Apple, Apple, Apple…

Though Steve Jobs has left us and leaves a tremendous legacy and hole to fill, he obviously left a great pipeline of products in place for Apple. Earnings for the quarter at Apple blew past every analysts expectations.  They just seem to keep coming with quarters that seem beyond belief.  As reported on Cnet, during the period, Apple posted $46.33 billion in revenue and a record profit of $13.06 billion. iPhone sales jumped 128 percent year over year to settle at 37.04 million units, while iPad sales rose 111 percent to 15.43 million units. Apple’s Macs got into the mix, too, soaring 26 percent to 5.2 million units sold.  Those are huge numbers and daunting for anyone competing against Apple.  If we break them down one by one it’s interesting to see the challenges for those competing and what to expect and do next.

Looking at the iPhone sales the number is staggering.  They sold 37 million units of primarily the Apple 4s, not 5 but 4s.  The 4s was what we used to refer to as a “dot” release, not a major release. Just a release with minor enhancements like Siri.  To put in perspective Nokia has announced they have 1 million Nokia Lumia 710 in the channel.  That is not in consumer hands but just to resellers.  Apples number reflects units in people’s hands.  The other thing is due to Apple’s channel that is pure money back to Apple.  With Nokia they get most and pay back a small percentage to Microsoft for the OS.  Then there is Google with Android, which is an indirect model as the hand set manufacturers keep the money and Google looks to make money via apps and mobile search.  The units of Android phone is impressive but to date it doe snot have the bottom line impact of Apple’s iPhone.  That could change as the mobile web grows and mobile ads increase the revenue to Google’s bottom line.  Though Microsoft Bing is challenging traditional search, Google seems light years ahead in mobile search.  With a major release from Apple due in 2012 with the iPhone5 could they beat 37 million?  One can only wonder.

Tablets are the fashionable device of the moment.  They have been since Apple made them so.  Steve Ballmer said “they will never sell those things”.   They sold over 15 million units in the quarter.  Though there are Android tablets I have not seen the excitement for Android Tablets like I do for Apple’s iPad.  The iPad seems to be playing its own game, in the short-term that could change with newer revs of Amazons Kindle Fire and further down the road with Windows 8 tablets.  The challenge for the competition is they may be talking about exciting new releases but no one I know of is putting their purchase decision on hold to wait for an Android or Windows 8 tablet.  I expect for the next 2-3 quarters that Apple to rule this domain, unchallenged.  The question will be how far in front they will be when a competitive alternative enters the market.  We will likely see a iPad3 this year, probably before Windows 8 Tablets hit the market, no one is waiting.

An interesting area of growth for Apple is its “old” business of Macs.  They sold 5.2 million units in the quarter an increase of 26%.  That is at the expense of Microsoft Windows.  Apple with around 10% market share is in an enviable position as they are not the leader and can only grow their market share.  As Microsoft Windows Revenue has flat lined (it’s still in the billions in terms of revenue) and Apple is enticing more and more developers to its platform you are seeing the first significant threat to the Microsoft crown jewel in over twenty years.  It’s interesting that it is coming from a competitor whose environment is considered very closed.  I think many people felt the most likely threat to Windows was going to come from the Open Source community in some variant of Linux.  But with Apple’s success in Smartphones and Tablets I can see the traditional Mac business was going to follow and it has.

With all this success it has led to that great American problem.  What do you do with $98 billion sitting in the bank?  When I was ta Microsoft we had (and they still do) usually upwards of $30-$40 billion in cash.  It would seem with Apples cash they could do almost anything they want, but in actuality it is a bit of a capitalist’s dilemma.  The obvious thing to do is return money to shareholders in either a quarterly dividend or one time payment.  They could also do a stock buy back, with  a market cap over $400 billion this could further drive the stock up benefiting shareholders.  They could do acquisitions, but Apple has never done the big multi-billion dollar purchases of tech companies.  I am not a big fan of these anyway as in the short run they slow progress down and when complete the industry has moved on.  It takes a couple of years for full integration, look at Microsoft’s acquisition of Skype for $8 billion and we have yet to see the fruits of this hit the bottom line.  It’s not a bad problem to have but the one thing that is for sure is they will have to do something as sitting in all that money does not seem a viable option, nor will shareholders allow for it.

