Open Letter to Microsoft
Dear Steve Ballmer and top management at Microsoft
You are shifting from mere misunderstanding through complacency to being delusional, with your corporate strategy relating to mobile phones (cellular phones).
The recent public statements by Mr Ballmer reflect a gross neglect of facts and trends, as the IT/tech industry today is going through as giant a shift in the industry as that which occurred with the transition from mainframe computers to personal computers. That previous shift produced the opportunity that spawned Microsoft and gave it the growth opportunity at the expense of the previous computer industry giants such as IBM.
Microsoft today is perilously close to mimicking the fate of IBM which once used to tower over its biggest computer manufacturer rivals so greatly that the industry used to be called "IBM and the seven dwarfs". Before selling its PC unit to Chinese Lenovo, IBM itself had squandered its leadership and shrunk into a "dwarf" of PC makers. You, Microsoft top management know this history. Yet your latest statements seem to suggest you have learned nothing from how previous giants lost their way in a major technological transition in this industry and seem headed full steam into the same catastrophy.
Now your public statements about the state of the computing industry suggest that Microsoft is pigheadedly insisting on outdated views and facts, and not unlike an ostrich, is sticking its head in the sand rather than face the new reality of the industry it, Microsoft created (computer operating systems). Soon your shareholders will start to demand a course-direction. I urge you to shift the strategy now.
DELUSIONAL COMMENTS BY BALLMER
What is this all about? The June 2, 2009 edition of the Wall Street Journal featured a long story from the All Things Digital Conference where Steve Ballmer was interviewed. The article includes quotes from Mr Ballmer saying: "The mobile area is red hot, and the truth is nobody sells very much." He is also quoted discussing the scale of the industry, "Everythings hot, but when alls said and done, Apple, Blackberry, us - were all in the 10 to 20 million units a year. Contrast that to the PC, which sells 300 million units a year." Mr Ballmer also makes a qualitative evaluation of the market, "The smart-phone market is really in its infancy."
Mr Ballmer is also quoted saying "...the number 1 device today, and likely the number 1 device for the next 5 years, is the PC." He also makes a statement to what differentiates the two platforms: "I'm not saying there's not a role for phones and PCs. I believe in phones, I believe in the PC. What's the difference? Probably we'll think of it as screen size."
Its not just that Mr Ballmer somehow lost his marbles talking to the Wall Street Journal. He's been saying the same stuff for a long while. In the USA Today 3 June, Ballmer was quoted: "I mean, Apple has done a nice job. RIM has done a nice job. Nokia is coming out … but it's such a nascent category."
In Forbes on May 28, Mr Ballmer was quoted saying it would take 5 years for the smartphone installed base to reach "400 million to 500 million devices on the market."
One cannot imagine what compels a CEO of the biggest operating system maker to make such misguiding statements. Is he not obligated to tell the truth about his industry, as stockholders would be expected to read his statements in papers such as the Wall Street Journal and Forbes?
First of all, the statement that "the truth is nobody sells very much" is patently wrong about the smartphone market and is astounding for a CEO of the worlds biggest provider of operating systems for computer equipment - a vital component for any computer to function - to make. In terms of needing an operating system, a smartphone is just like any computer, and Microsoft knows this full well having entered the smartphone operating system market with its first phones manufactured by HTC and sold as far back as 2002. After seven years, one would expect that the CEO would at least have his basic facts right.
In the Wall Street Journal article Mr Ballmer suggests that the big smartphone operating system makers are Apple, RIM and Microsoft, and that their combined market is about 50 million units. While its true, that RIM, Microsoft and Apple did sell 51 million smartphones in 2008, that is dramatically misleading. Mr Ballmer conveniently "forgot" to mention the biggest operating system, Symbian, which outsells all other operating systems combined, and he also ignored the biggest handset maker of smartphones, Nokia, which sold more smartphones than Apple, RIM and its Blackberry models and all smartphone makers who used the Microsoft Windows Mobile operating system last year.
MORE THAN LAPTOPS
Informa, the industry analyst, reported that total smartphone sales were 162 million units for 2008, and specifically, Informa pointed out that for the first time, more smartphones were sold last year than laptop computers. Every analyst who discusses mobile phones, including Informa, IDC, iSupply and Gartner, has issued statements for 2009, that inspite of the economic downturn, smartphone sales will increase this year. Meanwhile as far as I have seen, all PC industry analysts forecast a severe downturn in PC sales this year.
