Apple Versus Microsoft: The Great War Enters a New Phase

April 9th, 2008

Here’s where we left off in the 1990s: Apple CEO Steve Jobs, then with the word “interim” ahead of his title, conceded that the operating system wars were over and Microsoft was victorious. It doesn’t matter if Microsoft cheated to get there — and I think they did. In the end, Apple was doomed to be no better than second best, and, at that point in time accepted a $150 million dollar investment from Microsoft and a commitment to continue to develop Office for the Mac.

Now some felt, then at least, that Microsoft’s investment somehow rescued Apple from financial ruin, but that was simply not true. It was merely part of a deal where various disputes over patents that had consumed years of legal fights were all brought to successful conclusions.

Oh yes, Apple agreed to make Internet Explorer the default browser on the Mac OS, but we all know how long that lasted. But I’ve already written about the rise of Safari and whether the browser wars have flamed anew. Some of you think they have, actually.

In any case, Apple seemed doomed to niche status, until things changed drastically before Microsoft really noticed.

As Mac development moved at a reasonably rapid pace, Apple’s market share seemed to languish, although profits remained good. However, the arrival of the iPod put Apple in a whole new ballgame. Here’s where Microsoft’s traditional schemes to conquer markets simply didn’t succeed, or maybe they just reacted too late. But Microsoft has always had difficulty succeeding outside of its core market of applications and operating systems.

One day, Apple found itself at the very top of the digital music space, with more customers on the Windows side than on the Mac. iTunes, in fact, recently became the number one music retailer in the U.S., ahead of even Wal-Mart and Amazon.

Microsoft? Well, I think they got themselves pretty much blindsided here, because I don’t think they ever expected Apple to top them in any way. Their efforts to compete, first with various incarnations of their PlaysForSure DRM initiative, and finally with the Zune, were abject failures. Sure, I gather the Zune actually got itself a niche market of a few percent and is holding steady, but imitating a two-year-old iPod really isn’t the way to go.

As far as the iPhone is concerned, well, Microsoft is taking money from Apple to provide ActiveSync technology, which means that this hot-selling gadget will be a full citizen in retrieving Exchange email, calendars and all the rest. I just wonder whether Apple wants to do the same for Macs, or simply compete with various open source tools in Leopard Server.

Microsoft’s advantage, of course, is to sell more of those costly Enterprise server licenses, while the deal gives Apple plenty of credibility in its quest to convert big business from the BlackBerry to the iPhone.

At the same time, Microsoft’s Mac Business still makes plenty of cash selling Office for the Mac. What a strange relationship, though when money is involved, even supposed enemies can find ways to cooperate. The higher the figures, the easier it is to get along.

In the end, though, you wonder how the Mac versus PC wars will continue to play out over time. After all, sales of Macs are going through the roof, and it’s not just because of the arrival of the MacBook Air and the recent updates to the MacBook and MacBook Pro. Even though some of you have criticized Apple for supplying just glossy screens on the latest iMac, they are apparently selling quite well too, thank you. The iMac’s growing success comes at a time when sales of desktop computers are actually tapering off industrywide. So Apple has something good going for them.

While this is happening, what’s Microsoft doing about it? Well, it seems to me their attention is actually elsewhere, as Steve Ballmer continues his great quest to absorb Yahoo and provide real competition to the growing influence of Google.

Now it doesn’t appear to me that Apple has much of an interest in the outcome of the Microsoft and Yahoo skirmish, so long as the end result doesn’t somehow make Macs a poor stepchild in any new online or software products and services.

As to Google, the news about making its App Engine freely available to Web developers has to be causing Microsoft conniptions. Consider how Microsoft spent years pushing its .Net initiative — and, frankly, trying to explain what it is. Just how are they going to be impacted by the latest Google encroachment on their territory?

In the end, while Microsoft plays second fiddle in the great war to become an online powerhouse, Apple can do what it’s doing and get a higher and higher share of the personal computer market. I wonder if Steve Jobs and the rest of Apple’s executive team are hoping Microsoft will continue to focus the lion’s share of attention elsewhere. That could be the best news of all for Apple.

