The Apple Tax

Over the last few months Microsoft has been dialing up the rhetoric around the “Apple Tax”. Timing is everything and it is no different in advertising. When people were not worried about losing their jobs or paying the bills spending a few hundred bucks more on a Mac didn’t seem to be a problem. But times are changing and this economy sure helps. Steve Ballmer, who told a Business Week-sponsored forum last month that Mac customers were paying an extra $500 to get the Apple logo on what is essentially the same hardware.

Microsoft launch an advertising campaign called Laptop Hunters where they give people a set amount of money to find a laptop to meet their needs. If they get it for less they keep the cash. The recent commercial has a kid and his mom shopping for a new laptop.

This marketing campaign does get enough credit for being smart and effective. Microsoft’s response to Apple’s commercials has been direct and bold. Given the current economic environment, people are much more focused on making every dollar count. And these commercials hit and the heart of Apple’s premium pricing which has helped them amass a war chest of cash. Now that premium pricing will be under pressure.

Amazon Shows Off Kindle 2

Amazon finally announced the Kindle 2 today after weeks of speculation from the blogosphere. Amazon made several improvements but most of them are just incremental enhancements. The price is still the same $359. Hopefully in this version Amazon has worked out their supply chain management issues. Since its launch the Kindle has suffered from supply issues. This past holiday season there was a 13 week wait on getting a new Kindle.

The bigger question is how Jeff Bezos can scale this beyond the Kindle device. Even though he has found a niche hardware business that is probably profitable it doesn’t scale to 100s of millions of people.  Beyond the tech savvy affluent few, not many people are going to be shelling out $350 on a device with a singular purpose. Especially when you can get a netbook for roughly the same price.

Windows 7 Makes Netbooks Fly

If you want to see how much progress Microsoft has made with Windows 7, try it on a Netbook. I have been testing an ASUS Eee netbook with Windows 7 Beta 1 for the last couple of weeks. The netbook sports an Intel Atom processor and only 1 GB of RAM.

We have seen the netbook PC category explode over the last two years and Microsoft was forced to make a key decision. Give up market share to Linux or lower the price of Windows. With the average price of a netbook selling for around $400 Microsoft made a smart business decision and sold Windows XP at a discount. Microsoft now has over 80% of the netbook running Windows. But Windows Vista would never be a credible alternative on netbooks. It required too much hardware to run optimally and Microsoft was worried about cannibalization.

 In comes Windows 7, when I first booted Windows 7 the first time I could tell something was different. It was snappier and more responsive. Applications loaded fast and even with the minimum hardware requirements the Windows Aero interface was enabled and performed like my desktop running Vista. After using it for a while I can only describe it with one word, solid. There are not any flashy features but several enhancements that you quickly become accustom to. Microsoft has clearly taken a different approach with the design of Windows 7 and it shows running on netbooks. Windows 7 is by far the best Windows beta I have ever seen come out of Redmond. It looks like Microsoft is starting to get its mojo back.

Motorola Phone Business Continues Nosedive

When Dr. Sanjay Jha took over Motorola’s handset division he made some quick decisions to standardize on fewer platforms. One platform he took a huge bet on was Google’s Android operating system. Sales have been declining and Motorola continues to lose share in the market. They have failed to have a real blockbuster product for several years. PhoneScoop reported that they expect Motorola handset business to announce a massive layoff soon. This could mean bad news for Microsoft and Windows Mobile. The rumor is Motorola might bet everything on Google’s Android. This would be a really desperate measure especially since Motorola has yet to release an Android phone. Mr. Jha is motivated by pure greed. If he succeeds in rebuilding the mobile business for Motorola, he gets about $100 million over three years and 3 percent of the independent handset business. If he fails — he walks away with about $30 million.

LG Adds Netflix to HD TVs

Netflix and LG Electronics announced that LG will soon introduce TV sets that can stream Netflix movies directly from the Web without an external box. “It’s hugely symbolic,” said Netflix’s chief executive, Reed Hastings. “The holy grail has always been to give the TV an Internet jack in addition to the cable jack. It’s an early glimpse of the long-term future.”

