• Newsletter Issue #504

    July 26th, 2009


    I enjoyed watching Wall Street mess up totally on both Apple and Microsoft. For the former, they underestimated quarterly earnings. For the latter they aimed too high. In either case, you have to wonder whether they have discovered what’s really happening in the PC industry, at long last at any rate.

    So on this week’s episode of The Tech Night Owl LIVE, we explored Apple’s financials and the record sales and profits they reported for a non-holiday quarter. These results stand in clear contrast to Microsoft’s declining fortunes, where they suffered the first full-year drop in sales since 1986.

    Along to talk about Apple’s stellar performance: Stephen Baker, an industry analyst from the NPD Group, and Macworld Editorial Director Jason Snell. Since you expect an analyst to be careful in making judgements, Stephen’s reaction to the news that Apple owns 91% of the U.S. retail computer market above $1,000 were appropriately prudent. He has the figures, of course, since the company he works for produced them, and they, to me at least, clearly demonstrate that the PC market is struggling to shave prices and compete on volume. That, however, is not the best place to be.

    Apple is prospering because people would rather buy the more costly, feature-laden product that simply gets the job done without much fuss or muss. Microsoft would love to play in that sandbox, but it’s not in their DNA.

    By the way, since Jason is also our official TV expert, he also presented his fearless observations about some of the highlights of the current season. That segment, by the way, inspired one of my commentaries in this week’s issue.

    You also heard from Macworld’s Dan Frakes about his efforts to transform a Dell netbook into a Mac OS X computer by “hacking” Leopard to install on that cheap box. Success or failure? When you listen to the episode, you’ll see that it does work well enough, but it doesn’t mean Apple needs to jump into the netbook fray. There are too many shortcomings in those cheap boxes, such as reduced-sized keyboards and screens and questionable longevity, which are causing the feeling of buyer’s remorse on the part of many customers.

    This week on our other radio show, The Paracast, we present veteran researchers Dennis Balthaser and Frank Warren discuss the latest on the Roswell case and the prospects for UFO disclosure.

    Coming August 2: The Paracast remembers noted UFO researcher Richard H. Hall, who died recently. Featured guests include Jerome Clark, Don EckerPaul KimballDr. Bruce Maccabee and Kevin D. Randle.

    Coming August 9: Learn about the amazing life story of writer, producer and modern mystic Walter Starcke.

    Coming August 16: Paranormal talk show hosts, investigators and experiencers Paul and Ben Eno discuss their ongoing research.

    Now Shipping! The Official Paracast T-Shirt. We’re taking orders direct from our new Official Paracast Store, where you can place your order and pay with a major credit card or PayPal. The shirts come in white, 100% cotton, and feature The Paracast logo on the front. The rear emblem states: “Separating Signal From Noise.” You can get them for $14.95, each, plus shipping, and you can select from most popular sizes.


    If you can believe The Wall Street Journal, the main reason Microsoft suffered reduced sales is because of the “PC Blight,” which refers to the economic downturn affecting the PC industry. They sell less, so it means Microsoft distributes fewer OEM licenses, from which they earn most of their software income.

    However, millions of netbooks with Windows XP preloaded on them are selling, so didn’t that make the difference? Not quite. You see, in order to get PC makers to ditch Linux and still keep the prices ultra-cheap, Microsoft had to dump cheap XP licenses on them. In other words, they were forced to push an eight-year-old operating system, because the current one, Vista, was too sluggish to run acceptably on these little boxes and, of course, too expensive.

    Supposedly Windows 7 will be beefed up enough when it comes to performance to run acceptably. At least Microsoft is banking on that to gain decent sales in the final quarter of the year, but is that true? It’s hard to know, because there’s not much beta experience to depend on. Even then, you can’t assume that a beta version of an operating system represents the final product, or even that some of the people reporting great performance and fewer problems aren’t paid shills quietly doing Microsoft’s bidding.

    Vista wasn’t such an obvious train wreck until it was actually released, and the truth was clear to one and all, although it’s also true the beta experience was less favorable. Or maybe Microsoft didn’t recruit a sufficient number of hacks to boost Vista’s prospects with impossibly positive spins instead of genuine reviews.

    But lackluster OS and office suite sales don’t tell the whole story. Microsoft suffered worst at the hands of consumers, and lost lots of money on the Xbox, which has had some success in the past, and the failed Zune digital media player.

    Microsoft can be stubborn in many respects, and they usually won’t abandon a failing product. Well hardly ever. So they have invested tons of money into building a workable search engine. The latest iteration, with the peculiar name of Bing and an oddly colorful if inappropriate user interface, has apparently attracted some early attention. But when your competition becomes a verb, such as Google, you can’t just have a product that’s almost as good, or even slightly better. Instead, Microsoft has to demonstrate that innovation is not just a load of hype to them, but means something. But that’s also against their DNA.

