Version: 2008

February 12, 2007 4:00 AM PST

Newsmaker: Bach answers the call at Microsoft

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In the consumer space, we are hearing about a big shift to advertising-supported business models--a lot of predictions that consumers are going to spend less on software generally. What do you see as the role of ad-supported software?
Bach: What you are going to see is a diversity of business models. I think people are going to continue to buy packaged software--I'm a firm believer in that. It's a way people are comfortable with buying. I think that people will buy that packaged software in a store sometimes. They might buy it online. The idea that somehow people are going to stop buying physical goods is just wrong.

On the other hand, I do think download models are a valid model, and I do think ad-supported models are a valid model that people will add. You'll see us doing more ad-supported work across all of the things we do. In each of our platforms, we do work to support that type of advertising model, so that other people can do it. It's not just a Microsoft thing.

The real challenge on a phone and on any small device is, "What is the ad model? Is it the same ad model that we see happening online on the PC?" I'd be a little skeptical of that myself. Maybe it's more commerce-based on a phone. Maybe it is more location-based.

Another area that has been important in the mobile device space has been music. The biggest thing Microsoft has been doing in the music area lately has been Zune. What is the role of Zune in the phone market?
Bach: We get asked the question a lot--about whether we are doing a so-called Zune phone or some kind of phone device that plays music.

The Zune team is off to a good start and is very focused on delivering the music scenario on a music device. You can assume that's where we are going to be focusing most of our attention.

Now the company as a whole is very involved in the music space, across the board. We're doing a lot of work with operator partners who want to bring out their own music services. We continue to invest heavily in our video and music codecs, and in our DRM technologies around those products.

People have talked about the idea of a Zune phone. That wouldn't necessarily be the only way to get Zune content onto a phone. Presumably, any Windows Mobile phone could play Zune content, if you guys decided to go that way. It could be hardware partners. Do you see all of those as potential possibilities?
Bach: Any of those are possibilities in the future. Think of it as us being focused on music on a Zune device. That's our primary goal right now.

So things like having different form factors of traditional music players, video services--those things would be higher on the priority list?
Bach: Basically, expanding on the things we've done with Zune already is the top, middle and the bottom of the priority list right now.

It's taken Microsoft a long time to get to the place it is at in the phone business. What are the key things that the company still needs to do in the phone area?
Bach: Windows Mobile 6 is a huge stride forward. Of course there is more work we can do. One of the key milestones we have reached is getting great hardware design and great operator integration. As you look to the future, it's now taking advantage of that.

I actually think brand development is important to us in this space. If you look at a bunch of the devices out today--cutting-edge things like the Q and the Dash and the BlackJack--getting people aware that those are Windows Mobile devices, and that when they go into a store that they want to ask for a Windows Mobile device, is an important objective for us.

Today, people actually don't think about the company RIM (Research In Motion) as much as BlackBerry the brand. We want people when they think about these handsets, not so much thinking "That's a phone from Microsoft," because it's not. What we want them to think is "Oh, that's a Windows Mobile phone and that's what I want."

Who do you view as the most serious competitors in the phone space?
Bach: Certainly the two people that have the most attention here would be RIM/BlackBerry and Nokia/Symbian. We're ahead of RIM/BlackBerry today. We're still behind Nokia. They do a lot of feature phone work, so that makes the volume comparisons really tough for us. In the business space, certainly, we think we're getting tons of traction, even in competing against Nokia.

On the Xbox side of things, is there any update there?
Bach: Xbox continues to go quite well. We continue to see the kind of market momentum we had coming through the holiday. January went, I'd say, as we planned it to go. It's always a good month.

The game lineup continues to look awesome. Gears of War has continued to sell very well, and as an online phenomenon, is really driving Xbox Live in a big way.

So the shipment cut on Xbox is really just an inventory thing, then?
Bach: It's all part of managing the business. Everybody always asks me, "So when are you going to make money?" We've told people we're excited about the volume we're at. Getting to 10 million was a big milestone.

But we've also told people that next year, we're going to make money and we're going to run the business to make money. Given where we see competitors priced and where we see their volumes in the marketplace, we feel great about where we are. We're taking the opportunity to make sure we are optimizing the business model. That may mean a few fewer units in the short term, but we think it means a bigger and better business in the long term.  

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A refreshing perspective
by hawtdog February 12, 2007 6:50 AM PST
First, I'm a huge Apple guy. But, I must say it was nice to hear someone from the dark-side actually say that Apple might be after a different market. Whether or not that's true remains to be seen, but in the ever raging Microsoft/Apple war it was nice to hear someone not just denigrate the competitor at every moment possible. Sure, the company he works for is pure evil, but at least he can play nice in interviews.
Reply to this comment
He isn't playing nice.
by Macsaresafer February 12, 2007 7:24 AM PST
He's trying to leverage Microsoft's OS monopoly in the enterprise
to scare people from buying the iPhone. What's worse, he's
expanding on Bill Gate's lies to do it.

