How things change…

From Quentin’s blog.

There’s a piece in Business Insider based on an interesting fact first noted by MG Siegler. It’s this:

Apple’s iPhone business is bigger than Microsoft

Note, not Microsoft’s phone business. Not Windows. Not Office. But Microsoft’s entire business. Gosh.

As the article puts it:

The iPhone did not exist five years ago. And now it’s bigger than a company that, 15 years ago, was dragged into court and threatened with forcible break-up because it had amassed an unassailable and unthinkably profitable monopoly.

Wow! It seems only yesterday when Microsoft was the Evil Empire.

Apple: the new Microsoft

Those who are salivating about Apple’s new tools for creating iTextbooks ought to first of all have a read of this.

For nearly two years, Apple has wooed digital book publishers and authors with its unconditional support of an open, industry-leading standard. (The EPUB standard is managed by the International Digital Publishing Forum [IDPF], of which Apple Inc. is a member.)

With last week’s changes, Apple is deliberately sabotaging this format. The new iBooks 2.0 format adds CSS extensions that are not documented as part of the W3C standard. It uses a closed, proprietary Apple XML namespace. The experts I’ve consulted think it deliberately breaks the open standard.

I’m inclined to agree. Like Mr Bott, I see this as a variant of Microsoft’s old strategy of “embrace, extend and extinguish”.

Steve Jobs and Napoleon: an exchange

My Observer piece about Steve Job’s place in history prompted some interesting responses, in particular an email from my friend, Gerard de Vries, who is an eminent philosopher of science. “With all the articles about the genius of Apple’s Jobs around”, he wrote

Tolstoy’s War and Peace came to my mind. This is how historians used to write about Napoleon: as the genius, the inspirer, the man who saw everything coming far ahead and who designed sophisticated strategies to win his battles.

That image was destroyed by Tolstoy.

Was Napoleon in command? Well, he may have given commands but – as Tolstoy’s novel stresses – a courier had to deliver them and maybe the courier got lost in the fog, or got shot halfway and even if he arrived at the right spot and succeeded to find the officers of the regiment, the command to attack may have been completely irrelevant because just a half hour before the courier arrived, the enemy had decided to launch a full attack and all Napoleon’s troops can now do is pray and hide, or flee. Tolstoy’s point is that Napoleon’s power is projected onto him – first by his admiring staff and troops and later by historians. Napoleon plays that he is “Napoleon” – that he is in command, that he knows what he is doing. But in fact he too was a little cog in a big machine. When the machine got stuck, the genius of Napoleon disappeared. But in our historical narratives, we tend to mix up cause and effect. So the story is that the machine got stuck because Napoleon’s genius ran out.

Isn’t this also the case with Jobs? He played his role as the genius CEO and was lucky. Is there really more to say?

The best advice to generals, Tolstoy remarked somewhere, is to publish your strategy after the battle. That’s the only way to ensure that your strategy relates to what has happened.

I was intrigued by this ingenious, left-field approach. It reminded me of something that Gerard had said to me when we first worked together way back in 1978 – that War and Peace was quite a good text for students embarking on the history and philosophy of science, where one of the most important obligations is to resist the Whig interpretation of history — which is particularly seductive in the case of science.

I replied,

I don’t think Tolstoy’s analysis fits the Jobs case exactly, for two reasons: we have corroborated accounts by eyewitnesses/subordinates of Jobs’s decision-making at crucial junctures of the story (when the likely outcomes were not at all certain); and there’s the fact that Jobs’s strategy was consistent in an interesting way, namely that his determination to keep the Mac a closed system was a short-term disaster (because it left the field wide open for Microsoft and Wintel) but a long-term masterstroke (because it’s now what enables Apple to produce such impressively functional mobile devices).

To which Gerard responded:

I’m less convinced by the eye-witness reports: Napoleon’s staff also thought well about his judgements and determination (until the French were defeated and had to retreat from Russia, of course). What IS however a good point is that Job’s name appears on a large number of patent-applications (there was an interesting report about that in IHT/NYT last week which also pointed out that this could not only be motivated by the wish to boost Job’s (internal and external) company stature, as patent offices are keen to check whether the people who appear on patent applications have really contributed to the innovation.) Jobs seems to have been active not only on the level of “strategy” but also on the level of detailed engineering and design work in Apple (and that would be a difference with Napoleon: I don’t think Napoleon ever did some shooting himself. As I remember, he kept a safe distance from the actual fighting).

The more one thinks about this stuff, the more one realises how important it is to try and see technological stories in a wider context. For example, I vividly remember how Jobs was castigated in the 1980s for his determination to maintain absolute control over both hardware and software — in contrast to Microsoft, which prospered because anyone could make DOS and Windows boxes. Now the cycle has come full circle with Google realising that it will have to buy a handset manufacturer if it is to be able to guarantee “outstanding user experiences” (i.e. iPhone-like performance) for Android phones.

And that, in turn, brings to mind Umberto Eco’s lovely essay explaining why the Mac is a Catholic system and the PC is a Protestant one.

