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Anti-Misleading Talk Also Misleads

http://www.readwriteweb.com/enterprise/2012/07/dont-believe-the-doomsayers-microsofts-q4-results-are-good-news.php

I am helping MG Seigler by reducing his weasel wording and temporizing about Microsoft’s financials and his reading of the tea leaves.

MG Seigler via parislemon

[…] what we’re seeing in Microsoft’s numbers right now is the full-on shift of the company towards enterprise. To be clear, I think the company will remain alive and probably even thrive in that regard for a long time. I just think the time of their consumer dominance is already over. And within the next decade, it will be completely over. 

I think at that point, Microsoft will be an enterprise software and services company with a strange, but successful gaming sub-division that will probably be spun off by then. 

I totally agree.

Oh, and maybe Facebook will buy the Windows 8 code: they need an OS, bad. And Nokia to make the phones.

When one of the young developers of MSN Messenger noticed college kids giving status updates on AOL’s AIM, he saw what Microsoft’s product lacked. “That was the beginning of the trend toward Facebook, people having somewhere to put their thoughts, a continuous stream of consciousness,” he tells Eichenwald. “The main purpose of AIM wasn’t to chat, but to give you the chance to log in at any time and check out what your friends were doing.” When he pointed out to his boss that Messenger lacked a short-message feature, the older man dismissed his concerns; he couldn’t see why young people would care about putting up a few words. “He didn’t get it,” the developer says. “And because he didn’t know or didn’t believe how young people were using messenger programs, we didn’t do anything.”

Microsoft’s Downfall: Inside the Executive E-mails and Cannibalistic Culture That Felled a Tech Giant - Vanity Fair

The same observations about the use of AIM status updates led to Buddy Gopher, an app that consolidated the away field of your AIM buddies on a single page, now long shut down.

Microsoft completely missed the rise of social networks, but amazingly so did AOL, who had AIM as a great starting point.

I wrote about possibly building something cool on top of AIM based on the Buddygopher experiment, way back in 2006, and I was contacted by people reporting to Jim Bankoff, a VP at AOL. We set up a project to build what would have been a very cool app: project name Nerdvana. My partner, Greg Narain, and I were pushing at content curation through a stream-based, open follower architecture leveraging the 400M+ AIM accounts then in use.

Alas, Jim Bankoff, now CEO of SB Nation, left AOL after Randy Falco joined AOL. The project petered out without serious sponsorship, the budget pulled away to other AIM related projects. We never even got to build the prototype.

But Microsoft and Yahoo also failed to try to make the transition from disconnected buddylists to a unified social network. Likewise my client Jabber, who opted to not build a social network solution on top of its distributed protocol, and is now a part of Cisco.

You can say that these ideas were too early, but these are companies that had all the motivation in the world to experiment ahead of the wavefront.

Perhaps this failure to attempt to design speculatively is another proof of Ven Rao’s Manufactured Normalcy Field: the sense that the present will last a good while into the future, instead of the continuous creative destruction mindset, where the present is being relentlessly consumed by the future, which is only a few weeks, days, or minutes from now. But the bigger the company, the more likely they are to act as if the present is eternal, and the future is retreating as fast as they amble forward.

That’s why Microsoft has fallen so far, to the point where Apple’s revenues from the iPhone alone are more than Microsoft’s entire top line. That’s why AOL has fallen like a meteorite, vaporizing on a death trajectory toward the center of the Earth. That’s why Yahoo has lost its mojo. They stopped speculating, and tried to treat the future as the back porch of the present.

Microsoft’s developer problem – Marco.org

http://www.marco.org/2012/06/22/microsoft-developer-problem

Marco Arment doesn’t actually say that Microsoft Surface or Windows 8 smartphones are doomed, but he cuts to the chase pretty fast: Microsoft is in real trouble because they are starting with next to zero apps, and app developers — like Marco — have migrated off Windows onto Mac:

Marco Arment via Marco.org

By 2005 or so, most of those developers were working on web apps. The web was the platform for that kind of work for most of that decade.2

And during that decade, almost every such developer I knew switched to the Mac if they weren’t already there, partly because it was better for developing web apps.3

That’s one of the biggest reasons there was so much pent-up developer interest in the iPhone before the App Store opened: these consumer-product developers were all using Macs already. As the dominant consumer platform shifted from the web to apps over the last four years, most talented consumer-product developers built products for their app platform of choice during that time: the Apple ecosystem.

