Friday, June 8, 2007

My Deepest Fear

So groggy today... My therapist says I need to get this off my chest. I'm not so sure it will help, but here goes. See, I can't sleep. It's that darn Elevation Partners investment in the beleaguered Palm that's bugging me. Last night I passed out briefly, and moments later I awoke in a full on panic. I couldn't move my arms or my legs or turn my head. I was sweating and breathing really heavy. I couldn't even call out. Worse, I couldn't get it out of my mind, that damned Expand Your Universe banner that Apple hung up in Moscone West for WWDC 2007 next week.

After seeing that yesterday, I couldn't sleep last night worth crap. In fact, I haven't slept more than a couple disjointed hours a night, a few minutes at a time, since "WTF!!!? Tuesday", as I think of it, now.

My attendant had to jack me up on Ativan to get me through the Harvard gig. I didn't want to go there that day. This whole Palm thing has been bugging the hell out of me and I couldn't figure out why. Now I know why, and I wish I didn't.

Bono and My Deepest Fear

I mean, seriously, WTF?!!! Bono is involved in Elevation Partners, isn't he? I mean, Steve and Bono are good friends. Bono doesn't even take my calls any more, since I squirted contact info on him at a meeting with the staff over at The Bill & Melinda Gates Foundation. I mean, he autographed a U2 iPod with a dremel when my cousin wanted one, but you know, he won't like come over for dinner or anything.

Jon Rubenstein and My Deepest Fear

The same day they announce Jon Rubinstein is joining Palm. He used to be the head of the iPod over at Apple until he left the company in April last year (2006). He did some of the cool iMac designs, too. I wish Dell would have hired him. I tried to call Jon to see if he wanted to come help us innovate in the music player space with the Zune, but he wouldn't return my calls. They're too stupid and cheap over at Dell to hire a decent designer like Jon. According to a few of the articles announcing his departure from Apple last year, Rubenstein planned to do some amount of consulting for Apple for a while after that.

Paul Mercer and My Deepest Fear

A couple months ago Palm hired a former Apple employee by the name of Paul Mercer. He isn't just any former employee. He helped make the original iPod. I tried to hire Paul to come help us innovate in the music player space with the Zune, but he wouldn't return my calls. I figure that's not much of a loss. He's responsible to some degree for the abortion that is the Finder. If I was him I wouldn't put that on my resume, and I'd have the Microsoft Ninja take care of anybody who saw me there, as well as any written records.

Oh, that's right! We've got Ninja around here somewhere... maybe they can help take care of this. Damn. I'm afraid there are too many high profile people involved. I don't think we'll be able to stop it that way. Too many of them are already gazillionaires, too, or I'd pull a Detroit on the industry and hire them to party on the beach and forget they ever knew anything about handheld computers.

Yeah, you know what's bugging me. I can't bring myself to say it out loud.

Maybe I can sneak up on it, slowly...

Saving Palm and My Deepest Fear

My deepest fear concerns the question, "What would you do, to save Palm?" I mean, let's face it. Palm is in serious, deep, trouble, or they were until WTF!!!? Tuesday. Palm haven't been able to make software for so long that they finally gave up, I mean, innovated, and licensed Windows Mobile. Everybody with a clue knew they were in trouble way back with the spin-off. And that re-merger activity which they seemed to think was a substitute for innovation? It's a wonder they are still in business at all. Check this out boys: when you buy a company, either use it or kill it. Don't pretend that your worthless pile of poo is somebody else's gold mine. If it had gold in it, you wouldn't have sold it. And damned if it's not embarrassing to have to buy it back again, eh? It isn't very often that you make money with a deal like that. Like Daimler selling Chrysler. Everyone knows you screwed the pooch on that deal.

I still can't say it.

Cell Phone Innovation and My Deepest Fear

Look, everybody has Windows Mobile. It's the best platform for cell phones. Ballmer keeps telling me that. But why do I find myself unconsciously surfing to watch iPhone commercials when I'm on boring conference calls with the money guys?

This is the reason: cell phone makers don't know how to innovate.

Windows Mobile and My Deepest Fear

We give them this remarkable toolkit that is Windows Mobile. It's basically the same system that runs 90% of the desktop computers in the world. Well, it's not really the same. In fact it's pretty different. But it looks the same, and some of the parts are the same, and we tell them it's the same and they believe it and that's what matters.

