• Newsletter Issue #427

    February 3rd, 2008


    When I read the claim that some one million iPhones were missing, I had to wonder what some of these alleged tech and financial pundits were thinking. They seemed to be utterly ignorant of how things worked in the real world, particularly when it comes to the proliferation of unlocked iPhones, which can be found throughout the civilized world. Then again, maybe it’s easier to suggest that Apple can’t sell the product, and dealers are filled with unsold stock.

    Actually, that would seem to apply more aptly to the Xbox 360, although that’s something you don’t read very much about. Well, on The Tech Night Owl LIVE this week, we covered the search for those alleged missing iPhones with cutting-edge commentator Daniel Eran Dilger of Roughly Drafted Magazine. His answers, based on careful research, are illuminating if you’ve been curious about what’s really going on.

    Now that tax season is forthcoming, you also heard from Intuit’s Scott Gulbransen, product manager for TurboTax. The newest Mac edition, by the way, has some features exclusive to the platform and represents renewed emphasis by Intuit.

    Denis Motova joined me in our “Tech Junkies” segment to talk about car and phone navigation systems and whether it’s just easier to use a map. As far as I’m concerned — and call me an old fogy if you want — I have no problems living with maps, and I’ve survived for years getting around in small towns and large cities that way. And think of all the money I’ve saved.

    For a realistic look at the state of iPhone and Mac security, we brought onboard noted security researcher Rich Mogull.

    On The Paracast this week, David and I will spend an evening with Bill Birnes, publisher of UFO Magazine and co-host of the new History Channel TV series, “UFO Hunters.”

    During this conversation, Birnes will provide new information on his collaboration with the late Philip Corso, and the controversy over the so-called “deathbed confession” about the Roswell crash from the late Walter Haut.

    Coming February 10 (Rescheduled): Anthropologist C. Scott Littleton, Ph.D. discusses the “Battle of Los Angeles” UFO case of 1942, plus UFOs and the paranormal in Japan and similar incredible events throughout human history.


    After the first Mac came out in 1984, some believe that Apple, by dint of a series of blatant blunders, failed to take advantage of its opportunity to own the personal computing landscape for a generation and beyond. To some extent, I agree, particularly during the dark days of the 1990s, before Steve Jobs returned. Then, it seemed as if the company couldn’t do anything right when it came to properly marketing their products.

    I still recall all those unsold Performas getting dust at the local Circuit City store.

    At the same time, Microsoft gained dominance not as a result of having superior products, but simply because they know how to play the spin game big time and make people believe they they could do no wrong. Of course, when Windows 95 arrived, it wasn’t all that bad, and a growing number of tech pundits claimed that Microsoft had actually reached parity with the Mac.

    Regardless of the truth of such assertions, and I thoroughly disagreed after working with both, Apple fast became the beleaguered company, the one doomed to fail eventually. Indeed, things were so bad in 1996, you could almost believe that the doomsayers were spot on, and that Apple was indeed on life support.

    In retrospect, you have to congratulate the executives who decided to buy NeXT and bring Steve Jobs back to Apple. I don’t think they were stupid enough not to expect Jobs to stage a palace coup eventually, but that was, in retrospect, a good thing.

    Segue to 2008 where Microsoft is, in some respects, becoming a little beleaguered itself. Sure they’re making record profits from their operating systems and applications, but trying to move beyond their core products has proven extremely difficult.

    Their inability to gain traction in search and online ads is the key reason why they are making that huge play for Yahoo, which I discuss in more detail in the next article.

    Certainly, stuffing the channel with unsold Xbox 360s isn’t the way to become a game machine powerhouse, and they aren’t doing so well with digital music players either. In fact, as the success of the iPhone and iPod touch clearly demonstrate, that particular product category is morphing into a new mobile platform. That’s something Microsoft has yet to understand.

    If Yahoo goes for Microsoft’s offer, you can bet the latter’s attention is going to be focused on something other than personal computer operating systems for a long while. Besides, Vista’s successor is still several years away.

