Microsoft Has Fightin' Words for Apple

Them be fightin' words!

Never one to hide his animosity toward his rival from Cupertino, Microsoft (Nasdaq: MSFT  ) CEO Steve Ballmer promises to take off the kid gloves in the software giant's battle royale against Apple (Nasdaq: AAPL  ) .

Let's take this outside
In an exclusive interview with CRN following the company's Worldwide Partner Conference in Toronto recently, a characteristically "exuberant" (to put it politely) Ballmer made his ambitions clear:

We are trying to make absolutely clear we are not going to leave any space uncovered to Apple. We are not. No space uncovered that is Apple's. We have our advantages in productivity. We have our advantages in terms of enterprise management, manageability. We have got our advantages in terms of when you plug into server infrastructure in the enterprise. But we are not going to let any piece of this [go uncontested to Apple]. Not the consumer cloud. Not hardware-software innovation. We are not leaving any of that to Apple by itself. Not going to happen. Not on our watch. We do feel empowered to innovate everywhere and bring our partners with us. We are just not going to leave any -- what's the expression people like to use -- we're not going to leave any stone unturned, so to speak, as we pursue that.

Source: CRN.

Apparently, he was actually shouting at some point during the interview. This is also coming from the same CEO who once said, "We'll talk about slates and tablets and blah, blah, blah, blah ...." That's an actual quote, mind you, from an actual transcript of Microsoft's annual meeting with financial analysts back in 2010 when asked about Apple's iPad, which had just been launched.

His response was that Microsoft has had Windows 7 on slate and tablet form factors for years. He conceded that Apple had "sold certainly more than [he'd] like them to sell." This was just after Apple had reported its first fiscal quarter of iPad sales, which came in at 3.3 million units. Just think how peeved Ballmer must feel now.

All your markets are belong to us
Ballmer makes it pretty apparent that he wants to compete in every market with Apple. That has some heavy strategic implications for Microsoft.

For example, the company recently announced its new Xbox Music service, which combines subscription streaming similar to Spotify, as well as traditional digital music purchases to compete directly with iTunes and Amazon.com's (Nasdaq: AMZN  ) popular MP3 store. Google (Nasdaq: GOOG  ) is still catching up trying to grow music sales in Google Play also, while Apple and Amazon are the two clear leading incumbents in the market.

More broadly, that implies that Microsoft would also have to either focus more or enter markets like education, software for creative professionals, e-books, first-party wireless routers, first-party PC hardware, portable music players (didn't it just kill the Zune?), and many others.

No stone unturned, right?

Surface phone ... ?
"Hardware-software innovation" is probably the most loaded statement in there. Not only has Microsoft jumped into first-party tablet hardware with its Surface device, of which Ballmer expects to sell "a few million," but his words also strongly imply the possibility of jumping into first-party smartphones.

Indeed, he didn't rule out this alternative when asked, instead pausing and saying the company is focusing on Surface right now, but then "we'll see what happens." He acknowledges the hardware partnerships with Nokia (NYSE: NOK  ) and HTC in the smartphone arena, but not saying "no" is halfway to saying "yes."

Reality bites
Ballmer's aspirations frankly aren't realistic. He's spread Microsoft far too thin over too many areas, and that's now catching up. This is particularly evident in the wake of the $6.2 billion writedown related to the company's aQuantive acquisition as it hoped to challenge Google's advertising business. Microsoft killed the Zune for a reason, which presumably wasn't that it was making too much money.

Even the Xbox gaming console business isn't a financial success, despite its popularity. Consoles are typically sold at a loss, and the segment has lost billions of dollars over the years. The entertainment and devices division posted an operating loss of $229 million last quarter. The online services division saw $479 million in red ink.

Microsoft still needs to make its $8.5 billion Skype acquisition work to expand its presence in video-calling, while simultaneously jumping into professional social networking with the $1.2 billion purchase of Yammer. Yet it still wants to add more to its list of markets?