Apple is truly in a state of grace.  It seems even when they do wrong, as in the previous quarter, they rebound.  It would be easy to see a future where we all are using Apple products, luckily tech and society do not work that way.  There will come a time when younger generations will not think Apple s cool as their parents think it is.  We are in a time when tech trends start with the teenagers and young adults.  Do I see a time when younger generations say “wow Microsoft or Dell is cool”.  Right now I am having a hard time believing that scenario will ever happen.  More likely it will be a young fresh start-up similar to a Facebook or Twitter.  When will this happen?  All I can say for sure is the next 2-3 years it is not likely to happen and the Apple strength will continue.  There are exciting horizons with iCloud and AppleTV.  But as I am fond of quoting Bill Baker, “The future comes slowly, change happens quickly”.  This will be the case with Apple as well but in the meantime let us just enjoy being, “Wowed!”.

Good Night and Good Luck

Hans Henrik Hoffmann January 30, 2012

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Is Microsoft .NET a second class citizen of the Cloud?

This was sent to me as a possible discussion for a local user group. It is interesting that it would come up, but not surprising. The cloud is on everyone’s mind.  It is the current “buzz” in the industry.  It has long been said in the industry that the development platform of now and the future is the internet.  As companies began to productize these web-based solutions a name was needed.  Anyone who ever saw a whiteboard presentation, when you drew a network diagram  when the diagram eventually went out to the internet, we drew a line to a…cloud.  Amazon was the first to build a successful business model around cloud based computing and shortly thereafter everyone followed.  Now it seems everyone is talking cloud offerings (Google, Apple, IBM, Microsoft etc..).  Go to any tech companies website and you will see a cloud solution somewhere.  To grow the business you need developers to follow you.  The race is now on to get developers to create new and exciting cloud applications..  With the release of Windows 8 due later this year developers are being told by Microsoft, “Bet on Windows 8”.  What maybe gets lost is during the previews at the Professional Developers Conference in 2011 a lot of what was discussed was Windows 8 integration with the cloud and cloud based services.  But where does Microsoft’s cloud offering Azure fit into this picture?   In a larger context where does .NET fit into today’s developer mindset?

It has been over two years since I was at Microsoft, but when I left we were on the .NET Framework 4.0.  As I write today we are still on the .NET Framework 4.0.  There has been little  heard from Microsoft regarding the future of .NET.   In the mean time  the industry continues its march to the cloud.  If you go to the Microsoft Azure page you will see for development a lot of tools supported other than .NET.  Beyond .NET there is node.JS, Java, PHP and “other”.  This highlights the Microsoft conundrum.  Microsoft went down the path of .NET and for a long period more or less ignored what was going on in the world of development.   Microsoft needs developers writing to the Azure platform, in fact for the Server and Tools division at Microsoft, its very life depends on it.  But getting developers to pay for development tools when so many are available for free on the internet is becoming an increasingly hard challenge.  Therefore they need to be “friendly” to the non-Microsoft development community.

Open Source is big and it is a developers paradise.  It was one of those things when open source first became a household name at the dawn of the consumer internet.  It’s the largest development community on the planet.  There is a lot of innovation that is happening out there on the internet that is far larger than what 90,000 Microsoft employees can do, of which less than 1000 are focused day-to-day on these issues.  On the net speed is everything.  What I ship one day can be gone the next.  At the same time on the net you can quickly generate mass, which leads to wide-spread user acceptance and “viral” marketing.  One day Facebook was a university social network and shortly thereafter it was a global phenomena.  The inability of Microsoft to effectively leverage the open source community has stunted its ability to attract new and emerging development communities.  They do have something called Codeplex which is Microsoft’s open source community.  However it is not as big as other development communities on the web.  This inability to leverage the web development community to its full potential has fostered an environment where Microsoft is chasing innovation and is not driving innovation.

