Shareholders press Microsoft's CEO about Apple's marketing campaign

Image: Apple Inc.

Those Get-a-Mac ads make "you all look like a buffoon," one long-time shareholder (and father of four Mac-using children) told Microsoft (MSFT) CEO Steve Ballmer at the company's annual meeting Thursday. "I'm just wondering why your marketing group can't do something to try to rein in this next generation, because you've got a real bad image out there."

"We all watch television," Ballmer responded, before quickly changing the subject to Microsoft's market share.

"The truth of the matter is, we do quite well," he said, according to TechFlash's Todd Bishop, who seems to have taken the best notes. "Even among college students, we do quite well. Do we have an opportunity for improvement? We do. Some of that is marketing, some of that is phase of life. It is important to remember that 96 times out of 100 worldwide, people choose a PC with Windows; that's a good thing. Even in the toughest market, which would be the high end of the consumer market here in the U.S., 83 times out of 100 people choose a Windows PC over a Mac."

Ballmer acknowledged that Apple (AAPL) had "picked up a couple of tenths of a percent of market share," an achievement some in the audience seemed to find laughable.

But as the Wall Street Journal's Nick Wingfield points out, citing IDC numbers, Apple's share of new PC shipments in the U.S. was 9.2% in the third quarter, up from 4.8% in the same period four years ago. (Worldwide share: 3.9% compared with 2.4% four years ago.)

Wingfield also took a crack at estimating how many copies of Window 7 Microsoft has sold, a number the company has not provided.

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After the Vista debacle, Microsoft changed the way it makes software. The result – Windows 7 – is winning raves. Can a new operating system (and a new attitude) help the company take on Google?

With Microsoft's founder and chairman, Bill Gates, trotting the globe in a quest to abolish diseases, his handpicked successor, CEO Steve Ballmer, has had most of a decade to move the company beyond its two biggest cash cows, the Windows operating system and the Office productivity suite. So far, not so good.

The company's web forays, such as MSN, have only highlighted the dominance of Google and Yahoo. In software for smartphones, there is Apple, RIM (RIMM), and everybody else. MP3 players? Microsoft's Zune hardly merits a mention. And even the core franchise has suffered. In the face of slowing PC sales and the economic pall, Microsoft's fiscal 2009 revenue actually contracted, to $58.4 billion from more than $60 billion in fiscal 2008 — and the company missed its earnings estimate by more than $1 billion.

Fresh Coat of Paint: Artist Ricardo Richey, commissioned by Fortune, spray-paints a street-smartversion of Microsoft'sname and Window's logo on a San Francisco wall.

But the biggest failure under Ballmer's tenure was self-inflicted. Vista was meant to be a wholesale reimagining of Windows, the brand name for Microsoft's operating systems dating back to the early 1980s. Every so often the company unveils a new OS, blandly named for the year of the release (Windows 95, Windows 98) or a geeky abbreviation (Windows XP is short for Windows Experience). Vista had a marketing-friendly moniker, a fancy user interface, new security architecture, a better file-storage system, and much more. More

Photo: Bill and Melinda Gates Foundation

The collective net worth of the super rich on Forbes's annual list of the 400 wealthiest Americans fell by $300 billion over the past 12 months, and the tech sector spilled its share of the red ink.

Microsoft's Bill Gates lost the most — at least on paper. His net worth dropped from $57 to $50 billion, not enough, however, to keep him from topping the list for the 16th year in a row. Two current and former Microsofties were close behind: Paul Allen (No. 17) lost $4.5 billion and Steve Ballmer (No. 14) gave up $1.7 billion.

Other notable losers were Michael Dell (No. 13), down $2.8 billion, and SAS's James Goodnight (No. 33), off $1.9 billion.

In this company, the $600 million that Apple CEO Steve Jobs lost on paper doesn't seem so bad. In fact, on the strength of the $5.1 billion he still has, he moved 18 spots up the Forbes 400 list, from No. 61 to No. 43.

Below: The 12 richest tech moguls and their change in net worth. One actually got richer. Can you guess who?

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Ellison asks if Microsoft matters. Photo: Oracle

Oracle's Ellison gives the tech world a topic. Discuss among yourselves.

Does Microsoft matter? That's the question the noted Microsoft (MSFT) hater and Oracle (ORCL) CEO Larry Ellison found himself answering at a Silicon Valley event Monday night. The short answer, as Jon Fortt reported here, was yes.