Many Windows developers were upset that iOS development had to be done on a Mac, but it didn’t hurt Apple: the most important developers for iOS apps were already using Macs.

But the success of Windows 8 and Windows Phone in the consumer space requires many of those consumer-product developers, now entrenched in the Apple ecosystem, to care so much about Windows development that they want to use Windows to develop for it.

How likely is that?

Anything’s possible, but that’s going to be an uphill battle.

Actually, I don’t think that anything’s possible. But Microsoft might be able sway some developers by subsidizing development of critical apps, as reported by Bijan Sabet. I don’t think that will be enough.

Windows Phone 8 to go head-to-head with Apple's iOS 6 - Phillip Elmer-Dewitt via Fortune

http://tech.fortune.cnn.com/2012/06/20/windows-phone-8-to-go-head-to-head-with-apples-ios-6/

I feel like Elmer-Dewitt is writing an alternate reality scifi novel in this piece, where he makes it sound like Microsoft is still the worldbeater company of the last century, and Apple is the tiny upstart:

Phillip Elmer-Dewitt via Fortune

As predicted, Microsoft (MSFT) took the wraps off its next generation smartphone strategy Wednesday at the Windows Phone Developer Summit in San Francisco.

With Apple (AAPL) expected to introduce a new iPhone in conjunction with the scheduled release of iOS 6 this fall, the stage is set for a holiday face-off between these two long-time rivals in the battle for second place after Google’s (GOOG) market-leading Android smartphones.

Once again, Microsoft will be trying to stretch its lead on the desktop by taking a version of Windows into the mobile device marketplace. Apple, meanwhile, will be playing into its strength in devices that operate smoothly together in an easy-to-use software ecosphere.

Let’s clarify things:

  • Apple is the dominant player in smartphones. The iPhone revolutionized the industry, and Android (which is primarily Samsung) is ahead on unit sales, but Apple is catching up.
  • Yes, Samsung has sold more units: 43M to Apple’s 35M, with Nokia a distant third at 11.9M (mostly Symbian) and falling fast.
  • Samsung and Apple together get about 90% of all the profits in the smartphone market.
  • Apple posted record sales of the iPhone in q1’12, with 35M units sold and $24.4B in iPhone profits for the quarter, up from $10B a year before.
  • Microsoft is the provider of some Nokia phones, but Windows 7 is a tiny, tiny blip.

I don’t really see what Elmer-Dewitt is up to, but Apple is the clear market leader in the high profit laptop >$1000 sector. Who cares if Dell or no name manufacturers are selling bazillions of $450 laptops with $15 of profits?

Apple has the money and vision to create amazing products, and that’s not from selling badly designed, low-cost phones, laptops, or tablets.

And I am sure that Microsoft would love to perceived as going head-to-head with Apple. I think Windows 8 — what I have seen of it — looks cool, and might develop into a viable platform. But the characterization of Microsoft and Apple as side by side in the starting blocks for a race against Android is simply fiction, not analysis.

We are in the middle of a $600 billion disruption, but hardly anyone has noticed. The once-staid world of enterprise computing is in silent convulsions, with incumbent giants being assaulted by startups that are building from scratch for a new era in which the cloud, mobile, and on-demand software will dominate. Hot companies such as Dropbox, Asana, and Atlassian will ascend to the throne, while the corpses of the old rulers – Microsoft, Oracle, SAP – will lie rotting in the gutter. The Great Replacement is beginning.

- Hamish McKenzie, The Great Replacement: Microsoft, Yammer, and a New World in Enterprise Computing via PandoDaily

Hamish inteprets Microsoft’s eagerness to acquire the work media company, Yammer, as something greater than the value of the business — even given its solid team, momentum, and product — but instead as part of a strategic vision of a ‘great replacement’ of the current generation of enterprise software. This transition may take a decade or more, but we will witness the slow dismantling of server-based software running onsite, and the migration to cloud-based solutions, like Yammer.

Hamish also points out that Microsoft has deep expertise in running massive cloud solutions, like HotMail, which they acquired in 1997.