As we look at Windows 8 the discussion is around the Metro interface and writing applications to the Windows Runtime or WinRT.  I guess when we talk about the Metro interface we are talking about a desktop UI,  a question is how much time will an end-user spend within Windows and does a new UI matter a whole lot for Windows when the first thing I do when I log on is go the internet.  A stat I heard several years ago said that 75% of development is focused on the web and 20% is focused on Windows (the other 5% is targeting hardware).  That number may have changed, but I doubt Windows development went up and web development went down.  Is Windows 8 development targeting the 20 percent?  Which then brings us back to the central question, where does .NET fit into all this and what is Microsoft telling developers to do with .NET?  I feel like .NET is going the same way of Silverlight…confusion.

When looking at the market for developers in the coming year I was sent the following list of top ten development skills (click here).  It is interesting to note that Microsoft development skill sets are not a part of the list.  That is not to say everything is open source as iOS development skills is in the top three.  It does highlight where open standards and innovation lay a large role in the future development road map.  It is apparent that Android and iOS are leading the way for mobile development and will do so in the coming year.   This will be challenging for Windows 8, as developers can target an existing market or a potential market.  In the end I think many will do both but it’s apparent that Windows 8 is not going to make anybody put aside their plans for developing on Android or iOS.  It used to not be that way.  The release cycles for the latter two is fast and furious and keeps the development community engaged.  When your company is building a platform, engagement is paramount because it means they are listening.  You could be presenting the worst crap on the planet, but as long as the developer are listening to your crap and not your competitors that is ok.

Finally the biggest and most important question moving forward is does .NET have a future??  It is known that current Windows Chief Steve Sinofsky is no big fan of .NET and the move to WinRT could be viewed as the death of .NET.  But then if the development community is out their debating whether .NET is relevant to the cloud or not, what should they be doing?  Silence is not an answer and providing a bunch of marketing spin until an answer is provided is just insulting.  Changing direction is hard, especially when so many have invested in .NET Development, and will likely continue to do so.  We could be looking at a situation similar to Visual Basic 6 developers, who refused to move to .NET, until around ten years later support was finally pulled from them.  It is also a question of enterprise apps versus consumer apps.  Enterprise do not move as fast as consumer based apps.  Can you message a development platform to both with equal success?

Steve Ballmer likes to tout the largest development community with the largest market opp in the world when you target Windows 8.  He is wrong.  He has been wrong for some time.  The largest market opp in the world is the internet and that is not going to change anytime soon.  It seems rather stupid that I have to write the obvious.  The viral ability of the net. Most developers are leveraging the internet for development so it comes as no surprise when they start looking at cloud development they look to open source to provide the tools and the guidance.  It is really no different than society has always worked, when we look for advice we look to our peers.  Now they are simply our virtual peers.  Microsoft’s cloud message so far had been confusing and I think most so for developers.  At the end of the day developers will do what they have always done, which is follow the money.  No developer likes to write an app that nobody uses.

Good Night and Good Luck!!

Hans Henrik Hoffmann January 24, 2012

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CES 2012

Well this has been the week of the big Consumer Electronics Show (CES) in the glamorous city of Las Vegas.  It is a show, sad to say, I have never been to but would love to go someday.  Still with today’s interactive technologies it is pretty easy to follow from far away.  The great thing about CES is that it gives consumers a window n how they might spend their money in the upcoming year.  Or not.  Last year was a big year for 3-D TV’s, but I don’t think consumers were ready to give up their new LCD or Plasma screens just yet to experience 3-D at home.  This year promises a whole host of new gadgets and who knows what will be the biggest.  But it is always fun to hear what the big industry players are planning.  Even more exciting can be the young start-ups.

