Microsoft Gets Its Edge Back 14 comments
Larry Dignan
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Is it just me or is Microsoft (MSFT) a little more competitive than it has been in recent years? Microsoft has gotten under Apple’s (AAPL) skin—at least its lawyers—got Google’s (GOOG) attention with Bing and is even doing the Web app thing. Microsoft almost seems to be enjoying itself as honchos like Kevin Turner proclaim: “Competing is fun.”
The second part of operating chief Turner’s quote is: “Now, competing is a lot more fun when you’re winning than it is when you’re losing.”
Rest assured that Microsoft will win a few and lose a few, but you gotta admit the company is more interesting to watch these days. Let’s survey the battlefront.
Apple
Apple has kicked Microsoft’s marketing tail with its cheeky ads, trumped the software giant with the iPod-iTunes juggernaut, created a dominant entertainment market and has more mobile buzz with the iPhone than Microsoft can ever dream of. And oh yeah—there’s those iconic retail stores too.
But a funny thing happened along the way to this butt kicking. Microsoft almost seems to enjoy this underdog thing (granted Microsoft as underdog is comical, but teams like the New England Patriots, Yankees and Lakers will try to portray themselves as one for motivation).
Here’s Turner riffing at the software giant’s partner conference on how Microsoft got under Apple’s skin with its ad campaign yapping about the “Apple tax:”
Now let’s talk about Apple. What are you going to do about those Apple ads? That was a year ago. Gosh, when I went home for the holidays, brothers, sisters, cousins — hey, hope you don’t have anything to do with marketing over there at Microsoft. What are you guys going to do about those Apple ads?
Stay tuned, stay tuned, stay tuned. Wow. Did we punch right back? The PC Hunter ads, the PC Rookie ads clearly have been winners in the marketplace.
I pulled this out of my Sunday newspaper. I have an old habit because I came from retail looking at the Sunday tabs and circulars that are in newspapers. This is straight out of my paper last Sunday. This is a comparison out of a leading electronics retailer that you can get a 13.3-inch Macbook for US$1199 from that retailer. Guess what. That same retailer, you can get the same PC with more RAM, a bigger hard drive, and almost a three-inch bigger screen for US$649. What an incredible opportunity.
And so we’ve been running these PC value ads. Just giving people saying, hey, what are you looking to spend? “Oh, I’m looking to spend less than $1,000.” Well we’ll give you $1,000. Go in and look and see what you can buy. And they come out and they just show them. Those are completely unscripted commercials.
And you know why I know they’re working? Because two weeks ago we got a call from the Apple legal department saying, hey — this is a true story — saying, “Hey, you need to stop running those ads, we lowered our prices.” They took like $100 off or something. It was the greatest single phone call in the history that I’ve ever taken in business.
I did cartwheels down the hallway.
That’s a lengthy excerpt from Turner about an ad war, but it does give you the flavor of this edgier Microsoft that’s in attack mode. Microsoft is punching back. With Windows 7 Turner obviously feels Microsoft can go on the attack.
Now some of these attacks may turn out to be disasters. Does anyone think a Microsoft store will do well (ok Andrew Nusca)—especially if they are next to those hip Apple ones? But that’s exactly what Microsoft is doing.
Turner said that Microsoft will take its learnings from the retail stores and apply them right away. Nevertheless, the expectations for Microsoft’s stores are likely to be low. However, that’s a competitive edge for Microsoft. In some twisted way we’ve come to underestimate a company as dominant as Microsoft.
And speaking of low expectations here comes Microsoft’s next battlefront:
The competition with Google is almost never-ending. There’s search. There’s operating systems. There’s mobile. And there’s office apps.
Oddly enough, Google and Microsoft play this alpha male vs. underdog game in most markets.
Consider search. Clearly, Microsoft plays underdog here. And that’s actually an advantage. Why has Bing been a success? I’d say 85% of it is that most expected Bing to bomb. But Microsoft has made some key improvements. The focus on the verticals is nice. The marketing is strong. And once you try Bing you find enough to make it a search option.
The press has bit into this Google vs. Microsoft story line hard. It’s Google vs. Bing everywhere. The funny part. Microsoft just wants to be No. 2. By mentioning Bing and Google side by side so much you forget that there’s Yahoo in the way. Bing’s real target is Yahoo. Google will come another day. For now, Bing is happy to ride shotgun and be the Google alternative.
Turner said:
We’re never going to be satisfied, we’re going to keep that divine discontent as it relates to competing with Google in the enterprise. And you know what? It feels really, really good to be able to talk to you about the momentum we’ve got with Bing.
This game of distraction continues in every market. Is Google serious about operating systems? Perhaps. But it’s also likely that the Chrome OS was just an announcement to distract Microsoft from Bing. Chrome OS may just be some cold water thrown on all the yapping about Windows 7. Here Google plays underdog. And guess what? The Chrome OS preannouncement worked like a charm.
In office apps the roles reverse. Google wants to eat into Microsoft’s Office cash cow with its suite of apps. Microsoft ventures into free Web apps as a defensive move—but one that’ll get traction. Google and Microsoft will trade barbs, but it’s safe to say that the software giant’s Office juggernaut, which will soon include Office 2010, will remain because of enterprise strength and hooks into business intelligence. Why? No one wants to deal with that 1 percent (or less) of the time some presentation or Word doc looks off in an open source or Web alternative.
