
How, and Why, Apple Overtook Microsoft - ojbyrne
http://www.nytimes.com/2015/01/30/business/how-and-why-apple-overtook-microsoft.html
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Rapzid
Is interesting but now Microsoft is the more open company and Apple is IBM
from the 1984 commercial. Maybe I'm just older, but now at 30 I'm much more of
into Microsoft than when I was a teenager(I never really got on the hate M$
bandwagon though). What they have been doing with Azure and .NET ecosystems is
great. They have top engineering and research chops; just look at the new
goggles and a lot of their labs projects. MSDN is a wealth of free knowledge.
Etc.

Apple is on top of the world right now, but so was Sony 2000. Somehow MS just
feels more substantial to me than Apple in 2015.

I realize this is entirely subjective.

~~~
bluthru
>They have top engineering and research chops; just look at the new goggles
and a lot of their labs projects. MSDN is a wealth of free knowledge.

A common comparison between MS and Apple is that MS pours a lot of money into
R&D and makes a lot of forward-looking videos. Meanwhile Apple is laser-
focused, spends way less on R&D, and ships.

Microsoft lost a decade, and you feel that MS is more substantial in
computing? Are you sure they're not just tugging at your geeky heartstrings?

~~~
pmelendez
> "Microsoft lost a decade "

Did it though? MS has been pretty strong in the enterprise. Also is the same
decade of Xbox and Kinect.

~~~
ulfw
Blackberry is pretty strong in the enterprise too. :)

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DigitalSea
The easiest explanation of what happened was Microsoft were a software company
who had all of their eggs in one basket relying upon third parties to use
their operating system and consumers/enterprise to use their products like
Microsoft Office. Whereas Apple started out as both a hardware and software
company, first computers and then portable music players (iPod), watches
(iWatch) and phones (iPhone).

This is where Microsoft went wrong. They focused on providing the software and
let vendors like HP, etc use it on their machines. Apple was smart in seeing
that there are advantages to controlling both the software and hardware (the
iPhone is a perfect example of this). By the time Microsoft realised they
should have been producing hardware that used their software, Apple had
already overtaken it in the great tech race. Apple had the hardware and were
providing the software thus locking out any competitors from their platform.
Not to mention, they were focusing on the design aspect of the devices
themselves which others were not.

I think Microsoft have started clawing back. HoloLens looks like a seriously
great product, I think the amount of time and effort they have been putting
into hardware and infrastructure will undoubtedly catapult them back to the
top. Not to mention Microsoft have cleverly changed their strategy to favour
open source (something nobody would have predicted 7 years ago). The Xbox
division also does pretty damn well too.

The question is: can Apple sustain their current success? It seems the iPhone
is their meal ticket, if the iPhone eventually fizzles out, where will that
leave Apple?

~~~
laichzeit0
> Apple had the hardware and were providing the software thus locking out any
> competitors from their platform.

Lockout is one way of looking at it. Another way is that it gives them the
ability to make things integrate extremely well. Seamless integration like
Apple does is extremely difficult to achieve without complete control of the
ecosystem.

> Not to mention, they were focusing on the design aspect of the devices
> themselves which others were not.

This is where Microsoft still falls hopelessly short. They make ugly, geeky
looking hardware. Everything Apple makes looks and feels beautiful.

> It seems the iPhone is their meal ticket, if the iPhone eventually fizzles
> out, where will that leave Apple

I'm not sure which other phone I could buy that would integrate with the rest
of the Apple ecosystem? Unless they lag really badly in whatever technical
advances mobile phones make, this doesn't seem likely. Some people like myself
don't keep buying iPhones because of its technical specifications.

~~~
pjmlp
> Everything Apple makes looks and feels beautiful.

I don't care how beautiful it looks if I cannot buy a CPU/GPU combo that I
really need, nor if the only way to agree on device data requires some brain
damaged software.

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MarkMc
Good article, but this part was a bit jarring: "Steve would never have made a
bigger iPhone. He didn’t believe in it."

He may not have believed in it in 2011, but he may have changed his mind.

~~~
protomyth
Yep. If you watch all of the videos from the D conference, you see Steve Jobs
say no to a lot of stuff he later did (e.g. Video on iPod).

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tim333
I think quite a lot of why Apple overtook was focus as in the Jonny I've
quotes below:

"There is a clear goal and it isn't to make money. The goal is to desperately
try to make the best products we can. We are not naive - if you trust it,
people like it, they buy it and we make money. This is a consequence."

"We won't be different for different's sake. Different is easy... make it pink
and fluffy! Better is harder. Making something different often has a marketing
and corporate agenda."

Over a long time focus on the best products and user experience can be
powerful. Meanwhile Microsoft were doing things like killing the start menu
which not many users were keen on.

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avelis
I think in some ways Microsoft lost its dominance by focusing on the wrong
competition. Microsoft Bing is a great example of Microsoft trying to become a
company it wasn't. (i.e. Google)

In my perspective, Apple dialed in it's focus, avoided the same pitfalls, and
came out a dominant player in a market not many were focused to innovate on.
(i.e. smartphones).

~~~
PhoenixWright
I agree. Microsoft wasted great opportunities by trying to copy Google. I
really think they've fixed that however. Microsoft seems to have its own
identity as of late.

~~~
lurcio
I think they have always fought on too many fronts. Perhaps because of their
dominance, they didnt know how to ignore opportunity, which of course was
everywhere for them

Still - as they say in Italy - a fish rots from its head. Thats where the buck
lies.

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Steko
The problem for Microsoft isn't that they didn't see mobile coming and Apple
did like as article suggests. The problem for Microsoft is that their previous
strategy of ruthlessly copying Apple's innovations and taking the market for
themselves with a highly profitable licensing model was coopted by Google
doing the same thing except Google gave it away. If you're looking for the old
MS it's alive and well at Google, Samsung and Xiaomi.

~~~
SG-
Well MS lost mobile because quite frankly they didn't control the hardware,
and for a time it seemed OK to simply provide software for them, but they
couldn't push a specific idea out the door until it was too late. They were
happy to provide an OS that did phone calls, text messages, emails and a few
other small things.

They didn't quite see the big picture, it's not that they didn't see it coming
(they were already in it), they just didn't think you could do so many things
so well and that people would want to do it.

~~~
Steko
Google didn't control the hardware either though so I think that's selling it
short.

MS lost because they weren't ruthless is copying iOS. Google won the licensed
market because basically they dropped everything else they were doing in
mobile (copying blackberry) and put it all behind copying iphone. Samsung did
the same thing with their Galaxy line. These are the kind of moves 80's and
90's MS would do without blinking, they understood that "second place is a set
of steak knives". But late 00's MS -- spoiled on decades of success and
perhaps a bit cowed by EU antitrust -- couldn't pull the trigger.

~~~
SG-
True, but they also didn't need to control the hardware because Apple created
a template and Google created partnerships with specific requirements.

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cwp
Ugh. So annoying to see journalists ignore the obvious in their obsession with
writing a "balanced" story.

So yes, Apple's iPhone is like Microsoft's Windows. Both are hugely successful
products that accounted for the bulk of their creator's profits. Microsoft was
unwilling to threaten the enormous revenue it gets from Windows, and now that
the focus of innovation has shifted away from PCs it has lost its dominance.

Will Apple make the same mistake? No. Its first attempt to one-up the iPhone
was the iPad. For a while, it looked like it might succeed: iPad sales took
off even faster than iPhone sales had. But then they plateaued, while the
iPhone kept growing. Nice try, but no dice. The iPad is nice little business,
but it won't eclipse the iPhone.

Next try: the Apple Watch. It's not out yet, so we don't know what will
happen. But it's clear that this is Apple's next big move. This is not a
hobby. They'll be putting all their weight behind the product line. It might
flop or it might be another (multi-billion dollar) side business that lags
behind the wild profitability of the iPhone.

Mr. Stewart ends with a quote from analyst Robert Cihra: “The question
investors have is, what’s the next iPhone? There’s no obvious answer. It’s
almost impossible to think of anything that will create a $140 billion
business out of nothing.”

Well, maybe investors can't think of anything, but it's clear that Apple
thinks the next iPhone will be wearables. And they sure as hell aren't killing
promising products for fear of cannibalizing iPhone sales.

~~~
mercer
It's also possible that Apple is doing what they say they're doing: create
great products. Maybe the next iPhone is their 'next iPhone'. Maybe the Apple
Watch will eclipse the iPhone. Maybe it will be just another lucrative
product.

My impression from Apple's behavior is that they're focused on creating
products that bring 'computers' into the lives of consumers in ways that are
desirable by consumers, regardless of form or specific functionality. They had
a smash hit with the iPhone, but they're probably just as happy with the iPad
and, to a lesser degree, with Apple TV.

What interests me most is how they will react to a potential (and likely)
breakthrough in VR, or AR. Apple doesn't seem to put much focus on that.

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guelo
An article about how and why Apple overtook Microsoft would be interesting but
this was not it.

~~~
peteretep
Actually, the answer is right there in the story, and it's one word: iPhone.

    
    
        > the iPhone accounted for 69 percent of its revenue
    

Without the iPhone, Apple would still be huge, but they'd just be a luxury
computer maker who dabbled in some portables, and there would be no talk at
all of having passed Microsoft.

~~~
xorcist
That's the big challenge for Apple right there. It's a one trick pony, stock-
wise, with an enormous valuation. It's not at all obvious where to go from
there.

They need to diversify even more but that means either back to their computer
roots, which would be devastating to the stock price, or find even greener
pastures than one of the most commercially successful products on Earth.

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thewarrior
>> But he noted that by many measures, Apple shares appeared to be a bargain.
“The valuation is still inexpensive,” he said. “It’s less than 13 times next
year’s earnings and less than 10 times cash flow,” both below the market
average. “Those are very low multiples. They have $140 billion in cash on the
balance sheet and they’re generating $60 billion in cash a year. All the
numbers are just enormous, which is hard for people get their heads around.”

So would it be a good idea to load up on AAPL stock ?

~~~
capkutay
I don't know...I'm a relatively young investor. I started investing in 2009,
bought a bunch of apple and google stock. Now I feel like the market is
inflated like crazy and I'm afraid to touch anything. Am I being irrational or
is it normal to see these types of cycles?

Anyways, if you want my unsolicited stock advice, I think Tesla still has a
lot of upside. The way I see it, it has a $25b market cap where as a lot of
big name car companies are above $60b in market cap (BMW at $60b, Mercedes
around $100b, Toyota around $220b). I think Tesla could easily catch up to
them because of their potential for growth. So that's a somewhat likely 2x
return on tesla stock if you want to look at it that way.

~~~
mahyarm
Until you can make signifcantly more money off the returns of a broad index
fund vs. your near future salary, it's not worth the labor to try to beat the
most well capitalized and skilled finance firms in the world in the stock
market.

So if you can make 250k/yr and you get a %5 net return from an index fund,
it's not worth it to play stock investor until you have $5mm in the bank.

So if you have $300k in the bank, the constant hours of life, labor and
anxiety might get you +%5 more return than usual (doubtful) and you've spent a
huge amount of hours to make an extra $15k that year. It usually ends up less
than minimum wage and you were better off just doing contract programming work
on the side.

And the reason why the stock market is inflated like crazy is because central
governments of the world have been printing money like crazy with QE
everywhere, and it has to go somewhere...

Just buy an index fund, your going to have a relatively large amount of apple
stock indirectly as a result anyway.

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PhoenixWright
The same argument could be mad about Google and search. I don't think
Microsoft will ever come out with something as big as Windows. Nor do I
believe Apple will top the iPhone. For the next great profit generating
product I'd bet on existing companies that aren't bogged down by legacy
products. Maybe Facebook with Oculus or Amazon with AWS?

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dodyg
Apple had the grit, conviction and endurance to see it all through. I mean
everybody wrote them off in the mid 90's.

~~~
rch
By the late 90's the tide had turned back in Apple's favor though. I was more
into AltiVec than iMacs, but the G4 was really a nice box.

~~~
seanmcdirmid
The G4 era was actually kind of gut wrenching. I mean, when the G5 was
announced (2004?), I was excited that I might actually get a decent
replacement for my powerbook...but I had to wait a long time...until 2007
actually, for the x86 macbooks to come out (incidentally, the iPhone came out
at the same time). I would say 2007 is where they really turned their
trajectory way upwards.