This year, as always, CES started with the keynote from Steve Ballmer, the loud and proud CEO of Microsoft.  Of course the big news had already broke, this would be Microsoft’s last CES.  This was the last chance to see Steve.  It was a draw and then Steve went on to present, uh, well, nothing really at all.  Most of which he talked about had already been announced in previous talks about Windows 8 and Windows Phone.  The biggest announcement was really that Nokia was coming back to America with the Lumia 900.  It is sad to see Microsoft leave the event.  I am not thrilled that they have chosen to do big releases via internal style events and over the web.  My preference is in person events but I may be a bit old school in that thinking.  The problem I have with over the web is it usually means at a desk at work where there are many distractions.  Such as Bob’s vacation or Steve i snot happy at work or..well you get the picture. You may see higher numbers but how many people are really engaged in what they are hearing and seeing?  In any case we bid Microsoft a fond farewell.

Google Executive Chairman Eric Schmidt participated in a “pseudo” panel.  Not sure what kind of panel this was intended to be as it sounded like a group of Google partners just nodding their heads to everything Eric said.  But there were some valid discussion points, mainly the idea of ubiquity between connected devices.  Just think of it this way..walk around your home and see how many devices, appliances etc have digital displays.  You would find dishwashers, washer and dryer, clocks, stereo’s, etc..They should all be talking to one another and to the cloud.  And according to Eric they should be built on a foundations of, drum roll please…Android.  To be clear this idea is nothing new.  Microsoft had this idea of Microsoft @Home over ten years ago.  Novell had its embedded systems technology(NEST).  But like so many things in technology it is not predicting the future, it is timing the future.  As Eric points out with mobility and wireless pretty much everywhere making this “connected” home is much closer to reality.  Google is taking the lead.  Lets see how soon others begin to follow.

The term Gorilla Glass was new to me but it made a splash as Sony showed a Viao made out of Gorilla Glass v2.  First question o I want a laptop made of glass?  It will be a little bit heavier, but the environmentalist in me asks the second question: Is it recyclable?  IN any case they did show hat this glass could withstand 120 pounds of pressure making it fairly durable.  Given how often I drop things this is a good thing.  From a pure aesthetics standpoint it would seem you would be able to do some pretty fancy stuff with color.  I think more than anything this highlights advances being made in the materials that make up our technology toys.  A good thing and though not “sexy” now it will be in the future.

When we look at the best in show winners there, as usual is some interesting stuff.  Kudos to Nokia for coming through with the best smartphone of the show the Nokia Lumia 900.  The Asus Memo 370T Tablet running Android and priced for $250.  It has 16bg storage, oh how far we have come.   The features are nice and with those low price points it makes total sense.  I found the best software app, Bluestack interesting.  It brings all 400,000 Android apps to Windows 8.  It used to be the other way around, with competing platforms looking to run Windows Apps.  Remember Apple had dual OS capabilities.  If you want to be a real old-timer who remembers IBM OS/2 v2.0 with the Windows Subsystem?  To be fair these type of subsystems traditionally ran slow and were painful.  I would hope that Bluestack brings something new to the table and is…fast.  Which it should be ok at since Android Apps for phones and Tablets are not like running Microsoft Office.  Size matters.  One thing to note Bluestack is not yet in beta.  Murmur.

My summary of what I have read and followed about CES is there was a lot of focus on Tablets.  A lot of new and upcoming releases tied to Windows 8 and Android.  The one thing I am interested to see when Windows 8 Tablets roll out is cost.  It seems like Apple has staked out the high ground and Android the low ground, and both have lots of applications.  Is the middle ground a viable place to be? On the TV front I think we are waiting for the next big revolution.  Google did some talk about interactive television, however we are not there yet.  Apple has been strangely silent of lat  in this topic.   But I expect them to bet big on Television.  I do expect in the next 2-3 years for this to be a huge focus of CES.  The interesting question and one of great anticipation is who will lead.  Overall though this was not a great year at CES as there was no break through announcements.  No technology that came out and said this is what will be big in 2012, right or wrong (think 3-D TV).  Looking at the products it was more claims of, “This will be a big improvement on what currently exists”.  Take your pick, Tablets, Smartphones, mobile gaming etc…Next year will be bigger with Windows 8, though I don’t hear of anything ground breaking coming from Redmond…yet.  But what we want from CES is not an upgrade but something that changes how we experience life.