There is no lifestyle/work-style difference and he knows it. The
iPhone can connect with your companies email servers through
imap and pop, it has Google Maps, which is important for many
businesses, and what business can't benefit from a full web
browser?

The abilitiy to send/receive emails while talking is another
important business feature. In fact, when I first saw the iPhone,
this and several other features had me convinced that this was
the perfect phone for my business. Now I'm supposed to believe
that it isn't just because this guy says so? I think not.
View all 4 replies
agreE...
by Surf61 February 12, 2007 7:26 AM PST
I agree... there is plenty of room for everyone and it is nice to have
a choice...

Personally... everyone I know is excited about the iPhone and I can
not wait!!!
it's often good to hear from industry insiders
by jabbotts February 12, 2007 7:58 AM PST
It definately read like he had a lawyer watching over his shoulder with some of the more intricate wording and understandable "ra ra Microsoft" phrases. Still, good to hear from an industry expert and mature discussion of competitors.

I'd have been curious what they updated in Windows Mobile under the hood myself. Does it still fill it's memory when multiple programs are opened without being closes? As I remember, the older versions quickly return "out of memory" messages if you don't exit programs within the phone.
great job implementing it (DRM) and driving it.
by robintontx February 12, 2007 7:57 AM PST
Guess that is why I still can't activate the DRM (In Microsoft Reader) on my Windows Mobile 5 based phone so I can read the encrypted e-books I mistakenly purchased a few years back.
Reply to this comment
whats the bigg deal
by redrasys February 12, 2007 8:00 AM PST
Personally, i dont understand what the big deal is with the iPhone. Agreed, it has the coolness factor and all, but i am really really happy with a smartphone i bought for $100 - unless i have lot of money in bank that i am pondering what to spend it on, i am not going to buy a $500 phone just for the coolness factor. i need productivity tools and my tmobile dash goes beyond expectations there. Coolness works for a mp3 player, but not for a work/life device like cellphone. Bach is right, but i guess time will tell.
Reply to this comment
Coolness doesn't work for phones??
by Mark Greene February 12, 2007 8:16 AM PST
You might want to think over that again.
View reply
DRM
by phantomsoul February 12, 2007 8:29 AM PST
...is a criminal practice and those who sell content encoded with it should be sued for violation of basic consumer rights. Period.
Reply to this comment
Two things
by rapier1 February 12, 2007 9:13 AM PST
1) Is that how this exec dealt with Apple is very interesting. He
wasn't dismissive, angry, or even attempting to 'sell' his product
by bashing Apple. Apple execs, on the other hand, often work in
some dig at MS and other producers. Its good to see someone
acting like an adult.

2) The story mentions that when MS started out in the phone
business they didn't have many people behind them and they
had horrible sales. However, they kept plugging away at it and
each iteration took gained more and more market share.
Basically it underlined that MS is dogged in its persuit of its
goals and even initial failures are just seen as a stepping stone.
They have the resources to persue a strategy for years and years
and can afford to make mistakes on the way. Other companies
are in a more fragile position and one big failure will have a
devastating impact. Which I think helps explai what is happening
in point 1.
Reply to this comment
I agree...
by mbjr February 12, 2007 9:55 AM PST
Especially with #1. Noticed that too. When he was asked about the iPhone, I was expecting him to do a little bashing of Apple with the way Apple was treating MS in the media and trade shows...but...he didn't. Strange. Pretty mature comments from him and shows a level of respect that people SHOULD have in the business world.

But then again bashing competitor produces gets tiresome after the 100th time. I mean yeah, commercials doing this are cute at first, but it starts to get annoying after a while, and makes lose interest in the product itself they're SUPPOSED to market. Not to mention they start to sound and look like little children vying for attention.
But he was dismissive!
by Macsaresafer February 12, 2007 10:07 AM PST
The iPhone "is a proposition that some set of early adopters will
want to take a look at." How do you get more dismissive than
that? He doesn't even know all of the phones capabilities or what
the service plan will be yet, but he's already trying to relegate it
to one little corner of the market.

He's using a straw man: Apple doesn't do business (how do they
manage theirs???) so that he can dismiss not only the phone, but
the rest of their products in one swoop! That's the whole thrust
of his interview!
View all 2 replies
Re: Two Points
by mofo111 February 12, 2007 2:11 PM PST
Oh, come on. Microsoft execs are well known for trash-talking
and dismissing their competition. Ever read the book "Opening
the Xbox" by Dean Takahashi? Remember the part about a pair
of Microsoft Xbox execs in Tokyo drunk in a bar and calling up a
Sony exec late at night around the time of the initial Xbox
launch to ask him what he thought about the Xbox? Remember
the part about them posing for pictures with an Xbox prototype
in front of Sony's office building? Your claim that Microsoft execs
behave like "adults" is laughable. The reason why Bach is so
subdued and diplomatic in the interview is that he is smart
enough to know that iPhone has completely trumped the Zune,
and that any trash-talking by him would be seen as "sour
grapes" by everyone.