Netflix has been hard at work practically equiping every consumer electronic in the home with the capability of instant movie viewing.  From Tivo and DVD players to Xbox 360, Netflix has been fast to lock up as many devices as it can. This partnership with LG is really significant because it is a big step forward in making the TV become a connected device in the home. Read more

Race For A New Game Machine

Sony’s PlayStation 3 is nothing short of a greek tragedy. There haven been many companies before it suffer similar fates, Magnavox, Atari, and even Nintendo but none have squander their opportunity like Son.  But now David Shippy, the “brains”  behind the cell processor which powers the PlayStation 3 tells the story of how Sony was part of one of the biggest business failures of all time.  

In a new booked called The Race For A New Game Machine, he describes how the project went off the rails, ending up with IBM engineers creating the processing chips for two rival video game consoles. In the process IBM sold parts of the cell processor design to Microsoft for their Xbox 360 and Microsoft benefited from over $400 million in R&D funded by IBM, Sony, and Toshiba. The R&D teams worked in the same building and in some cases Shippy met with Microsoft engineers right after meeting with Sony engineers. Ultimately Microsoft benefited a great deal from Sony’s work on the cell processor. Microsoft launched their Xbox 360 a year before Sony launched their PlayStation 3 and the rest is history.

Lenovo iPhone Killer

Lenovo has been busy finalizing their new smartphone code named the “OPhone”. Compared to the iPhone it looks to be a killer device. Some Chinese bloggers got their hands on one and did a comparision against the iPhone. The dimensions closely mirror Apple’s iPhone but there are some surprises like a 5MP camera with a flash and a 16GB micro SD slot.

Early in December photos leaked on the OPhone and it was rumored to be built on Google’s Android platform. This would be a big step up from Google’s G1 device in many ways. Lenovo and China Mobile could have a legitimate iPhone killer on their hands. Time will tell but if this is build on Android, Google is quickly closing the gap on Apple.

Game Over For PlayStation 3

The game is over for Sony (SNE) and its PlayStation 3. Sony’s sales plunge 19 points compared to sales in November 2007. Sony’s strategy has been flawed from the beginning. 

Sony made two big bets with PlayStation 3. First was the cell processor which promised to be a breakthrough in computing power and bridge the gap between x86 architecture and specialized hardware. It proved to be challenging to develop for. The second big bet was on the Blu-rayDVD format. This bet was a mixed blessing. The shift from standard DVD to HD DVD has been much slower than other industry format changes. Sony ultimately won the format battle with Toshiba but they might have lost the war. The Blu-ray drive which is included in every Sony Playstation 3 causes the price of the PlayStation 3 to be $200 more than other consoles like the Xbox 360.

PlayStation 3’s run rate has a compounding negative impact on Sony. Game developers are less likely to build blockbuster titles something the PlayStation 3 has lacked.  Even more important are the third party royalties that come with licensing the PlayStation 3 platform and contribute a majority of profit to Sony’s gaming business. The PlayStation 3 has become a big boat anchor on Sony’s bottom line. Read more

Future of Microsoft’s Zune

Zune came on scene in 2006 when the iPod had 90% market share and was on pace to hit 100 million units. The Zune design was nothing short of an ugly brown brick of a device. Microsoft tried to differentiate the Zune by adding “the social” to the experience but the party was already over.

Apple had launched the iPod Nano a year earlier and the game was over. Apple’s unit volumes went up exponential and in no time,  everyone that was ever going to own a music device on the planet had an iPod. In Zune’s 2nd generation Microsoft started to get the software right and in many ways its superior to the iPod software but it seems too little too late. The puck is already shifting away from pure play music devices. 

At first you would think that this is a razor blade business. Sell the razor (hardware) for little to no profit and make all the money on selling razor blades (content and services). Except the paid content business is a horrible business. There is no money in that business, it just adds value to the device you are using. Apple makes all their profit selling hardware. So what is the future of Zune? Read more

Samsung Pixon 8MP Cameraphone

The race to bring a 8MP cameraphone to market is heating up. Sony Ericsson was rumored to be working on an 8MP cameraphone for the US. But it seems Samsung’s effort are in full swing with the recent FCC filings for the Samsung Pixon.  The recent specs reveal its targeted to hit the At&t network. This phone is packed with features and resembles the Samsung Omnia.

But the most interesting thing is how these types of devices are blurring the lines for multimedia experiences. With a 8MP camera on board it becomes a compelling multi purpose device. Now I only need to bring one device out with me.

The Samsung Pixon offers a compelling replacement to my point and shoot camera. I can now take high quality photos that are not just good enough to post on Facebook but can be printed and shared with family and friends.

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