Microsoft promoting Hewlett Packard - Why?

Why has Microsoft made a 60 minute advertisemnt showing someone buying a Hewlett Packard Notebook?

Windows Laptop Hunters $1000 - Lauren "Not cool enough to be a Mac"

If I was CEO of one HP's competitors, say Dell, Lenovo, Asus, etc., I'd be screaming down the phone to Microsoft's CEO, Steve Ballmer.

On the surface, the ad appears to be a clever retort to Apple's "I'm a Mac" ads, but digging a little deeper reveals a lot of murky issues:

• Lauren will have to live with Vista;


• Lauren could save even more money if she didn't have to pony up for a Vista licence. If she wanted to install Linux, or dare I say, turn her laptop into a hackintosh, that Vista licence is a double-waste;


• MacBook Pros are arguably better machines, and come with an arguably better Operating System;


• Sticker price always neglect the total cost of ownership, where Macs are generally considered to provide better long term value.

Of course, other people have already commented on these and other issues: e.g. that "the ad was staged", and that the theme of the commercial seems to be “PCs: Computers for Losers”.

Another thing this ad shows is that Microsoft willingly ignores generally accepted rules of advertising. For example, according to the panel of The Gruen Transfer, the acknowledged leader in a market should never mention lesser rivals by name in its ads. Doing so lends credibility to the the challengers. That explains why Pepsi (number two cola maker) refers to Coke (number one cola maker), and never the reverse. And Telstra (number one telco in Australia) never mentions its rivals by name, whereas Optus (the second biggest telco in Australia) deliberately compares itself to Telstra in its ads.

Windows 7 and Movie DVDs: Examples of Price Discrimination

Apparently Windows 7 (like its predecessors Vista and XP) will give users a choice of multiple versions. See "Windows 7 SKUs announced: your worst nightmare has come to pass" for information about the versions and their distinguishing features.

On the surface, this "choice" gives users the ability to pay only for the features they want. But, what it actually represents, is an example of what economists call "price discrimination". Now, this term sounds bad, but conceptually it's not necessarily a "bad thing". The point I'm trying to make is that the reason for the different versions is not so much to give consumers greater choice, but more simply to maximise the profits of the producer.

In particular, Microsoft is employing a premium pricing strategy. The cost of developing Windows 7 is essentially sunk, and so can be spread out over all the versions (refer: "Pricing Information Goods, Price Discrimination, Pricing Digital Goods"). Therefore, the cost of supplying an additional copy of "Windows 7 Starter" is essentially the same as the cost of supplying an additional copy of "Windows 7 Ultimate" (I'm assuming minimal differences is packaging and number of discs). From the Wikipedia article on price discrimination: "by providing a choice between a regular and premium product, consumers are being asked to reveal their degree of price sensitivity (or willingness to pay) for comparable products." Other examples include bewildering choice of drinks at coffee chains and the pricing of business class airline tickets.

[An aside: "Hey, your an Apple fanboy - what about the two versions of Mac OS X: Client and Server?" The comparison is not really applicable, as these variations are clearly aimed at different types of installation. The Client version actually corresponds to all six flavours of Windows 7: it is intended for an individual's workstation. The Server version is intended to drive backend (i.e. server) systems, and corresponds to the separate Windows 200x Server products.]

For a detailed explanation of how price discrimination increases profits, I suggest you consult Wikipedia or an introductory economics book (e.g. The Undercover Economist or Naked Economics). I'll try giving the gist. In a free market for a product, there is a single price that applies for all units sold. This price represents the point where demand equals supply. Suppliers will continue to sell units of the good as long as the price matches or exceeds the (marginal) cost of producing that additional unit. Now, different consumers value the benefits of the product differently, so some would actually be willing to pay more than the market price if they had to. Those who aren't willing to pay the price miss out altogether. If the seller could charge different prices according to the class of consumers (e.g. by marketing a premium version), it could increase its revenue on the same total volume of sales. This in turn increase profits.

The case of "Windows 7 Home Basic", which is only available in emerging markets, is an example of third degree price discrimination, where "price varies by location or by customer segment, or in the most extreme case, by individual customer".

Those familiar with region coding of movie DVDs should recognise a similarity here. According to Wikipedia: "Price discrimination is especially applicable to movies, because the marginal cost of selling one copy (or viewing) is quite small, giving the seller great flexibility in pricing. There is great disparity among the regions of the world in how much a person is willing to pay for a DVD, and region encoding allows a publisher to sell a DVD for less money in the regions where the demand is low and more where the demand is high."

Note: I haven't mentioned the more contentious issue of Microsoft's predatory pricing through OEM distribution. See "Predatory Pricing - Microsoft's Modus Operandi" for an interesting discussion.

[Adelaide's maximum temperature was only 33.0 degrees Celsius (91 degrees Fahrenheit) today. The temperature continues to fall, but the humidity is increasing.]

Jobs/Apple Speculation Frenzy

Some of the wild speculation surrounding the health of Apple CEO, Steve Jobs, has been shameful. He's a human being, and now that he's stepped aside as Apple CEO for a while, he deserves some level of privacy and respect. The speculation about Apple's future has also been rather bizarre, and I'll be discussing some of that in this rant.

The revival at Apple since Steve Jobs returned as CEO has been in large part due to his efforts, both direct and indirect. He's assembled a great team of talented people, for example: Jonathan Ive, Tim Cook and Phil Schiller. Obviously, having such an influential CEO stand aside will have an impact on Apple's day-to-day operations. But there are about 35,000 other employees who've had a hand in producing great products too.

