Avoiding an iPad-induced panic

Avoiding an iPad-induced panic

Summary: Everyone seems to think that Microsoft must rush to release a credible competitor to Apple's iPad. I beg to differ. Getting it right is more important than getting it tomorrow.


Apple released it's financial results on Tuesday, and they were nothing short of spectacular. Apple is making money hand-over-fist across product categories, though particular attention was paid, not surprisingly, to the new iPad. They managed to shift 7.33 million units last quarter, an incredible number when you put them in the context that Henry Blodget did over at Business Insider. Apple's iPad now accounts for approximately 7% of global PC shipments, assuming a ship rate of 100 million per quarter.

Cannibalization is already taking place (though it seems to be hitting Macs hardest, not surprisingly), and the netbook market is being eaten whole by tablet computers. That might explain former netbook leader Acer's new-found interest in the tablet form factor.

Netbooks turned out to be less of a threat to Microsoft than was originally thought, as most ended up running some variant of Windows, even if it was usually the lower cost Windows XP. Its tablet replacement, however, is in a different platform universe. iPad, based on Mac OS X, still accounts for over 90% of the market for tablets (not surprisingly, as they ignited the craze with the rollout of the iPad), and Linux-based Android doesn't give Microsoft much love.

It's understandable, then, for everyone to be screaming for Microsoft to release a tablet challenger. They were knocked at CES for offering little more than plans to bring Windows to low-power ARM processors, a shift that is only likely to materialize in 2012. According to Peter Bright at Ars Technica, fixating on power consumption is spectacularly besides the point, as Microsoft's real problem in the tablet space isn't short battery life but the lack of a user interface expressly designed for touch.

Clearly, the newly resurgent tablet space should be cause for concern in Redmond. Panic, however, can be more destructive than delay, especially if it wastes resources that could have been used more effectively elsewhere. That's why I still think Microsoft should wait a bit before fielding a true competitor to the iPad.

Don't get me wrong...I think it's absolutely critical that Microsoft field something in the not-too-distant future. I just think that getting it right is more important than getting it tomorrow. Perhaps my perspective is somewhat tailored by fire season in Los Angeles. When there are multiple fires with which to contend, sometimes you have to pick your battles, even if it leaves a few expensive houses in the hills a bit crispy.

I still think Microsoft's first priority in portable devices should be to get its mobile phone house in order. Microsoft has an uphill battle to fight in mobile phones, afflicted as they were by the "early entrant" curse that has hit all incumbent mobile phone vendors. Nokia, RIM, Ericsson and Motorola are all hurting, whereas the new market leaders, such as HTC, Samsung and Apple were almost non-existent in the space a mere seven years ago. The lessons learned from those early days simply don't apply today.  The iPhone inflection point has had the market effect of a hydrogen bomb.

Clearly, the sales numbers for its "strategic reset," the new Windows Phone 7 (WP7) platform, aren't where Microsoft needs them to be, as they'd be crowing about them the way they did about Kinect at CES. Or, maybe they aren't as bad as information-starved journalists imagine while floating in their pundit isolation chambers. Amazon still doesn't release real numbers on Kindle, even though most estimates claim it is selling well. The HTC HD7 is in short supply at the stores in my area, though the cause is anyone's guess.

To be fair, though, I don't think Microsoft has promoted WP7 as much as it should. Maybe they have lots of TV commercials (I don't know, all my TV is on-demand and streamed over the Internet), but when I think of BIG promotional campaign, I think of what Apple has done in Los Angeles. You can't throw a rock in this town without hitting an ad for an Apple product.

WP7 is definitely the right direction for Microsoft to take. I have an HTC HD7 AND a Nexus S, something I'm sure to talk about more in some future blog. In my experience, the WP7 device is much easier - and more fun - to use.

But irrespective of the difficulties or possibilities, a key reason to focus on WP7 is how it informs future strategy. Apple found the path to a sensible touch UI by way of building portable devices, starting with iPod, moving into phones, and blasting through the surface in a shower of money with the iPad. Microsoft followed some of that trajectory with WP7 (albeit with less financial success), as the Metro UI originated with concepts developed for its Zune media player. I think Microsoft's strategy in tablets will depend on doing something sensible in mobile.

Sun's barrier with client-side Java was that they didn't understand the client as well as the server. The same dynamic applies to portable devices, and in particular, phones. There's a lot more pressure to achieve a simple user interface in phones. Besides screen size, which of necessity are small enough to fit comfortably in one's hand, users carry their phone with them everywhere to a degree they won't with a tablet computer (well, unless you have a jacket with very big pockets). This creates learning opportunities that simply don't exist for any other type of mobile device.