When Google CEO Larry Page visited Steve Jobs shortly before his death, asking for advice, Jobs set aside their companies' differences and talked about focus, telling him: "Figure out what Google wants to be when it grows up. It's now all over the map." Jobs said that Google's plethora of offerings was turning out to be just "adequate but not great," warning, "They're turning you into Microsoft." Just months later, Page would shift Google's strategy to greater focus and putting "more wood behind fewer arrows."

Ballmer would never admit it, but he should also heed Jobs' advice. The last thing Microsoft needs right now is a Zune resurrection.

Apple's intense focus has driven it to unprecedented heights, yet it still has plenty of room to run. Sign up for The Motley Fool's brand new premium Apple research service and get an in-depth report on all of the company's strengths and weaknesses. Even though Microsoft is a Dow dividend stock, it's not one of three that dividend investors need. This special free report will get you up to speed.

Fool contributor Evan Niu owns shares of Apple and Amazon.com, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Google, Amazon.com, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Amazon.com, and Google and creating bull call spread positions in Microsoft and Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (30) | Recommend This Article (34)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 11, 2012, at 10:21 PM, bugnuts wrote:

    Ballmer's got nothing but bluster. He's been promising to best Apple for years now. MSFT is toast under his leadership.

  • Report this Comment On July 11, 2012, at 11:22 PM, techy46 wrote:

    A lot of bravado but let's be realistic. It's Micro-Soft which means software first and foremost. Sure, they can establish a reference device like Surface but there'll be plenty of Fluids, Infinitys and Lumias to make the competitions life miserable. Microsoft and it's partners can bring IT to Apple without Microsoft building everything Apple builds.

  • Report this Comment On July 12, 2012, at 12:59 AM, TMFNewCow wrote:

    rctrjck, quick fun fact: Microsoft's Online Services Division (OSD) has generated cumulative operating losses of $10.3 billion since fiscal 2005. Entertainment and devices has lost "only" $616 million over the same time.

    Do you think more unprofitable businesses is what Microsoft needs?

    -- Evan

  • Report this Comment On July 12, 2012, at 1:01 AM, Fruitfan wrote:

    I don't know anyone who actually likes Mr Softy's junk but just tolerates their junk software because most business run a Windows platform. The day I can no longer need Microsoft in my professional life will be a great day. Until then it's all Apple with a little Google in my personal life. Microsoft has been a disaster under Balmer. The lost decade for the stock. I can't believe Gates hasn't stepped in and gotten the board to fire Balmer

  • Report this Comment On July 12, 2012, at 5:20 PM, terryongarland wrote:

    Its' all in the charts.Look at stock prices of AAPL and MSFT the last ten years.

    Enough said.

  • Report this Comment On July 12, 2012, at 5:22 PM, SkepticalBen wrote:

    Steve Ballmer is the problem. Apple has out innovated and out executed everyone, only Google which took a page from MS book and gives Android away for free (remember Netscape?) has been a thorn in its side. Microsoft has tremendous resources, but Ballmer is a bonehead. Look on youtube for the crosscut video between Steve Jobs and Steve Ballmer highlights, including Ballmer dissing iPhone's prospects.

  • Report this Comment On July 12, 2012, at 5:31 PM, grisatre339 wrote:

    Dear rctrjck,

    We hear you, and we applaud microsoft's expert security.

    love,

    All the virus infected PC's throughout the world

  • Report this Comment On July 12, 2012, at 5:32 PM, JeensJeepAndADog wrote:

    Microsoft's advantage was that they were in the right place at the right time. Developing an Intel based OS when the PC was becoming an open hardware platform where different manufacturers could compete. They assumed that since Intel and commodity hardware would become dominant, they had a monopoly on PCs and the new generation of servers that used commodity hardware.

    Then came the Internet and Linux, and then Apple.

    Apple's forte is to take the battle elsewhere and not compete head to head. They use new technologies to create new markets, something Microsoft has never done.

  • Report this Comment On July 12, 2012, at 5:44 PM, jjhudak wrote:

    And exactly how many successful hardware platforms has M$ built???

    Attention to detail is the key - and over 30+ years of M$s existance they have NEVER demonstrated enough attention to detail to earn the user comment 'it just works'.....Apple has, I know, I use and design hw and sw for both....

