Can Apple Put a Hurting On Microsoft?

by Chris Seibold Jul 27, 2005

If you’ve spent much time jumping around the ‘net reading computer news and views you could be forgiven for making the assumption that Microsoft will be hanging a largish sign in front of the main office saying “Going out of business! Used Office Furniture CHEAP!” any day now. That is just how bad the recent press has been. Whether people are predicting that iTunes will kill Explorer  or that Tiger is so far ahead of anything Microsoft could ever produce they might as well give up altogether, the news for Microsoft is uniformly bad.

Surely some of this is just rooting for the underdog, people always like to see the little guy succeed (unless they have a large wager on the big guy of course) but some of the articles make persuasive arguments and present scenarios which seem imminently plausible. That said let us first let us dismiss the notion that Microsoft will simply keel over anytime soon if for no other reason than the corporation has incredibly large cash reserves. To put a finer point on it Microsoft raked in 9.62 billion in revenue last quarter (not exactly a skip the hamburger in Hamburger Helper number) and has a room for growth.  On the other hand just because things look rosy for the moment doesn’t mean the complete picture will always be painted on hundred dollar bills.

So how does a dominant company go from master of the market to irrelevant niche player? The example generally proffered at this point is Ford and GM. At one time Ford owned the American car market yet a scant few years later Ford found themselves looking up at GM. It is an interesting an enlightening exercise but not the most relevant to the world of computers. Hence a look at other companies that were once dominant then marginalized is obviously in order. A great place to start is with, well, Apple Computer.

Apple Computer never enjoyed the dominance that Microsoft currently does but in 1981 with their Apple // they did command a respectable 15% of the market. And that percentage, while impressive, is not indicative of Apple’s true command of the market. It must be noted that the percentage includes computers like the TRS-80 (wish I had one) and the Atari 400/800. Apple really wasn’t competing with those brands, Apple was competing for the business users and high-end home users. Not only was Apple competing Apple was winning. So what cost Apple their lofty perch in the world of personal computing? Here some people will point to the transition to the Mac (a switch which did cost Apple dearly) but the thing that really got Apple was IBM deciding to enter the PC market. IBM entering the market meant computers were here to stay and hence legitimized the technology for businesses everywhere.  This is one case where there wasn’t much Apple could have done to hold onto their lead short of passing out free computers. Unfortunately Microsoft is the big dog on the block so there is no conceivable chance of this occurring again in the PC arena. It is, however, interesting to note that much the same thing happened when Apple introduced the iPod. Digital music players were suddenly legitimate and Apple took the market by storm, what a difference 23 years make.

Besides the near impossibility of the above scenario the argument also lacks in another area: it is comparing two hardware makers. Microsoft is primarily a software company so an inspection of a once giant, now nearly failed, software company is in order. There is no better example for this case than Wordperfect. At one time Wordperfect was synonymous with word processing, they made a reasonably good product and had a great name but now your are lucky to stumble across anyone who actually remembers using the once ubiquitous program let alone find someone who still uses the now venerable application. So were did Wordperfect go wrong? The app missed the Windows boat. When Microsoft Word was on Version 2 Word Perfect was just limping over to Windows. Lateness was not the only problem facing Wordperfect, they also had to contend with the fact that the key combinations that worked so well in DOS didn’t work as flawlessly in Windows. As more and more people switched to Microsoft Word Wordperfect began a slow spiral to obscurity. Expecting Microsoft to make mistakes of the same magnitude of the makers of Wordperfect is a bit of stretch. You’d have to imagine things like an incredibly late version of Windows, one that was not only late but a release that didn’t offer any real incentive to upgrade and, further, failed to deliver on many of the promised features while the competition keeps churning out ever better products…. Wait a minute… Apple might be on to something here!

