Ballmer: Apple market share gains are a 'rounding error'
Microsoft CEO Steve Ballmer was in surprisingly good form this morning, as he kicked off the company's annual Financial Analysts Meeting. His presentation was one of the best in years. The economy may be cool, but Ballmer is hot.
Perhaps his most piercing comments were about Apple, a competitor that has nipped away Windows PC market share and proved to be a formidable opponent in mobile devices markets.
Ballmer dismissed Mac shipments of "10 million" units a year as being meaningless. He described Mac market share gains as "a rounding error." Ballmer emphasized: "Apple's share globally cost us nothing."
But what he didn't say: Microsoft gained much. In a later presentation, Robbie Bach, president of the Entertainment & Devices division, touted the revenue contribution from Microsoft consumer software, which Macintosh Office is the largest component. Increased Mac sales do benefit Microsoft.
Some advice to Ballmer: Perhaps FAM attendees should receive some Windows 7 netbook swag. Too many attendees -- or at least too many for Microsoft's CEO -- use Mac laptops. "We have lower share in the investor audience." he said looking out at attendees. "Don't hide them. I've already counted them," he joked. "Feel free, as long as you're using Office."
Ballmer laid out the philosophic differences between Microsoft's approach to personal computers compared to Apple. Microsoft's focus is high volume, high value and low price. By comparison, Apple focuses on high price and low volume. What he didn't say: High margin. Apple commands some of the highest, perhaps the highest, hardware margins in the computing industry.
High volume is essentially important to Microsoft's Windows business strategy, Ballmer explained. "You can't be high priced. That doesn't get us to the high volume that we aspire to." Value and volume are longstanding Microsoft corporate principles, which go back to the IBM PC era. Clearly, Microsoft has no plans to abandon value and volume principles.
Apple justifies higher pricing by asserting that "'at the end of the day we have the coolest hardware,'" Ballmer claimed. For holiday 2009, Windows PC manufacturers will release new hardware -- and that will wipe away Apple's hardware design justification, he asserted. "New PC designs -- boom -- we're going to have a heck of a Christmas."
COO Kevin Turner followed Ballmer and made a separate competitive attack. Turner reiterated Microsoft's "Apple Tax" claims, asserting that consumers pay more for Macs than PCs. He used an ad circular comparing Windows PC and Mac configurations and pricing. Typically this is true: Comparably configured Windows PCs often do cost less than Macs.
That said, there are hidden features not alway obvious on either side, such as extra-long battery life in new MacBook Pros or Blu-ray playback in some Windows portables.
The question I'd like to pose to commenters: Are Mac market share gains "a rounding error?"