    Ever use a Win CE phone???? nuff said.

  • Report this Comment On July 12, 2012, at 5:46 PM, dvena wrote:

    By the time Ballmer et al "catch-up" to where Apple is now, Apple will have innovated and be further ahead along the curve. While it is nice to see a CEO that is ambitious with regards to meeting or exceeding their competition, it is also folly to chase your competition in every area, wasting valuable resources that could be better spent innovating and developing their own markets. That is what has made Apple the powerhouse they are today. Finding an area that desperately needs it and innovating and creating new markets that previously did not exist. Blah blah blah indeed!

  • Report this Comment On July 12, 2012, at 6:09 PM, Vancanman99 wrote:

    If Microsoft really wants to compete with Apple it has to do what Apple does: Come up with really great, original products and ensure that they are the best they can be before you release them to the public. Then you make them even better.

    Microsoft has a whole slew of divisions and operations and products. Their software, useful as it is, is bloated and early versions are notoriously buggy.

    Apple has iPhone, iPad, iMac and iBook.

    4 products. All original. All best in class. All top quality.

    That's how you compete. Not by making poor copies of somebody else's ideas - which is what Microsoft has been doing for years.

    It's a shame because some of the guys that work for Microsoft are crazy smart and full of original ideas but all Ballmer wants to do is crush Apple at it's own game.

    This will not end well for Ballmer nor for Microsoft.

  • Report this Comment On July 12, 2012, at 6:11 PM, Bert31 wrote:

    Remember microsoft had to bail apple out many years ago.

  • Report this Comment On July 12, 2012, at 6:23 PM, awallejr wrote:

    MSFT has done nothing under Ballmer's leadership. The first thing MSFT needs to do is replace him with someone outside the company but in the industry.

  • Report this Comment On July 12, 2012, at 6:45 PM, RondoAZ wrote:

    Nothing is ever always or never. MSFT has $. It has some technical talent, and can buy all it wants whether they have the fire in the belly for the fight is a different story.

    My years in IT, we won some big fights and it was based on many 18 hour days of slogging through details too tiny to seem to count.

    MSFT has hubris, which probably goeth before another fall - it's a "UTILITY" but doesn't know it - yet. Next CEO needs to take advantage of that. Soon, please.

    Apple should ignore them other than any accidental good stuff.

  • Report this Comment On July 12, 2012, at 7:00 PM, mday1 wrote:

    If only Steve were still here... Apple might put out a "Welcome, Microsoft. Seriously." ad, just like they did to IBM. ;-)

    http://www.slashgear.com/apple-releases-full-page-welcome-to...

  • Report this Comment On July 12, 2012, at 7:10 PM, ebsco1 wrote:

    It's an old story: businessmen should worry less about their competition or more about their business affairs. Balmer statements comes close to sounding paranoid. He needs to forget about Apple and go back to work figuring out what Microsoft can do to return to being a vital factor in the market again. Balmer's problem is that Apple is fun and Microsoft is dour. Therein lies the real problem.

  • Report this Comment On July 12, 2012, at 7:17 PM, Darwood11 wrote:

    I agree with the author. Ballmer is not being realistic. He sounds as if he's simply spreading braggadocio.

    I think it is prudent to get into hardware for some other niche as MS did for the X-Box.

    But to date their success in hardware has been limited and I don't think Ballmer is the one to lead the company to do it.

    Tablets now have three well funded players; Apple, Google and Amazon. MS is to be the fourth. I like the possibility of choice but I think this area could get crowded.

  • Report this Comment On July 12, 2012, at 7:52 PM, IanNY wrote:

    so next he buys RIM to get at the subscriber base. Microsoft will overpay but that is inevitable...

  • Report this Comment On July 12, 2012, at 7:54 PM, CluckChicken wrote:

    I know MSFT is a favorite target top bash and most of it is just rehashed junk that either was never true, true once decades ago or just ignorance to what reality is.

    "MSFT has done nothing under Ballmer's leadership."

