You can not make money on a desktop OS if the end-user functionality is moving to the cloud... that is why Office as a cash-cow moved to cloud and non-Microsoft platforms are embraced. I think the strategy and products of the current MS company is in the edge of technology and vision, and the reason why Apple is facing a hard time as they arrived on the point missing the boat for products other than iPhone. On the other hand, that could be a strategy as well (as one could see signs of it like making the MacBook Pro less "pro" than people expect) but an ecosystem consisting of just Android and iOS does not seem healthy to me in the long run
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Former Microsoft CEO Steve Ballmer Admits He Was Wrong About the iPhone
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Xerox PARC gave access to Apple engineers and Steve Jobs (Apple was given license in return for Apple shares) to look at the OS they had installed on their Star computers on which was a window file, icon GUI based OS was run using the mouse. Xerox finally dropped the project but Apple turned the OS into MacOS and the Macintosh was born. You didn't read the book?
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Sounds like a fascinating read, I'll be sure to look it up.
So, Apple essentially stole from Xerox?
I thought Xerox just did photocopiers.
Ballmer was right about the phone being too expensive and it turned out that Jobs/Apple agreed with him.
A couple months after release - massive price reduction... Something Apple rarely if ever does but in the case of the iPhone it was arguably done because they realized they botched the initial pricing strategy.
http://www.macworld.com/article/1059838/iphonepricecut.html
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It still may not have taken off had Jobs/Apple not agreed with Ballmer's initial assertion that costs of the original iPhone with the subsidy was ridiculous. Jobs and Apple realized this fact and proceeded to massively reduce the cost of the original iPhone a couple months after it was released.
A couple months after release - massive price reduction... Something Apple rarely if ever does but in the case of the iPhone it was arguably done because they realized they botched the initial pricing strategy.
http://www.macworld.com/article/1059838/iphonepricecut.html
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It still may not have taken off had Jobs/Apple not agreed with Ballmer's initial assertion that costs of the original iPhone with the subsidy was ridiculous. Jobs and Apple realized this fact and proceeded to massively reduce the cost of the original iPhone a couple months after it was released.
The first iPhone was most certainly subsidized. The $499 and $599 price points were WITH a 24 month contract. That was way too expensive, it didn't sell that well so after a few months Apple had to cut the price by $200 in order for it to take off. Ballmer was 100% correct on that point.
Apple didn't start selling off-contract iPhones until the iPhone 4.
Apple would have been sued if they "stole". To use your terminology a number of companies "stole" ideas from xerox parc, Microsoft and ibm included.
Time you learnt what subsidised phone plans are. You are paying a few $$ more per month to cover the cost of the phone, the part you didn't pay for outright. The bill you pay per month costs more with a subsidised phone cause you're paying it off slowly within the bill. You are paying the full price for the phone. Either outright or a small price up front and the rest within the bill over 24 months.
Back in the day it was only 100% outright but Apple changed that. Apple did not invent the idea as you correctly said but Apple's change to allow the subsidised method was one of hte reasons why the iphone si successful. a 100% upfront only option for the iPhone would have made the iphone fail. Ballmer was 100% correct about that point. Few people want to or have the money for $750 up front. But they do ahve $200 or whatever up front and can pay off the rest over 24 months.
I did read your whole reply. You just disagree with my answer that's all.
Not sure how old any else is here but pp subsidies have existed for years with just above EVERY smartphone there is across the globe. Apple wasnt the first and not new to this paradigm. Yes Wi-Fi Assist, apple's way forcing users using WiFi on weak signals to continually use up their bucket monthly alotment and over pay carriers for mobile data = yup their the first!
Xerox had quite an R&D section called Xerox PARC (Palo Alto Research Center) working on many things that later became mainstream: GUIs, networked computers, laser printers, object oriented programming, etc.
Xerox PARC built the first modernly recognizable mouse and GUI based computers back in the early 1970s, a half decade before Apple even existed with its first simple kit computer. However, Xerox management was focused on copiers and didn't try to make money from licensing their work, although they did sell some early business oriented machines that cost tens of thousands to set up in an office.
Xerox _DID_ sue Apple in 1990.
Despite a common internet myth, Apple did not have a GUI license paid for with stock. Xerox's lawsuit did not mention one. And not even Apple has ever claimed such a thing. It's a mixup of two different events:
1) an investment division of Xerox had bought some pre-IPO Apple stock (as did other Silicon Valley investors) with an eye towards possible joint computer marketing.