Good Night and Good Luck

Hans Henrik Hoffmann January 13, 2012

Windows Phone..where are we today

Mobility is always one of the topics I like to write most about as I find the world fascinating. From the carrier networks and billing systems down to the actual consumer devices. I was at Microsoft in Bldg 117, home of Microsoft Mobility, when the first Windows Phone was released. I had every Windows Phone OS from v1.0 on up to 6.5. I won’t go through the whole history, but needless to say, things started to fall apart for the Microsoft Phone business after the release of the Apple iPhone.  With the latest release of Windows Phone, code-named Mango and the flowering relationship with Nokia, Microsoft at long last seems in a position to compete with Apple and Google.  However so far Windows Phone, despite every positive reviews seems to be at a cross roads.

Recently former Microsoft Windows Phone GM, Charles Kindel on his blog wrote about his thoughts as to why, despite in his view, WP7 is a superior product, sales were so lack luster.  Though I don’t agree with all his points some are very valid.  He highlights four areas of the mobile eco system. They are as follows:

  1. Carriers
  2. Device Manufacturers
  3. OS Providers
  4. Users
  5. Developer **

As noted in his blog he intentionally left the developer community off the list, but I shall add it back in.  So there you have it 5.

Carriers are kind of the Mitt Romney of tech, he wants to be popular to the conservative base of voters but he is not.  The carriers want to be like Silicon Valley, but they are not.  Telco execs are closer to Depends than Huggies.  Silicon Valley kids are definitely in the Huggie category.  Carriers at the end of the day own the last mile to the customer.  Any service for mobile devices will run through them.  They get us all connected.  It’s exciting stuff.  That being said no one gets excited by their carrier.  High School kids do not say they are cool now that they have Verizon Wireless.  Kids are excited by the device and  the functionality it provides them.  Voice and data plans are a necessary evil.  The only talking points are quality of service and the cost of the service.  But make no mistake these old boys wield a lot of power and would like nothing better than to be recognized as “cool” for it.  If you want your device sold you have to play with them…unless you are Apple which managed to dictate their own terms.  This leads us to the next category.

Device Manufacturers do some of the really cool stuff that make the handsets we buy..well cool.  But how do carriers select which handset they will place in their storefronts and promote?  Well we have two different approaches.  One is very monolithic and takes control away from the carriers.  That of course would be Apple.  Apple s the only device manufacturer that I can think of that was able to dictate how their phone would be sold , which at first was sold exclusively through AT&T.  Steve Jobs knew he had broken new ground when Apple created the iPhone.  It was a leap-frog step in mobile phones.  He knew it and he negotiated it.  AT&T sold voice and data plans for the iPhone, but Apple got the rest, including the App Store.  All AT&T could hope for was that the iPhone would drive more subscribers to their network.  It did.   a lot of new subscribers.  On the flip side is Google and what they have done with Android.  Buy a mobile OS, leverage open source and let device manufacturers create.  It was a good plan that gave some leading handset manufacturers cool software so that they could compete and sell against the iPhone.  Quickly HTC went from being a dominant Windows Phone shop to a dominant Android shop.  Other handset manufactures fell quickly into line such as Samsung and Motorola.  Device manufactures had the flexibility to innovate and not have to adhere to a rigid set of software design practices.  Charles Kindel highlighted this in his blog and I am in strong agreement with him on this.  Microsoft has not done this and it has caused friction with device manufacturers. The carriers liked this model as it was less friction between the carriers and device manufactures.  It gave carriers more variety to sell and also more inexpensive devices. Cost was an area where Google could innovate and compete with Apple.