    I am not going to say that Ballmer is the world's greatest CEO but it is very easy to find a list of companies that would like to have done as poorly as he has. Gates ended his day-to-day leadership of MSFT in 2008 (yes Ballmer had been CEO since 2000 but was he really in charge) and since then Ballmer has been the one to drive the direction of MSFT. In 2007 Revenue was 51B and Net Income was 14B in 2011 70B and 23B. That isn't performance one calls crap.

    Sure the phone has been a miss (though the metro interface is so much better then iOS or Android) and I agree you don't need to go after everything your competitors do. Then again MSFT does have all the pieces, they do have outstanding talent, time to see if they can just put it all together.

  • Report this Comment On July 12, 2012, at 8:59 PM, Dccps wrote:

    When will MS wise up and get rid of their BIGGEST problem... A man named Steve Ballmer? The MS glory days are over as long as they stay married to an obsolete OS ( Windows by any number) and they aren't controlling the quality of the built product their OS is installed on. Ballmer: retire! Do your company a real favor. Stick a fork in you... You're done.

  • Report this Comment On July 12, 2012, at 9:16 PM, DBLBLU wrote:

    As an enterprise customer of Microsoft I can tell you that their profit didn't come from Zune, Kin, Bob (remember that joke?), aQuantive, Bing, xBox, etc. etc.

    Microsoft's profit has come from sticking it's enterprise customers (who are stuck with its products) with 17 to 50% price increases every 3 years.

    When you have the enterprises by the corporate jewels, you can produce inferior products at inflated prices.

  • Report this Comment On July 12, 2012, at 9:16 PM, Guyver wrote:

    Nice Zero Wing reference.

  • Report this Comment On July 13, 2012, at 4:15 AM, TerryHogan wrote:

    I've no doubt that Apple products are popular, as the numbers speak for themselves, but as far as real innovation goes, they do as much 'borrowing' as anyone. I mean Bill Gates was a Tablet evangelist a good 5 years or more before the iPad, Apple just did it better. And they definitely didn't invent the smart phone, but they have sold the most.

    I do think there's a bit of 'coolness' factor that goes into it. Even if Microsoft were to produce a better Tablet, people would still by the Apple product. It's like Pepsi beating Coke in blind taste tests, but Coke still way outselling Pepsi, something about brand image that people cling to.

    Why pay $150 for a leather guess purse when you can pay $1500 for a leather coach purse.

  • Report this Comment On July 13, 2012, at 9:03 AM, ziq wrote:

    I am shocked--shocked!--to hear that Balmer was actually shouting during an interview.

  • Report this Comment On July 13, 2012, at 9:08 AM, Johnjd7 wrote:

    Microsoft never learned.

    Bigger, slower and more buggy is a DOWNGRADE not an upgrade.

  • Report this Comment On July 13, 2012, at 10:11 AM, WishToRetire2 wrote:

    Here's the video with Balmer's comment about Iphone.

    http://www.youtube.com/watch?v=v3qGX3PNphw

    P.S. His body mass index and type A behaviour is likely to precipitate a heart attack.

  • Report this Comment On July 15, 2012, at 11:57 AM, JAXXJAGUAR wrote:

    Apple has eaten Microsofts lunch for years and years and years; over a decade. And who was on watch? Steve Ballmer. Take a look at MSFT vs AAPL on a 10 year chart. Sorry Steve, the horse is already out of the barn. By the way, Win 8 is going to be a HUGE FLOP. You heard it hear first.

  • Report this Comment On July 17, 2012, at 5:35 PM, awallejr wrote:

    "I am not going to say that Ballmer is the world's greatest CEO but it is very easy to find a list of companies that would like to have done as poorly as he has."

    Except what has the stock done? In 2007 it peaked at $37 and has never come near that price since. Ballmer is the problem. There is little reason to invest in MSFT over AAPL.

  • Report this Comment On July 19, 2012, at 8:00 PM, EdGrey wrote:

    Has Ballmer switch from cocaine to crack?

  • Report this Comment On July 19, 2012, at 8:00 PM, EdGrey wrote:

    er, switched...

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1940801, ~/Articles/ArticleHandler.aspx, 9/30/2014 12:08:23 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement