Microsoft, Facebook Home, MG, and that meaning of it all

///It’s Friday, so expect a typo or two. Email corrections to imkidding@goaway.com.

Yesterday at Facebook the technology media showed up in full force, counting in the hundreds by my estimation, to gawk at whatever Mark and his merry band had created. The result: Facebook Home, an Android launcher - if you didn’t know what that meant until yesterday, you are in surprisingly large company - and a handset in conjunction with HTC.

There isn’t a need to go over the specifics here, as many a fine publication has written that post.

However, the move by Facebook to take a more active roll in the mobile space has resulted in commentary from both those critical of Microsoft, and the company itself. It’s worth our time to look at what is being said, and award demerits where they are fitting.

We’ll cover this in two tranches: Microsoft’s current market posistion vis a vis Facebook’s mobile comments, and today’s comment from the company about Facebook Home itself.

It’s Friday, let’s have some fun.

///

My mostly-digital friend MG Siegler tweeted a short commentary based on a Mark comment uttered yesterday during the event. Here is the resulting Twitter exchange:

MG: Zuck just indirectly declared the end of Microsoft.

Alex: what.

MG: “people will have never seen in their lives what you and I call a computer”

Alex: I read that as: People in developing markets will be mobile first. That != implies the end of Microsoft - a very broad firm.

MG: okay, maybe just suggesting Microsoft will never grow beyond current usage.

Alex: Windows may plateau, sure, but that is only 1/3rd of the company. Also, productivity on mobile hasn’t been figured out.

MG: I’m well aware of all this. But I’m gonna stick by my stance. We’ll revisit in 10 years.

Alex: Going to blog this later when I get back to SF - I think we actually agree here.

///

MG states that if the main drivers of computing usage growth will be mobile, Microsoft is in a very tough spot, as its mobile offerings are currently tertiary - or worse - in mobile categories.

My response was simple as well: Microsoft is a large firm, with more than consumer-facing products, and thus to declare its ‘end’ due to some unfavorable market conditions in one of its markets was a bit much.

MG appears to agree me based on his next comment, but makes a very interesting point: “[I might be] just suggesting Microsoft will never grow beyond current usage.”

Very interesting. We have to decide here what counts as usage. I doubt that MG is discussing things like cloud computing services, enterprise productivity, on-premise server software and so forth. Let’s hit at the core of the discussion and focus on just two Microsoft products: Windows, and its mobile offerings.

This sets aside Xbox, and a host of other Redmond products, but by focusing early we’ll reach a conclusion more quickly.

The PC market is in a long, slow decline. IDC thinks that it will shrink by 1.3% overall in 2013. Global PC shipments were down 4.9% in the fourth quarter of 2012. These are not heartening numbers.

They do not, however, take into account tablets, to the best of my knowledge, and thus they are figures that are becoming increasingly dated. Microsoft’s period of Desert Wandering Mobile Irrelevancy tried to start writing its last chapter with the launch of the Surface tablets. It hasn’t gone well thus far, with sales of perhaps 1.5 million units by March. OEM partners haven’t reported strong sales of their Windows 8 and RT-based tablets either, but Windows as a whole is being dragged kicking and screaming into the Era of Touch.

And about time, too, given how fanatically bad Windows 7 was at accepting touch input.

Back to the IDC figure: 1.3% decline in 2013 for the larger PC market. We don’t have perfect numbers, but let’s take the Q4 2012 shipment figure, multiply it by four, and see what 1.3% of that sum comes to. By doing so we can compute a rough unit decline figure for 2013:

90.3 million * 4 * 0.013 = 4.7 million.

That’s a rough estimate for non-tablet PC shipment decline for the global PC market in 2013. Now, how many tablets running Windows 8 and RT will be sold in the year around the world? I’d wager more than 4.7 million. Microsoft can probably do 2 million itself in 2013, assuming updated Surface models for the holiday season. Its partners, unless things are far worse out in the market than I have heard, can handle the rest.

That plugs the ‘usage’ gap that MG implied, keeping Microsoft flat in a sense in the desktop/laptop/tablet market. Great figures? Strong growth? Not a fucking chance. But the company has an asset that people often forget: Windows momentum, from enterprise customers, cautious businesses, and consumers who really just want something cheap and now. And gamers. A stitched-together coalition, but a real one nonetheless.