    So the time is ripe for Apple to continue to market the hell out of Macs and gain significant market share. It’s still in the single digits worldwide, of course, but there’s plenty of room to expand, and lots of people who are totally disgusted with Windows and are ready to take the great leap across the tracks to something far better.

    Apple’s ubiquitous Mac versus PC ads continue to hammer away at Vista’s shortcomings in a gently amusing way. The MacBook Air is also getting a fair amount of TV exposure in those clever new ads that will also sell lots and lots of manila envelopes, no doubt.

    The focus here remains on the consumer, not the business person. So, of course, some tech writers will claim that Apple is frittering away significant possibilities of getting more play in the enterprise. But they fail to realize that the people who own those businesses are also consumers, and when they buy a new Mac and perhaps an iPhone, they are going to be tempted to go to the IT departments and suggest that they support Apple’s gear too. When the directive comes from the top, the IT people aren’t going to say no, and Apple knows this full well.

    But can they do more to boost market share big time with Microsoft looking elsewhere? Would a larger ad budget help? What about more print ads to supplement the heavy-duty broadcast buys?

    More to the point, what about the products themselves? Is there something Apple might be missing to fill out its Mac and “mobile platform” lines to increase sales even further?

    Certainly the iPod line is expansive, and, regardless of your budget, you’ll find an affordable model. But when it comes to Macs, Apple’s half-hearted approach to selling the Mac mini is its only foray into the sub-$1,000 desktop category. True, there isn’t a whole lot of profit to be made in that market space, but surely enough cheap PCs are moved at the Wal-Mart stores to provide strong temptation.

    I really think that Apple ought to do more to sell the Mac mini, but there is also a serious need for a costlier, more powerful model that would be situated between the mini and the Mac Pro. Again, we return to my vision of the headless iMac. Sure, some of you might suggest this is just another niche market that isn’t ripe for the picking. But what about the MacBook Air? Sure, it’s a blatant fashion statement, but the number of died-in-the-wool road warriors who will buy them despite the well-known trade-offs is certainly far lower than those who’d prefer the regular MacBook or MacBook Pro.

    Now that Apple has delivered a thin and light note-book, wouldn’t a mid-priced desktop Mac be the next logical item on the agenda? I don’t see there would be much in the way of development costs here, since it’s just an extension of the existing iMac hardware. I actually think that they’d sell more product, even if they lose a few iMac and Mac Pro sales along the way.

    In the end, it would provide superior coverage of the desktop segment, and provide far fewer arguments for people to stick with Windows.

    What do you think, gentle reader?


    The news that Microsoft has made an unsolicited bid for Yahoo came only partly as a surprise to me. Microsoft has had little success penetrating the world of online advertising and searching, and Yahoo seems to be on the skids, with plans afoot to shed some 1,000 workers.

    Indeed, neither company has had any great success overtaking the strength of the market leader, Google. Sure, Google didn’t earn quite as much as analysts projected this past quarter, but you cannot always fault a company because the analyst tea leaves failed to reveal the truth.

    The fact is that, even when you combine the market penetration of Microsoft and Yahoo, Google is still way, way ahead when it comes to the world of online searching. So what made Steve Ballmer and the rest of the crew at Microsoft offer a huge wad of cash and stock to acquire Yahoo

    In short, the answer is failure. Microsoft has tried to make it in the online world since the 1990s, when they introduced MSN to compete with AOL. Of course, that’s when AOL was flying high, and Microsoft was regarded as the untouchable superstar of the personal computing world.

    How times have changed. MSN never realized its potential as an ISP powerhouse, although the name survives. AOL, flush with dot-com play money, bought Time Warner, considered to be one of the worst mergers in modern history. Thank heavens, Time Warner came to their senses and reasserted control when the bubble burst.

    But you have to wonder what Microsoft is thinking here. No merger of this sort can be done seamlessly. Even if most of the employees will be retained in the new company, assuming they want to stay onboard, it will be a huge task to somehow merge these lumbering online giants, with no guarantee of success. Besides, Microsoft has never acquired a company of that size, and questions of true synergy have yet to be resolved.

