Daniel Eran Dilger
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New York Times Violates its Own Microsoft Shill Policy

NY Times Shill Policy
Daniel Eran Dilger
Randall Stross tried to explain in the New York Times that Apple is bungling its limited window of opportunity to sell Macs as Microsoft recovers from its Windows Vista retail sales flop. In doing so, he had to rely on overly broad generalizations, ignore well known retail realities, and violate the Times’ ban on interviewing Microsoft’s weaselly shills.

The Premise.
Stross described Windows Vista as a “world of hurt,” but said Windows PC users looking for a replacement would find that the “choices are grim.” Apparently, those grim choices boil down to finding a PC still sold with the “comparatively ancient Windows XP,” or a getting a Mac.

The problem with the Mac, Stross says, is that “odds are that you’ll have to look far and wide for a store that sells it.” This is a big problem, he suggests, and core to the reason why Apple is flubbing its golden opportunity to capitalize on Microsoft’s weak rollout of Vista.
Randall Stross
Stross’ article talked circles around how many retail outlets offer Macs, suggesting that if Apple could only raise that number closer to PC maker HP, it might be able to actually sell some machines before Vista recovers from its sloppy start.

[A Window of Opportunity for Macs, Soon to Close – New York Times]

The New York Times Is Back in Bed With the Shills.
Before getting to his fatally flawed point however, Stross managed to introduce a Microsoft-enamored shill in his third paragraph, poor form for a publication of the caliber of the New York Times. 

This is particularly the case since the Times acted to ban writers from quoting Rob Enderle prattling about Microsoft, or in the words of Times spokeswoman Abbe Serphos, any “analysts who have an obvious business relationship with a company.”

Perhaps Stross–who is a professor of business at San Jose State University–isn’t aware of this policy, or simply doesn’t know that basing the majority of an article on quotes from a single analyst with an undisclosed conflict of interest isn’t really journalism.

Perhaps he is also unaware that Roger Kay of Endpoint Technologies Associates–and previously of IDC–is nearly an identical clone of Enderle. Maybe he didn’t know that a two second Google search would reveal that Kay has nothing but ad-speak adoration to say about Microsoft, and nothing but fear and doubt and ignorance about any of its competitors.
Roger Kay
That’s a lot to suppose. Remember this is the same Kay who announced “They’ve shaken people’s confidence in their ability to execute!” after Apple postponed Leopard for six months–the first time Mac OS X has ever been delayed by any significant period–in order to deliver the iPhone.

The same Kay also worried in print about the iPhone. “You have to squeeze your fat fingers onto this fairly small, glass surface and hope to hit the right key,” he told NPR, before the iPhone was released and before he had ever touched one. “That could be quite challenging.”

[NY Times bans Microsoft analysts from Microsoft stories – The Register]
[Roger Kay Advocates Trusted Platform Module as Real, Viable and Available Now]
[Apple puts a leash on its Leopard – ZDNet]
[Apple’s iPhone: It All Depends on the Keypad – NPR]

The Market Share Mantra.
Stross immediately headed into familiar territory for Windows Enthusiasts: bring up that Apple once had 14% market share… in the relatively small, US-centric market for computers back in 1984, when Apple made its money selling Apple II computers, the IBM PC was scarcely four years old, the Mac was brand new, and Windows 95 was still a full decade away.

Kay noted that irrelevant historical percentage to indicate that Apple’s market share has dropped precipitously since then, down to a low of 2% and rebounding up to “only 3%” of the the entire world’s sales of all computer systems, desktops and servers combined.

That depiction is the only way to marginalize the fact that Apple actually doubled its Mac unit sales over the last few years. Kay dismissed Apple’s Mac growth by saying “the increase to 3 percent may be a result of the ‘halo effect’ produced by the success of the iPod.”

This is particularly comical because Kay was quoted in BusinessWeek just last year saying, “I really don’t think there has been much of a halo effect. Most of what they’ve done is reconvert the faithful.” Which story is correct, Kay? Is it whichever sounds worse for Apple at the time of utterance?

[Apple Computer: iPods, sure. But don’t go dissing Macs – BusinessWeek]

Confusing Macs with Zunes.
Stross used Kay’s “3%” quote to set up a false comparison of percentages, something that a business professor can’t do without knowing they are lying, unless they are simply incompetent.

He wrote that Steve Jobs cited the Zune’s 2% market share among sales of music players in January after its weak launch last winter, suggesting that percentages of the music player industry–which brings in roughly $250 million in retail every month–are equal to percentages of the roughly seventy times greater, $213 billion worldwide PC industry.
Market Share vs Installed Base: iPod vs Zune, Mac vs PC
They are not. Recall that Apple makes nearly as much of its revenues and profits selling iPods as Macs, despite having a market share close to 75% among music players, but only 3% among all computer sales.

To suggest that Mac sales are an insignificant bump related to an iPod “halo effect” is just as silly as to deny that any “halo effect” ever existed, two sides of the truth Windows Enthusiasts like Kay perpetually find themselves on the wrong side of, as Ogden Nash might have observed.

[Market Share Myth 2007: iPod vs Zune and Mac vs PC]
[Market Share vs Installed Base: iPod vs Zune, Mac vs PC]

Market Share vs Sales.
After acknowledging that the “official line from Apple” is that Mac sales are up over 30% over last year and that unit sales are hitting new records, Stross returns to the safety of market share percentages to point out that “no gains can be seen for Apple.” This is why Windows Enthusiast like to talk about market share.