That slow-moving momentum means that Microsoft has time to do two things, without risking irrelevancy: Retool Windows to provide a great touch experience, and build Apple-level hardware that can compete on price and experience with what Cupertino is shipping.

Those are massive tasks, and we’re only part of the way there.

In my Surface RT and Pro reviews - thanks for the loaner devices, Microsoft, next time share with MG as well, for real - I came the conclusion that both devices had much going for them in terms of hardware - despite the fact that I still can’t type on Touch Covers - but that Windows and RT in fact made the system a tricky experience.

Windows was tripping up Microsoft’s new hardware. That’s odd for a company that is a new OEM, and one of the oldest hands of software.

That irony isn’t due to incompetence, so far as I can tell. I’ve met and spoken and in some cases clinked martinis with Sinofksy, Larson-Green, and Reller, the past and current heads of Windows. They are brutally aware of its quirks and issues. As I wrote the other day:

I’ve called Windows 8 something along the lines of ‘quirky’ since its formal release. Blue looks like it will help the operating system greatly, by completing it to a full, version one build status. I could be wrong on this. Blue could disappoint. I don’t think that it will, however. My opinion on that is more gut check than anything else. […]

You might think that our above argument is unfair. If Microsoft only had so much time, and could only get Windows 8 to a certain point, is it decent to fault the company for not shipping something perfect? It is, in fact, because a company with as much capability – in terms of mental power and financial resources – as Microsoft does should never be granted clemency.

That said, Microsoft’s inability to ship the Blue feature set at Windows 8 general availability is its own issue; the problems that Windows 8 has experienced in the market that are fairly sourced on its quirks are its burden.

Blue is coming. If late. We’re at least going to see a demo of Blue at Build 2013 in a few months. Let’s hope we get code instead, and that it goes far beyond our expectations.

Microsoft is so cognizant of the issues that Windows 8 contains that it is confidently shipping Blue - Windows 8.1 - to market when its predecessor won’t have hit the one year mark. For a company that has its DNA based on 3 to 5 year releases, this isn’t to be taken lightly.

[Joke about slow boats having large turning radii.]

So, if tablets running Windows variants can, in the short-term, buck up Microsoft’s usage figures, blunting any real decline for the year, where will the company be in 2014, and 2015, and beyond? Good question.

Here’s the gambit: Either Microsoft corrects the Windows 8 ship, and gets the Surface selling the way that it needs, or not. If it fails, the company will enter into a long, slow decline, much like the current traditional global PC market. That would be the ‘end’ of part of what the company does; Windows is the soul of Microsoft, but it remains only a fraction of its revenue.

In my view, and this is simply my opinion having been among the very first in the public to use Windows 8 before Build 2011, through to today - one of my main machines runs Windows 8, making it part of my daily workflow - that the company can in fact correct the operating system from something that provides a negative user experience to one that provides not something neutral, but actually delightful; there is much unrealized potential in Windows 8.

I’m not a my-phone-and-tablet-and-I-are-staying-in-bed sort of person, so I can’t comment as much on Surface, but I suspect that by the time we reach Surface 3 in late 2014, Microsoft’s OEM status will be cemented.

However, the world is more than simply tablets and desktop and laptops. Phones are no longer something that are optional for platform companies, so let’s return to Facebook Home, and everyone’s favorite pastime: Masturbating in the media about smartphones.

///

Microsoft isn’t pleased that Facebook Home is receiving the hero’s welcome that it has thus far. It isn’t fair, in its eyes, as it has been working on something similar for the past few years with Windows Phone.

It’s a fair point made poorly.

Microsoft is correct that much of what Facebook Home aims to do - Zuck’s point about people, not apps* first - has been its goal in Windows Phone. However, Facebook’s software to reach that same conclusion is different enough that Microsoft shouldn’t be anything less than complicated.

Now, is the media attention paid to Home fair? Yes, patently. Facebook Home is a product that will be available on, shortly, Android. That’s a pretty big platform. Now backwards compatibility is a PITA and a half on a fragmented platform, but it’s obvious now that Home will be available moving forward for Android, meaning that it will have a large potential footprint. That is why Home gets more attention than Windows Phone; its - soon to be - install base is bigger.

Windows Phone, by contrast, is only available on Windows Phone handsets, a modest unit sum.