2) Jobs later used that marketing connection to wrangle (PARC insiders say bully) his way into a visit at PARC, a different division. PARC managers warned their bosses that Apple would steal their ideas, but they were ignored.
Fortunately for Apple, Xerox's case was dismissed after a legal timing technicality arose.
You are correct that other companies besides Apple got the idea of the GUI from PARC, and many hired ex-PARC developers. It didn't matter whether Apple did one or not; the GUI was coming to personal computers anyway.
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The problem with iPhone originally was $600 *with* subsidy. Apple knew they screwed the pooch on pricing which is why shortly after (~2 months later) they dramatically lowered the price.
We should be glad that they were wrong. Otherwise they might be out of the Client computer business just like Apple has chosen to be. Somebody has got to care about OS and computing and not just removing ports and how thin an item can be.
Soon enough Microsoft will be back to a monopoly, and Cook and Ive will rejoice that they no longer have to make stupid low profit margin computers. They can then focus on important matters like watch bands, cars, Beats and making everything paper thin.
Soon enough Microsoft will be back to a monopoly, and Cook and Ive will rejoice that they no longer have to make stupid low profit margin computers. They can then focus on important matters like watch bands, cars, Beats and making everything paper thin.
Actually no. ATT had an exclusive contract with Apple, so nobody else could sell the iPhone. The exclusivity meant that if you wanted an iPhone, you had no choice but to use it on a plan from ATT, for which ATT developed a special plan for the iPhone. I am not sure whether ATT paid Apple anything more per phone. If they did, then the rest of the cost of the phone was subsidized, but that wasn't much compared to the subsidies absorbed by the later plans, where the customer only paid $199.
I completely disagree that Balmer meant the iPhone would fail because Apple was selling them full price. Microsoft had a mock funeral for the iPhone for crying' out loud. If the rest of Ballmer's statement which logically follows was "if Apple subsidizes the price like every other cellphone, then they will dominate the market", you all might have a point. But that's not what Balmer meant. He's trying to revise history.
Thanks for the patronizing response.
I disagreed with your answer because it's wrong.
In order to qualify for an ATT phone plan, customers had to have a credit check run. And even on "free" subsidized phones ATT was already selling, often a customer had to pay significant sales taxes and the full amount of the phone, usually placed on a credit card.
Most people likely did not pay cash for the iPhone but put it on their credit card, and made monthly payments over time, which works out to be the same thing as getting a credit check in order to make monthly payments to ATT. While $199 (plus sales tax) is far more attractive to someone than $599, the rate plan also underwent a substantial hike as well. So anybody wanting to use an iPhone knew they were paying a significant premium, and most were likely paying for them over time with low monthly payments on their credit cards.
Now one can try to link the two things together, but that's a bit specious, when one considers that the iPhone really took off when they added 3G, something the original was criticized for lacking, not to mention adding apps. It's really hard to say Balmer was right, when most people were already making low monthly payments, and the addition of 3G and apps were so much more important aspects of the apparent revolutionary technology, which by Gen 2 had been thoroughly proven. Maybe the iPhone sales took off for no other reason that it was an amazing device which blew all the other smartphones out of the water.
So no, Balmer was not likely right. Did the marketing of teaser rates and subsidized phone plans contribute to the success? Sure. But people don't seem to have a single issue paying full price for a smart phone today, as long as they can pay for it over time, just like they could in 2007 buy paying for it on a credit card. Based on this specious reasoning that Ballmer is revising the past with, smartphone sales should be declining because people now have to pay full price, and that's simply not the case.
It doesn't matter whether ATT paid Apple anything in addition or not. What matters is what the customer had to pay in total. Perhaps it wasn't technically subsidized but it doesn't change the fact that the customer had to pay $499 - $599 and then be tied to an expensive 24 month contract. It's a fact that the first iPhone sold below expectations and Apple slashed its price to fix this.
So, if the first iPhone wasn't subsidized I will ask this: did the monthly cost of a plan tied to an iPhone increase significantly when the iPhone 3G was launched subsidized at only $199 and $299?
