Microsoft's Next Frontier: Wireless

[Ed Hansberry]

<a href="http://www.cnn.com/2003/TECH/biztech/01/19/microsoft.swireless.ap/index.html">http://www.cnn.com/2003/TECH/biztech/01/19/microsoft.swireless.ap/index.html</a><br /><br />Interesting article in CNN a few days ago. Talks about how MS is trying to extend their domination on the desktop to handheld and wireless devices - something they've been working on since 1996 when Windows CE launched. "And last week it made a big North American advance as Hitachi and Samsung each said they would soon produce Microsoft-powered handhelds with phones that employ the most common U.S. network standard."<br /><br />I didn't know this little tidbit either - emphasis mine. "The Redmond, Washington-based behemoth can influence a lot of corporate technology buyers and it has yet to really flex its muscle in smart phones the way it has in personal digital assistants <i>(although Palm's operating system is No. 1 worldwide in terms of units sold, Microsoft is tops by revenue, according to Gartner Inc.)</i>. I knew Pocket PC topped Palm occasionally when iPAQs sales spiked in some quarters, but it seems it is a given that Pocket PC revenues are ahead of Palm, at least world wide. :D Thanks to Media Mike for the link.

[scottmag]

(although Palm's operating system is No. 1 worldwide in terms of units sold, Microsoft is tops by revenue, according to Gartner Inc.). I knew Pocket PC topped Palm occasionally when iPAQs sales spiked in some quarters, but it seems it is a given that Pocket PC revenues are ahead of Palm, at least world wide.


No way. I don't believe it. I do not believe that "Microsoft is tops by revenue" in the handheld market.

The total worldwide sales revenue from devices that run on Microsoft's handheld operating systems may be greater than that of those running PalmOS, but that does not equate to sales revenue for Microsoft. MS only collects a licensing fee for each of those devices sold. The revenue figures apply to the individual manufacturers. In fact, I believe it has been documented that MS is losing a large amount of money on handhelds. That is, the income from the OS does not cover its development costs.

My disagreement is with the quote attributing the revenue to "Microsoft" and not with Ed more correctly attributing it to "PocketPC."

Profits and loses here don't mean that much to Microsoft, but there are a couple of important distinctions between unit sales and overall revenue.

First, establishing market share in an emerging technology market is more important than establishing profitability (provided the company can survive). Microsoft knows this better than others - look at the battle to give away web browsers. Once established as a standard the profits start flowing. And this is what MS wants from PocketPC - to leverage the handheld market to sell its profitable infrastructure products (i.e., BackOffice, Exchange, etc.). So in that sense market penetration is far more important than profit or revenue. For Palm it's a two-edged sword, because, unlike Microsoft, Palm needs the income from hardware and OS sales to survive.

Second, PocketPC devices have historically been much more expensive that PalmOS devices so revenue could be higher with significantly lower unit sales. Now that Dell has entered the market that will change dramatically. We are seeing a shift in the average selling price for a PocketPC from the US$600 range to around $300 (based on my observation). That's right in line with Palm's hardware pricing, but still with lower unit sales. What will be interesting here is if Palm retreats into the lower priced market ($100-150), or battles it out with more feature-rich devices.

Finally, who cares. Microsoft makes a billion dollars in profit every month. They are not the underdog that you need to cheer on every time there is a category where they can be shown to be "winning."

Scott

[Ed Hansberry]

(although Palm's operating system is No. 1 worldwide in terms of units sold, Microsoft is tops by revenue, according to Gartner Inc.). I knew Pocket PC topped Palm occasionally when iPAQs sales spiked in some quarters, but it seems it is a given that Pocket PC revenues are ahead of Palm, at least world wide.


No way. I don't believe it. I do not believe that "Microsoft is tops by revenue" in the handheld market.My disagreement is with the quote attributing the revenue to "Microsoft" and not with Ed more correctly attributing it to "PocketPC."

I think the quote is meant to show: "although Palm's operating system is No. 1 worldwide in terms of units sold, Microsoft{'s operating system" is tops by revenue, according to Gartner Inc."

Plus, if you are *JUST* talking about the OS, MS might make more from Pocket PC than PalmSource makes from Palm. That is happening. I showed last month where MS's mobile device division has slightly more in revenue than PalmSource, and PalmSource has a big chunk of cash coming from Palm Digital Media.