So what’s the solution to raising market share?

“To try to win over customers when Vista appeared,” Stross complained, “Mr. Jobs and his managers did not enlist resellers for the Mac with the same enthusiasm that they showed in building Apple’s own network of retail stores. In the war for operating system share, there’s no substitute for boots on the ground to retake territory, shelf by shelf.”

He managed to find another analyst to agree, whom he cited as saying, “You could grow your share a lot faster if you could get your Mac retail presence up.” Stross noted that HP sells its PCs through 23,000 retail stores, but said Apple wouldn’t provide a figure for its Macs. Perhaps it didn’t want to further arm Stross in his “can’t see progress” numbers games.

The Retail Outlet Numbers Myth.
The simpleton logic that having more Macs on more shelves would result in greater market share sounds good, but we really already know how that would work out, because the company already tried it and failed miserably. Throughout the 90s, as computer stores dried up and sales migrated towards big box retail, Apple embarked on a retail strategy that involved a wide spectrum of chain stores, from Sears to Office Max.

Having Macs sitting on shelves in lots of stores did not in itself help Apple’s market share, nor its sales, nor its profits. Between 1997 and 2000, the number of retail outlets selling Macs began to drop quickly, from 20,000 stores to 11,000. However, Apple wasn’t getting kicked out; it fired those stores for poor performance.

Shortly after taking over Apple, Jobs recruited Tim Cook from Compaq in 1998. Cook took efforts to simplify Apple’s operations and reduced the number of suppliers the company used. Cook also slashed retail outlets; that same year, he announced Apple would “cut some channel partners that may not be providing the buying experience [Apple expects]. We’re not happy with everybody.”

Apple subsequently pulled out of Sears, Best Buy, Circuit City, Computer City, and Office Max to focus its retail efforts with CompUSA. Apple later returned to Sears, only to pull out again in 2001. Apple also ended a shaky retail partnership with Circuit City in 2001.

Having 20,000 retailers wasn’t working, because each of those stores sold Macs with the same casual indifference that they later sold Microsoft’s Zune. Recall that Microsoft boasted that over 30,000 stores were lined up to sell the Zune. That fact didn’t result in sales, let alone significant market share.

[Apple’s Retail Challenge]

DIY Retail Stores.
Apple found in the late 90s that trying to sell Macs by relying on retailers to do it for them was not going to work. Instead, it focused on its partnership with CompUSA while also working to develop its own retail strategy. Jobs brought in Mickey Drexler from J Crew–and formerly the Gap–to help set up a retail sales team and build a network of stores.

At the time, expert critics like David Goldstein of the Channel Marketing announced, “It makes absolutely no sense whatsoever for them to open retail stores,” but Apple’s retail stores now earn exceptional, market leading revenues and profits. Other tech companies from Gateway to Sony to Microsoft have all struggled and commonly failed in their efforts to maintain retail stores.
Apple's Retail Challenge
Given Apple’s stellar success in retail, it’s questionable why Stross is insisting in his article that Apple should turn back the clock to 1996, when Apple had Macs sitting unsold on dusty shelves in tens of thousands of retail stores, while losing money and falling behind in growth. And at the same time, he also notes that Apple is working with Best Buy in a program to expand its retail sales. He complains it’s not enough.

[Apple’s Adventures in Retail]

Best Buy Actually Probably Not.
Stross wrote, “If Apple had begun wooing Best Buy two years ago, and perhaps appointed an ambassador to look after the relationships with the chain and other resellers, the Mac would have been much better off.”

Would it? Best Buy runs its cold warehouse stores like a police state, demanding receipts and digging through bags. Its employees are few and far between, and have incentives to steer customers toward store brand PCs and the resulting profits from Geek Squad repairs and service.

Vista’s Gonna Get You.
The biggest problem for any hope for change in Apple’s market share numbers, worries Stross, is that his Microsoft shill Kay informed him that the problems of Vista are only temporary and that Microsoft’s “thousands of certified supporting hardware vendors and the two million device drivers” for Windows make up “an enormous flywheel.”

“It takes a lot of energy to spin it up,” Kay said, “but once it gets going, it’s virtually unstoppable.” One might recall that IBM was also unstoppable up into the 80s, and that US carmakers were unstoppable into the 70s. The reason they were unstoppable was largely because they had no effective competition.

Once competition arrived and began grinding the metal off of those large flywheels, the momentum they had been coasting on failed to continue to propel them along with the minimal effort and maximum profits they had been generating.

Microsoft’s Vista is now facing an industry aligning behind Linux in servers, OpenOffice in desktop applications, and open software in embedded applications.
Windows 95 and Vista: Why 2007 Won't Be Like 1995
It has also completely lost its leading edge in desktop computing to Apple, and now trails behind in a me-too fashion. Apple trounced Windows Media with iTunes, and just recently slaughtered Windows Mobile with the iPhone.

A flywheel that loses its weight can’t maintain the same momentum. One that slows to a dead stop–as Microsoft managed to do with its disastrous rollout of Vista–can be tough to get going again. It’s going to take more than some spin from Kay.

[Windows 95 and Vista: Why 2007 Won’t Be Like 1995]

More Zoon Awards!
Randall Stross
gets a Zoon for his atrocious article relying on shills, false numbers, and half-truths; Roger Kay gets a Zoon for his Microsoft babbling and self contradictions, and the New York Times gets a Zoon for printing this problematic piece despite having a policy against publishing Microsoft shill interviews as news articles.

What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas.

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