Microsoft looks to mimic Apple success, says Ballmer

Computerworld - Microsoft Corp. CEO Steve Ballmer said yesterday that his company hopes to steal a page from Apple Inc.'s playbook and change how it works with hardware makers in an attempt to duplicate its rival's success.

In a Wednesday e-mail memo to employees that also outlined changes brought on by the departure of platforms and services chief Kevin Johnson, Ballmer cited several areas that Microsoft would focus on during the next year. Among his comments were some cryptic remarks about Apple.

"In the competition between PCs and Macs, we outsell Apple 30-to-1," Ballmer said in the e-mail, which was obtained by the Seattle Post-Intelligencer, as well as other news outlets. "But there is no doubt that Apple is thriving. Why? Because they are good at providing an experience that is narrow but complete, while our commitment to choice often comes with some compromises to the end-to-end experience."

Ballmer went on to promise that Microsoft would change how it deals with hardware vendors, such as Dell Inc. and Hewlett-Packard Co., the world's No. 1 and No. 2 computer sellers, respectively. "Today, we're changing the way we work with hardware vendors to ensure that we can provide complete experiences with absolutely no compromises. We'll do the same with phones -- providing choice as we work to create great end-to-end experiences."

Analysts struggled to interpret Ballmer's comments, with some unsure exactly what he meant and others willing to read between the lines.

"If he's serious, this would be a pretty fundamental change in how they work with hardware manufacturers," said Rob Helm, an analyst at Directions on Microsoft, a Kirkland, Wash., research firm.

Historically, Microsoft's role in deciding what goes into a PC, or how PCs are priced, has been minor. "Microsoft may have had a major role at times, the Tablet PC is one, but really it relies on forward-thinking partners like HP, who would take a change on Microsoft's designs on software," said Helm.

But the company clearly sees Apple as a threat, outnumbered sales notwithstanding. "Apple's making inroads in the U.S., especially in the consumer market and at the high end," Helms said as he speculated on what drove Ballmer to announce a major change in PC production. "Those are the same people that might pay for a premium version of Windows, so maybe that's one reason."

Allan Krans, an analyst at Technology Business Research Inc., was less inclined to read Ballmer's note as a major shift in Microsoft's strategy. "I don't think this is surprising. This is not anything new."

Rather than see it as a call for Microsoft to become more involved in hardware design, Krans interpreted the memo to mean the company will try to market its software as competitive with Apple's in the functionality and user experience areas. "He's talking not only about the software experience, he's also talking about how Microsoft plans to draw excitement to the platform and why they need to do that because of the shift toward the consumer," Krans added.

During a previously scheduled day-long meeting with Wall Street analysts at Microsoft's headquarters today, Ballmer did add that the company would boost spending on marketing in fiscal year 2009, noting that Microsoft currently spends much less on marketing PCs and smart phones than does Apple.

"My first reaction is that Microsoft may be willing to do more with contract hardware makers," said Helm. "If I had to take a guess, I'd say [it would be] in the ultramini laptop market, which is currently hot and an area that Microsoft has deep concerns."

The low-cost, lightweight notebook market, which Microsoft has touched on already this year as it made exceptions to the retirement of its aged Windows XP operating system, is important for other reasons, said Helm. "The current operating system [Windows Vista] doesn't run on that, so Microsoft has had to make allowances for crippled licenses of XP.

"It's probably within Microsoft's ability to produce an ultramini laptop," he said.

But can Microsoft pull off such a dramatic shift in how it works with hardware partners? Can it really make itself more Apple-like? Helm was dubious.

"They'll say, 'How hard can it be? And we have the money to blow it a couple of times if that's what it takes.' That's their thinking," Helm said.

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