MG, who much like me has opinions on everything, wrote today a somewhat funny piece on Microsoft’s Frank Shaw. I quote:

Frank Shaw, Microsoft’s head of communications, took to the company blog today to “congratulate” Facebook on the launch of Facebook Home. Except that he’s not really congratulating Facebook, he’s passive-aggressively signaling the old “WE DID THIS FIRST!!!” whiny bullshit that Microsoft loves to pull from time to time. […]

Said another way: If you guys were the inventors of Facebook Home, you’d have invented Facebook Home.

I’ll just repeat what I said a year ago on a similar matter: If you have to tell people you won, you lost.

Right. That’s all true. But it somewhat misses what is the key point in all of this: How is Microsoft doing around the world with Windows Phone?

We’ve established that the current, say, five year fundamentals of the PC and tablet market aren’t going to see the rapid down-in-flaming of several Microsoft divisions’ income. However, if Microsoft fails to field a functional, and salable smartphone line its cloud services will lose mobile market share by default, and the company will in fact lose key relevance to consumers just coming online, which was, as you recall, the initial point of our conversation.

So, is Windows Phone flopping, or not? AllThingsD, take us away:

Microsoft’s new Windows Phone operating system has a lot of ground to make up if it’s ever to become a viable third mobile platform. But with some slick new handsets reaching the market, it appears to be making some noticeable gains in a number of countries.

New market share data from Kantar Worldpanel show Windows Phone seeing significant increases in adoption in a number of major markets for the three month period ending February 2013. Year over year, Windows Phone’s share of the U.S. smartphone market rose to 4.1 percent from 2.7 percent; in Great Britain, it rose to 6.7 percent from 3 percent; in Australia, it rose to 3.4 percent from 1.7 percent; and, in Italy, it posted a gain of 7.7 percentage points, rising to 13.1 percent from 5.4 percent.

Well then, that could be worse. By the way, those gains are sourced from the only three things that matter in mobile: good hardware, good software, and good hardware/software harmony.

But what about those low-end markets that Zuck spoke about, and MG feels views minefields for Microsoft as the company’s Windows-based products won’t be sold to those customers? Happily, Microsoft has a friend in ‘low’ places: Nokia.

Yes, Nokia, the much-maligned mobile OEM. What’s great for Microsoft is that Nokia is at once all-in on its mobile operating system, and very, very well established in smaller, poorer markets. In short, Microsoft’s best partner is the precise partner it needs to reach the people that MG claims, correctly, that it needs to reach.

And with the new low-end Lumia 520 handset, Nokia is doing precisely that. TNW, preach:

The Finnish handset maker will release the 520 in Hong Kong and Vietnam this quarter before rolling out to markets in Europe, Asia – including China and India – Latin America and Africa in the second quarter. The 520 will also land on T-Mobile in the US.

Bingo.

Now, none of this is to say that most of Microsoft’s mobile work isn’t still in front of it; it is. But it also goes to show what a few years and billions of dollars can do if a company understands an existential threat to its business.

Microsoft gets how important mobile is. If it didn’t, it would have abandoned the Windows Phone 7 Series project - remember that name? - after its slow start.

There are few companies in technology history that have a better track record than Microsoft of building developer platforms. I’m not prepared to bet against Windows Phone, especially now as it is showing real growth at last.

The app issue remains an open sore for Microsoft. But, that argument has already been made, so read Alexandra so we can wrap up.

///

In short, Mark’s point during the Facebook Home demo day that many new digital customers will be mobile-first, or perhaps even mobile-only, is salient. However, it’s easy to overstep that fact and call other markets dead, when they are in fact very much alive. Continuing, Microsoft’s early touch and tablet efforts have been ham-fisted, but the initiative, dollars, and brains are in place to see them through; the Surface may never outsell the iPad, but in a very real way it doesn’t have to - partner OEMs and all that.

And finally, Microsoft is working to directly target the very people that are mobile-first and only through its yet-nascent Windows Phone project and Nokia partnership.

Thus, ‘the end of Microsoft?’ Only in the sense that the entire firm is changing from a Software In A Box operation, to a Devices and Services outfit. So, yes to the end of Old Microsoft.

New Microsoft is showing real signs of vitality. The question left is simple: How quickly can the company adapt, and what will its market position be when it stops molting? That we don’t know the answer to. But we will, to follow a later bet by MG, know in 10 years.

Now go have a beer, you earned it reading all this.

*When the current app bubble we are in bursts, I shall shed tears of joy and browse the Internet rabidly.

 
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