For Mr Ballmer to state that smartphone sales are "in its infancy" (Wall Street Journal) or "nascent category" (USA Today) is grossly misleading when smartphones outsell laptop computers - itself the largest category of personal computers by type.
CHENEY-RUMSFELDIAN LEVEL OF DECEPTION
One is reminded of "greeted as liberators" and "will pay for itself" type of falsehoods of a strategic decision in government some years ago. Mr Ballmer with a straight face said: "The truth is nobody sells very much. When all's said and done, Apple, Blackberry, us - we're all in the 10 to 20 million units a year. Contrast that to the PC, which sells 300 million units a year." Mr Ballmer clearly suggests that the total smartphone market is in the 50 million unit annual sales range, and compares with to PC sales at 300 million. He suggests that personal computers outsell smartphones at a ratio of 6 to 1.
The smartphone market is not sized in the 50 million units scale. Understand the relative sizes. The three largest manufacturers of personal computers, HP, Dell and Acer, sold 55, 44 and 31 million computers in total in 2008. But far above those numbers, the worlds largest maker of smartphones, Nokia, sold 61 million smartphones last year. Note that is not the total global output of Nokia counting all of their mobile phones (cellular phones) - that would be over 400 million units; no this is only counting Nokia branded smartphone sales, which use the Symbian operating system.
Obviously where Mr Ballmer mentions Apple, Blackberry and Microsoft based smartphones in the interview to indicate the supposed size of the market, Nokia alone is bigger than those three brands put together. And Symbian is bigger still, as it powers several other brands of smartphones in addition to Nokia. Symbian is more than half of all smartphones. To ignore Symbian is like to count personal computer operating systems today, to include Apple OS/X and Linux and "forget" to count Windows, the leading operating system.
ERROR AS BIG AS HP AND DELL PUT TOGETHER
The total size of the smartphone market is completely mischaracterized. Mr Ballmer says that the scale of the PC market is roughly 300 million units per year, and this number according to Mr Ballmer "continues to be big". But the PC market has been at a stagnant level for most of this decade while smartphone sales have grown dramatically from year to year. The actual number of total PC sales in 2008 was not 300 million, it was less. It was only 288 million units, according to the latest industry numbers reported by Gartner.
Meanwhile the smartphone market last year was 162 million devices according Informa. It is severely misleading for a CEO of a publically traded corporation to suggest that the market for PCs is a six times larger market, when it in fact was far less than even twice as big.
The error is enormous. Mr Ballmer's characterization misses out on over 110 million smartphones in units sold. For scale, it is as much, as counting "all of the world's PC market" but then "forgetting" to add the total output of HP and Dell, the two largest PC manufacturers (who manufacture about 100 M PCs per year, when combined) !
Again, this is something that one would expect the biggest operating system maker to know, especially after selling smartphone operating systems for seven years already. If CEO Ballmer doesn't know it, certainly Bill Gates seemed to know this instinctively when as Chairman of Microsoft he was quoted specifically on the operating systems for smartphones in ZD Net on 13 May 2005: "Well, Nokia is the leader by far. We definitely prefer the press coverage we get when we are considered the underdog in a category." What happened to Nokia the leader "by far", Mr Ballmer? Or is it your policy as CEO not to listen to your Chairman?
500 MILLION IN FIVE YEARS? NO: BY END OF NEXT YEAR
The statement that it would take 5 years to reach smartphone installed base levels of 400-500 million is equally outrageous. The installed base of smartphones is already 340 million units and Mr Ballmer fully well knows this. The Seminconductor Industry Association has reported on replacement cycles for mobile phones and their latest numbers for 2007 said 18 months for cellphones and 3.5 years for PCs. So the full replacement of the existing base of all smartphones is twice the average replacement cycle which any 5th grade student can tell you that 18 months times two is 3 years. Counting the sales of new smartphones as reported over the past 3 years, the current installed base of smartphones is about 340 million units.
