The lure of cheap, subsidized phones underwritten by massively long two-year contracts stands in the way of competition and innovation. The big carriers use their contracts to lock in profits and help limit the customer “churn” that would otherwise make their revenues too unpredictable. But those two-year contracts keep people from upgrading as quickly as they would otherwise, stifling handset makers’ ability to get the latest models in our hands.
Carriers also stifle OS upgrades, keeping you from upgrading to the latest version of Android because they don’t want to invest the time to make it work with a string of older phones: They’ve already got you locked in to a contract, so why would they want to make your phone any better than it already is?
The U.S. is not unique in its dependence on carrier subsidies, but it’s not the only way: In many European countries, for instance, people buy their phones and SIM cards separately, without long, onerous contracts.
Some carriers are starting to see this as a wedge issue. T-Mobile, for instance, promises to do away with contracts and subsidies altogether. The carrier sees it as a more honest, direct model, and I agree: I’m done with contracts. I recently paid $245 to get out of my contract with a large carrier after I had endless problems with its service and its phones.
In an earlier column, I blamed Microsoft for not being able to solve these problems. It was an unfair criticism, but it does reveal an opportunity for the Redmond, Wash.-based software company.
We need someone to break the logjam. Could it be Microsoft?
Instead of standing by and playing the same ballgame as every other mobile phone maker, Microsoft should take a page from Apple’s book and rewrite the game. It’s got the leverage, it’s got the installed base, and it’s got a powerful weapon: cash.
In Microsoft’s vision of the future, Kinect sensors are everywhere: In your living room, your kitchen, at school, and even in the supermarket, above the fruit display.
And why not? The $150 motion-sensing device provides a cheap way to add gesture and voice controls to any application. Plus it’s got a camera and two 3D depth sensors that give computers a tool to map out spaces in three dimensions, recognize people by their faces, identify real-world objects, and create 3D models of those objects.
I spent a day at Microsoft’s Redmond campus this week attending TechForum, a small gathering of about a dozen journalists hosted by Microsoft’s chief research and strategy officer, Craig Mundie. Part strategy briefing, part new-product showcase, part science fair, TechForum was a chance for us writers to see an array of recent and upcoming technologies that Microsoft’s been working on, both in its commercial products as well as in its pure research labs.
Kinect sensors weren’t the day’s primary theme, but it was fascinating to see how many contexts in which the flat, three-eyed black bar kept popping up.
SAN FRANCISCO — Trust us. We’re not going to screw up Skype.
That was the message Microsoft delivered Tuesday, hours after formally announcing that it was buying the internet telephony pioneer for a staggering $8.5 billion — staggering because it’s more than the Redmond giant has ever paid for anything, and because Skype doesn’t exactly print money.
But in an early morning press conference, as Google strutted for its Android developers in another part of town, an increasingly mobile-minded Microsoft made the Skype acquisition seem like the most logical thing ever. And, it said, it has no intention of messing with the brand which has become a consumer favorite and synonymous with the disruption of the telephone business.
We know what we’re doing, Microsoft CEO Steve Ballmer said on a noticeably small stage he shared with Skype CEO Tony Bates to explain why the merger of their two companies makes sense.
“We’re irrepressible,” said Ballmer. “This Skype acquisition is completely consistent with our ambitious, forward-looking, irrepressible nature. Microsoft and Skype will bring together hundreds of millions — or as Tony said, billions! — of consumers and empower them to connect in new and interesting ways. It’s core to our mission, and it’s core to our technology direction.”
Microsoft’s acquisition of the Luxembourg-based Skype will close this year, assuming it passes regulatory muster, the executives said.
Skype is the poster child for voice-over-internet-protocol — or VOIP — services, which allow customers to place telephone calls using the internet’s infrastructure instead of the phone company’s. Most people use Skype to place free calls to other Skype users. After its founding in 2003, eBay paid $3.1 billion for Skype in 2005, then sold the majority of it to an investment group in 2009 for $1.9 billion.
Skype is popular, especially among people who use its services to place international calls cheaply or for free. But it hasn’t exactly captialized on the social networking revolution and has faced carrier resistance in its efforts to create fully featured mobile clients. Meanwhile, Google acquired a competing service, Grand Central, for a reported $50 million in 2007, eventually launching it as Google Voice in 2009. Google recently struck a deal with Sprint, enabling Sprint customers to integrate their phone numbers with Google Voice.