For the providers of OS’s there are primarily three: Apple, Google and Microsoft.  Apple is a walled garden or prison cell, which ever analogy you prefer. Google is on the flip side as it pursued more the open source model and courted developers heavily to their Android platform. I flatter Microsoft by putting them here as they are around 2% in terms of market share, but they have over $30 billion in cash so I guess I should.  Operating systems, whether they are on a tablet, laptop, phone  or other don’t matter as much as the makers would like to think.  But they do enable our experiences so to minimize them would also be wrong.  Really Apple is a soup to nuts shop so they own hardware and software design,  Google and Microsoft differ in approach and cost.  Google has a better developer model and doe snot cost.  Microsoft is less open and does charge for the OS to hand set manufacturers.  In my view these two things will slow down their progress in the market place and to get to a substantial market share is going to be a hard journey.

Users in the end decide where they want to invest their money.  Sp much of what they invest is not necessarily for cool features and cutting edge technology.  It is for how the product makes them feel.  Don’t get me wrong all the technical stuff is very important in making the end product successful, but at the end of the day users want to feel good.   Apple has been far and away the best at this.  Android is good, but it is a cheap alternative to Apple.    Though Charles Kindel claims the Windows Phone is the best bar none, it is hard to substantiate when it’s hard to find anyone (as of yet) who owns one.  My view is tainted toward the positive as I live in Seattle so I have plenty of Microsoft employees happy to show me all the cool features.  Note to Microsoft employees here.  Stop showing features and hand the phone to whomever you are talking to, so they can “experience” the phone.  Feature demo’s are for geeks.

Finally we come to developers.  The are the Windows Phone is weakest in.  Remember Steve Ballmer saying, “Developers, Developers, Developers” .  Apparently he forgot.  Recently Apple hit 500,000 applications, Google has a few hundred thousand.  Microsoft announced they hit 50,000..  Apple amazed me as they used Object C as the development language for the  iOS.  I sold C compilers in the early nineties.  It seemed dead.  However after the release of the iPhone it went from dead to one of the top ten programming languages.  Developers g where the money is.  The development language they use is secondary.  Google use of open source made sense, since the open source community is a whole lot of developers at heart.  It’s a large community so leverage their brain power.  Which brings us back to the Microsoft developer.  Who is Microsoft asking to write Windows Phone apps?  Simple the large and robust Microsoft developer community and yet they are still not even visible in the rear view mirror of Apple and Google.  Why?  For starters mobile apps are simple and cheap.  It is based on a high volume lower margin principle.  Plus a lot of Microsoft developers are not targeting consumer apps.  One of two things has to happen.  Either Microsoft has to create enough consumer demand for Windows Phone to bring developers over to Microsoft or they need to attract non-Microsoft developers to the Microsoft brand.  Not easy but it has to be done.

In the long run I expect that Microsoft will pour enough money into Windows Phone to drive some success, but how much and what is deemed a success is to be determined.  I think short-term it makes more sense for Microsoft to go after Google and Android as Apple has extremely high consumer satisfaction.  A recent study cited 85% of Apple iPhone users would buy Apple again.  Android is ow cost but it is also in danger of fragmenting as the OS layer as more handset manufactures modify the OS , thus creating apps that are compatible on some devices but not all.  This needs to happen fast as Android sales are sky rocketing.  Microsoft and Nokia will have a successful launch and Windows Phone will increase in market share (how much?!?), but the next big question will be can it create and sustain momentum?  Though Charles Kindel claims the Windows Phone is the best mobile phone on the planet, that does not translate into success.  Technology is littered with products that were deemed the best and yet failed to catch on.  It is early for Windows Phone 7 and Microsoft is way late to the game.  Their key partner, Nokia, is making a last stand with the Microsoft mobile platform.  In the mean time Apple and Google have not slowed down.  It seems impossible to overcome.  But what does Microsoft have to lose except for ….the future.

Good Night and Good Luck.

Hans Henrik Hoffmann –  January 9, 2012