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13 Responses to “Apple Versus Microsoft: The Great War Enters a New Phase”

  1. K. Trot says:

    Ironically I think Apple has been a major contributor to the eventual demise of the desktop OS in the consumer market – Apple’s included. Apple will cannibalize some market from Windows for a little while, but the overall desktop OS market is going to become flat in the long term. MS knows this so as you say they’re focused on becoming another Google. Apple knows this as they focus on portable devices and becoming a media distribution powerhouse.

    I have many friends with iPhones, iPods, Blackberries, etc. who have given up their G5s and Dells with the realization that they just don’t need them. Or they use their desktops so infrequently (e.g., tax time), that they have no interest in upgrading or spending money on them. Especially for young people the desktop, even OS X, just doesn’t capture the imagination (unless it’s running on an iPhone:-). It’s a paradigm shift that’s here to stay. This doesn’t bode well for Dell, but Apple has seen the writing on the wall which is why their desktop offerings will increasingly play second fiddle to the portable gizmos and media store.

  2. Andrew Z says:


    I’m not sure of the central thesis in this article, however I would paint the success of Apple’s products and Microsoft’s failures on company focus.

    Apple focuses on one product category and implements it fairly well. They put an emphasis on core functionality and introduce few new features over the course of a year or two. iPods didn’t add video for several iterations. Basic functionality such as storage space is added as the hardware capability improves. I’m confident iPhone/touch will follow a similar development path.

    Microsoft, on the other hand, tries to be everything to everybody. Is it a game company, phone and media player developer, consumer software company, small business software company, or enterprise player? It tries to be too much, burdening the user with too many ways to do the same thing. As a result it is unfocused and unable to execute any one thing very well. Their most success contemporary products, X-box and Zune, while not the market leaders, are end to end products developed outside of the core Microsoft development and release process. They constantly try to chase the latest fad with no thought to their core competencies.

    I believe it would have been the best thing for Microsoft to have been broken into smaller companies in the late ’90s. Maybe Ozzie can save them, but they are their worst enemy. Please the customer and success will come. They only seem to be pleasing their own management which is a recipe for a decline.

    I’m not experienced in running a business so I could be wrong, but as a customer this is why I don’t believe in 1 Microsoft Way.

  3. Spencerian says:

    Gene, your observations are insightful as always.

    To add to your comments, there’s an important distinction to make in these “new OS wars.” As you noted, the operating system isn’t the thing. Neither, per se, is the hardware (there are many better music players, technically-speaking, than even an iPod Touch). As a previous poster said, Apple sticks to its core competencies (since 1997 at least). They sell not only a music player, or a phone, or a computer, but wrap it in an attractive experience, nuanced and polished, fine crafted. Often the products are so innovative that using it is practically intuitive: the iPhone and Touch are certainly that.

    Apple’s ability to sell the whole widget and stick to a consistent polished plan is working well. Competitors face the challenge of leadership, of branding against the juggernaut Apple logo, and of creating not just a product or a portal for its product, but convincing buyers that they’ll feel good, heck, even LOVE their purchase. Microsoft and others knew of the classic Apple Mac zeal, but none of them apparently expected that it would mutate through iPods and iPhones and become a new infection all over the world that their “good enough” products could not counter.

  4. I don’t see desktop and portable OSs as being either/or. Each does a different thing. The casual user, which is to say, the data consumer, will find iPhones and other smartphones quite satisfactory for their needs. The content creators are not going to write on an iPhone. They won’t edit video on an iPhone, or crop photos, or design anything. One is passive, one is active. The desktop is active.

    MS already owns the desktop, even though the wave it rides is collapsing. MS doesn’t see it that way, of course, and wants what the other guy has even as it loses what it has. Apple makes great stuff. It doesn’t matter what that stuff is as long as it connects with its core product, OS X. iPhone, MacBook, AppleTV, iTunes, all of that is OS X. MS doesn’t see that Apple’s product is a competitor with its Windows monopoly because to them, it’s an iPhone, or iTunes. By the time they realize their wave is collapsing around them, they will be IBM of the ’90s and Google (and maybe Apple) will tower over them even as some new, as yet unknown beast enters the fray with new technology, which is the grin in the grimace of change.

  5. John Davis says:

    It seems to me that Microsoft has only ever succeeded in large contracts with enterprises and governments where the buying is controlled by a few people. Without this, it would have been smaller than Apple. Its hardware efforts, the XBox and the Zune, etc., have all failed to show a profit.