I agree that players like Microsoft, SAP, and Oracle are not going to let themselves be squeezed out of the market by upstarts: they will buy a seat at the table, and cut the cards.

(via worktalkresearch)

(via worktalkresearch)

Why Yammer Deal Makes Sense

Yammer has agreed to a $1.2B acquisition by Microsoft, as was rumored yesterday.

The work media, or enterprise social networks, marketplace is exploding. In December, Forester forecasted that work media will grow at a compound annual rate of 61% through 2016, reaching a market size of $6.4 billion, compared to $600 million in 2011. And with its current offerings — not withstanding the dominance of Sharepoint as a document repository, and the company’s numerous other enterprise software products — Microsoft did not have a horse in the race.

Yammer raised $85 million in February in a round valuing the company at more than $600 million, and has raised $142 million in all. So the investors would like to see a successful IPO, or a sale of $1B at sometime in the not too distant future. However, the recent Facebook IPO has somewhat dimmed the prospect of an IPO for tech companies in the near term.

My bet is that Microsoft has been dancing with Yammer for some time, trying to fill the empty spot in their enterprise jig saw puzzle, and all the while Yammer has been fending them off, biding their time. But the stars came into alignment: Yammer perhaps saw the IPO options fading somewhat and Microsoft finally piled enough cash on the table to sweeten the deal.

Yammer might have seen offers from a number of other companies in recent years, as other enterprise players were rolling up competitors, like the SalesForce buy of Socialcast, and the recent Citrix acquisition of Podio. I wouldn’t be at all surprised to find out that Oracle is on the hunt, and SAP has made a dramatic splash in this market in the past few months, albeit without making an acquisition, yet. Yammer might have looked at the rapid consolidation in the market by multibillion-sized competitors and deemed acquisition by Microsoft as one of the least-risky paths to potential market dominance. A Yammer/Sharepoint integration is a potential killer app for the market today, with hundreds of millions of seats to be sold.

And — incidentally — the Enterprise 2.0 conference is next week, which is the cornerstone event for the work media market, and someone mentioned to me (I haven’t substantiated it) that the Yammer and Microsoft booths are located side by side in the trade show hall. Is that coincidence?

Demo of Microsoft Xbox Smart Glass second screen application. Very cool, although this piece didn’t demonstrate any social features. With 70M sold, Microsoft would be in a good place to launch a second screen social capability, and build a social network.

As Casey Chan at Gizmodo said

As expected, Microsoft just announced something called SmartGlass at E3. Less expected? Just how awesome SmartGlass turned out to be.

When will it run on my iPhone?

Facebook Entering The Next Social Battlefield: Social Operating Systems

A lot of buzz on the interwebs today about Facebook’s apparent third effort to build their own smart phone, and people trying to dissect the reasoning behind it.

Nick Bilton, Facebook Might Have a Smartphone in Its Future - NYTimes.com

For Facebook, the motivation is clear; as a newly public company, it must find new sources of revenue, and it fears being left behind in mobile, one of the most promising areas for growth.

“Mark is worried that if he doesn’t create a mobile phone in the near future that Facebook will simply become an app on other mobile platforms,” a Facebook employee said.

Facebook is going to great lengths to keep the phone project a secret, specifically not posting job listings on the company’s job Web site, but instead going door-to-door to find the right talent for the project.

But can a company that is wired as a social network learn how to build hardware? Mixing the cultures of hardware and software designers is akin to mixing oil and water. With the rare exception of Apple, other phone makers aren’t very good at this.

The biggest names in consumer electronics have struggled with phone hardware. Hewlett-Packard tried and failed. So did Dell. Sony has never done very well making phones.

“Building isn’t something you can just jump into,” explained Hugo Fiennes, a former Apple hardware manager for the first four iPhones who has since left Apple and is starting a new hardware company, Electric Imp. “You change the smallest thing on a smartphone and you can completely change how all the antennas work. You don’t learn this unless you’ve been doing it for a while.”

He added, “Going into the phone business is incredibly complex.”

Bilton suggests that Facebook could simply buy RIM or HTC as a shortcut on the hardware side.