For a company that hopes to continue its important role in client computing, having a credible stake of the smartphone market is absolutely critical. No other device will be used as often as a smartphone. Many of Microsoft current web service offerings, including the "Live" family of products (which are tightly integrated with WP7) and the Bing search engine, will depend on a strong showing in phones, particularly as Google uses Android as a trojan horse by which to encourage linkage to their own web service offerings.

The Windows ARM strategy, by itself, isn't much of a near-term competitor to iPad. It does signify, though, that the company is serious about unifying their fragmented client operating system story. Combined with hints that Microsoft wants to make the Metro interface a built-in shell on Windows 8, it appears Microsoft believes believes they can create a common core that can be shared across desktops and devices.

Some might find that "Windows everywhere" strategy to be so 1990s. It's worth pointing out, though, that it's the same strategy followed by its competition. Apple has extended a modified version of Mac OS X across form factors, and Google pushes Linux (by way of Android) from its backend through to mobile phones. The consistency advantages has a lot to recommend it, particularly given the massive base of products that work with desktop Windows.

Regarding the numbers, Blodget thinks that iPad could be 25% of the market for PCs in a few years (though how much of that 25% are new computer users remains to be seen; it doesn't have to consist only of cannibalization of existing sales, in other words). That's clearly a threat, though even on Blodget's numbers, 75% is still a significant beachhead from which to launch a counterattack. Such a counterattack, if done properly, would have the advantage of seamless interoperability with a large base of Windows-based computers, while bringing with it some of the real advantages of PCs...without the complexity.

In other words, Microsoft NEEDS to avoid the impulse to rush a product to market due to very real threats on the horizon (as they did, I think, with the KIN) and take the time to get it right. There is obviously danger from the "network effects" that are building up around iPad. I can't open a magazine without finding ads touting a new custom application for an iPad. On the other hand, Windows brings with it rather sizable network effects (and will even in Blodget's "several years"), provided they direct it properly.

Microsoft needs to make a tablet solution that is truly different than what is on offer from competition that will only be more formidable in a year's time. They have done it with WP7, in my opinion. Now they have to figure out a way to communicate that effectively. Microsoft should focus on the huge job they have ahead of them in phones, and give themselves time to figure out how to make the other areas of its business feed into a really compelling tablet form factor that is notable as more than just a competitor to iPad.

[ADDED Jan 21, 2011] I've had a couple of people ask what "synergies" desktop Windows has with Tablets (which is paraphrasing, as the actual question was posed as if I was stark raving mad).  What I'd REALLY like is a Windows tablet with a "real" touch UI (as opposed to one that shows the Windows desktop and let's you try to use it with a finger), plus the ability to dock it so that I can attach a full-width monitor, keyboard and mouse and treat it like a desktop computer.  Basically, it's still a Windows PC, but a new shell gives you a proper touch environment.

Obviously, apps would have to be written to use that new shell, and many of the applications that you might use while docked (like Visual Studio) simply wouldn't be available while in "tablet" mode (I do NOT want a touch version of Visual Studio).

I'd love if something similar could happen with a Windows Phone as well.  In fact, perhaps that's what Microsoft is trying to do with the move to ARM processors.  They plan to make a unified Windows platform that will serve as the baseline for all their products.  That's bad news for the Windows CE team, but good news for everyone else.

Topics: Mobility, Tablets, Software, Operating Systems, Apple, Microsoft, Laptops, iPad, Hardware, Windows

John Carroll

About John Carroll

John Carroll has delivered his opinion on ZDNet since the last millennium. Since May 2008, he is no longer a Microsoft employee. He is currently working at a unified messaging-related startup.

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  • IPad cannibalizing Macs hardest? Mac sales grew 23% or 8 times PC.

    "Cannibalization is already taking place (though seems to be hitting Macs hardest, not surprisingly),"<br><br>hitting Macs hardest?<br>did you read the Q1 financials. Mac growth was 23% or 8 times PC growth.<br><br>ZDnet Adrian Hughes "4.13 million Macs sold, a 23% unit increase over the year-ago quarter (nearly 8 times the IDC numbers for PC growth)."

    Also if Msft sells tablet OS like WinMo at around 15 bucks a pop (can't really charge more as Android is Free):
    1 million iPads gives Apple roughly (asp $600 approx) $600 million
    1 million WP7 (or whatever tablet OS) gives Msft 15 million.
    • Yeah, I gave up at that line too.