Of course it is not enough for Vista to be horrendously late and terribly named (Apple and Microsoft are almost dead even in the bad names of OS releases department, though you have to give the edge to Apple for hitting the bad name thing so consistently) it is going to take Microsoft eschewing something demonstrably better for the sake of preserving their existing business. Obviously that would be corporate suicide, no company would ever knowingly turn their back on innovation simply to preserve an aging business model would they? Oddly enough that is precisely what happened in the case of vacuum tubes and transistors. Western Electric was big into vacuum tubes, a substantial portion of their revenue was derived from the sales of the constantly failing tubes. When presented with the opportunity to jump into the clearly superior realm of transistors Western Electric balked and licensed their transistor technology to a smallish company for a mere $25,0000. While you might not be too familiar with Western Electric (their web page still features a vacuum tube prominently displayed) you might have heard of the company they licensed their technology to: Sony. How can this possibly apply to Apple? There are a number of very smart people who earnestly believe that Intel has a plethora of technological advances they are unable to implement because of Microsoft’s overarching desire for backwards compatibility.

Of course noting that something has happened before and expecting it to happen again are two markedly different prospects. It is doubtful that Microsoft will take one of the catastrophic falls outlined above, their competitive advantage is too large to be so easily overcome. On the other hand such a fall is not out the realm of possibility. Microsoft will likely not be relegated to the role of equal player for decades to come (unless, of course, Linux gets everything just right) and imaging Microsoft as just another moderately successful software developer any time soon seems like a stretch worthy of Mr. Fantastic. Still for the “Apple must grow” crowd there are reasons to hope.


  • Microsoft’s OS market share may erode over the next few years if the MAC OS and Linux can keep the pressure on, but corporations will continue to prop-up Microsoft for years to come. Just look at the billions the suits poured into the Y2K disaster as an example of their willingness to bend-over and take it with a smile.

    cloudwall had this to say on Jul 28, 2005 Posts: 21
  • What do you mean no one uses WordPerfect? I have a feeling that a lot more people out there use WordPerfect than you’d think. It’s on most of the PCs at my office, *and* it’s the stock software offering on Dell PCs. If you go buy a Dell Dimension 5100, when you get into the configuration options, the “stock” option for “Office Productivity Software” is “No Productivity suite - Corel WordPerfect word processor only.” They also offer WordPerfect Office 12 for $69.

    I’d have to assume that many/most cheapskate PC buyers would just stick with the “free” WordPerfect. Oh, wait a minute…then, after the computer is delivered, they just pirate M$ Office. Heh.

    NOLA Matt had this to say on Jul 28, 2005 Posts: 2
  • Yeh, NOLA Matt I think you’ve pretty much hit the nail on the head. I can’t count the number of times MD office left my old office for “home back up” purposes. I’m sure each of those computers had wordperfect installed (though for some reason most folks went with Gateway) but just about everyone except me pirated a copy of Office.

    Chris Seibold had this to say on Jul 28, 2005 Posts: 354
  • As long as there are lawyers, WordPerfect will have a loving home. That app has been the mainstay of attorney’s firms for two decades, with no end in sight.

    tao51nyc had this to say on Jul 28, 2005 Posts: 45
  • I think academics enjoy wordperfect as well. Unfortunately for WP everyone else seems to strongly prefer MS word.

    Chris Seibold had this to say on Jul 28, 2005 Posts: 354
  • Agreed.  I can see a potential marketshare slip fo MS in the future, but I would be surprised if it went below 70%.  Mac OS might be able to capture 20 - 25% of the desktops given the right conditions, but corporations are very slow to adapt to new systems, even when the old ones are failing.

    Clearly, many organizations would be able to cut IT support costs by switching machines over to the Mac OS right now... but IT managers don’t see it that way. It’s “easier” for them to keep using whatever corporate licensing they now have and not rock the boat… despite the fact that it means they have to have a bigger IT support staff and use expensive desktop management solutions like Altiris, LANDesk or SMS.

    Don’t underestimate corporate inertia. It’s the reason why IBM is still able to sell mainframe hardware even today (and why you still see COBOL and Fortran programming positions in the classifieds).

