John Gruber’s analysis of the current state of Windows really struck a chord with me, because it reminded me of an article I read a long time ago about Wal-Mart. (I blogged about it in 2006.) Gruber’s writing about Microsoft’s declining revenue and the recent news that Apple now holds 91% of the retail market for laptops that cost more than $1,000.
Here’s the key bit:
Microsoft is no longer ignoring Apple’s market share gains and successful “Get a Mac” ad campaign. But the crux of these ads from Apple is that Macs are better; Microsoft’s response is a message that everyone already knows — that Windows PCs are cheaper. Their marketing and retail executives publicly espouse the opinion that, now that everyone sees Apple computers as cool, Microsoft has Apple right where they want them.
They’re a software company whose primary platform no longer appeals to people who like computers the most. Their executives are either in denial of, or do not perceive, that there has emerged a consensus — not just among nerds but among a growing number of regular just-plain users — that Windows PCs are second-rate. They still dominate in terms of unit-sale market share, yes, but not because people don’t recognize Windows as second-rate, but because they don’t care, in the same way millions of people buy metric tons of second-rate products from Wal-Mart every hour of every day.
The older article explains why high-end lawnmower manufacturer Snapper stopped selling its products at Wal-Mart. Here’s Snapper’s then-CEO explaining why it was ending the relationship:
“As I look at the three years Snapper has been with you,” he told the vice president, “every year the price has come down. Every year the content of the product has gone up. We’re at a position where, first, it’s still priced where it doesn’t meet the needs of your clientele. For Wal-Mart, it’s still too high-priced. I think you’d agree with that.
“Now, at the price I’m selling to you today, I’m not making any money on it. And if we do what you want next year, I’ll lose money. I could do that and not go out of business. But we have this independent-dealer channel. And 80% of our business is over here with them. And I can’t put them at a competitive disadvantage. If I do that, I lose everything. So this just isn’t a compatible fit.”
The bottom line is that Snapper could not maintain their high quality or their reputation for high quality in a market where price was the main factor in purchase decisions. It doesn’t surprise me that Microsoft’s current Chief Operating Officer came from Wal-Mart.
As I side note, I just went to Apple’s online store and saw that the 17″ MacBook Pro costs $2,499. Then I went to dell.com and built a Dell Precision Workstation M6400 with nearly identical specs — the total was $2,864.
What happened to Microsoft?
How Microsoft Lost Its Mojo: Steve Ballmer and Corporate America’s Most Spectacular Decline
I just got around to reading Kurt Eichenwald’s account of Microsoft’s decline in Vanity Fair. Microsoft has always held a grim fascination for me — when I first started writing this blog my number one topic was inveighing against Microsoft’s monopoly. Now Microsoft is just another information technology company. The article puts Microsoft’s drift down to two causes, a stagnation of its stock price that stopped the minting of Microsoft millionaires, and a stack ranking system that creates perverse incentives inside the company. My only criticism of the article is that it refers to Microsoft to being “cool” in the past more than once. As someone who was around at the time, I can guarantee that nobody ever thought Microsoft was cool.