hour. It also includes gorgeous high res radar images, if you’re into that.

Dark Sky is available for the iPhone and iPad. It looks gorgeous in the iPad but I just it almost exclusively on my phone.  My father is a weather nut, and I’m hoping this is the straw that finally pushes him into getting an iPhone.

IMG_0897IMG_0898darksky

Shutting Down The Samsung Copy Machine

Apple was awarded $1.05 billion in damage yesterday when a jury found that Samsung mobile devices infringed on six Apple patents. Of course, the crux of Apple’s complaint was how Samsung has been churning out phone after phone that not only infringe on their patents, but appear to be outright iPhone knock-offs.

For those who don’t believe Samsung blatantly copied Apple’s iPhone, this picture says it all.

apple_samsungphones

Take a look at the phones Samsung created before the iPhone was announced in January of 2007.

Samsung then spent the next two years designing their phones to look like the iPhone, but they hadn’t quite perfected the process. I suspect many of these phones would have been in the design phase around the time the iPhone was released giving Samsung very little time to pivot towards the Apple design.

But the last panel shows that by mid 2010, Samsung is building phones that could pass for counterfeit iPhones on the streets of New York. That’s not innovation. That’s not borrowing or being influenced by other’s designs. That’s Samsung firing up their copy machines.

One must be completely blind to not to see this.

This has nothing to do with Android. This is Samsung riding the coattails of Apple’s most successful product, and intentionally trying to confuse consumers.

The jury has spoken. I’m sure Samsung will fight this as long as they can through the appeals process. But their reputation as a company that intentionally copies Apple products is cemented in history. Any new product Samsung releases going forward will be scrutinized against this verdict as well it should.

One thought: If Samsung is eventually compelled to license patents from Apple, it’s possible that Android could generate more profits for Microsoft and Apple than it does for Google. If I were a Google shareholder that would not make me happy.

We already know that Google earns four times the revenue on iOS search compared to search on Android. But that could be winding down as Apple seems hell-bent on replacing or removing Google services that ship with the iPhone.

Given that Samsung is arguably the only Android OEM making any money building Android phones, one could say that the Android business model works best for two companies that don’t produce Android phones.