    As a practical matter, if Microsoft poured that much money into its own online efforts, wouldn’t it fare somewhat better? Just wondering.

    But here’s a reality check: Yahoo didn’t just bend over and bow down to Microsoft. This is an uninvited offer. Call it a hostile takeover if you will, and Yahoo has already said they plan to take their own sweet time deciding how to deal with the situation. That can mean a delay of days or weeks, at the very least.

    At the same time, it’s quite possible there will be other suitors, including Rupert Murdock’s News Corporation. Yahoo may have choices, or, in the end, decide to go it alone and try their best to rebuild their business.

    In the end, even if Yahoo does agree to join the Microsoft fold, there will be intense investigations from the U.S. and European Union before a decision is made whether to approve the deal. In the intervening months, Google will have plenty of time to decide how to handle its new competition.

    During this period, Microsoft and Yahoo will be tarnished companies, since the future direction and potential for success will be troubling unknowns. I rather suspect that their online advertising revenue is apt to suffer in light of these uncertainties, which will only help Google further expand its lead.

    Even if the merger succeeds, Microsoft and Yahoo will not leave the starting gate as the sum of their parts, but at a substantially lesser figure. The road they travel in their quest to gain market share against Google may prove more difficult than ever.


    The Tech Night Owl Newsletter is a weekly information service of Making The Impossible, Inc.

    Publisher/Editor: Gene Steinberg
    Managing Editor: Grayson Steinberg
    Marketing and Public Relations: Barbara Kaplan
    Worldwide Licensing and Marketing: Sharon Jarvis

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    5 Responses to “Newsletter Issue #427”

    1. […] Story continued in this week’s Tech Night Owl Newsletter. […]

    2. Dana Sutton says:

      To answer your second essay first, Microsoft trying to buy out Yahoo seems a bit like Cunard calling up White Star and making an offer on the Titanic after she started taking on water. Yahoo doesn’t seem like it’s going anywhere, and it’s hard to see what Microsoft could do to breathe any life into it.

      As for the other one, besides business there’s the education market. A few years ago I visited a local high school and saw its computer lab, which had maybe fifty e-Macs ganged together so that the guy at the head of the room could control them all with Remote Desktop. Even with the cheapest Mini the cost of setting up a similar lab today would be a good deal higher because each station would require 1 Mini + 1 monitor + 1 mouse and keyboard. To stay alive in the education market Apple needs to have a super-low end Mac such as might be approved by the purchaser for a school district.

    3. kenh says:

      Dana; Apple needs more than that. I work in a school system that has 6,000 computers. They are attempting to make the complete changeover to Windows. Teachers are not happy, etc.

      But the IT dept. has a comfort level with Windows, and believe it or not, I understand it. The devil you know vs. the angel (Apple) who really does not pay attention to them.

      People make all kinds of comments about IT people, job security and all that, and there is a lot of truth in that.
      But when you work on an IT desk all day long, you need to respond in seconds to a specific complaint.

      And although the system is a Rube Goldberg device like any Windows collection, they understand it and can actually work with it relatively well. In order to respond to a specific complaint, they do know generally where to go and what to do. Macs have fewer problems, so they know less about what to do when it does happen, as silly as it sounds. They don’t know the bigger picture of Windows vs Mac and honestly do not need to to do their job every day.

      And when an Apple rep shows up, typically he or she is some sales/marketing type. A waste of time.

      The IT people need to meet with tech people, not salesmen. Yes, there are many fewer problems, but when you have one, you need to call a familiar voice who can deal with your day to day problems.

      My experience with Apple tech people by phone is uniformly excellent, but that is a completely different thing than having an “enterprise” tech department who knows how to work with a 6,000 computer network. You tend to call the human that you know even if you don’t like him or her, and that is what they can do in the Windows world.

