Ballmer on Linux client competition

Ballmer: Linux Bigger Competitor than Apple

Maybe no surprise. Apple markets pricey hardware and software in a manner that’s not anathema to Microsoft. And Macs runs MS Office. Linux runs on everything, is flexible, is distributed by free download, is being rapidly adapted by countless users and commercial companies for legions of purposes.

On Wed, 2009-02-25 at 17:36 +0000, saahne wrote:
> ‘Ballmer: Linux Bigger Competitor than Apple’
> (http://tinyurl.com/dhc9kl)

But… we’re talking about Ballmer. Ballmer is less honest
than Mr. Gates. And everything he said had lots of “spin”
on it.

So… I suspect that this is simply Microsoft fud (little fud)
against Apple… an attempt to make Apple look like a non-player…
just a slam against Apple, that’s all this is probably designed
to do.

>
> Maybe no surprise. Apple markets pricey hardware and software in a
> manner that’s not anathema to Microsoft. And Macs runs MS Office. Linux
> runs on everything, is flexible, is distributed by free download, is
> being rapidly adapted by countless users and commercial companies for
> legions of purposes.

You might be surprised by the number of Apple users out there vs.
Linux.

EDIT - sorry, misread.

Interesting post though :slight_smile:

Not quite sure what the investment bit is supposed to show but the investment proportions are significantly different from the market share proportions. I wonder what the story is behind that.

Your can read the whole text, slides and webcast at Microsoft Strategic Update Meeting, Tuesday, February 24, 2009.

Well, he’s definitely not being nice to Apple the whole bit about the one point increase being “interesting” is an amusing put down.

I think depending on how you look at it, Apple has probably increased its market share over the last year or so by a point or more. And a point of market share on a number that’s about 300 million is interesting. It’s an interesting amount of market share, while not necessarily being as dramatic as people would think, but we’re very focused in on both Apple as a competitor, and Linux as a competitor.
But I don’t think they are really worried about Apple in a big way. Apple is a known and well understood quantity. Linux and open source on the other hand really threaten to shake up their market. Which has what has happened in the last year. The big emerging areas are mobile devices. Linux isn’t a big force on smart phones yet but it promises to be. It’s an open market. None of the players aside from Symbian (now also open source) have a huge share. But we know what happened with netbooks. Microsoft got caught sleeping and Linux was all over the place. In the presentation Ballmer crows about now, according to their research, being on 90% of netbooks but then goes on to say they are low margin. It doesn’t really matter whether Linux gets big netbook install share or not; either way it is killing Microsoft’s profit machine. Another amusing part of the talk is about how they have had to adapt Windows for netbooks and make it more flexible (like Linux–although he doesn’t say that–and he’s really dreaming).

I think is important for us to have in our heads is what the netbook may open up in terms of new possibilities for us. You now get a very lot cost, very small, essentially hardware stack that can run our software anywhere. And you can start literally thinking about embedding it in a lot of different devices.
But they really don’t like the low cost bit. There’s also a lot of rabbiting on about SKUs and up-sell. It’s clear they spent a lot of time figuring out how to keep Linux off cheaper mobile devices and yet still trying to maintain their profit margins. Good luck with that one! I’m sure we’re in for a lot of ‘creative’ marketing when W7 appears.

Except that M$ is hopping mad that Apple stole the first march on them with iPod and now iPhone, hence their belated catch up efforts with Zune and WinMobile. On the desktop, Apple has delineated their high-end market well. Linux on the other hand as saahne says is unpredictable, and progresses in leaps and bounds depending on the ingenuity of leading edge developers and users. Asus was very clever to use Linux on the netbook to extract pricing concessions and a stay of execution for XP. M$ is going to be saddled with supporting XP until the hardware catches up.

As the saying goes, first they ignore you…

It’s not going to make me popular, but I think Ballmer is pretty much correct in his assessment here.

He acknowledges Linux & Apple as competitors, which they are. But saahne is right “Apple is a known and well understood quantity”. The battle of the OSes is great example of marketshare vs mindshare. Apple punches above its (marketshare) weight because of its mindshare. It’s popular among some to state “Apple has nearly 10% marketshare”, but as we all know ‘USA != World’. Beyond the iPod & iTunes, Apple’s power is more perceived than actual.

For typical businesses the viability of Mac is still Microsoft dependent. iWork is not a drop-in replacement for MSO in a number of cases, NeoOffice lags OpenOffice, and proper OpenOffice for Mac only just went native. Further as we all know, for many business OOo isn’t considered a viable option. There’s also Google Docs, Zoho and the rest of the SaaS approach, but again not a drop-in replacement in a lot of cases. All of those things will probably change at some point in the future, but until that day Apple as we know it - walled-gardens and high-margins or else - does not pose the huge threat to Microsoft’s core business (Windows + Office) that many people make them out to be.

