It Was Just My Imagination, Ballmer

Steve Ballmer witnessed the unveiling of the iPhone — going on seven years ago this January — and here was his reaction.

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And here’s the relevant bit, cribbed from a Seattle PI story from 2011:

Microsoft CEO Steve Ballmer, in an interview with CNBC (embedded below), laughed at the iPhone, balking at its $500 price tag and writing it off as a business option because it didn’t have a keyboard.

“Right now we’re selling millions and millions and millions of phones a year; right now, Apple’s selling zero phones a year. In six month’s they’ll have the most expensive phone by far ever in the marketplace. And, we’ll see,” Ballmer said with an amused grin. “Let’s see how the competition goes.”

It was right there in front of him, and Ballmer lacked the imagination to see the iPhone’s potential. He lacked the imagination to think that Apple might drop the price. He had his Windows Mobile fiefdom to protect, and he lacked the imagination to see that Windows Mobile might not play out in the 21st Century the way Windows did for desktop and laptop computers in the 1990s. He lacked the imagination to see that the iPhone was actually a pocket computer, which could be scaled up to tablet size — and then threaten his Windows/Office cash machine. In fact, Ballmer’s first response was to do essentially nothing, and stand by Redmond’s widespread-but-unloved Windows Mobile. By the time Microsoft debuted Windows Phone 7 (to lackluster reviews), it was too late.

Google’s Eric Schmidt did have the imagination to see what iPhone might become, and immediately shifted Android’s gears. Android was originally prototyped as a BlackBerry clone, but practically overnight it became an iPhone clone. Google now owns the mass market for smartphones. Apple owns the lion’s share of the profits. Microsoft soon will own Nokia, which owns… not much. They sell some Windows Phone 8 units, but not many.

As of this writing, MSFT shares are down over 6% on the news.

And what’s wrong with Nokia? This is a company that knows how to move product — they’ve always been a volume seller. The first problem is Windows Phone 8. Ballmer lacked the imagination to give WP8 any real differentiation from Android or iOS. There’s nothing wrong with it, but there’s not one standout awesome insanely great thing about it, either. And since Redmond can’t compete on Android’s price, the company needed the imagination to produce an OS which really stands out in some way from iOS.

Alternately, Nokia needed to do something outstanding with the hardware. But guess who runs Nokia? That’s right: Ballmer’s unimaginative former right-hand man, Stephen Elop. And so Nokia produces nice-enough-but-unloved smartphones running Ballmer’s nice-enough-but-unloved operating system.

And let’s not even talk about tablets, because there should be an upper limit on the amount of shame one column may detail. So let’s just say that Android (again) owns the mass market and Apple (again) owns the profits, and Microsoft owns the 12 people who think their tablet ought really to be a laptop you can’t put on your lap which runs a touch operating system you can’t fully operate without a touchpad and a keyboard. The result was a $900 million writedown on unsold Microsoft Surface tablets, all because Ballmer lacked the imagination to see that for most purposes, masses of people no longer needed full Windows or Office — if they had ever needed them at all.

Microsoft could have been selling millions of iOS and Android copies of Word and Excel and maybe even a mobile version of Halo or other hit games. Instead, Ballmer insisted on smashing the Windows square peg into mobile’s round hole. Ballmer lacked the imagination to see that his software didn’t have to run on his platform.

So this morning we learn of Ballmer’s solution: Spend seven billion dollars on a fading cellphone maker and its failing CEO. Because… um… help me out here, someone? Oh, yes — I remember now. Microsoft is buying Nokia because trying to buy your way out of trouble is what unimaginative CEOs usually try to do. Remember when Ballmer tried to resuscitate his company’s flailing mobile efforts by spending $8.5 billion on Skype two years ago? How’d that work out?

What we’re seeing here is the Law of Diminishing Returns playing out in excruciating detail. Billions on Skype bought Redmond very little. Billions more on Nokia will buy it even less.

I had hoped last week that Microsoft would find a product person to run the company. You know, somebody who really understands what it takes to make a great device that people just gotta have. Instead, Elop — father of the messy Office “ribbon” and the slow-selling Lumia Windows phones — will be the company’s new “Devices” manager. And I wouldn’t be at all surprised to find that he ends up taking Ballmer’s job a few months from now.

Then again, picturing Elop as Microsoft’s CEO certainly doesn’t take much imagination, does it?