• Newsletter Issue #712

    July 22nd, 2013


    As the tech media awaits word from Apple about the June quarter financials, it’s clear that other companies aren’t having an easy time. Google has missed estimates, which is a rare thing, but is supposedly partly attributed to changing their ad payment scheme in a way that will supposedly deliver more revenues in the future. We’ll see.

    The larger story, however, is that Microsoft isn’t feeling the love these days. That’s why the former and long-time leader of the tech industry was a key subject on this weekend’s episode of The Tech Night Owl LIVE. First on the agenda: Macworld Senior Editor Dan Frakes joined us to focus primarily on the pros and cons of the forthcoming 2013 Mac Pro, and how his vision of a midrange minitower Mac compares.

    We also heard from cutting-edge commentator Daniel Eran Dilger, from Roughly Drafted Magazine and AppleInsider, who discussed the unexpected success of Apple’s “hobby,” the Apple TV, which is the top-selling streaming video player. He also continued his ongoing exploration of the platform wars involving Apple, Google and Microsoft.

    John Martellaro, Senior Editor, Analysis & Reviews for The Mac Observer, talked about Microsoft’s ongoing problems with lower-than-expected earnings and the decision to take a $900 million write-down on the unsuccessful Surface tablet. He also commented on whether the passion for Apple gear is less than it used to be, and about those who continue to clamor for Apple’s next big thing.

    In passing, it is curious that so many people expect Apple to be the main source of innovation in the industry. You can hardly call Samsung and Motorola Mobility innovators. At least the HTC One looks great, though it has a few shortcomings, such as the curious design of the camera. Besides, customers don’t seem to be lining up to buy them. As to former market leader Nokia, well the Windows Phone platform hasn’t paid off for them. Maybe they should have gone Android?

    On this week’s episode of our other radio show, The Paracast: Gene and Chris explore the reports and legends of hidden government installations around the world where top-secret research and possible UFO explorations are going on with Mack Maloney, author of “Beyond Area 51.” In addition to discussing such mysterious locales, he’ll cover incredible tales of animal experimentation and UFO sightings. And wait till you hear Maloney’s views about the Roswell and Aztec UFO crashes.

    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.” We’ve also added a huge selection of additional special custom-imprinted merchandise for fans of our show.


    I suppose many of you felt I must be joking when I began a series columns exploring the possible death or decline into irrelevance of Microsoft. After all, how could Microsoft possibly go out of business, or become unimportant in the tech industry? But the warning signs were there, and I wonder if the company is starting to realize that there are serious problems that need to be solved real soon now.

    In failing to meet Wall Street guidance for the last financial quarter, Microsoft is taking a $900 million write-down on the Surface tablet. A huge factor is an inventory of millions that remain unsold. Just a few days ago, the prices were cut by $150, each, in order to boost sales. But does anyone care?

    The Surface was launched with a huge flourish in the spring of 2012, when Microsoft held a special event in Los Angeles in a curious effort to do better than Apple at staging such sessions. So the media wasn’t told where the event would be held until that very day. Stupid? You betcha!

    It was worse. Almost presaging the discovery that the Surface really wasn’t a terribly good product, the media was only allowed a short time to actually touch the prototypes on display, hardly long enough to type a single sentence on the virtual keyboard, or even the physical keyboard embedded in the sometimes optional covers.

    The specs were bare-boned, almost as if Microsoft was still in the process of working them out. They appeared shortly before the release of the ARM-based Surface RT last October, and they weren’t terribly impressive. Reviews were also sort of hit or miss, with some questioning Microsoft’s decision to make the gadget function similar to a touch-based Windows PC with a different processor. Worse, in adding Office and other bloat to the package, half of the capacity of the 32GB version was filled with Microsoft’s apps and OS. This brings to mind the overstuffed Samsung Galaxy S4 smartphone, where half the capacity of the entry-level 16GB model is largely wasted with Samsung’s own bloatware.

    The arrival of the Surface was announced with some particularly irritating TV ads. You see somewhat set up a Surface on a table, using the build-in kickstand to prop it up. He attaches the keyboard cover with a click, and soon we are inundated with clicks, loud music, and dancers jumping about with neither rhyme nor reason. At no time do you actually see what you can do with the thing. Perhaps Microsoft hoped they’d achieve success with smoke and mirrors, or overwhelm you with loud noises.

    More recent TV ads are meant to demonstrate the features the Surface contains that the iPad lacks. While some of the advantages may be true, some are exaggerated. Worse, Microsoft made the decision to reduce the size of the iPad, so the horizontal depth is the same as that of the Surface, which looks much bigger as a result because of the widescreen display. In the real world, with proper sizing, the actual display size in square inches is larger on the 9.7-inch iPad compared to the 10.6-inch Surface. In other words, those TV ads lie about the iPad, but it doesn’t seem as if Apple is complaining.

    Despite the huge marketing investment, the Surface tablets have failed big time.

    One serious problem is the result of having two distinct versions of the Surface. The RT version is optimized for the ARM processor, and hence can’t run traditional x86 Windows apps. The bundled version of Office is specially compiled for the processor, though it’s just barely touch capable. The Surface Pro, which is little more than a regular PC netbook in a slimmer form factor, is the one that supports your regular Windows apps.