It's also laughable that you applaud Microsoft's "dogged pursuit
of its goals" even with flopped "initial failures". You're right
about the initial failures part. Microsoft has a long history of
putting out version-1.0 flops. It makes me wonder who out
there is actually foolish and stupid enough to buy anything new
the Microsoft puts out. Yes, I'm talking to you, all of you Zune
owners.
iPhone = iPod+Phone+Internet
by Llib Setag February 12, 2007 12:46 PM PST
(i.e. It can be used for Business too!)

Ballmer: How are you going to use the iPhone for business when it does even have any keyboard keys?

GUI touch screen system...keyboard is part of GUI & has auto correction during typing.

iPhone can auto-sync all your internet & personal contacts from a PC or MAC computer and email / calendars sync too. Works with Microsoft Exchange Server via Mac OSX. ( so, once again WORKS FOR BUSINESS TOO!)

Don't you love how MS is attempting to paint the iPhone as just "another lifestyle choice device from that toy computer maker Apple",
but MICROSOFT, well THAT'S for serious business people...

Get the facts from the source...

http://www.apple.com/iphone/

http://events.apple.com.edgesuite.net/j47d52oo/event/
Reply to this comment
You're overlooking wireless sync of calendar, contacts and tasks
by Mister Winky February 12, 2007 5:22 PM PST
In addition to e-mail, a lot of people use their Treos and Blackberry to sync their contacts, calendars and tasks. Treos and Blackberry's can do this over their 3G wireless data connections; the iPhone looks like it won't be able to do this when released (and it isn't 3G).

Many Blackberry and Treo users at my work want iPhones when they come out, but they won't buy them because they don't want to have to go back to their desktops to sync their Exchange-stored info.

In 2007, mobile/wireless sync of all Exchange data is a must for business.

-Mister Winky
View all 2 replies
iPhone doesn't have anything new
by niravabhavsar February 17, 2007 9:19 PM PST
I don't know why Apple is making a lot of fuss about this. For years HTC and others have fully functional touch screen phones with Keyboard (for keyboard lovers) with Windows Mobile 5 that works pretty well unlike previous versions. Apple is not offering anything that Nokia, Motorola, HTC are not offering for years except for their fancy Mac OS for mobile. So in a way it is just for Apple lovers - which i think are complete idiots.
All the typical Microsoft BS
by Hardrada February 12, 2007 1:03 PM PST
Microsoft's strategy: "we'll keep plugging away until we get it right". They should use this as an advertising slogan. "Windows Vista. It's crappy, but we'll keep plugging away until we get it right."

And his comments regarding DRM also show a complete lack of vision or leadership. I guess that Microsoft is not really interested in selling either the Zune of music. Either that, or they believe that consumers are so stupid that they will just buy whatever Microsoft gives them.
Reply to this comment
Zune Phone
by t8 February 12, 2007 1:51 PM PST
Funny. Nobody wants a Zune, so why would there be a market for a Zune Phone?
Reply to this comment
Zune is second?
by t8 February 12, 2007 2:00 PM PST
Not sure about that.
There are a lot of MP3 players on the market and there have been for some time.

I doubt Zune is a distant second.
Zune Phone: I Know One Application
by Sumatra-Bosch February 13, 2007 3:57 PM PST
You can call them up and laugh at them, too.

Both of them.
View reply
I don't know either
by taoman1 February 12, 2007 1:53 PM PST
but Zune is a distant second to the iPod. Second place means some people want it.
Reply to this comment
Are you sure?
by t8 February 12, 2007 2:08 PM PST
Not sure about that.
There are a lot of MP3 players on the market and there have been for some time.

I doubt Zune is a distant second, considering the time it has been on the market and it's lack of popularity.
View reply
Pretty persuasive argument
by Mister Winky February 13, 2007 2:03 PM PST
Thanks for enlightening us with, well, nothing at all. Can you please reference a popular enterprise-class smart phone that can't sync with Exchange or Notes?

-Mister Winky
Reply to this comment
Microsoft's Mission Statement, right there:
by Penguinisto February 17, 2007 5:18 PM PST
[i]"Our job really is to provide the tools and the technology that
we get requested from our operator partners and from our
media and content partners."[/i]

...notice how the word "customer" is lacking? Quite telling, one
must say.

I'll stick with OSX and Linux, thanks.

/P
Reply to this comment
Customers=Witless Dogs Who Do What MS Wants
by Sumatra-Bosch February 24, 2007 8:28 PM PST
You got it.

Customers are completely out of the picture.

They have a choice to buy a computer or not to buy one with Windows. Hey, competition is good except when it comes to OSes on Intel-based CPUs. Then it's not. In fact, choice is evil.




Roberto
Apple iPhone Ad!
by Llib Setag February 26, 2007 5:32 PM PST
http://www.apple.com/iphone/hello/
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