Connor Simpson, Do We Really Need A Facebook Phone?

do we really need a Facebook phone? From Facebook’s perspective, the parts are there, and so is the demand. You’d be hard pressed to find a young person who doesn’t have the native Facebook app, Instragram, and Facebook Messenger already on their phones. It makes sense that they’d want to put something in the market that comes preloaded with all of those apps anyway, along with further Facebook integration.  Plus, a Facebook phone probably may not help solve their current mobile problem. Facebook isn’t making any money from their mobile efforts. All of the Facebook apps are free, and they’re still trying to figure out ways to generate any significant income from their mobile efforts. They wrote in their S-1 filing that if users increasingly started to use Facebook on their mobile devices, they have no way to generate any meaningful revenue from those users. Charging upfront for a Facebook phone would generate revenue, but the real question is whether the cost to get a Facebook phone out would be too expensive to make it worth it.

There is a saying, generals spend a lot of time planning how to fight the last war and are therefore surprised by the new one when it occurs. In this case, Bilton and Simpson are focused on the current smartphone marketplace, the one dominated by Apple and Google, where social has largely been an afterthought, and where social capabilities have been provided by apps, like Facebook in a browser. (Leaving aside Apple’s partial integration of Twitter into iOS.)

The next war will be won by the players that build the best social experience into the guts of next generation smartphones. Social capabilities will be wired into the device at a foundational level, not at the application level. And this is why Facebook must develop its own operating system and mobile devices that run it. It must square off with Apple, Google, and, yes, Microsoft still has a chance, here.

What is amazing to me is that this goes largely unconsidered in these articles: the authors don’t really focus on what a social operating system means.

Smart mobile devices have unique handles for their owners — the phone number, email, and social signifiers (like @stoweboyd) — so, in the not too distant social future I could opt to follow a friend, like @gregarious, independently of applications. By doing so, my social smart phone would receive all sorts of updates from @gregarious — status updates, calendar posts, geolocal information, blog links — and my social O/S would attempt to handle this stream using whatever apps I might have associated with the various flavors of updates. But the fundamental follow would be managed in the O/S, natively.

Note that this could also work across different operating systems: @gregarious might be following me from a Google Android device, a Windows phone, or a Facebook phone. Each O/S might have different sorts of capabilities — Google might have Circles and Huddles, Facebook might have Pages, iOS might be based on Twitter esthetics — but the core functionality of receiving status updates and direct messaging would likely become universals.

At any rate, this battle is just over the horizon, and Facebook needs to build its offering as fast as it can, because Google, Apple, and even Microsoft have a huge head start.

(PS I still don’t understand why Apple doesn’t acquire Twitter, and really bake it into iOS.)

Update 1:03pm — Mathew Ingram weighs in, but never discusses the operating system battlefield.

Update 1:05pm Henry Blodget thinks a Facebook phone is a horrible idea, and after a long list of reasons — mostly saying hardware is harder than software — he closes:

Perhaps Facebook doesn’t really have any intention of building a full-fledged phone—perhaps it just wants to partner with someone like HTC or Samsung. But even then, all the same challenges apply.

Facebook already has an “operating system” for mobile—it’s called the social graph.

So instead of building a phone, which seems like a desperate move, Facebook should partner with every operating system and carrier and hardware maker it can to try to embed this social platform within every mobile platform. And it should build great apps to float on top of these systems. (And if Apple keeps giving it the brush-off, it should probably start by cozying up to Samsung, which is the only company giving Apple a run for its money).

Yes, everyone wants to be Apple.

But there’s only one Apple right now.

And Facebook’s chance of becoming the next Apple seems even smaller than Apple’s chance to become Apple was.

The fact that Facebook is even thinking of going into the hardware business is a bad sign. If Facebook actually does go into the hardware business, it will be a really bad sign.

The Social Operating System: A Reader

For the sake of my pal Valdis Krebs, I am collating a list of posts I’ve made in recent years on the idea of a social operating system. The basic notion:

Stowe Boyd, Rockmelt: Why The Social Browser Won’t Matter

The next generation of operating systems will be social at the core.We won’t be fooling with files and folders. We will be connecting with others, reading streams from our friends, and tossing observations and hopes and insights into the wake we leave behind, spreading out to all that think we matter.

So here’s some links to pieces I’ve written mentioning the idea:

Please send along any references to other people writing on the subject.

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