The level of 400 million smartphones in use will not be achieved "in five years" but by the end of this year, 2009. And the upper end of his scale, the 500 million level of installed base of smartphones, will be achieved by the end of next year, 2010. One would hope that the CEO of a 60 billion dollar company would know basic math and at least bother to read the basic metrics for the industry where his goods are sold. The 400-500 million unit level installed base of smartphones will be reached in no more than a year and a half from now.
No, Mr Ballmer. If current trends hold - and most analysts seem to suggest the strongest growth area for mobile phones is smartphones; and if smartphone sales increase at the levels of the recent past ie between 20%-30% annually, then in five years, the installed base of smartphones will be between 1 billion and 1.4 billion units and the annual sales of smartphones will be more than twice that of all PCs of any type, all desktops, laptops and netbooks counted together.
PC SIZE SHRINKING, SMARTPHONES GROWING
This year the PC industry projections all suggest a decline in PC sales (Gartner projects a 13% decline) while all smartphone industry projections suggest an increase in smartphone sales, inspite of the economic downturn.
One would hope that the CEO of a major corporation providing operrating systems to both PCs and mobile phones, to bother to follow the trends, and where the major analysts all agree, for the CEO also to acknowledge that the likely truth is the one that is the consensus view of the industry. Or else, to provide clear logical reasoning, to explain why his company holds the opposite view from all major analysts of the two industries involved. This is not a sudden unanticipated surprise. Bill Gates was speaking of this eventuality back in 2004 when he discussed the strategy for Windows Mobile, that smartphone platforms will grow past those of the PC. For all who follow Microsoft, the more familiar theme is one, that smartphones are a promising and rapidly growing market, soon to overtake PCs. Not a tiny insignificant market in its "infancy".
PC IS LESS ACTUAL O/S SALES
For Microsoft the situation is actually far more dramatic. Currently the replacement cycle for PCs is about three and a half years and most PCs are sold as replacement units. In many cases the new buyer does not buy a new operating system, using the one from the previous PC, or worse, uses a pirated operating system (Mr Ballmer's own presentation in February 2009 showed about one quarter of Windows operating systems being "unlicensed"). As the growth market for PCs is now in the Developing World, these issues of piracy continue to grow as a concern for PC operating system makers. By using Mr Ballmer's own figures for "unlicensed" copies of the Microsoft Windows operating systems for PCs, the total sales of Microsoft branded PC based operating systems last year, was about the same as all smartphone operating systems sold. Of this - actual sales of smartphone operating systems - the CEO then says to the Wall Street Journal, "The truth is nobody sells very much." How dare he!
It is worse still for actual unit sales of Microsoft's PC based operating systems. In larger corporate accounts, the operating system is often sold on a corporate licence basis with dramatic bulk discounts. When that corporation buys some new hardware in the form of PCs, it often results in zero added revenue for Microsoft. 300 million PCs sold is nowhere near the same as sales of 300 million individual PC operating systems sold. Microsoft has not revealed actual total installed base or annual sales of its software, but Wikipedia reports that after 6 years, Windows XP had achived 400 million cumulative sales; and in over 2 years, Windows Vista had achieved 140 million cumulative sales. Smartphones sold 162 million units, each with an operating system last year. Microsoft sold far less than 162 million actual operating systems last year. The market for smartphones is not one sixth the size of PCs. For operating systems sold today, the market is already larger for smartphones than for PCs, Mr Ballmer. Please learn the basics of your industry before you talk to the press on behalf of your company and its strategy
MICROSOFT MORE THAN O/S SOFTWARE
Meanwhile the true scale of the complete economic opportunity for Microsoft is far more than just selling operating systems, whether to PCs or phones (or gaming platforms etc). Microsoft is in the data applications, software sales and digital services market - a market space far greater on mobile phones than on PCs.
When counting all mobile phones, not just smartphones, the mobile phone annual sales are four times bigger than the PC market, and the installed base of mobile phones is three times greater than that for PCs. Yes, against a population of just over one billion PCs in use worldwide, the 4 billion mobile phone subscribers connect to 3.4 billion mobile phones. Each phone has a CPU, input, output, and at least modest memory; and every mobile phone has an operating system, not just the smartphones.