      @Davewrite Funny how he just threw that subjective parenthetical out there with nothing about how he arrived at that conclusion.
    • left me scratching my head too..

      @Davewrite ..makes absolutely no sense to me too.. who knows.. iPads could very well be being cannibalized by iPad.. but you wouldn't know to what extent because of the rate Mac are eating into PCs.. any way you slice it PC are being hit more that Mac since they are getting eaten on both sides.. by Macs and iPads
      • RE: Avoiding an iPad-induced panic

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    • RE: Avoiding an iPad-induced panic


      Think with such a mistake, panic is already setting in. :-)
    • RE: Avoiding an iPad-induced panic

      @Davewrite You do know that 3.1% PC growth accounted for 93.48 million units of PC vs. 23% of 4.13 million units of Mac, right?

      93.48 million of PC vs 4.13 million of Mac... *obviously* PC is doomed!
      • LOL, Apple zealots always forget that one

        We just have to remind them that the Windows Phone 7 marketplace is growing at a percentage that is [b]FAR FAR FAR FAR FAR FAR FAR FAR[/b] bigger than Apple's application storefront. Therefore, WP7 marketplace is better. :) :) :)
      • I don't really get your numbers.

        @Samic <br><br> "You do know that 3.1% PC growth accounted for 93.48 million units of PC vs. 23% of 4.13 million units of Mac, right?"<br><br>92 million is the estimated total of all PCs sold, 93m is not 3% as your sentence suggests. 93m should be compared to 4.13 million macs not 23% of it. Also that 92 million I think includes macs (because IDC counts macs as personal computers: PCs), so PCs alone is 88 million.

        (IPads sold 7 million plus which is another 7% of PC totals. Note PC tablets are counted in PC totals but NOT iPads)<br><br>IDC "industry vendors shipped about 346 million PCs last yearincluding a record 92 million units in the fourth quarter"<br><br>Also I was replying to the comment that iPad was cannibalizing Macs more than PCs. GROWTH is more an indication of cannibalization than raw numbers.<br><br>IDC "Growth steadily slowed throughout 2010 as weakening demand and competition from the Apple iPad constrained PC shipments,"<br>So is IDC wrong as well? <br><br><br>I laugh when PC lovers quote PC sales.. that's EXACTLY Microsoft's executives thinking. When iPhone came out and made Apple billions all Balmer did was basically say 'who cares. We outsell Macs by xxx percent". Then they sit back and .. RELAX while Apple laps them. <br><br>Q1 Apple made 27 billion revenue with 6 billion net.<br>In Oct 2010 quarter Msft made 16 b revenue with 5.4 b net (no figures for Msft Christmas quarter yet).<br>Apple market cap: 312 b Msft 243 b.<br>Msft stock has basically frozen for 10 years, aapl has grown 4000%. To be beaten by apple which was at the brink of death 15 years ago. <br><br>Go on Msft fans and Msft execs keep trotting out PC sales numbers keep laughing at Apple and watch Apple eat your lunch.<br><br>
      • @davewrite

        [i]Go on Msft fans and Msft execs keep trotting out PC sales numbers keep laughing at Apple and watch Apple eat your lunch.[/i]

        Actually, you are the only one who consistently comes out here and laughs at PC sales numbers.

        Regardless though, anyone who discounts Windows PC sales [b]or[/b] iPad sales is obviously delusional. They are both doing remarkably well and earn their respective companies billions of dollars of profit. Why Apple earning billions of dollars of profit makes you so happy or proud is beyond me though. Congratulations on loving the multi-national, multi-billion $$$/year mega-corporation that contracts out the assembly of the bulk consumers goods that you happen to purchase to the lowest Chinese bidder. :) :) :)
      • NZ &quot;Why Apple earning billions of dollars of profit makes you so happy... &quot;

        NZ<br><br>"Why Apple earning billions of dollars of profit makes you so happy or proud is beyond me though"<br><br>I guess making over $150,000 in profit in aapl in the last two years of recession sort of makes me happy...<br><br>sold all my msft stock 10 years ago. Stopped buying Google when Android came out and compared it to iOS : aapl about tripled since then, Google about 25% (and still under it's all time high). I've explained Apple finances over and over again but I've been called idiot, fanboy... lol.
      • That's a fair answer

        [i]I guess making over $150,000 in profit in aapl in the last two years of recession sort of makes me happy...[/i]

        Although you do realize that anyone can invest in Apple.