    Microsoft follows. It copies or buys technology. It creates and innovates very little.

    But then, so do enterprises and governments.

    The similarity here, is “group think.” Someone once described Barry Manilow as a “singer designed by a committee.”

    Microsoft products are designed by committees.

    If they do finally buy Yahoo, they’ll screw it up.

    Yours sincerely,

    John Davis

  6. Chuck says:

    My guess is that MSFT will rule the Enterprise, and Apple will nibble away at it. There is no money to be made selling computers to the Enterprise. Look at Dell fight for its very survival because it’s all about being cheap.

    Apple will rule the consumer, design, prepress and graphics markets, where the money is. Apple is in the best position they could possibly be right now.

  7. Hold your friends close; your enemies closer.

  8. Dana Sutton says:

    “Ironically I think Apple has been a major contributor to the eventual demise of the desktop OS in the consumer market.” If there is any truth to this, italicize the word “consumer,” because it won’t have any application for content producers. And in this electronic age it’s very easy for somebody to slip over the line almost without realizing it. For ex., the guy who posts some pix of his new baby on the Web using idiot simple AOL prefab page-creation tools so that the home folks back in Peoria can see it has suddenly become a content producer. You might even say that of somebody who uses a very simple editing tool to crop or remove the red-eye from his photographs. The number of potential purchasers who can’t be described as 100% passive “consumers” must be huge, and some of the software Apple bundles with its OS and includes in iLife encourages customers to cross this line, it’s a pretty fundamental part of the Apple sales pitch. And the traditional desktop/laptop is still the only form of computer gear that facilitates this.

  9. Ken says:

    I think what really differentiates Apple from Microsoft is very simple. Apple sells to the user, while Microsoft sells to the buyer. This is an important distinction.

    Apple’s emphasis on the user leads to its vertical integration and to its concentration on one market at a time. It also leads them to minimize confusion in software (one version of OS X that includes everything) and in hardware (all base configurations are usable, no “do you want a gas tank with that?”)

    Microsoft’s emphasis on the buyer leads to its dichotomy of home and business software and too many confusing choices. For example, Vista comes in 20 versions in the US: 5 editions times 2 (32 or 64 bit) times 2 (upgrade or full). Microsoft even offers a features matrix so that confused buyers can make an informed choice, and includes an easy upgrade method, to fix a wrong choice. Apple offers one version of OS X that contains everything. What you don’t need, you simply don’t use. Apple’s products work great in the enterprise. The US Army is a major customer and runs its web site on OS X. The only thing Apple lacks is not the product but the marketing.

    Trying to buy the right hardware from Dell and the right software from Microsoft can make your head spin. Selecting the right hardware and software from Apple can even be fun.

    Apple built the iPod and the iPhone for users, and then convinced suppliers to come on board. Microsoft built the Zune for its partners, and then tried to turn all those partner-oriented features into user features–for example, “squirting” is more valuable to partners than users, because it turns every user into a salesman.

    Microsoft doesn’t get it. If users don’t like it, they won’t use it, and if users don’t use it, buyers won’t buy it, and if buyers don’t buy it, Microsoft’s partners will all go away. The focus on buyers also breaks down when the same user is simultaneously a home buyer and a business buyer. For Microsoft, the user is number two, for Apple the user is number one. For Microsoft, world domination is the corporate goal. For Apple, making profits for customers is the corporate goal.

    In the end, the world is made up of people. Microsoft has it all backwards, and that is why, at some point in the future, Microsoft will fall like a soufflé.

    How can Microsoft prevent this? Get new top management. Break itself up into relatively independent subsidiaries. Adopt a user focus.

  10. Lino Positano says:

    I had hoped that you cold elaborate on the two points: “…years pushing its .Net…” and “…trying to explain (it).

    How about an article on these? I would be very interested since I know little of these topics.

    Consider how Microsoft spent years pushing its .Net initiative — and, frankly, trying to explain what it is.

  11. I had hoped that you cold elaborate on the two points: “…years pushing its .Net…” and “…trying to explain (it).

    How about an article on these? I would be very interested since I know little of these topics.

    Consider how Microsoft spent years pushing its .Net initiative — and, frankly, trying to explain what it is.

    I don’t know if it’s worth researching, but I’ll think about it.


  12. Hold your friends close; your enemies closer.

    I know what you mean. 😀


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