Suppose MS receives $30 per box for Windows from OEMs…if MS receives an average of $120/copy of Windows at retail then that means they only need ¼ of Mac owners to buy Windows for Bootcamp or Parallels to come out even as far as revenue is concerned. Certainly, MS would prefer people run only Windows rather than Windows + OS X, but for a supposed threat there’s a lot of money to be made by MS on Apple hardware. By contrast a new home Linux user often already has Windows via an OEM licence and potentially some copy of MS Office. So a typical new Apple user represents a source of future revenue for MS, while a typical new Linux user represents revenue already received.

Linux poses a much more holistic threat to MS than Apple & OS X. So far Apple is missing from the netbook market, their high-margin stance makes them weak in the middle-end PC market and non-existent in the low-end. OS X Server is similarly not a major player and Apple doesn’t exist at all in niche markets like HPC/supercomputing or scientific computing. Linux, by contrast, is everywhere and has so many suppliers that killing it isn’t a simple matter of wiping out one vendor. It’s sort of like war, fighting Apple is like a country declaring war on another country. Fighting Linux is like fighting an idea or concept – akin to a country declaring war on drugs or terrorism. Yea you can win against an idea, but it’s a lot more difficult than against a country.

Lastly, piracy is definitely Microsoft’s #1 target because that’s where they have the most revenue to gain. Moving to kill Apple in any of the easiest ways would only stir up the American DOJ, and frankly trying to move from 90%+ to 90%++ marketshare is a waste of effort. It would be more fruitful for MS to convert some of its existing marketshare from unpaid to paid. Better to think of ways to get revenue from people who you already know want your product, as opposed to trying to convert alt-OS fanpeople back - especially when they think they’re hip for leaving in the first place.

My driving instructor used to say ‘There is no point in being dead right.’

Ballmer may be right but the business model he is trying to promote is dead, at least for general software. I think it may survive in niche markets where there isn’t the critical mass of programmers prepared to contribute to developing a program.

I agree with your perspective of Linux.

But I don’t think Balmer talks about that. Instead, as you note, he focusses on Apple, and he focusses on software piracy.

He predict’s Linux on the slide in the average desktop market:

… Linux, you could see on the slide, and Apple has certainly increased its share somewhat …snipped … From a marketing share perspective, we show you on the left here you can see operating systems, and on the right you can see the browser. Windows license, number one market share, number two market share goes to Windows pirated, or unlicensed. That’s a competitor that’s tough to beat, they’ve got a good price and a heck of a product, but we’re working on it. Linux, you could see on the slide, and Apple has certainly increased its share somewhat.

His overall mention of Linux is very limited, and instead IMHO, in the areas where Linux is competitive, he notes those as areas where there is a market opportunity for Microsoft:

… we’re very focused in on both Apple as a competitor, and Linux as a competitor. I think the dynamic with Linux is changing somewhat. I assume we’re going to see Android-based, Linux-based laptops, in addition to phones. We’ll see Google more as a competitor in the desktop operating system business than we ever have before. The seams between what’s a phone operating system and a PC operating system will change, and so we have ramped the investment in the client operating system.
and

Server, server we are the biggest share of the market. We do have a problem with licensing here, too. We’re yellow, which means our share is about stable. Linux and we have not shifted share positions, but Linux is the big competitor. Linux still dominates Web and scientific computing workloads. We about split line of business application workloads. And we generally have the lion’s share of the market in what I would call desktop infrastructure, and IT infrastructure workloads.

and he talks about Netbooks as a new market he intends to target:

We did the marketing work to have a high market share on netbooks. Retailers were looking at the very high return rate they were getting on Linux netbooks and they said, this is the way to go, we’re now I think over 90 percent attach rate against netbooks, which I’m very excited about.

I agree with your view, and I think Balmer’s talk was a very astute view of the Market. Microsoft got to where they are in computer operating system (and selected office application) dominance by some smart moves.

I think they will continue to be the dominant software force in computers for some time to come.

I think that is exactly the competition. A big selling point for Microsoft is vertical integration. They are not just selling Windows or Office; they are selling a whole ecosystem of desktop and server software that interoperates. And of course they’ve often resorted to proprietary protocols to lock-in users and lockout competitors. They are selling businesses a system of software–Windows Server, SQL Server, Exchange, Sharepoint, Internet Explorer, Office etc. Dropping a bit of OSS into a Microsoft ecosystem can be a nasty experience and it doesn’t necessarily save you money. On the other hand OSS has enough penetration at various points that Microsoft also needs to interoperate because their customers demand it. It’s a tricky game. Apple doesn’t compete at all points in the software stack but Linux and OSS does and potentially could do much more aggressively than it does at the moment. There’s a reason for all the fighting over standards and you can bet that Microsoft wasn’t happy that the EC forced them to cough up most of their server protocols (see documentation here). That was a lot of stuff that the people at Samba, OpenChange, Alfresco etc. were keen to get their hands on.

Also, if you look at what Ballmer says about smart phones and netbooks he’s not just talking about products he’s talking about integration and smart phones being part of an ecosystem. I think that’s why he fears Android because Android isn’t just phones and an OS; it’s the whole expanding Google ecosystem.