Some may point to what happened to Apple after Jobs was ousted in 1985. There are several factors that need to be considered, however: Jobs went on to start NeXT Inc, "taking several Apple employees from the SuperMicro division with him" [Wikipedia]. Then-CEO John Sculley didn't waste time reorganising (de-Jobsing?) Apple. Other top Apple personnel also left around that time (notably chief Macintosh engineers Andy Hertzfeld and Burrell Smith). And in 1987, co-founder Steve Wozniak left Apple. Quite a brain-drain, I'd say.

The current situation is quite different. Jobs has stepped aside, but his hand-picked team remains in place. As has been noted recently, "although the co-founder has been critical to the company's resurgence, his spirit and drive have since been instilled in thousands of other Apple employees".

Perhaps a more appropriate guide is Pixar. Steve Jobs is no longer CEO of Pixar, yet WALL·E (released last year) did rather well. "It grossed $521 million worldwide, won the 2009 Best Animated Film Golden Globe Award and is nominated for six Academy Awards, including Best Animated Feature" [Wikipedia]. After the acquisition of Pixar by Disney in 2006, most of Jobs' creative team has retained control.

In stark contrast, Microsoft's situation does seem to have greatly deteriorated since founder Bill Gates left the company. The past few years have been rather underwhelming for the company: Vista, Zune, Xbox 360's "red ring of death", SPOT, Windows Mobile, Origami/UMPC, PlaysForSure (to name a few problems, failures and missteps).

[Would you believe, another hot day in Adelaide. Today's maximum temperature was 41.1 degrees Celsius (106 degrees Fahrenheit)!]

Apple's Mighty Mouse, Not So Mighty In Practice

Late last year I bought a new 17" iMac to replace my 3 year old eMac. Incidentally, the iMac is the first computer I've ever owned that features an Intel CPU.

Include with the iMac is Apple's latest mouse, dubbed the "Mighty Mouse". The Mighty Mouse comes in both wired and wireless forms, however the standard version sold with its computers is the wired version. Apple's web site extols all the virtues of the design of the Mighty Mouse. In particular:

1. The entire top shell is the actual button, but that the single button can actually trigger multiple responses, depending on where you press it: "Capacitive sensors under Mighty Mouse’s seamless top shell detect where your fingers are and predict your clicking intentions, so you don’t need two buttons — just two fingers."
2. The Scroll Ball, unlike traditional scroll wheels, allows scrolling in two dimensions simultaneously. Clicking on the shell where the Scroll Ball is also acts as a third button.
   
3. In addition to the three "virtual" buttons on the shell, "force-sensing buttons on either side of Mighty Mouse respond when you press in with your finger and thumb."

All this and a sleek look should make this another slam dunk product from Apple, following the success of the iPod, iMacs, MacBooks, Mac mini etc. However ...

The problem is all three of the features I've listed above don't seem to work well with my big and often clumsy fingers.

Firstly, the multiple "virtual" buttons lead to mistaken right-clicks when I want a left-click. Over 15 years of using single-button mouses/mice from Apple, and especially since the introduction of the "top shell is the button" designs around 2000, I tend to be a bit sloppy where I've clicked the mouse button. For example, sometimes I've even pushed the whole surface with the top of my palm. So now, with my new Mighty Mouse, I sometimes seem to click just enough on the right side of the Mighty Mouse when I actually want a standard left-click. Other times it seems I actually do click with a non-index finger on the right side when I meant a left-click. I say "seems" because I'm not always sure. Anyway, the point is that my fingers have become so used to one-button mice that I actually need to make an effort to retrain my fingers to use the new Mighty Mouse. This seems odd given that I've never seemed to have a problem when I've had to use multi-button mice with Windows and Linux. To prove this point, I've been able to use a basic Logitech multi-button mouse on my iMac without the clumsiness I've experienced with the Mighty Mouse. My fingers seem to need separate, tactile mouse buttons.

The second issue is the Scroll Ball. A great idea in theory, and the behaviour can be customised to restrict scrolling in one-dimension if you want. However, the ball itself is prone to dust or other gunk finding their way inside the mechanism that detects the scrolling, causing it to fail. This has already happened twice in only a few weeks. Apple has published a guide, "How to clean your Mighty Mouse", along with an accompanying tutorial movie. Personally I don't think the scroll ball is reliable enough, since I've found the standard scroll wheel mice that come with PCs to have far fewer problems.

The third problem I have with the Mighty Mouse is more of a niggle than the previous two. The fourth "squeeze" button is not really that practical, since it requires quite a bit of pressure to activate it. In fact, I need to lift the mouse up and give it an uncomfortable squeeze with my thumb and pinky.

I'm willing to accept that the first issue, namely my mistaken right-clicks, is more of a user problem. I'm sure a bit of patience retraining my fingers could overcome it. I've also admitted that the third issue is probably just a personal niggle. But the second issue, the problematic scroll ball, is potentially a fatal flaw. Its unreliability lets down the rest of Apple's hardware (and software). Some liken it to the Apple III fiasco. Hopefully Apple will address the Scroll Ball problem soon.

In the meantime, I've decided to invest in a Logitech MX 400 for my iMac. And to complete my transition from single-button mice to multi-button mice, I'm using an entry-level Logitech optical mouse with my old eMac. These mice can be used with downloadable drivers, but Logitech provides a monolithic "Control Center" for all its keyboards and mice. Fortunately, the devices can function with the standard drivers provided in Mac OS X. You don't get all the customisability, but I'm willing to forgo that to avoid having to install extra bloatware.