The difference is, that the basic handset operating systems are quite modest compared to those of modern PCs, yet in their simplicity, they are not unlike something called Microsoft DOS from the early days of the PC. Also most basic handset operating systems are proprietary software developed by the handset makers themselves like Nokia, Motorola and Samsung. Nonetheless they are operating systems, much like the Apple Macintosh PC operating system was (and is) a computer operating system, even if it was proprietary to the Apple brand. If Microsoft had wanted to, it could have entered this market, as indeed it has been able to license some of its more advanced operating systems to some of the biggest handset makers including Samsung, Motorola and SonyEricsson. Why didn't Microsoft build a "non-smartphone" operating system to power a billion phones per year? A lost opportunity, for sure. A fatal one, perhaps?
Meanwhile the distinction of a smartphone, compared to a high-end feature phone is increasingly blurred. High end feature phones have advanced phone operating systems, include web browsers and allow data applications to be installed using software platforms such as Java and Brew and increasingly accept widget-based applications. Even low-end mobile phones today tend to have WAP browsers and their users can access services such as Google search, Yahoo email as well as Facebook and Twitter. If the current mass market use of a laptop or netbook PC is to do some searches and emails and update the status on Facebook and Twitter, for the mass market consumer, the utility of that mobile phone is approaching the utility of using a PC (with the possible exceptions that it doesnt take a "Microsoft Minute" to boot up the phone).
For a company that sells most of the world's best-selling PC software applications, like MS Word, MS Excel, MS Powerpoint, MS Internet Explorer and MS Outlook, etc., it seems bizarre that the CEO does not understand that more software applications and services are downloaded to and sold to mobile phones of all kinds, not just smartphones, in a market more than 50% bigger than the total worldwide market for PCs. Is Microsoft turning into the horse carriage maker who worries about systems for feeding the horses, right when the gasoline powered cars appeared a little over a century ago that needed petrol stations. One option over the ensuing century produced more of the top 10 largest companies on the planet than any other industry? Household names like Exxon, Conoco and Chevron. PS they don't make horse-feed..
A CEO WITHOUT VISION
I would argue that the prudent CEO of a computer software company would at least acknowledge that similar software and the same branded applications and services are now consumed increasingly on non-smartphone mobile phones, and that the mass market consumer is already shifting consumption away from PC based internet access to all types of mobile phones, not just to smartphones like the iPhone and Backberry.
Some of Microsoft's rivals from the PC/internet industry have been open-minded about this emerging opportunity and moved aggressively and early into this space. Google CEO Eric Schmidt went public in May of 2005 in the Financial Times, stating that the future of his company's business was on mobile. Apple's CEO Steve Jobs in January of 2007, when annoucing the iPhone, dropped the word Computer from the company corporate name, to underline how significant the shift to mobile phones was for Apple's business. Sun President and CEO Jonathan Schwartz has been evangelizing mobile data since his keynote to the mobile industry's biggest event, 3GSM World Congress in Barcelona in 2005, and has aggressively pursued the opportunity for Java in mobile (today he says 2.6 billion mobile devices are Java-enabled - yes more than twice as many "normal" cellular phones can accept software applications using Java, than the total installed base of any type of personal computer, whether running Windows or not).
Yet years after those visible rivals of his own industry, the CEO of Microsoft says "mobile is hot but the truth is nobody sells very much". He sounds as if he is dismissing mobile as only hype today. That reminds me of other former US based giants, like the TV industry when facing Japanese makers, or the car makers when considering consumer shifts to more smaller cars. Delusional gross mis-analysis of obvious worldwide trends, that led to mass bankruptcies or corporate take-overs of some of the biggest global brands. IBM was once the biggest company on the planet and for half a century was the biggest computer maker. Today its computer brand is owned by the Chinese. GM was once the biggest company on the planet and for over half a century it was the biggest car maker. Not anymore, now bankrupt. RCA was once the world's biggest manufacturer of TV sets, today its brand is owned by the French. What is the fate of Microsoft. How long can prudent investors put up with excuses, gross incompetence, and winning the wrong war?
At what point will the industry analysts for the PC industry start to raise concerns? Or will they too ignore the realities of the PC world not unlike the analysts of the banking industry did last year? Citibank was once the worlds biggest bank as well.