    Also, why do you think MS Office for Mac still doesn’t have Access or Visual Basic support?  For this very reason.

    Corporations who rely on VB apps for finance, etc can’t switch their systems to a non-Windows OS.  It’s not because MS engineers couldn’t make Access or VBScript cross-platform… They don’t want to because it helps protect their monopoly.

    I wish Jobs had demanded a VB port instead of the $150 million “investment” when MS got caught with Quicktime code years ago.

    vb_baysider had this to say on Jul 28, 2005 Posts: 243
  • tao51nyc: While it is true that the legal profession was one of the last hangers-on to WordPerfect, it’s pretty dead there, too. I’m sure there are still some law offices using it (probably the same ones who don’t upgrade any of their computer products), but many of the law firms migrated to Word years ago. I have a friend who worked in the IT department of two huge law firms when they were doing the conversion. The biggest reason they had to change is because documents going back and forth to clients had to be in Word because all the clients had switched.

    Kris Thom White had this to say on Jul 28, 2005 Posts: 18
  • The biggest problem facing Windows/Microsoft in general (and to a certain degree Sony)in my eyes is their size. People dislike dominance and often seek out an alternative.Look at the public opinion of EA. People see it as a faceless corporation, that killed Sega hardware for no good reason. People only buy EA games because often there is no alternative, but Microsoft(and Sony) have competitors coming in from all sides, can they cope with the likely defections? I say this, being a defetor from both myself.

    Jensonb had this to say on Jul 28, 2005 Posts: 3
  • Jensonb has a great point. A relatively smaller company like Apple and smaller installed base can innovate and gain market share. The larger has to keep its larger installed base happy. Its a cycle - one day Apple (or Linux, or some other unknown company) will be at the top and be taken down by a smaller nibler more innovative company.

    Nathan had this to say on Jul 28, 2005 Posts: 219
  • As long as apple keeps going down the road it has been for the last 10 years with blinders on then MS has NOTHING to worry about. Apple is reaping exactly what it sowed in the 90’s, slow PC sales, eroding PC customer base, and disdain from those that jumped ship. Why Apple didn’t give up proprietary hardware and keep control over the OS no one knows but it cost them big time. Don’t believe it? Then explain why sales of Apple PC’s have slowed every year since 1995 and why software for them has disappeared as well? When Adobe ported PS to Windows the writing was on the wall for Apples demise. Had it not been for the ipod raking in over 60% of all apples cash revenue they would already be hanging the out of business sign. With Sony and the PSP (nicknamed ipod killer) the ipod sales will continue to slack, in fact I am willing to bet that 3Q sales will be stagnant and 4Q will show really bad numbers for apple. You can’t expect people to spend 5 grand on a PC and two years later tell them they have to do it again, it’s OK if you’re pimping a $500 x86 but not a $5k Apple. As far as I am concerned they will get exactly what they sowed in the next few years. Don’t get me wrong, I hate MS, love FreeBSD, but as far as the Corp world goes MS has a long and prosperous life left, Apple on the other hand will be lucky if they are still in business and making PC’s in 2010. They knew this was the last year they could taught the fastest PC so now they go Intel?!! If that isn’t selling out PPC then I don’t know what is. You apple die hards cry about windblows being unstable, what do you think OSX is going to do on an x86 platform?
    If Steve Jobs had ANY integrity for Apple then he would have let the south pacific knock out Apple clones cheap and cost effective to consumers and hold onto the OS, but he didn’t and he won’t and now you can thank him for putting Intel in next years G5’s, so sad someone could be so stupid and take what used to be the ultimate PC and turn it into an expensive toaster oven.

    warezdog had this to say on Jul 28, 2005 Posts: 1
  • Gosh warezdog tell us how you really feel. I expect Apple to continue to grow in the coming years though the next few quarters might not be so great. As for letting Asia knock out cheap computers, well Apple already does that. iBook, iMacs, Mac Minis, Powerbooks and PowerMacs are all built by Asian manufacturers from Apple designs.