Microsoft’s purchase of Skype is arguably as much about defense as offense. It denies Skype to, say, Facebook and Google, both of which were reported just days ago to be interested in in partnering with, and possibly buying it. As carriers de-emphasize what are becoming commoditized calling minutes in favor of pricier data bytes, Microsoft’s strategic alliance with Nokia also gives it huge reach in the distribution of Skype-integrated handsets.
However, that seems like a rich price tag for a company that only generated $860 million in revenue in the most recent year and $264 million in operating profit — yet no net profit at all. Microsoft is paying about $50 for each of Skype’s 170 million users, or about $1,000 for each of its 8 million paying customers.
Ballmer seemed optimistic about Skype’s ability to integrate into Microsoft’s current businesses, such as Windows Live Messenger and the corporate-oriented Lync. He said he expected to apply “classic” business metrics to evaluate the success or failure of the new Skype division.
Charles Golvin, an analyst with Forrester Research, said that while Skype probably wouldn’t generate much revenue for Microsoft directly, it could be a valuable addition to other internet-based services, in which e-mail, voice and video are all becoming part of the same stream of data.
“Part of the bet that Microsoft is placing is that this technology helps them do a better job of delivering to that river of communications,” Golvin said.
For instance, Golvin suggested, the company could integrate Skype into Xbox and Xbox Live, which — with the addition of Kinect — have become more voice-centric products in the last year.
Both executives sought to reassure Skype customers who might be worried about Microsoft’s ability and willingness to support the multiplatform software, which is available for Windows, OS X and Linux PCs; Android, BlackBerry and iOS smartphones; and even televisions.
“We’re one of the few companies that has actually has a track record of doing this,” said Ballmer, pointing to the company’s Mac support over the years. “Fundamental to the value proposition of communications is being able to reach everybody, whether they happen to be on your devices or not.”
“The commitment from Microsoft to support multiplatform clients is absolutely critical,” Bates said, indicating that Skype got assurances from Microsoft that it would continue to support all of Skype’s platforms.
Finally, Ballmer indicated no intention to take on the carriers in an aggressive attempt to bring VOIP services into Windows Phone 7. Indeed, Ballmer said, “the partnership and collaboration that we have today [with carriers] is fundamental.”
Bates pointed to Skype’s track record of striking deals with carriers to offer Skype services as a differentiating feature.
In other words, expect Microsoft to try to sell Skype to carriers, not use it to bash them about the head with VOIP services that reduce their billable minutes.
Most of the tablets released in 2011 will be Android-based, but a few stalwarts are sticking with Windows.
We recently got a closer look at two tablets shown off in Microsoft CEO Steve Ballmer’s CES 2011 keynote: The Acer Iconia and the Asus Eee Slate EP121. Together, they show the potential — and the limitations — of a Windows-based tablet strategy.
It’s not that surprising to see Windows tablets, given that computer makers have been making them since 2001. In a sense, the Tablet PC never went away.
But in another respect, these tablets show just how wrong-headed Microsoft’s plan to use Windows for everything is. The company recently announced plans to create versions of Windows for ARM-based processors like the Qualcomm Snapdragon and Nvidia Tegra 2, which are found in a lot of upcoming tablets and high-end smartphones.
LAS VEGAS — Microsoft unveiled its vision of the future, where everything from phones and tablets to big-ass tables runs Windows.
Microsoft CEO Steve Ballmer delivered a somnolescent and nearly news-free keynote presentation on the eve of the Consumer Electronics Show here, laying out his company’s strategy for home entertainment, mobile content, PCs and tablets.
“Whatever device you use, now or in the future, Windows will be there,” Ballmer said.
LAS VEGAS — Microsoft detailed plans for XBox 360 enhancements, a new gesture-driven interface for the XBox and a tablet-style Windows PC tonight at a keynote presentation kicking off the Consumer Electronics Show here.
It was the second year as CES headliner for Microsoft CEO Steve Ballmer, who took over the keynote spot from his former boss, Bill Gates, last year.