Whether it was subsidized or not, it's specious reasoning to say the success of the iPhone was entirely dependent on the upfront cost customers had to pay -- completely discounting the importance of the technology Apple was offering. And that's the point -- Ballmer is trying to revise history as if to say he never questioned how important the technology was that Apple brought to market, by changing his story to merely being about Apple's failure to initially market the phone correctly. I don't doubt for a minute that the price of the phone helped broaden its appeal faster than had they not, but I also have no doubt that the iPhone would have been a success with or without subsidies, just as is being proven today. So Ballmer is just wrong here all the way around.
And yes, ATT's 3G plans cost more than the original 2G phone plans. How could they not unless Apple and ATT both lost money?
I don't think anyone is saying that its success was "entirely dependent" on the up front cost, but decades of history have shown that up front cost plays a very important part in phone sales. For example, anywhere that phones are not subsidized or otherwise available via some kind of time payment (not credit card), the iPhone usually barely gets into double-digit market share.
This is a well known industry phenomenon: people don't like to pay more than about $200 - $250 upfront for any phone. Monthly payments don't matter. It's the upfront cost that's the gating decision. This is why Apple has often made sure there's a loan program in countries without subsidies.
-- Original iPhone Not Subsidized:
As for the original iPhone, it was not subsidized by AT&T. A subsidy means the carrier bears most of the sales cost. The phone manufacturer gets the money from the sale right away, and then the carrier gets paid back over time via the contract. This is great for the manufacturer, but a huge burden on the carrier. (Which is why they've gone away.)
Instead, Jobs made a revenue sharing deal, where Apple not only got the full retail price up front from the customer, but also got another $10 or so each month from the carrier. If this revenue sharing was eternal, then Apple stood to make a lot of money over time. As for AT&T, they didn't care. It was as if they were giving Apple the customer's subsidy stipend.
In other words, Apple got BOTH their retail price... AND a monthly kickback. So when Apple had to drop the price by 1/3 after a couple of months to restart sales momentum, they counted on the monthly revenue to help make up more profits.
Unfortunately for Apple, they had neglected to make a deal where people had to keep a contract after activation. So more and more people began unlocking iPhones and reselling them around the world on networks other than AT&T. This meant Apple never got to see an AT&T monthly payment on those phones, and this became a growing concern to Apple and its investors when such non-AT&T phones reached 20% or more of sales.
Normal subsidy programs don't have this risk, as the money goes to the maker upfront instead of over many months. This was one reason why Apple went back to the usual subsidy arrangement starting with the iPhone 3G.
The primary reason for going to the subsidy model though, was to get more Americans to buy the iPhone. The mass consumer was not used to paying $400+ upfront.
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In short, Ballmer was dead wrong. The physical keyboard didn't matter because the screen real estate afforded by a virtual keyboard allowed the device to succeed at so many other things, especially browsing the web, and later full-screen apps. Also, the predictive text technology that dynamically changed the size of the contact targets on the iPhone keyboard according to the word the user was likely typing, but while not actually visually changing the size of the virtual keys, was huge! I remember showing others that were skeptical of the iPhone how amazing the keyboard was by frantically typing sentence after sentence all wrong, but every time I tapped the space key, the word I had actually wanted was displayed! It looked like I was typing a bunch of gibberish that magically turned into the exact sentence, spelled correctly, of what I wanted to type! People couldn't believe it! Then later with Siri, even people who still have difficulty typing on a virtual keyboard gained another option with voice dictation. Ultimately, the lack of a physical keyboard is what enabled the iPhone to do so much more than other similarly-sized devices, and improved the experience so much, people were willing to give up their crackberry's to use a device that was so much more useful in so many more contexts.