    That confusion no doubt caused untold numbers of customers to simply return them. But that’s not all, and the dearth of Windows 8 RT apps is particularly telling. No wonder the Surface bombed.

    To Microsoft, the Surface tablet is just another PC with touch capability, running on a different processor. This is in keeping with the company’s original unsuccessful concept of a tablet, which was nothing more than a PC note-book with a touch-enabled display. That went nowhere, but Microsoft is nothing if not persistent. With a few exceptions, such as the Zune music player and the Kin, Microsoft will pour untold billions of dollars into a product or service until it begins to pay off. Of course that assumes such products will ever pay off, which may be a stretch.

    Certainly, the Xbox has been successful and even managed to earn a profit after years of huge losses. In 2007, however, Microsoft took a $1 billion charge to fund repairs of a serious defect that rendered many of these gaming consoles unusable. The press didn’t make such a big deal of it. I guess they assumed defective Microsoft’s gear must be par for the course, for if Apple did anything close to that, you’d be hearing the tech and financial pundits declaring, at the top of their voices, “See I told you so!”

    Does Microsoft have a solution other than to keep on keeping on? It doesn’t seem so. The recent corporate reorganization, not an unusual move for Microsoft, doesn’t actually leave the guilty executives looking for a job. But it the buck has to stop somewhere, and that’s on the desk of CEO Steve Ballmer. Clearly he is clueless how to save the company co-founded by his good buddy Bill Gates. That the company’s board of directors hasn’t demanded his immediate ouster hardly makes sense. Or maybe they don’t get it either.


    Apple has hit a hit or miss relationship with the competition. After working together in the early days of the PC era, Apple and Microsoft went their separate ways. There were even lawsuits, but all was forgiven in the 1990s, when Steve Jobs and Bill Gates made a deal that included Microsoft’s $150 million dollar investment in Apple. It covered the cost of non-voting stock, but it sent a signal to one and all that Apple was healthy, and that they would not devote major resources into getting back at Microsoft.

    It doesn’t mean the two companies don’t compete, but they also cooperate when appropriate. Office for the Mac is still being supported. Macs and iOS gear offer Microsoft’s Bing search as an option in the Safari browser. Beginning in iOS 7, Siri will use Bing as a search tool rather than Google.

    But even Apple and Google are still cooperating in some ways. You can get Google software on Apple gear, and Google Maps for iOS is quite popular. In short, Google is getting huge paychecks for ad clicks from Apple, and Google executive chairman Eric Schmidt claims the two companies are talking regularly. So maybe they will avoid suing each other over mobile platforms, although Apple has been embroiled in legal by-play with Google’s Motorola Mobility division.

    When Apple sued Samsung for patent infringement in a California Federal court, the judge asked the two to attempt to reach a settlement. It clearly didn’t work, and the trial revealed two companies that clearly hated each other. On the other hand, recent published reports indicate that there have been ongoing discussions between them since then, and that an agreement was almost reached earlier this year.

    According to a report published by Dow Jones Newswires,”The negotiations included face-to-face meetings in Seoul, South Korea, in December, one document states. The two companies even appeared to come close to a settlement in February before talks cooled off.”

    That doesn’t sound so promising, except for the claim, from “people familiar with the discussions,” that the companies are still talking. Such a deal, if it happens, might be similar to the one Apple struck with HTC last year, in which both companies agreed not to sue each other and to cross-license a number of patents.

    One would expect a similar deal would be sought should Apple and Samsung reach some sort of agreement. Indeed, it would appear to make a lot of sense from a business standpoint. Apple has apparently cut back on component orders from Samsung. However, it is reported that Samsung earned billions of dollars from Apple over the years for memory chips, processors, display panels and other parts. Indeed, Samsung has assembled all those A-series mobile processors at a plant in Texas, although the rumor mills claim that Apple has sought to move their business to Taiwan Semiconductor.

    Now it may well be that it would be very expensive for Apple to completely ditch Samsung, and losing billions of dollars of revenue at a time of supposedly flattening high-end smartphone sales isn’t very encouraging for Samsung. Surely there must be a way for these two industry giants to find a way to compete in a cordial fashion, just as Apple and Microsoft have done for years, and still do business together.

    It’s certainly true that, after spending untold millions of dollars fighting in courts around the world, it’s not as if Apple and Samsung have accomplished very much. There have been victories, and defeats, but you can still buy mobile gear made by Apple and Samsung. May the best product win, but it’s not as if either tech powerhouse is going to go out of business anytime soon.

    Didn’t someone once say, “Can’t we all just get along?”


    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: Sharon Jarvis

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    One Response to “Newsletter Issue #712”

    1. John Dingler, artist says:

      Oh, come on! Why should I want to get along with a second person who breaks into my home and steals my best stuff? I already did that with the first. Never again.

      By your argument, I should again turn the other cheek and negotiate with the person over what he/she can or can’t keep. Geez.

      You know, this is Obama’s MO, if I can bring in an example in which he said — and I have heard him — that “I will negotiate from the middle because that’s the right thing to do and we’ll meet in between,” while the opposition starts its negotiation from the extreme right, which indicates that he has zero capacity to negotiate from a position of strength.

      No, I want Apple to follow Job’s wish to go thermonuclear against Samsung/Android.

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