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Friday, August 23, 2013

Apple and Microsoft, Then and Now

If you picked up The New York Times in December 2000, you would have seen very different headlines than exist today. Microsoft was projected to generate revenue of $6.4 billion for the last fiscal quarter of 2000, whereas Apple, the company’s almost-lifeless competitor, was clawing to reach $1 billion in revenue.

“I’m not proud of this,” Steven P. Jobs, Apple’s chief executive said at the time, while also noting that the company would not make its quarterly revenue goals.

This was same year that Steven A. Ballmer, who joined Microsoft in 1980 as the company’s first sales manager, had taken over as chief executive of Microsoft after its co-founder, Bill Gates, stepped down.

Mr. Ballmer was taking control of a company that was nicknamed “The Evil Empire” because size, power and aggression had brought on a long antitrust fight with the Justice Department.

Now, it seems that Microsoft is having a moment it is not proud of.

Mr. Ballmer, 57, announced on Friday that he would retire from the company within the next 12 months.

Under Mr. Ballmer’s leadership for the last 13 years, Microsoft has struggled to transition from a PC-driven company to a mobile-centric one. Observing his attempts to move into new product categories has been like watching someone try to run a marathon with her shoelaces tied together. Each step has ended with a fall.

As Nicholas Thompson of The New Yorker wrote: “Ballmer proved to be the anti-Steve Jobs” in his tenure. “He missed every major trend in technology. His innovations alienated people.”

In comparison, Apple, which was once believed moribund, has seen its market capitalization rise from $4.8 billion in December 2000, to $455 billion today.

Certainly, Apple had its failures over the last 13 years â€" the Power Mac G4 Cube and first iterations of the Apple TV and Apple Maps were flops.

But Microsoft has seemed almost clueless as consumer and even business spending has shifted toward smartphones and tablets. After Apple popularized the importance of simplicity of design, Microsoft stayed the course with confusing and geeky designs from the ’90s.

As I wrote in a column last month, forces within Microsoft have been trying to change things for for years, hoping to shed the reputation for trumpeting features over simplicity. But often, it was an uphill battle … and Microsoft’s stock continued to go downhill.

Microsoft was able to make some beautiful products under Mr. Ballmer â€" the Xbox and Windows Phone 7 were intuitive to consumers and marketed with a fair amount of finesse â€" but the company has been unable to change its DNA, building for the tech guys in the backroom rather than savvy consumers.

Investors clearly weren’t happy with Mr. Ballmer’s product choices for some time. In 2011, the hedge fund manager David Einhorn called for Mr. Ballmer to step down, saying that Microsoft was “stuck in the past.” At the time, Mr. Einhorn attacked Microsoft’s efforts to create a search engine as a “sinkhole.”

That wasn’t the company’s only sinkhole. In July, Microsoft announced that it was taking a $900 million write-down to reflect unsold inventory of the Surface RT tablet. It was estimated that the company sold 1.5 million to 1.7 million Surface tablets in the eight months it was on sale.

That’s a stark comparison to Apple’s iPad, which sold 3 million devices over just three days in November. 

But this is the difference between Apple and Microsoft, then and now.