      We can’t just keep saying, “Macs have fewer problems, so you don’t need that” You still need it, even to answer a silly question that the user should know.

      Maybe that enterprise network tech group exists, but Apple needs to go to these companies and schools and say: Here we are, we exist, and this is how exactly we can help you. They tend to sit there like an old maid hoping for a date. You come to me, etc.

      Apple does have kind of an anti-corporate culture image which they seem to cultivate, but at the same time they profess to love education. But it is a huge mistake to think that there is any significant difference between education and “evil corporations” Structurally, they are identical and have pretty much the same needs.

      They can’t have it both ways.

      Not getting down on you, Dana. We all know that Apple could dominate business over a period of years if they chose to. Educational systems and corporations are made up of people, and Apple does the best job of serving people.

      End of sermon.

    4. gopher says:

      Apple could release the Mac Mini Pro. And they would confuse a lot of people because the name would make people wonder is it a pro machine, or is a consumer machine. In a way it could liken itself to the Cube, but with more expansion possibilities. It would have a form factor of a 6500 on the outside, but the simplicity of the Mac Pro on the inside. It would be clad aluminum with PCI-X and two optical drive bays and three hard drive bays. And it would open like a Mac Pro.

    5. bellidancer says:

      What a minute. Education and business may have essentially the same needs, and they may have similar structures, but to say they are essentially the same is crazy. Education has different goals, a different environment, and a different bottom line. A school that is failing does not go out of business. It gets more money to try to fix its problems. Conversely, a school that excels does not receive more money. School decisions are not driven by market forces. It is difficult for parents to select better schools for their children. Most children attend their neighborhood school no matter how bad is it.

      The educational technology market has changed over the years. Schools used computers before personal computers, even K12. Then the technology was completely top-down and teachers had little say about the technology. The personal computer was a revolution and the teacher was the leader. Teacher-centric technology leadership was the rule and teachers dragged schools into the new technology. Educational technology was bottom-up in the eighties and early nineties! The first District Technology Coordinators were usually teachers. Schools were mostly ignored by “real” technology companies. Organizations like Computer-Using Educators were teacher-led powerhouses.
      My story was common. I was a classroom teacher who on my own became interested in computers when Apple gave an Apple II to every school in the state of California. I attended computer conferences, seminars, and inservices and became a school and district technology expert. I became a Technology Mentor Teacher and finally left the classroom and became a Technology Coordinator. At educational technology meetings, the attendees were often people with the same background.
      With the increasing sophistication of technology and the maturation of the educational technology “market” more and more school districts are setting up “real” IT departments with “real” IT people. From my perspective, that means the focus in educational technology has been changing from education to technology. Again educational technology has become top-down. Obviously the technical knowledge required to manage a modern technology infrastructure is more than most teacher/tech coordinators would have. (I graduated with degree in History in 1977 and never touched a computer while in college, however, since then I have taken dozens of computer classes and will have my CCNA certification in the next couple of weeks.) But the computer admins/technicians we hire often have no clue about education, (despite having been a student for at least 14 years.) Administrators will often defer to technology “experts” rather than their own teachers. So technology decisions get made by people who do not understand teaching or the environment teachers work in. (Unfortunately, that seems at times to refer to the administrators as well as the vendors.)

      Worse, now the technology vendors see educational technology as fertile market. We have so many vendors come to us with business solutions that ignore the differences between education and business. I don’t know about other states, but technology funding is so screwed up in California that technology support can not work in education the way it does in business. My district of 12 schools, 7600 students, and about 2000 computers has 3 technicians to kept everything running! We can’t do things the way a business would. I fight to keep Macs in the classrooms because we can’t support Windows. We don’t have the resources. It drives me nuts when vendors breeze into a district and sell the administration on technology the IT staff can’t support.

      But Apple is increasingly causing me frustration in its lack of support for the educational IT depts. Apple has a great sales force to go out and get the big contracts, but Apple neglects education in general. Apple doesn’t seem to realize they need us more than we need them.

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