        For someone who only cares about his AAPL shares though, you do seem to take a lot of pleasure in MS's missteps. Of course, that would easily be explained by the fact that you care about a lot more than just the profit from your AAPL shares. :)
      • NonZealot. I do find it &quot;funny&quot;

        That all the pro Apple/anti-MS people here who costently trott out Apple's stock price at every chance (OK, maybe just davewrite) [i]allways[/i] say the same thing "I sold all my MS stock [eneter number here] years ago, and..."

        For one, I'm absolutelly amazed how they knew so much more then professional stock traders did/do, to see that way before anyone else.

        They never said boo about stocks 2 or 3 years ago, yet today they're all here telling us how much they made (150, 000? Thats all?) in the past two years, because they knew what the world would be like in 10 years, something no-one else in the tech sector could have possibly predicted!

        I'm not saying they're lying, I am just saying how amazed I am at their finacial prowess. (Imagine the finacial experts that bought Google at 730 a share still waiting to get their money back!)

        I say more power to them, but they should have done like I did, just kept both the MS [b]and[/b] Apple stock, and they would have been even better off today then they are now.

        Unless of course 10 years ago they foresaw the future, and sold off [b]all[/b] their MS stock and bought Apple stock with the profits, which is what i figured davewrite did. ;)
        John Zern
      • RE: Avoiding an iPad-induced panic

        @Samic OHHHH NOOOOOOOO I was wondering when someone would point out the numbers and not the percentages.... when you only sell 100 of something then selling 123 is a 23% increase, and 98.5% of all statistics are made up on the spot...
      • RE: Avoiding an iPad-induced panic

        @Samic : Yup. Davewrite is comparing apples [errr] and oranges. Looks like anotherone brainwashed by Apple.
        Gis Bun
      • AAPL stock

        @John Zern

        <i>For one, I'm absolutelly amazed how they knew so much more then professional stock traders did/do, to see that way before anyone else.</i>

        In Jan 2009 AAPL was trading below $80/share, for absolutely no good reason. The economy was not doing well and Steve Jobs announced his first medical leave. It was a perfect storm of stupidity as the so-called experts declared:

        1.) With the economy doing so poorly, nobody will buy Apple stuff anymore because it's too expensive.

        2.) With Steve Jobs being sick, Apple was doomed to fail because Apple <i>is</i> Steve Jobs.

        These prognostications seemed convincing enough to dumb people that it sent them into a panic and they sold. Smart people realized that both of these things were utterly stupid and bought low. It's really simple.
      • RE: Avoiding an iPad-induced panic

        @Samic <br>To non-zealot.... You are a truly ignorant individual. How people like you can dress down Apples success is beyond me.

        <br><br>Don't smoke crack! Its bad for you!!!
    • RE: Avoiding an iPad-induced panic

      @Davewrite See my response below. The link that was in my version didn't make it's way onto the blog (looks like I mistyped the raw anchor tag). It's now there. In the response below, I also reference another article (which wasn't previously linked) discussing Apple's financial results.
      John Carroll
    • I was scratching my head at

      [/i]Apple?s iPad now accounts for approximately 7% of global PC shipments, assuming a ship rate of 100 million per quarter.[/i]

      How many iPads are in [b]addition[/b] to PC's?
      In other words, how many iPad owners also own a computer? 100% of them?.

      It would be interesting to see how many non-computer owners actually bought an iPad, because information like that would more valuable then just numbers on PC/Mac?Tablet sales

      I'm also curious as to what your comparison was all about: If you're trying to tell us that Apple sells you their hardware and software, while MS just sell you the software, because we know that already. But then wouldn't that mean MS makes more profit, because they don't have to payoff componenet and manufacturing costs to the level a hardware manufacture incures?
      John Zern
      • RE: Avoiding an iPad-induced panic

        @John Zern not when you overcharge for you hardware, a macbook runs you around $1000, a laptop "PC" of the same spec around $500, I'll take the PC everytime, (I would wipe out windows, and install linux, but thats merely personal preference). I am probably gonna get bashed for this, but apples HW isnt really all that great, at least not for the people who ask me to replace parts on them, and its certainly not worth twice as much as say Toshiba, HP, or Dell.
      • RE: Avoiding an iPad-induced panic

        @John Zern I'm not even sure if it's possible to own an iPad without owning a PC or Mac. The first thing the iPad makes you do when you turn it on is plug it into a computer running iTunes to activate it (which is just brain dead stupid). I love my iPad, but Apple needs to figure out that requiring you to tether mobile devices to a computer running iTunes is the height of stupidity. Who knows how many people might make a complete switch to iPad in lieu of owning any other computing devices if they eliminated this requirement? It might be one reason Android tablets really take off once Honeycomb becomes available.