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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Touch technology help non-tech industries improve business, efficiency, and their bottom lines.

The SMART Table brings touch to masses and classes. Photo: SmartTech

We all oohed and aahed when Apple's (AAPL) iPhone came out because of how cool it was, especially its multi-touch capability that let us flick through photos and "pinch" and expand photos and websites.

Now, with Microsoft (MSFT) Windows 7 specially formatted for touch capabilities, and everyone from manufacturers to hotels touting their tough capabilities, we know human contact with computer screens is more than a gimmick — it’s here to stay.

Touch is already a big business — estimates indicate that sales will be more than $3.66 billion for this year and will catapult 145% to almost $10 billion in the next five years.

Only half of that revenue is coming from consumer electronics (i.e. cell phones, digital frames, etc.) — the rest is from retail, hospitality and more. What many people forget is that this 30-year-old technology has been integrated in non-tech industries for years — mainly as a way to improve efficiency, but never as a centerpiece.

So, we decided to take a look at the best of the rest and highlight the most innovative, business-savvy ways other industries are implementing touch technology — and helping improve their bottom line. More

It has near-monopoly status and nimble, disruptive competitors. We’ve seen this movie before.

By Jay R. Galbraith, president and founder, Galbraith Management Consultants

Galbraith questions Microsoft's resolve to change. Image: Galbraith Management

The more I learn about the current situation in software, the more Microsoft’s position seems to mirror General Motors’ position in the auto industry a few decades ago. Like Microsoft (MSFT) today, GM was an icon in its industry, held a quasi-monopoly, produced eye-popping profits and was often distracted by antitrust lawsuits. When a company experiences this kind of environment over a couple of decades, it eventually loses its competitiveness. Of course, Microsoft would vigorously deny any such comparison. The top executives in Redmond, Wash., claim to be on top of the trends in the industry. They are confident they can develop all the software they will need to be competitive.

My concern is not with the leadership of Microsoft; I am sure Ray Ozzie, the chief technical officer, will stay on the cutting edge of the technology. But its 15,000 to 20,000 middle managers have never been through a downturn (assuming they’ve worked only at Microsoft). And to me, you are not a real company until you have been through a downturn. Growth and high margins are very good at covering up a company’s bad habits and unresolved issues. When a downturn hits, all of the flaws come to the surface and the company purges itself of its bad practices. A  3% decline in sales in 2008 – Microsoft’s first ever – during the worst recession in decades will not wake up Microsoft. The bad habits will persist. More

Microsoft moved a lot of install disks, but hardware makers got a bigger bump two years ago

Photo: Philip Elmer-DeWitt

When Microsoft (MSFT) launches a new operating system, as it did two weeks ago, PC manufacturers like Hewlett Packard (HPQ), Dell (DELL) and Acer are supposed to reap the benefits. And everything seemed to be in place on Thursday Oct. 22 for that to happen.

"Never before has the industry launched such a variety of new form factors, price points, technology upgrades, and design innovations at one time," wrote NPD's Stephen Baker just before Windows 7's release. "This past weekend I happened by a Best Buy store and there was not one single PC for sale with Vista on it. Lots of Windows 7 machines, however, all of which were marked 'not for sale until October 22.' Someone did a great job in the supply chain making this happen. This will give Win 7 a tremendous boost out of the gate." (link)

Two weeks later, Baker is singing a different tune. Microsoft got a big boost according to NPD's weekly tracking data, racking up sales of Windows 7 that were 234% higher than Vista's during its first few days of sales. (More on that below the fold.)

But PC makers didn't make out quite as well. Although they had a relatively strong week, with unit sales up 49% year over year and 95% from the week before, it was nothing like Vista's launch in Feb. 2007. Then, sales soared 68% year over year and 170% from the week before.

In a press release issued Thursday, Baker explained what happened:

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Just three days were enough to push computer sales for the week up 40%

Click to enlarge. Source: Morgan Stanley, NPD

The sharp spike in the chart at right is the Windows 7 effect PC makers have been waiting for.

In a note to clients issued Monday afternoon, Morgan Stanley's Kathryn Huberty reports that NPD data for the week ending Oct. 24 — which included three days of Windows 7 sales — show PC sales jumping 40% year over year.

This was particularly encouraging, she writes, because sales in the early part of the week likely reflected the same pre-Windows 7 declines as the previous two weeks. PC buying for the weeks of Oct. 17 and Oct. 10 was down 29% and 2%, respectively, as consumers waited for Microsoft's (MSFT) new operating system to launch.