[wiz]

Pfff, I'd like to see that. Most likely they will try and force us towards Microsoft affiliate hardware only. Look at their Bluetooth Keyboard, which "supports up to 7 devices" but not comes with a BT dongle that not even supports BT Activesync with PPC's, let alone that the keyboard can be used with notebootk integrated BT hardware.

[markpmc]

Ed,

What point are you trying to make? Surely you don't want Palm to wither and die. Do you really want to see MS finally win here (bad for consumer) or do you want to see MS, Palm and Symbian all duke it out over 10 years by adding features...

Competition is good for all of us. Frankly I hope that PalmSource hangs in there, but as a former Clie owner I do wish that Sony would ship a PPC device.

markpmc

[scottmag]

OK, I read the CNN article, but I had to check twice to make sure it wasn't one of those MSNBC puff pieces. I've never really read CNN's technology news page, but I guess they regurgitate old information as news just as well.

Check out this quote:
"PalmSource's chief competitive officer, Michael Mace, believes Microsoft programs such as Word and Excel work better on the Palm operating system. Why? Palm enlisted outside developers to shape special mobile-only versions of the software."

I wish I had known that Microsoft was making Word and Excel "programs" for the PalmOS all this time.

Don't get me wrong (although after my previous message I'll probably be branded a hater and told to go away ... again), but I actually like what I've seen of the MS SmartPhone platform. Mostly vapor at this point, but conceptually I really could like it. Alas, it does not seem likely that I will see one in the near future.

What the CNN article does do a good job of is summing up the extent of the opposition Microsoft faces in the telephony market. All it's major competitors are energized by the threat of MS taking over the handset and smartphone markets. What should be most frightening is this quote, "Microsoft and chip giant Intel Corp. also plan to jointly release basic blueprints for communications devices in hopes device manufacturers will thereby standardize the handheld world like the Intel/Microsoft-dominated PC market."

That's what will keep executives from Nokia and Ericsson up at night. I hope for a short term benefit to consumers as this battle lights a fire under every competitor and results in better products for all of us.

Just don't look for me to be cheering when Ed reports market share numbers showing Microsoft has won the smartphone battle.

Scott

[Leviathan]

This report is another MS ad. Again, apart from OS and Office, Microsoft loses money in every other business they have entered into. They constantly try to develop 'universal platforms' and convince people to go with them. They started 15 years ago with the MSX computers (who remember them?) but while Commodore and Sinclair kept selling millions of they respective hardware, MSX got practically unnoticed. They were exteremely positive about last christmas that XBOX would have become #1 in sales, the reality is that they've come head to head for the second place with Nintendo while Sony outperformed them by over three times their sales. The latest blow will come from the so called SmartPhone, SPV was touted as a 'closed' phone to provide security and to avoid malicious programs, the reality is that an XML configuration file was needed to unlock it: security is really not an issue for MS, they just relay on non-obvious features to keep their systems secure, which are constantly exploited always in a quite embarassing time frame after product release. Oh, by the way Nokia sold over three millions of their 7650 phone, Orange didn't released any number, I wonder why. When it is not OS/Office MS is only a player with a lot cash, but not a smart one.

Cheers,
Lev

[mmace]

"PalmSource's chief competitive officer, Michael Mace, believes Microsoft programs such as Word and Excel work better on the Palm operating system. Why? Palm enlisted outside developers to shape special mobile-only versions of the software."



Ugh.

Just for the record, I didn't tell the reporter that Word and Excel run on Palm OS. I tried to do a really careful job of explaining about working with Word and Excel files, bundled vs. add-on software, etc. Looks like the reporter didn't understand (or chose to over-simplify). I'll try to do a better job of explaining next time.

Mike
CCO, PalmSource

[scottmag]

"PalmSource's chief competitive officer, Michael Mace, believes Microsoft programs such as Word and Excel work better on the Palm operating system. Why? Palm enlisted outside developers to shape special mobile-only versions of the software."



Ugh.

Just for the record, I didn't tell the reporter that Word and Excel run on Palm OS. I tried to do a really careful job of explaining about working with Word and Excel files, bundled vs. add-on software, etc. Looks like the reporter didn't understand (or chose to over-simplify). I'll try to do a better job of explaining next time.

Mike
CCO, PalmSource


Yeah, I looked carefully at that one to see where the quotation marks were. I think everyone here knows exactly what you would have said and that the reporter carelessly misstated it.