After a power outage briefly plunged the stage into darkness and delayed the start of the keynote by over 20 minutes, Ballmer ambled onstage in his trademark V-neck sweater. He touted the company’s successes with its recent Windows 7 launch, outlined its plans for enhancing home entertainment and tying together the “three screens” through which people experience media today (television, PC and mobile devices). He provided more details on upcoming enhancements to the successful XBox 360 platform and XBox Live online service.
“From the largest screen on the wall to the smallest screens in people’s pockets, we are delivering the entertainment people want,” Ballmer said.
It’s been a good year for Microsoft. Ballmer reprised the launch of the company’s search engine, Bing, which he said has attracted 11 million users since its launch. There are now more than 39 million Xboxes in use around the world, and XBox game sales have totaled $20 billion since the platform’s launch, Ballmer said.
And, Ballmer said, “the Zune HD device is getting rave reviews.” That is true — Wired’s review of the Zune HD is quite positive — but the device still has a single-digit share of the portable media player market.
But the centerpiece of Microsoft’s business in 2009 was Windows 7. After taking well-deserved criticism for its launch of Windows Vista in 2007, Microsoft bounced back with many much-needed enhancements in Windows 7. For the most part, the critical and consumer response to Windows 7 has been excellent. The operating system is more streamlined, easier to use and prettier to look at than Vista, and it seems to have injected new life into what seemed like a staggering personal-computing dinosaur. Ballmer called Windows 7 the fastest-selling computer operating system in history, and touted figures showing that it drove a 50 percent increase in PC sales the week it was launched, and a 50 percent year-over-year increase in overall sales of Windows PCs.
The Mac, it seems, has not killed off Windows.
But with rumors of an upcoming Apple tablet looming large in many observers’ minds this week, Microsoft — along with many other computer industry companies — can’t afford to ignore the persistent irritation that is Apple.
Accordingly, one of the gadgets shown by Microsoft tonight was a tablet-like device, produced by HP and running Windows 7. Not the “Courier” tablet that Microsoft previewed in 2009, this is more akin to old-school Tablet PCs, albeit with no keyboard and running the now-multitouch-enhanced Windows 7.
HP said the device would be available later this year, but provided no details on pricing, availability or specifications.
Another not-so-subtle message from Ballmer’s keynote: Apple’s iPhone hasn’t killed off Windows Mobile, either. Microsoft partners shipped 80 different Windows Mobile-based phones last year, Ballmer said, and indicated that more would be coming in 2010. As an example, he showed off the HTC HD-2, a new WinMo-powered phone that will be available on T-Mobile. The HD-2 will feature a 4.3-inch LCD screen and will be about as thick as two poker chips.
Microsoft pushed the message that it’s an entertainment company, too, on two fronts. One was the announcement of Media Room 2.0, software for viewing multimedia content (videos, audio and photos) on your computer. The new version lets you view content on any screen in your home, from a phone to a PC to a TV, Ballmer said.
And the second entertainment front is the XBox 360. Microsoft entertainment and devices division president Robbie Bach took the stage to show off the company’s achievements here. Fresh from the wildly successful pre-holiday launch of Modern Warfare 2 (one of the highest-grossing videogames in history, according to Microsoft), the company promised more games exclusive to the XBox platform to come in 2010, including Tom Clancy Splinter Cell, Crackdown 2, Mass Effect 2, Fable 3 and Alan Wake.
An update to the Halo series, Halo Reach, will enter beta testing later this year. In an unusual twist, anyone who bought the previous title, Halo ODST, will be invited to take part in the Halo Reach beta test, which Microsoft anticipates will include as many as 2 million testers.
Microsoft also showed off a new XBox Live feature called GameRoom, featuring more than 1,000 old arcade games from the likes of Atari and Intellivision, like Tempest and Pac-Man. Users will be able to create “virtual game rooms” that their XBox Live avatars (and those of their friends) can walk around in. Virtual quarters, one assumes, will be available without limit.
Finally, Bach showed off the company’s gestural interface for XBox 360, Project Natal, which first appeared at E3 last year. Natal will be available in time for the holiday season in 2010, Bach promised, as a camera plus software that will work on all existing XBox 360 systems. Developers are currently working on Natal-enhanced games and applications that will be available when the system launches.