Apple’s customers (like me) got a brand-new operating system, cool new MacBook Airs and maybe-not-quite-as-cool-but-whoa-no-optical-drive Mac Minis. Meanwhile, tech and business reporters (like me) got a quarterly earnings report that had some of us (okay, it was me) making jokes about Steve Jobs diving like Scrooge McDuck into a room full of gold Krugerrands.
Microsoft released their quarterly earnings results, too. And they’re almost as huge. Redmond made almost $6 billion in net income on more than $17 billion in revenue. That’s a record quarter — and remember, Microsoft’s been making a lot of money for a long time, in much better economies than this — and a 30% jump in profits from 2010.
Now, here’s where it gets interesting: Microsoft scored its record quarter with mostly flat growth in PC sales — where Windows and Windows Live revenue, its biggest business since forever, actually dropped. Three months where the company didn’t release a significant new product. Three months where the typical Microsoft stories you read at Wired or elsewhere were about things like whether CEO Steve Ballmer should resign.
Apple crushed its quarter mostly because it’s been selling new iPads faster than it can make them. It’s opening up enterprise and foreign markets where it’s never found success before. Its most popular product is a store wrapped in gorgeous hardware its owners carry around with them everywhere they go.
Bloggers are writing Apple-inspired fan fiction faced with the prospect that the company maybe might use a fraction of its Scrooge McDuck money to snap up TV streaming service Hulu. I know it might not really make sense! And some of the sources leaking this story might be trying to goose Hulu’s purchase price or Apple stock! But who cares? It would be so awesome!
Ultimately, it doesn’t matter. When a company is as successful as Apple’s been lately, anything seems possible.
Apple is cruising. Microsoft is scrapping.
And that’s why I think — against all odds — Microsoft has suddenly become more interesting than Apple.
For a long time, it was the other way around. Microsoft couldn’t make a mistake, and Apple was on the ropes, with no hope but to innovate their way out.
Like almost everyone else, I used almost all Microsoft and PC-compatible software and hardware, but Apple was always more interesting.
- An all-in-one computer with no floppy drive? Wow.
- A digital-only music player? That’s a cool idea.
- iPhone? I never wanted a smartphone before, but I would really love something like that.
But now, even as I (like most everyone else) use more of Apple’s stuff, I think I’m more fascinated by Microsoft — particularly the Microsoft that most of us don’t usually think about.
If you walk into an Apple store, particularly if you play with an iPad or iPhone, you get to see almost everything that Apple does. It’s a monolithic company, built like a pyramid. All the pieces fit together, even the imperfect ones. Everything compliments and supplements everything else.
Microsoft, by contrast, is at least — at least! — three different companies. And since we’re all geeks here, I’m going to loosely name them after three different comic book iterations of Marvel’s superhero team The Avengers.
- Mighty Microsoft. The Microsoft everyone knows: Windows, Office, Internet Explorer, Hotmail. Boring, maybe, but still mighty. Every new version, every interface quirk, is a big deal. Part of our common culture that lives and dies by the PC business. This Microsoft was largely flat this quarter (although Office did pretty well). The growing-but-still-not-profitable Online Services division, which includes Bing, straddles both Mighty Microsoft and…
- New Microsoft. The Microsoft for which a retail store would actually make sense: Xbox 360, Kinect, Windows Phone 7 — everything from the entertainment and hardware division, which had a gangbusters quarter.
I’ll also include the amazing Microsoft Research team as part of New Microsoft. They’re the closest thing we have to the legendary Xerox PARC today (even including some of the same people). Microsoft Research regularly turns out great projects, some of which eventually feed into great retail products — although you could also call them part of…- Secret Microsoft. This is the Microsoft whose services you end up using as a consumer even though you never see the word Microsoft — something that never happens with Apple. It’s also the Microsoft that partners with enterprises and governments and other corporations. The Microsoft, for which, unlike Apple, business revenue is never a surprise.
The ugly side of Secret Microsoft is the stuff that resembles patent trolling and rent-seeking. For instance, Microsoft makes a little bit of money on Amazon’s Kindle. Does the Kindle use Microsoft tech? Not really. But the Kindle uses some Linux, and Microsoft claims Linux violates its patents. So Amazon pays a licensing fee, because really, who wants to fight Microsoft?
Here are some better Secret Microsoft stories, which go a long way towards explaining why Microsoft continues to rake in money: Matt Rosoff observes that Microsoft’s quarterly report includes $17.1 billion of “unearned revenue.”
What’s “unearned revenue”? Money that Microsoft has collected up front for new long-term government and business deals, but which will be accounted for over the life of the contracts. So while Mighty Microsoft might not be showing big bank, Secret Microsoft just re-upped and/or upsold a whole bunch of the company’s best customers for the foreseeable future.
Another Secret Microsoft story concerns a subject close to my heart, the alliance between Microsoft and Facebook. Tricia Duryee reports on Microsoft’s latest work with game developers for social networks.
Microsoft gives the game developers prefab backend tools, all the boring stuff game coders hate bothering with, including stuff like managing user profiles and collecting and cashing in Facebook credits. In return, the game developers host their games with Microsoft’s Azure rather than a cloud competitor like Amazon. Everyone wins! (Except Amazon.)
There’s a great line in the HBO series “The Wire,” where one of the detectives, Lester Freamon, talks about a major problem policing drugs in any American city: “You follow drugs, you get drug addicts and drug dealers. But you start to follow the money, and you don’t know where the f— it’s gonna take you.”
I feel the same way about Apple and Microsoft. If you follow Apple, you get plenty of information about what’s happening right now in technology for consumers. When you follow Microsoft, you start discovering a lot more about how the entire technology industry works — and where it’s headed. Source This Article Is Here
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