Care to comment on the contribution of OS licensing fees to pre-split Palm, Inc's bottom line?

Scott

[Ed Hansberry]

What point are you trying to make? Surely you don't want Palm to wither and die. Do you really want to see MS finally win here (bad for consumer) or do you want to see MS, Palm and Symbian all duke it out over 10 years by adding features...

Competition is good for all of us. Frankly I hope that PalmSource hangs in there, but as a former Clie owner I do wish that Sony would ship a PPC device.
On Palm, you know, I am not sure what I want. Palm is not a competitor in my eyes - it is anathema. Not because it isn't Microsoft, but because of its attitude. I got a PDA a few years ago based on Windows CE, not because at the time I had a clue what Palm vs Microsoft was, but because after trying the devices out, the Palm felt like a little, fast Japanese sporty car, like a Toyota Celica or something, the base model. The Nino felt like a decent European car, like a Volvo. Not fast, flashy, but complete, rear fog lights, heated seats and a nice THUD when you shut the door.

After getting into the newsgroups and online sites, I really began to get ticked at how I saw Palm treat its customers. Not bad customer service or shoddy products, but a 'you are an idiot' mentality.

Rather than answer Microsoft with competitive features, Palm simply patted their users heads and said "Don't you worry your little self over those features. Those are complex, slow the device down and will make your life needlessly difficult." They said this about (just to name a few biggies):
• Color screens
• Voice Recording
• Storage Cards
• Anything more than 2/4/8/16 MB of memory. (That number changes as Palm adds memory to their devices)
• Networking
• Anything more impressive than 160X160
• Email
• Spreadsheets
• Word Processors
• Music
• Multitasking
• Handwriting recognition
• File Systems

Meanwhile, Palm is furiously working on these features in the back room. Frustrated, licensees like Sony, Handera/TRG, and Handspring are bolting secondary processors, voice recorders and even allowing completely separate computers to interface via proprietary slots to give users many of these features, all the while pretending to be Zen, whatever that means.

So, based on that? Yeah, I don't give an M100 if Palm up and dies. Like with any other company, you hate the human effects that has on the employees, but they will get absorbed back into the market, just like people in any failed company/industry. That's how capitalism works. I've been laid off and re-absorbed myself, so I know what happens.

That said, someone with some vision should get PalmOS. Give it to the BeOS guys. Keep it away from Sony. They are lunkheads with their proprietary card technology and abandoning every Clie owner out there except for the few that were lucky enough to buy an NX or NZ series. Sorry $599 NR owners. :roll: Give it back to Hawkins. His Treo thing isn't working, but maybe he can do something with it. No, scratch that. He is the one that gave Palm this mentality in the first place. Give it to the guys at RIM, or Nokia. amendment: The current PalmSource may be working into a more competitive area. Yankowski is gone, OS 6 promises to deliver on multitasking, more than 16MB of RAM, etc. Maybe it should just be allowed to simmer another year and see if it gets back on track. Whatever happens - don't kill Palm Digital Media!!!! :D

Palm is bad for the market from a competitive standpoint. Name 1 thing Palm does that Pocket PC can't. Just 1. Can't do it. The 1910 kicks it in size and PalmOS devices are sucking in battery life in the 10hr and less category now that they figured out their "3 months of battery life" thing is crapola marketing and means nothing with 100+MHz devices and kewl color screens. The Axim/V35/h1910 really kick on pricing too. So, what does Pocket PC have to strive for? MS is probably spending more time figuring out how to make Pocket PC 200x better than 2002, not better than Palm. It is already better in most areas. There are some UI issues I addressed in this article (http://www.pocketpcthoughts.com/articles.php?id=5971) but Pocket PC has no more "problems" than Palm's UI has, only different ones. So how is Palm helping the competitive front? What does MS have to strive for? Just besting itself. I just don't see Palm helping Pocket PC improve itself right now.

[Ed Hansberry]

Ugh.

Just for the record, I didn't tell the reporter that Word and Excel run on Palm OS. I tried to do a really careful job of explaining about working with Word and Excel files, bundled vs. add-on software, etc. Looks like the reporter didn't understand (or chose to over-simplify). I'll try to do a better job of explaining next time.

Mike
CCO, PalmSource
I figured that's what happened. Mike, it doesn't matter how you explain it sometimes, they just write what they want. Of course, we would never do that. :wink: :lol: No, really, I'm serious! 8O