    Chris Seibold had this to say on Jul 28, 2005 Posts: 354
  • Sputnik! It’s great to see you on AM!  I really love your work on MDN - you fool sooo many people with your tongue in cheek opinions.

    But why are you calling yourself warezdog now?

    Chris Howard had this to say on Jul 28, 2005 Posts: 1209
  • People dislike dominance and often seek out an alternative.

    Does that apply to Apple and the Ipod/ITMS as well?  Do you consider that a “problem” or an asset?

    Where MS’s size matters is in backwards compatability.  Apple can re-invent itself every few years because their market share is so small that they can rely on a relatively loyal user-base adapting and putting up with the changes (like the switch to OSX and the switch to Intel) without too much of a fuss.  MS does not have that luxury and so they are hampered somewhat by having to stay compatible with previous iterations.

    Beeblebrox had this to say on Jul 28, 2005 Posts: 2220
  • To be honest, haven’t Apple fans been spelling the demise of MS for years?  I know they’ve been predicting the explosion of Apple marketshare for quite some time.  Basically, every new computer that Apple puts out is going to be “the one” that finally makes people switch to the Mac OS.  And it never really happens that way.  It was really going to happen with the original Imac.  Then the Cube.  Now the Mac Mini.

    Let’s imagine for a moment that MS just decided one day to stop.  They divy up their $30 billion to their employees.  Gates says to the world, “Well, I’ve had a nice run but I’m tired and I’m through.”  They close up the doors and go home.  And btw, Windows is now free.

    How would Windows marketshare be affected?  At first, not much would change.  Too many companies rely too much on Windows.  And there hasn’t been a new version of the OS in a few years anyway so there’s not really an urgent need to switch to Linux or Mac.  If it ain’t broke, don’t fix it.

    But eventually, those machines will start to get old.  And provided Windows isn’t updated by the opensource community, manufacturers like Dell are going to start looking for alternatives, probably Linux.  Meanwhile, Apple will make a move to take over the home and business markets as well.

    But Apple has a unique problem here, even with Windows slowly moving out the picture.  They still face the hurdle or being incompatible and being more expensive than other PCs.  In fact, Dell, free of MS licensing and costs, will probably be able to charge even less for a Linux box than it currently does for a Windows PC.

    Both businesses and home users, forced to give up Windows compatibility, will get to choose between two systems (barring the introduction of some third new OS) based pretty much on the criteria they use now minuse the compatibility issues with Windows: Cost, Ease of use, Software.  As it stands right now, the Mac wins two out of three versus Linux.  It’s got more software and it’s easier to use.  But cost is a serious factor, probably greater than the other two combines, and it may be what keeps Apple from gaining any significant foothold even in a Windowless world.

    Beeblebrox had this to say on Jul 28, 2005 Posts: 2220
  • So were did Wordperfect go wrong? The app missed the Windows boat. When Microsoft Word was on Version 2 Word Perfect was just limping over to Windows.

    Memory has it that Microsoft deliberately withheld the Windows 95 APIs from competitors for as long as they could until Word and Excel had been able to make significant inroads.

    Lotus 123 suffered the same fate.

    The developers of Word and Excel had access to the Windows APIs and beta versions of Windows well ahead of WordPerfect Corp and Lotus Corp. From memory, I believe WP didn’t get them until after W95 was released - or maybe not long before.

    So you can’t put the blame on WP or Lotus for their failure. It was a preconceived and malicious plan of MS using their advantage as the developer of both the OS and the software, to wipe out their competitors.

    Feel free to correct me if I’m wrong, but that was what the press of the day were saying.

    PS WordPerfect had one chance at recovery when Novell bought it - who still had the market clout at the time and should have given it cheap to all their customers. But Novell mismanaged it and quickly offloaded it to Corel

    Chris Howard had this to say on Jul 28, 2005 Posts: 1209
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