Mr Ballmer's comments suggest that he personally has not bothered to pay attention to the mobile phone market at all until about the time of the iPhone launch of June 2007 and that Microsoft's own smartphone operating system project has been an afterthought at Redmond, given lip service and considered of no strategic value. Certainly Microsoft's lackluster initiatives and contributions to the mobile industry suggest a lack of corporate interest. Not unlike the train operators of America who summarily dismissed the emerging airlines as a mode of travel.
DIFFERENCE IS SCREEN SIZE.. NOT
A mobile phone is not "a smaller laptop". Mr Ballmer once again reveals his naivete about mobile when he comments on the differences between a PC and mobile, saying "whats the difference? Probably we'll think of it as screen size." Again dismissive, as if the smaller screen of a mobile phone would somehow be read as also an inferior PC perhaps, more akin to a toy? That sounds perilously close to statements by top managements of once giant computer makers Univac, Control Data, NCR, Honeywell, Burrows etc, former giant mainframe makers who considered the PC not a threat because of a smaller size and relatively lesser computing power.
As a software platform and data application consumer device, the typical modern smartphone can do all that a consumer laptop can do. Every bit of it. This is well known even in Microsoft's HQ and even Steve Ballmer seems to recognize this. But for the consumer of digital services, a mid-range standard mobile phone, a non-smartphone cellphone, can actually deliver seven unique abilities that no personal computer can match today. It is like a train operator in America, looking at an airplane and thinking its a train without the rails, and that it can be used to replace continental routes operated by trains (which is true) but ignoring the bigger opportunity of travel that trains cannot compete in - intercontinental (overseas) travel, where a railroad is impossible, but which economically, is larger than the USA domestic travel. Oh, that reminds me, once there used to be a global giant airline called Pan Am. Whatever happened to them..
Yes, the phone can do everything a PC can do, but also there are seven things a modern phone can do, that the PC cannot. The modern mobile phone is inherently superior in capability than a laptop or desktop PC. Inherently superior yes. There is sound reasoning why so many are abandoning the laptop and selecting the iPhone or the Blackberry etc.
These are not some company secrets tightly guarded in the headquarters of Nokia, Samsung and Motorola. The seven unique abilities of mobile beyond those on PCs are openly listed at Wikipedia and explained in full in books such as my latest hardcover book, Mobile as 7th of the Mass Media. The mobile phone is not an inferior tiny PC, it is a superior communication, consumption and creation device, far more powerful than the personal computer - of any size, and with any size screen.
Focusing on the tiny screen as supposedly the only significant difference, is as misleading as suggesting the home TV is an inferior opportunity to the cinema, because the TV set has a smaller screen than that in the movies. Every movie ever made has been ported to the "small screen" on TV but try to run a movie business showing 24 hour CNN news, or American Idol, or MTV music videos or Letterman and Conan night-time talk shows. 95% of television content cannot succeed in the cinema, no matter how much larger its screen is. The TV took every content ever made for cinema, then invented new opportunities not possible on cinema. That is now already happening with mobile above and beyond the PC. If you bothered to study your industry, Mr CEO of operating systems, you would know how those devices are used. There is a reason why the PC is a device for the 6th mass media, and mobile for the newer, 7th mass media. and it does not require using specifically a smartphone for that opportunity.
The first difference between a PC and a phone, is that every phone is always connected. That is why we are able to receive phone calls on our cellular phone as it is in our pocket, but we can't take calls on our laptop also with us, and carried in our briefcase. The laptop or netbook needs the connectivity, which is not permanent and is typically achieved via a wifi hotspot or broadband connection. The mobile phone is always on. is this relevant? the total aggregate size of the PC industry and the internet industry, when put together, is less than what we spend annually just on the telecommunication services (voice calls and SMS text messages) on our mobile phones - yes, I'm excluding the landline telecoms business. Yes, just mobile telecoms as an industry is far larger than the pc industry while we are at it.
What was it, Mr Ballmer, did you mention something about this industry being in its "infancy"?
The mobile phone has a far better range of inputs and outputs than a PC. That means that the mobile is used far more for creation of digital data content than a PC and mobile content revenues dwarf those of the PC-based internet content revenues. More than twice as many people use SMS text messaging on a mobile phone than all users of email on PCs worldwide. More people create digital content using the camera feature of modern phones alone, than use all Microsoft Office suite applications, Word, Excel, Powerpoint etc combined. Perhaps the irony is in the fact that most of those cameraphone snapshots that might end up edited on a PC, will be modified using Microsofts free Photo Editor that ships with all Windows systems. But I digress.