The carrier contract subsidies were definitely a big deal. Rich corporate executives often lose sight of typical consumers and how much they can afford to pay. Scott Forstall recently said him and Steve Jobs would argue over price with Steve wanting the higher price, both for profit and the prestige of luxury devices, and Scott would tell him about people in his own family that would never be able to afford it. Apple worked an amazing deal that brought the up front cost of entry into iPhone to $199, which was palatable for many people. Apple also wanted unlimited data, so that users could take full advantage of web browsing, email, and other data-intensive use scenarios without going over limits or being throttled by the carrier. But the carrier (AT&T at the time) essentially guaranteed that users would begin rapidly consuming mobile data plans. When cellular data was charged by X number of pennies per KB, nobody used data except in extreme circumstances. Once data was unlimited, everyone used the networks to their full potential, resulting in extra revenue for the carriers, which they then re-invested in order to deploy faster and better networks (3G and later 4GLTE). Apple's deal with AT&T with the phone subsidies brought the iPhone to a cheap enough up-front cost that average people without much money saved but a steady income could afford an iPhone, and the carrier would be guaranteed to generate approx $30 per line for unlimited data. If the user was satisfied with their iPhone after 2 years and was eligible for an upgrade (and not particularly financially savvy), they might have chosen not to spend an additional $199 to upgrade, but the carrier would continue collecting the $30 per line. Savvy users unlocked their iPhone and sold it privately on ebay or craigslist for as much or more than the $199 needed to upgrade. Thus upgrading every 2 years was extremely common under the subsidy model because you had to pay the $30 a month whether you used an old iPhone or a new iPhone. So why not sell the old iPhone privately to someone that wanted to use it on another GSM network for the same cost as upgrading to a new one? My iPhone 4, and iPhone 6 were all purchased under my 2-year contract where I only paid the bull sh*t activation fee the carrier charged me. I always sold my old one for more than $200. With the subsidy model having gone away, users are well aware of how much they are ultimately paying, but they still remain willing to do so, at least every few years.
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The carrier contract subsidies were definitely a big deal. Rich corporate executives often lose sight of typical consumers and how much they can afford to pay. Scott Forstall recently said him and Steve Jobs would argue over price with Steve wanting the higher price, both for profit and the prestige of luxury devices, and Scott would tell him about people in his own family that would never be able to afford it. Apple worked an amazing deal that brought the up front cost of entry into iPhone to $199, which was palatable for many people. Apple also wanted unlimited data, so that users could take full advantage of web browsing, email, and other data-intensive use scenarios without going over limits or being throttled by the carrier. But the carrier (AT&T at the time) essentially guaranteed that users would begin rapidly consuming mobile data plans. When cellular data was charged by X number of pennies per KB, nobody used data except in extreme circumstances. Once data was unlimited, everyone used the networks to their full potential, resulting in extra revenue for the carriers, which they then re-invested in order to deploy faster and better networks (3G and later 4GLTE). Apple's deal with AT&T with the phone subsidies brought the iPhone to a cheap enough up-front cost that average people without much money saved but a steady income could afford an iPhone, and the carrier would be guaranteed to generate approx $30 per line for unlimited data. If the user was satisfied with their iPhone after 2 years and was eligible for an upgrade (and not particularly financially savvy), they might have chosen not to spend an additional $199 to upgrade, but the carrier would continue collecting the $30 per line. Savvy users unlocked their iPhone and sold it privately on ebay or craigslist for as much or more than the $199 needed to upgrade. Thus upgrading every 2 years was extremely common under the subsidy model because you had to pay the $30 a month whether you used an old iPhone or a new iPhone. So why not sell the old iPhone privately to someone that wanted to use it on another GSM network for the same cost as upgrading to a new one? My iPhone 4, and iPhone 6 were all purchased under my 2-year contract where I only paid the bull sh*t activation fee the carrier charged me. I always sold my old one for more than $200. With the subsidy model having gone away, users are well aware of how much they are ultimately paying, but they still remain willing to do so, at least every few years.
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No the key difference is that Apple paid Xerox to look at what they had created, and Xerox agreed and was willing to show them. Apple then correctly realized that the GUI concepts could be applied to a computer "appliance-type machine," which anyone and everyone could easily use, which turned into the Mac. Xerox pioneered some desktop GUI concepts, but they didn't understand the power of applying those ideas to a mass-market audience and mass-market product. Just a made-up example, but it would be similar to the internal combustion engine being designed and created, but not knowing what it could be used for. And having Henry Ford ask the creators of said engine if he could license their technology to build something of his own. And the original ICE creators having no idea what Henry Ford was thinking about doing, and later seeing him use it to build cars. Microsoft stole from Apple in that they did not license Apple technology, and yet they still stole their GUI. Xerox invented the GUI, Apple innovated like crazy on the GUI, and Microsoft stole Apple's innovative GUI when it released Windows.
but I can tell you, my family won't. I am not shelling out $5,000 for 5 iPhones, every year, not happening. And I can tell you, my kids don't want to spend that kind of money on a new phone every year either, once you tell them how much it is, they say, "my phone works fine!". lol