    Consider their reported efforts to open a chain of retail stores. Now Apple actually builds hardware and software, so they have lots of things to sell even before third parties enter the picture with accessories, applications and even a handful of computer books. Most of Apple’s income comes from consumers. Most of Microsoft’s income comes from businesses who enter into long-term pacts for software licenses.

    So what is Microsoft hoping to accomplish at a retail store that they cannot already accomplish with existing third-party vendors, or even through direct sales to businesses? What is their core audience and how can they best reach them to boost revenue?

    Apple, you see, had a strong reason to go into the retail business. Many of the dealers on whom they depended for a lion’s share of their sales didn’t do right by the brand. How often Steve Jobs lambasted Apple vendors in the old days, complaining in especially blunt language how they left Macs high and dry and failed to provide an attractive environment and knowledgeable sales support.

    The Apple Store represented a truly innovative experiment, and third-party dealers are, in part, attempting to imitate the layout to a lesser or greater degree. By using Apple’s own hugely-successful retail initiative as the guide, independent retailers will be able to move more Apple product. They make money, and Apple’s revenue increases.

    Microsoft, on the other hand, seems to think that if Apple can make it in the shopping malls, they can as well. They just have to provide essentially the same features with different labels and a Microsoft logo on the storefront. So the Genius Bar becomes the Guru Bar. Give me a break!

    Sure, Microsoft can continue to squander billions of dollars hoping and praying that they’ll regain the magic formula to make them grow fatter and fatter and defeat all those upstart competitors. That sort of backward looking approach will only hasten the day where they will ultimately decline into insignificance.

    As to the businesses that depend on Microsoft’s bloated, malware-prone products to manage their operations, surely a growing number must be having second thoughts by now. How much money can they afford to lose, for example, from malware outbreaks? The totals are now in the billions of dollars, you see. Indeed, how many businesses — in addition to Microsoft of course — have had to lay off employees because of those losses. And for the workers who remain on the job, how many have seen their paychecks flat year after year and benefits decrease?

    Sure, there are lots of economic conditions in place now that hurt businesses far more severely, but I won’t get into such politically-charged issues as health care reform, high taxes, the inability to get business loans and so on and so forth.

    The issue at stake here is whether a business prospers from the exclusive use of Microsoft products, or continues to suffer. And will the message ever get through to Microsoft’s uber-rich executives, or will they continue to live a trouble-free existence oblivious to what’s really happening around them?


    In the old days of cable and satellite TV, most of the regular series fare came from the traditional broadcast networks, along with the usual dose of news and public affairs. The cable stations delivered movies and repeats, or at least that’s the way it used to be.

    One day Ted Turner invented CNN, and news delivery methods changed forever. Each day, millions of viewers catch their regular diet of the latest news and commentary from CNN, Fox News, MSNBC (a network originally founded by Microsoft and NBC) and several others. Far fewer numbers of viewers wait for the famous six o’clock network news for their daily supplement to regular newspapers.

    Both free and premium cable stations ultimately got involved in creating their own original programming. The premium networks, such as HBO and Showtime, came up with concepts that would never survive on network TV, because of adult situations and a fair dose of vulgar language. More important, the production values, such as the writing and acting, were good enough to earn such programs as “The Sopranos” Emmy after Emmy for excellence.

    The basic cable stations got into the act as well. Sometimes they’d just grab a failing network show and continue it with a reduced budget. More and more, however, there are original ideas that deliver compelling drama and action. Take “The Shield,” about a team of cops on the edge, “Damages,” about a lawyer who breaks the rules and sometimes even commits murder, or that wonderful serio-comic variation of the police procedural, “The Closer.”

    These and other shows capture ever larger and larger audiences, which are coming closer and closer to those of the regular networks.

    Almost invariably, they feature ensemble casts that include not just unknowns and familiar character actors, but sometimes feature Oscar-winning movie stars. Glenn Close, for example, did a full season on “The Shield” as a police captain before she led the cast of “Damages,” which also featured Oscar-winning William Hurt in the last season.

    Now in its second season is “Leverage,” featuring another Oscar winner, Timothy Hutton, who assembles a group of quirky criminals to right wrongs.

    More recently, BBC America, which delivers some of the best programming from the UK, featured a five-night science fition mini series, “Torchwood: Children of Earth,” which was truly fabulous. The acting, writing and production were all first rate, and the show wouldn’t look out of place on any of the major U.S. networks. Special praise goes to actress Eve Myles, someone essentially unknown in the “colonies.” Her performance as Torchwood member Gwen Cooper was variously funny, sad, vulnerable and tough. Although American John Barrowman deserves kudos as the immortal Captain Jack, Myles remains the soul of the show.

    The future of “Torchwood” is in question, since this mini series supposedly represents the sum total for the current season. But it would be a tremendous loss to the science fiction community and regular TV lovers who adore great action adventure if it all ends here.

    As you can see, there’s a wealth of great programming to be found on cable. Broadcast networks are suffering and, except for a few and not always successful alternatives, seem to have no better ideas than to spin off existing shows. Do we really need three versions of “CSI”?


    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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