The longer version of his answer on the one hand shows Ellison as the old zen master that he is, making a backhanded and self-serving swipe sound like an innocuous observation. At the same time Ellison raises a fascinating point that's worth exploring further.

First consider his comments in their entirety when asked about the relevance thing by former Sun (JAVA) president and Motorola (MOT) CEO Ed Zander.

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Yahoo CEO Carol Bartz said two months ago that Microsoft would have to cough up “boatloads of money” to get Yahoo’s search business. In the end, it took nothing of the sort.

Apparently, all Microsoft (MSFT) CEO Steve Ballmer had to do was let Yahoo (YHOO) take the lead in selling search to premium advertisers, and promise to supply Microsoft’s Bing search technology on the cheap. Under the terms of a 10-year deal announced Wednesday, the software giant will take a slim 12% cut of the search revenue Yahoo makes from its huge network of sites. More

(MSFT) (YHOO) (GOOG)

Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer pose for the cameras after doing a search deal. Image: Yahoo

Soon after Yahoo (YHOO) and Microsoft (MSFT) announced their search deal on July 29, I spoke with Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer about the market's negative reaction, the benefit to the bottom line, implications for affiliates, and comparisons to Google's (GOOG) much-maligned ad deal with AOL (TWX). Below is an edited transcript.

The Street seems to have mixed feelings about this deal. Were expectations too high with people expecting boatloads of money up front, or are people misunderstanding how good this is for Yahoo? More

As messy as their hard-fought search deal was in coming, it had to happen.  Find out why in Pattie Sellers' Postcards column.

Here's a chart that should keep Steve Ballmer up at night.

It compares Microsoft's (MSFT) market share, revenue, net profit and growth rate to Apple's (AAPL), using the numbers from each company's most recent quarterly report.

Although Apple has a bit more cash on hand ($24.5 billion v. $20.7 billion), Microsoft's operating system still dominates. And if you use generally accepted accounting principles (GAAP), Redmond's revenue and net income still dwarf Cupertino's.

But it turns out that Apple has been hiding most of its iPhone revenue behind subscription-based accounting (see here). As Apple Insider's Prince McLean points out, if you use the non-GAAP deferred revenue numbers that Apple released last week (and are shown in this chart), the company now earns more than half of Microsoft's profits on more than three fourths of its revenue (see Apple earnings, profits, and cash embarrass Microsoft).

Steve Jobs' company is also growing much more quickly than Ballmer's. Microsoft's revenue grew 9% year over year last quarter. Apple's grew 75%.

Now that Apple (AAPL) has shipped its 10 millionth iPhone this year — outselling Research in Motion's (RIMM) BlackBerry for the quarter, according to Steve Jobs, and climbing to the No. 3 spot in cell phone revenues worldwide, after Nokia (NOK) and Samsung — this might be a good time to revisit MacDailyNews' collection the dumbest things people have said about the device over the past two years.

A sampling:

“Apple is slated to come out with a new phone… And it will largely fail.”

Michael Kanellos, CNET, December 07, 2006

“[Apple's iPhone] is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard which makes it not a very good email machine… So, I, I kinda look at that and I say, well, I like our strategy. I like it a lot.”

Steve Ballmer, Microsoft CEO, January 17, 2007

“Apple should pull the plug on the iPhone… What Apple risks here is its reputation as a hot company that can do no wrong. If it’s smart it will call the iPhone a ‘reference design’ and pass it to some suckers to build with someone else’s marketing budget. Then it can wash its hands of any marketplace failures… Otherwise I’d advise people to cover their eyes. You are not going to like what you’ll see.”

John C. Dvorak, Bloated Gas Bag, March 28, 2007

“The iPhone is going to be nothing more than a temporary novelty that will eventually wear off.”

Gundeep Hora, CoolTechZone Editor-in-Chief, April 02, 2007

“I’m more convinced than ever that, after an initial frenzy of publicity and sales to early adopters, iPhone sales will be unspectacular… iPhone may well become Apple’s next Newton.”

David Haskin, Computerworld, February 26, 2007

“There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”

Steve Ballmer, Microsoft CEO, 30 April 2007

“How do you deal with that? How do they deal with us?”

Ed Zander, Motorola CEO/Chairman May 10, 2007

“It just doesn’t matter anymore. There are now alternatives to the iPhone, which has been introduced everywhere else in the world. It’s no longer a novelty.”

Eamon Hoey, Hoey and Associates, April 30, 2008

To see MacDailyNews' full list, click here.