More people have downloaded paid applications or paid content to mobile phones than the total installed base of any type of personal computer using any software, any operating systems and any applications by any software maker. Yes, 1.7 billion people have already downloaded, installed or consumed software, content and premium services on mobile phones. Paid services! I'm not talking about those mostly free apps from Apple's iPhone Apps Store. I mean honestly paid apps and service downloaded to the phone, from office suite apps to read Word documents and Powerpoint slide, to calorie counters and mapping software to ringing tones and screen savers. Apps apps apps. 1.7 billion people not just downloaded and installed them; they paid to do so. Note that most of the software applications on the modern PCs come pre-bundled with the PC and most of us consumers would not bother to pay for it, if those were offered as separate paid applications. But 1.7 billion people happily pay for downloads and services to their phones, worldwide..
For the CEO of the biggest PC applications provider to suggest that the mobile market is "in its infancy" is not unlike a sailship operator remarking about the Titanic and Lucitania that steamships will never take off. Mr Balmer: the data application and services consumer market has already shifted away from PCs and onto mobile phones. You are precariously close to being "left standing at the station, as the train pulls away."
SURE, STILL MUCH LEFT IN THE OLE PC
I do not mean to suggest the PC industry is about to go away. Certainly there is a solid lifespan of decades left in the desktop and laptop based PC market and very likely Microsoft can retain a meaningful market share in that area, even as more free software spreads with Linux etc; and more of the actual Windows operating systems are pirated etc and ever more of the PCs are replacements in ever smaller levels of new sales.
But we should learn from history, shouldn't we. The computer shifted before from one predominant platform to another. Microsoft's birth coincides with the previous shift so you, Mr Ballmer saw it first hand and benefitted from that shift, when mainframe computers gave way to personal computers as the prevailing computing platform. MBA students the world over pour over the marketing textbooks that discuss the utter failure of IBM, then biggest computer maker, to notice and capitalize on the shift from mainframes to PCs. Now you, a child of that shift, are about to repeat the IBM mistake and create the sorry follow-up chapter to that sad story, how Microsoft also refused to recognize the shift, and lost its way when computers became more personal once again, more portable and more user-friendly as they did with the current shift to mobile phones. Do you really want MBA students of the future to laugh at Microsoft, how it repeated the very same mistake which gave birth to its growth?
Apple got into the mobile industry "very late" in 2007 and yet in less than two years, they have already taken about 8% of the smartphone market. Canadian RIM, the maker of the Blackberry, started earlier and have built themselves 17% of the smartphone market.
Microsoft announced its interests into smartphones at the start of this decade and launched its first commercial handsets to use Windows Mobile with HTC's smartphone for the Orange network branded Orange SPV in November 2002. In the past seven years, Microsoft has managed to grow their sales with dozens of handset makers, to a truly underwhelming 16 million total handsets sold per year. Apple alone, with only two primary handset models and in only two years, has achieved 70% of that level.
Tiny RIM, with its own branded Blackberry models alone - not "dozens of manufacturers" and not a giant global iconic brand like Apple, in the same period of time as Microsoft has been in smartphones, has grown far larger and sold 23 million smartphones in 2008.
Just five years ago, in 2004 Microsoft Windows Mobile had 23% of the smartphone operating system market. Today it has 12%. This in a time when smartphone global market has exploded in size. Pretty pathetic when you think about it - Microsoft's performance. They have lost half of their market share in the past four years. Is this prudent strategic vision, or is the CEO dismissing cellular phones as toys, not of strategic value to the company?
This Open Letter is intended to wake up the top management there at Redmond. There was a time many years ago when smartphone sales were indeed a tiny fraction when compared to PC sales. One could be forgiving, if at that time a major PC maker or PC software maker would ignore the emerging "nascent" smartphone market.
Today that is no longer true. Very likely within two years, or at worst, three years, more smartphones will be sold than PCs. And already today, all cellular phones sell 4 times more annually than PCs (and they all have operating systems too).