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Cheeky Get-a-Mac ads are not the only way Steve Jobs is going after Microsoft

Image: Google

If you ran a Google search for "download windows 7" early Monday, you got about 137 million results — plus something you probably weren't looking for. There, at or near the very top, was a sponsored link suggesting "There's never been a better time to switch to a Mac."

A four-line ad was spotted over the weekend by the Next Web's Alex Wilhelm, who suspected that Apple (AAPL) was paying exorbitant prices for the space.

In fact, this form of guerrilla marketing is surprisingly inexpensive. The cost per click for either "windows 7 download" or "download windows 7," according to Google's (GOOG) Keyword Tool, is 5 cents.

[UPDATE: The Apple-sponsored link disappeared mid-morning Monday, but it was back early Tuesday.]

See also:

• Apple's 2009 ad budget: Half a billion

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Microsoft has not halted Apple's momentum, according to Net Applications' October report

Source: Net Applications

If Microsoft (MSFT) was hoping that the launch of Windows 7 would halt the erosion of its operating system market share — and curb further inroads by Apple (AAPL)  — there is no evidence that it's working yet.

In fact, preliminary data released overnight Sunday by Net Applications show Mac OS X's Internet share growing by 2.73% in October, from 5.12% to 5.26%.

Windows' Internet presence, meanwhile, fell from 92.77% to 92.54% — its ninth loss in 12 months. Windows 7's share, however, was more than 2% even before its Oct. 22 general release, thanks to widespread use of early release versions. By Oct. 30 the Windows 7 portion was 2.85%, largely at the expense of Windows XP, according to a separate Net Applications report.

Net Applications, it must be noted, is not measuring share of market in the sense of sales revenue or unit sales. Rather it tracks the presence of various operating systems on the Internet by sampling browser data from visits to its clients websites — some 160 million hits per month. It's a methodology that tends to favor devices that make it easy to navigate the Web, which explains the relatively high "market share" of the iPhone in the firm's monthly surveys.

You can see Net Applications' October report here. The results are summarized in the chart below.

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Chatting with a Canadian analyst, Cupertino execs offer hints about Apple's future plans

Rendering: Piper Jaffray

Apple executives (AAPL) have strict rules about not discussing products that the company has not announced. But they'll talk about market opportunities, as three of them did on Thursday at a special event for RBC Capital. And sometimes that's enough to discern what direction the company is heading.

In a report to clients issued Friday, RBC's Mike Abramsky ticks off the key takeaways from his meeting with Eddy Cue (vice president for iTunes and Internet services), David Moody (vice president for worldwide Mac marketing) and CFO Peter Oppenheimer.

What caught my eye was what they had to say about where they did — and didn't — see opportunities in digital content. They were talking about Apple TV, but it was as if they were thinking about future tablet computers.

Here's what Abramsky reports, in analyst shorthand, about that portion of the conversation: More

Microsoft's big launch, it turns out, was not entirely trouble-free

Image: Digital River

College students who took advantage of a "deal too sweet to pass up" have run into a bit of trouble.

The $29 electronic version of Windows 7 Home Edition sold for Microsoft (MSFT) through Digital River (DRIV) doesn't seem to install properly on some 32-bit Vista machines.

Apparently the download files weren't properly packaged and when some users tried to "unload the box" they got an error that read:

"We are unable to create or save new files in the folder in which this application was downloaded"

A discussion thread with that title was begun on Microsoft Answers' Windows 7 install forum less than 3 hours after the new operating system launched. By Saturday morning it had generated more than 500 replies and been read nearly 44,000 times.

Microsoft acknowledged the problem Thursday evening and by Friday was reportedly offering refunds. Meanwhile, however, Microsoft technicians are pointing users to a five-step Download Squad workaround (pasted below the fold) that might be enough to send students screaming to the nearest Apple Store.

Any bets on how long it will be before the incident turns up in an Apple (AAPL) Get a Mac ad?

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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Celebrating Microsoft's big day with a store opening and three new Get-a-Mac ads

Image: Apple Inc.

In the long running battle between Apple (AAPL) and Microsoft (MSFT), Thursday was a huge win for the boys from Redmond.

Windows 7 launched without a visible hitch and generated more positive reviews than we could count (a Google News search turned up 3,281, but we haven't read them all.)

Meanwhile, in Scottsdale, Ariz., the opening of the first Microsoft retail store delivered the kind of publicity coup money can't buy: customers camping out all night and a crowd the next morning estimated at 500.

Which brings us to our videos. The first shows Microsoft doing its best imitation of an Apple Store opening, complete with employees in multi-colored T-shirts hollering, clapping and giving high-fives.

The other three are Apple's response to all the hoopla: three snarky Get-a-Mac ads trying to turn the event into an opportunity to grab a few more points of market share.

Let's go to the videotape. More