Later, another friend, Jon Crowcroft commented:

“Well Jobs is a Buddhist and Gates is agnostic – that certainly tells you something. People I know that talked to Jobs on various projects support the idea he had a major hand in project successes. I think his early failure was a common one of being too early to market; once he got re-calibrated after Apple bought NeXT to get him back, then he had it all sussed.”

Still later: Comparison between Apple and Microsoft is also interesting, as David Nicholls pointed out in an email. In terms of market cap, Apple is now worth considerably more, but:

While it is true that Apple is doing amazingly well at the moment, and ‘gaining ground’ over Microsoft, when it comes to the total amount of money made over the years, Microsoft is still well ahead.

I did a quick bit of digging and found that Apple’s total Net Income from 2001 to 2010 (the only figures I could find) is around $35.5 billion. In the same period Microsoft’s equivalent is $119 billion. These figures aren’t corrected for inflation but that obviously won’t affect the relative amounts.

Microsoft’s figures are available back to 1991, and the 1991-2010 total is around $151 billion.

In the Apple economy, only Apple gets really rich

This morning’s Observer column.

Microsoft is a huge and important company. But guess what? It’s in danger of being dwarfed by an outfit that it once regarded as a joke. In terms of market capitalisation, Apple passed Microsoft ages ago. When I last checked, Apple was valued at $364bn, compared with Microsoft’s $230.5bn. And at the moment, there is only one other corporation in the world – Exxon Mobil – that is bigger than Apple.

Last week, Apple unveiled results that suggest even Exxon may not be safe from the relentless growth of Steve Jobs’s empire. Apple made a net profit of $7.31bn on revenues of $28.57bn for the quarter ending in June. That's the best three months it’s ever had, with revenues up 82% and profits up 125%. The company also revealed that it’s sitting on a $76bn cash mountain. Just to put that in context, Apple could currently buy both Tesco and BT and still have some loose change. The news sparked an 8% rise in the share price, with the stock breaking the $400 barrier for the first time.

So is Apple the new Microsoft? Answer: no – and the quarterly results explain why…

LATER: Even stranger is the revelation that Apple has more cash in hand than the US Federal government.

Skype’s the limit

This morning’s Observer column.

“A billion here, a billion there, and pretty soon you’re talking real money” is an aphorism frequently attributed to the late Everett Dirksen, the celebrated Republican senator from Illinois, who died in 1969.

While intensive research has failed to unearth documentary evidence for the source of the entire quotation, the phrase “a billion here, a billion there” was one of Dirksen’s mantras which he often deployed in castigating congressional profligacy with taxpayers’ money.

One wonders, therefore, what Dirksen would have made of the news that Microsoft was spending $8.5bn (around £5bn) of its shareholders’ money to buy Skype, the internet telephony venture, in an acquisition that has gobsmacked both the technology industry and Wall Street. It is, said the ArsTechnica analyst, “a deal that’s hard to understand” (translation: nuts).

The scepticism that greeted the announcement stemmed from various sources…

The other half: Paul Allen’s autobiography

From my Observer review.

They say you can never be too thin, or too rich. After reading Paul Allen’s memoir, I’m not so sure – especially about the rich bit. After founding Microsoft in 1975 with his friend and schoolmate Bill Gates, Allen spent eight frenzied years building it into the corporate colossus that it is today. But then two things happened: he became ill with Hodgkin’s lymphoma; and he decided that life was too short to endure the perpetual conflict that comes with working with Bill Gates. And so he quit in 1983 (having rebuffed Gates’s offer to buy his Microsoft stock at a knockdown price), held on to his shares and has spent the rest of his life with his money (his net worth was $1bn in 1990 and was 13 times that in 1996).

His memoir, like his life, divides neatly into two parts, of which the first is by far the most engaging. Allen and Gates were schoolmates at the exclusive private Lakeside school in Seattle. Because of the school’s eccentric decision to install a terminal that was linked to a General Electric mainframe computer in a distant office, the two boys had a unique opportunity to teach themselves programming, and in relatively short order acquired more experience and expertise than most undergraduates at the time (the mid-1960s)…

800-lb gorilla buys cool new gadget

David Pogue’s take on Microsoft’s purchase of Skype.

Every time some big clumsy corporate behemoth buys a popular consumer-tech product, I cringe. It almost never works out. The purchased company’s executives take a huge payday; promises are made all around that they’ll be allowed to continue operating independently; and then, within a couple of years, the product disappears altogether. A little star of the tech sky is snuffed out, for absolutely no good reason.

Yahoo bought GeoCities, Broadcast.com, HotJobs.com, MusicMatch, Konfabulator and Upcoming. AOL bought CompuServe, Netscape and Xdrive—all gone or irrelevant now. Cisco bought the Flip camcorder, and then killed it last month.

But what about Microsoft? Its acquisitions list includes the Sidekick (Danger) service, Groove, Placeware, Massive, LinkExchange and WebTV.

It has shut down all of them.

(As my Twitter follower @jfhaft notes, “Microsoft = King Midas in reverse.”)

I guess what I’m saying is that I’m skeptical. This feels more like an 800-pound-gorilla move than anything that will wind up benefiting you.