Several stories are taking aim at Apple, including a rant by Steve Ballmer (sorry, no videos). No matter how many bad things that Ballmer says about the iPhone, this is the man who gave us the Zune. The fact that he is upset about the iPhone is the strongest endorsement I’ve seen so far.
First, however, the less sexy but potentially more serious matter, Apple’s options backdating scandal. In yesterday’s Wall Street Journal, Alan Murray discusses how the federal investigation was not being taken seriously enough by the company:
Arrogance in the corner office is out of favor these days…
Steve Jobs, however, is another matter. The chief executive officer of Apple has good reason to think well of himself. As the founder of both Apple and Pixar Animation, he has produced remarkable products that have transformed three different industries: computers, music and movies. His trademark arrogance is more than just a personal characteristic. It is part of his brand…
Steve Jobs is Apple Inc….It is difficult to imagine Apple continuing in anything like its current form without him at the head…
That is why the market’s euphoria came to an end on Friday, when The Wall Street Journal reported that federal authorities continue to actively investigate a grant of 7.5 million stock options to Mr. Jobs that was finalized in December 2001 but dated October 2001, when the stock price was nearly $3 lower. (See related article.) Other CEOs caught up in the options backdating scandal have lost their jobs. If Mr. Jobs were to lose his, the principal source of Apple’s magic would be gone.
The company’s handling of Mr. Jobs and the options issue has raised as many questions as it has answered….If Mr. Jobs participated in backdating options, he should be punished. To let him off the hook would send a terrible signal that some people are exempt from the rules or above the law.
But any punishment that hampers his ability to continue running the company would be a mistake. That is punishing the victim, and only compounds the crime.
Murray is right, this isn’t encouraging. Presumably, if Apple were cooperating with the Feds, or had a better story to tell, they would have put it forward by now. And the best course with prosecutors is to say mea culpa, fast, pay a large fine, and put it behind you. A big target like Jobs is enticing, but even if his facts aren’t great, what usually turns cases like this into disasters for the defendants isn’t their original misdeed but their conduct during the prosecution. Judge Penfield Jackson delivered his blistering decision against Microsoft because he felt Bill Gates lied under oath (and not very well at that). Microsoft was incredibly lucky that the judge spoke ex cathedra and got himself replaced. Similarly, what did in Martha Stewart was her decision to go to trial rather than settle, compounded by her tampering with evidence (she altered her notes on trading records).
If Apple merely makes inept but narrowly factual statements as they have so far, that might annoy the prosecutors but is probably not enough to provoke them to ratchet up their action against Apple. But Apple has gone about as far as it can down that path. And the Martha Stewart example shows that the Feds don’t care how a successful prosecution might affect shareholders.
Not only are we reading second thoughts on the backdating, but also on whether the iPhone will be as hot as it appeared at MacWorld. A piece in today’s Wall Street Journal pits fans against foes. But the worst criticisms don’t seem that serious: first, the high pricing ($499), second, the phone works only on Cingular’s network, and third, the fact that Cingular’s 2G EDGE network isn’t the fastest at moving data, and would hinder using some services, like Google Maps.
The real voters, consumers, will have their say in 6 months, but none of these objections sound like iPhone killers. High-style, high end phones have been launched in the $300-$400 range; with an MP3 player and other “gee wow” features, the price doesn’t look like a stretch. The argument for Cingular (for being tied to any one carrier) was to implement the “visual voicemail” feature, by which you can look at your voicemail messages and skip the replay of certain ones. The data speed may be an issue, but the fact that the phone can also use WiFi hotspots will make it less of a problem for urban customers.
What is more amusing is the dismissive tone of this story by John Dvorak of MSNBC, and the fact that it took a completely different angle of attack:
So I’m working on a column about Netflix’s streaming video and how nobody seems to understand the entire IPTV scene when the network calls me in a panic about Steve Ballmer going ballistic over the Apple iPhone.
I’ve already chatted about the device, saying I can’t see it being that successful. Apparently Ballmer feels the same way.
Right now the trend with these phones is to look more like a BlackBerry with little keyboards rather than to be minimalist, with not even a numeric dial keypad — the way the Apple iPhone is designed.
In Europe there is an unusual phone called the Neonode that employs a touch screen in much the same way as the Apple iPhone, and it’s more of a fashion accessory and conversation piece than anything else. I’m thinking the iPhone will go that same way and just become an iPod with benefits.
Heck, we’re not even sure that Apple can use the name iPhone, since it’s owned by Cisco.
Anyway, I’m asking myself: Why is Ballmer so upset? What’s he got to do with it?
And for an actual moment I dismissed his ramble with the idea that he was just looking for some self-promotion.