The signs should have been most glaring last year when Nokia became the worlds largest computer manufacturer by unit sales, counting only the Nokia branded smartphones. The smart CEO would have paid attention years ago when a conservative business weekly like the Economist celebrated the 25th year anniversary of the PC in its cover story 29 July, 2006, and pointed out that the PC would give way to mobile phones, and that it was mobile phones, not the PC that would "carry the dream of the personal computer to its conclusion."
If the Apple iPhone announcement and launch in 2007 and Google announcements of its Android operating system for smartphones in 2008 was not enough to jolt you out of your complacency, then at least when HP, your biggest customer of your operating systems, was no longer the biggest PC maker (using Windows O/S), and that becoming the smartphone units of Nokia (using Symbian O/S), should have awaken you. But even for those who refuse to do the math (or perhaps, are unable to handle basic math), when the industry analyst Informa said that more smartphones were sold than laptops, that should have woken up the last snoozing executives at Microsoft HQ.
Microsoft's primary rival in smartphone operating systems is not Apple or RIM/Blackberry (or Palm). It is Symbian, who sell more smartphone operating systems than Microsoft, Apple, RIM and Palm, all rolled together. And the biggest branded manufacturer that is Microsoft's rival, is not Apple and not RIM/Blackberry. It is like Bill Gates said about smartphone sales in 2005, it still holds true today: "Well, Nokia is the leader by far." Yes, in just the last quarter of 2008, Nokia sold as many smartphones as all the dozens of manufacturers using the Microsoft Windows Mobile operating system, counted together sold in all of 2008.
Its time to wake up at Redmond. We expect Microsoft to become serious about mobile and to make a serious effort with Windows Mobile. And CEO Steve Ballmer, please stop saying the smartphone market is in its infancy and that your rivals are primarly Apple and RIM. Lets get real. Lets not repeat the asinine strategic moves of GM, IBM, RCA, Pan Am, Citi etc. Lets make a strategic shift for Microsoft and turn this turkey around. The PC market will never grow like it has in the past, but smartphones will be the new opportunity. Microsoft is already there. You have one of the major operating system platforms and you command about twelve percent of the market. You had almost a quarter once, if you decide to fight for it, you could get to that level, a quarter, again. And in a few years as smartphones will outsell PCs by two to one, you could well sell more paid operating systems to smartphones than you do to PCs
You just need now some strategic focus. Like Google CEO Eric Schmidt was reputed to be saying recently in every meeting he went to: "mobile, mobile, mobile." That is what you need at Microsoft. Not blatant lies like "the truth is, nobody sells very much." 162 million individual smartphone units in just one year is certainly far more than "not very much?"
We need Microsoft in the PC world. We don't need Microsoft in the bigger world of mobile. Microsoft needs the mobile future. The PC future cannot sustain Microsoft. We don't need you here, but you need us desperately to survive. What was it that uncle Darwin wrote about evolution, that in times of change its not the strongest who will survive, nor the most intelligent, but rather the one most adaptive to change? Your industry changed totally in 30 years ago. It is changing totally now. Being biggest or smartest is no protection at all for you to survive. Think GM, IBM, RCA, PanAM, Citi.. Only adapting to change can save you.
If you Microsoft want to be gobbled up by the newcomers in a few years, keep on this silly path. Else change.
You've been warned
Tomi T Ahonen :-)
This open letter may be freely forwarded and referenced. It has been emailed to the corporate headquarters of Microsoft.
About the author: Tomi T Ahonen is an author of 9 books on mobile and the father of countless industry theories, who is referenced in 50 books by other authors. Seen presenting papers at over 200 conferences on six continents and quoted in over 300 press articles on mobile, Tomi Ahonen lectures at Oxford University on the future of mobile and advises most of the giant companies of the industry including HP the biggest computer maker, Nokia the biggest handset maker, Ericsson the biggest telecoms network vendor, Intel the biggest chip maker, Vodafone the largest mobile operator group, NTT DoCoMo the world's biggest mobile internet provider, Symbian the biggest operating system provider for smartphones and Buongiorno the world's largest provider of mobile phone applications. Follow Tomi's Twitter @tomiahonen
PS - Have written a major analysis piece about why US and rest of world have evolved so differently in smartphones. The blog is "a tale of two smartphones"