You can carry this Google-Microsoft battleground out forever. It’s the same deal in mobile operating systems. Add it up and I’m left to conclude that Google and Microsoft are the equivalent of two big dogs peeing on trees to carve out their turf. Ultimately these two dogs will co-exist and form a happy duopoly in many markets. Until we get to that point it’ll be one helluva show.
Linux, VMware and the rest of the gang
Aside from the tri-match of Apple and Google vs. Microsoft there are a handful of other skirmishes worth watching.
The biggest one is an oldie, but a goodie: Linux and the open source movement. How exactly does Microsoft compete with free? Seems impossible until you consider that bottled water competes with tap and people buy it.
But Windows Server has hung in even as Linux has become standard in data centers. What you wind up with is another duopoly type game. Microsoft and Linux reside in nearly every enterprise and the odd one out is most likely Unix over time.
Turner will yap about the cost benefit analysis of Windows Server vs. Linux, but in the end you’re set up for a peaceful coexistence. Mixed source are the operative words here.
When you deal with VMware (VMW) the Microsoft Hyper-V scrum looks a lot like its battle with Apple. Microsoft is basically ripping off its PC Hunter ads with its pitch.
Check out Turner on VMware:
Just like we did with Apple, and I’ll cover that in a moment, we’re going to get this virtualization tax, the VMware tax out there and start driving people crazy with the value proposition. We took 24 points of market share, with a product as you can see in the center column that had lots of things that VMware didn’t have.
The list of targets goes on and you can even get into Sony Playstation vs. Xbox if you want, but you get the picture. Microsoft feels like it has some edge back, isn’t above talking smack and is more fun to watch these days from a tech sports perspective. Will Microsoft win them all? No way. I expect some spectacular flameouts ahead, but Microsoft will win its share.
As Turner said:
We’re doing stuff and we’re in the game and continuing to take some of these hard market share opportunities head on and compete because it’s a test of will.
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This article has 14 comments:
Sadly, most managers don't think of concepts as complex as 'opportunity cost' when making these kinds of decisions.
A company should focus its efforts on sustaining of widening its own moat. With the exception of the company's drive toward cloud computing, I'm not certain any of these efforts contribute to that greater goal.
More important than the search numbers, what about the share price? AAPL is far more tasty of late.
Apple probably said to MSFT that, "Hey, update your Ads to use the real pricing...". Nothing wrong with that. MSFT's ads can still make all the same point about how Apple's current $999 laptop is still more expensive than XYZ's $640 offering. I do not see what the big deal is about.
If this sort of innocuous call can be so exciting to MSFT and resulting in something about MSFT gaining its "edge", MSFT must really be down so low that any tiny glance from APPL is like a visit from the King himself. MSFT must be painfully desperate for some sign of attention from Apple.
Instead of "edge", I would say it is "pathetic".
As an end-user, I would be happier if both companies spent their advertising budgets on making their core applications and services work right.
Granted comparable spec'ed laptop offerings with Microsoft Vista (UGH) is cheaper than Apple but which is perceived to be way cooler? Yep Apple. So this comparison is kind of "tie".
That said Apple has whipped Microsoft on:
1. Ipod and Itunes vs. pathetic Zune and joke Zune music site.
Microsoft began to peddle re-badged and lousy Toshiba MP3 player at least 5 years Ipods were introduced.
2. Iphone vs. Windows Mobile (plus countless other names like remember Pocket PC?)
Microsoft has been trying to monopolize the smart phone OS for over 10 years and the bloated OS has been distant also ran for years.
In summary Apple carries the cool hip image while Microsoft carries POS softwares like Vista and hardwares like Xbox with dreaded ring of death.
MSFT stock is dead money. The stock repurchase is all about transferring cash to Bill Gates. Most MSFT employees are retired in place. The manipulators have remained, the doers have left for other places where they can do
Rather than watching Microsoft fight others, the bigger issue is if anyone will ever be able to take Microsoft on in its own cash cow, Office. There are certainly many improvements that can be made, especially on the retarded version they made for Apple. The same reason Microsoft needs to deflate Google's cash cow is the same reason sooner or later Google needs to at least put up a decent proposition against Office. Since they are serious about making the seach more like an OS I'm sure they are in development of such an application.
Even though Microsoft ad wise may look more lively and on the offensive, I would tend to side with those that believe that Microsoft has been on the defensive. They are loosing the portable device and music platform, the high end PC market, the search wars, and Linux has spread like wildfire among corporate servers. Their only real victory is perhaps the demise of Sun which was more due to their own failures than that of Microsoft.
Even though I think Microsoft will do fine in the next cycle since I and everyone else in the world can't wait to get rid of Vista (meaning i must upgrade to their new OS) it's a far cry from saying Microsoft has it's edge back. Microsoft has no mojo. It just has a giant pocketbook and a monopoly that hopefully will become obsolete one of these days. They don't encourage technological advancement, they stymie it. May the digital world belong to the innovators.
Here is an article that really puts things in perspective...
www.roughlydrafted.com.../
Microsoft, with it's typical disregard, does it anyway.
"More important than the search numbers, what about the share price? AAPL is far more tasty of late."
AAPL share price has been much better over the last 5 year period but if you do a recent comparison you will find MSFT on a run. A rising tide may lift all boats, especially if AAPL gets a tablet on the market.