Then it dawned on me. Microsoft sells an operating system for smart phones and is in a fight to the death with Symbian, the rival standard put out by Nokia, Ericsson, Panasonic and other wireless-phone makers. Microsoft doesn’t need some third player coming into the game with what is essentially a vague copy of what it already does.
No wonder Ballmer’s upset.
As I began to think about it, how come the writers fawning all over the iPhone never mentioned Microsoft during the discussion? How does that work?
How do you bring out a product, use a name that isn’t yours, copy the idea of a major competitor that is constantly accused of copying your ideas, and get off free of criticism?
The answer lies with something called the reality-distortion field, a term coined long ago by an Apple employee regarding Steve Jobs.
I’ve witnessed this over the years, though I have not personally suffered the consequences of it, except for these momentary lapses. It’s an actual phenomenon, I can assure you…
I have a totally crackpot explanation for this, which I first mentioned in the 1980s, when Jobs was honing this skill. And, yes, my explanation is an eye-roller. But it’s the only thing that makes sense to me.
Jobs traveled throughout India in his youth, when transcendental meditation was hot and various screwball gurus were training the Beatles and other folks to meditate. Heck, Mitch Kapor, who founded Lotus (get it?) Development, actually got so far into it that he taught TM himself.
I’ve always suspected that Jobs ran into some crazy guru who taught him this reality-distortion-field trick. Seriously, it’s the only explanation when you start to think about it.
It also explains his seriously ascetic nature and his connection with Larry Ellison, who has some weird Japanese spiritual thing going on. I’d rather not know the details…
But the reality-distortion field does exist. And at least Ballmer sees it, even if all those reporters covering Jobs and Apple don’t.
You gotta love stuff like this. Rather than saying something intelligent, he says, “the trend in these phones is to look more like Blackberries.” He fails to grasp the essence of Jobs’ success, that he recognizes unmet consumer needs and creates devices that satisfy them. Extrapolating trends is incremental. It’s what Microsoft tries to do, often not that well. Jobs does something much harder, and when it works, it is spectacular, and even when he fails, it’s usually a commercial failure (the Newton, the NeXT computer) that appeals to a small but fiercely loyal and often savvy audience (top Wall Street firms and the NSA bought NeXTs, for instance).
But since he doesn’t (can’t?) comprehend that central fact, he attributes the hype (and at this stage it is hype) around the iPhone to Jobs’ mystical powers, rather than excitement that he might have done his mojo again. (Oh, and spare us the idea that the iPhone is derivative of anything Microsoft has going. Yes, some of the plumbing is doubtless similar, but the interface and consumer experience is completely different. But that is Microsoft again. They can’t see past the code). For more detail, please visit Daniel Eran’s “Top Ten Myths of the iPhone“, courtesy Slashdot, that addresses the issues raised in both iPhone stories above.
Why might the iPhone succeed? For reasons that are totally alien to Microsoft, hence Ballmer’s frustration. First, MP3 player/phone combo is still a new product category. The iPod demonstrated that ease of use and cool styling can create and preserve a dominant position. If the iPhone does that alone, it is a winner. And it certainly beat the other entrants on the looks factor, hands down, so all that remains to be seen is ease of use.
I ride the subways in Manhattan. I am astounded at how many people I see using MP3 players, predominantly iPods. They are all potential converts to the iPhone.
Second, the iPhone (oh, please stop caviling about the name. Apple could call it the iTurkey and it would still sell) is likely to appeal to other users. Dvork is probably right that it won’t get the CrackBerry market. But many of these are corporate users who weren’t available to Apple anyhow. But it may also pull in people simply who like high end phones (the styling is fantastic, and beautiful phones are one of the few forms of adornment that straight men can wear, much more eye-catching than nice cufflinks), and smart device owners for whom e-mail isn’t a big usage.
And third, Jobs might get people like me. I have an embarrassingly cheap phone and don’t use a PDA because I don’t need to and they haven’t been worth the bother. And I have long hated little buttons on phones and Blackberries and Treos (that style feature that Dvorak and Balmer find so important is a big negative to me). I feel that being hyper responsive to e-mails is bad for one’s mental health. I really have no need for the iPhone, but it is gorgeous, and the idea of a new user interface is VERY appealing (if it works well, and that could be a big if, since what killed the Newton was that its handwriting recognition never worked very well). I am a huge fan of great design and functionality (I owned, used, and loved a NeXT computer for that very reason). And I can look like a digital citizen while being a closet (more accurately, selective) Luddite.
If the new iPhone or whatever it is called can pull in someone like me, who wouldn’t fit into any of the normal targets that consumer marketers or someone like Dvorak would identify for an MP3 phone, who’s to say who else it might attract? That ain’t Eastern woo-woo, that is true innovation.