They could innovate on Windows Mobile. Yeah, I know, you have to reboot your phone once in a while. I had to re-install my phone (a beta test unit) just this morning (another reason I'm so late getting to this blog). But heck, it's not that bad. It's a real operating system, and they could do cool stuff with it. But they didn't. For years. Do we have to do everything for them? It's like they didn't get the innovation gene or something.

So the Palm guys I kinda feel sorry for. Re-org after re-org, mergers and spin-offs. Downsizing and partnerships that fizzled. And all the while stuck on Palm OS. I can totally grok not getting much innovation done under those circumstances.

HTC Touch, and My Deepest Fear

But what about everybody else? They've had Windows Mobile for years, and this is the best they could come up with:

Yeah, that pretty much sucks. And we had to hand-hold them through every step of the process. Even the form factor. Idiots. I mean, seriously, that's the best they can do?! I could do better than that, but I'm busy trying to save human kind.

Breathe in.... breathe out... breathe in... breathe out... I'm in a calm, happy place... breathe in... breathe out... OK, I can do this...

I've been predicting that Palm would be the first casualty of the iPhone. They have been on the ropes for years. They can't write software to save their life. They didn't even do anything interesting on Windows Mobile.

Then they hired Paul Mercer. A guy who understands that the iPod is software. Then Jon Rubenstein. Then they get Bono and Fred Anderson? That's the WTF moment.

OK, I can do this...

OS X, Palm and My Deepest Fear

This is my deepest fear.

Palm is going to license OSX from Apple for their next generation of smart phones.

Come to think of it, maybe that's why they stopped taking my calls...

Look, Apple really can't license the Mac OS X to Dell, IBM, or HP for laptops. I made sure of that years ago. If they tried it, some cheap ass outfit from Taiwan would sell ugly beige and black clunky boxes with scads of wires and cables and weighing twice as much and basically being total eye-sores even worse than a Dell running OS X at Walmart for 12% less and take 40% of Apple's hardware market away overnight. The overall Mac OS X marketshare might grow for a year or so until the cannibalization killed Apple, and took the entire ecosystem down with it.

They even tried it back in the 1990s and it almost killed Apple, until Steve came back and introduced sanity by whapping a few people with a clue stick. So they are boxed in. Their market share will always be less than 10% on the desktop, and there isn't any way around that because I've got what I need from them -- just enough competition to give the stooges over at the Justice Department plausible deniability on the anti-trust front.

It's win-win, too. Apple gets some good press, with stories about how they crush those Dell clowns as a hardware vendor, growing 3x to 5x faster than the market grows, which means Apple is taking laptop sales away from any vendor tied to Windows. Hey, that's just part of the deal. We gotta give a little too. Just between you and me, it's chump change, though. They grow a point here, a point there, but they are boxed in. Even now that they run the Intel chips, they are perceived as a risk by big corporate accounts because they look like a "sole supplier". Yeah, whatever. Dell is a sole supplier of Dell's, and Microsoft is the sole supplier of Windows, too, but the bean counters are too frigging stupid to get that, and that's just fine by me.

Apple Breaks Out of The Box

Apple is in position to take a chunk of the cell phone market with the iPhone. I don't know how big of a chunk, but it's was going to be good for everybody. Apple was going to show those clowns over at HTC and everywhere else how it's done. People who would never have bought a smart phone would buy a smart phone. The smart phone market would grow from a tiny, basically insignificant percentage of the billion a year cell phone market. Everybody wins.

But this could change everything. See, the cell phones are another deal.

Apple has no existing cell phone sales to cannibalize.

In fact, the cell phone market is so large, and the access to customers so deeply entrenched through the retail access points of wireless carriers, that Apple's currently announced strategy of a long term partnership with AT&T/Cingular in the U.S. market places an upper bound on Apple's market share. Sure, a couple million people might switch to AT&T/Cingular, but Verizon, Sprint, T-Mobile and other carriers will still keep from 1/2 to 2/3 of the U.S. market. Apple can't get to these other potential customers because of its exclusive agreement with Cingular.

However, Palm devices running OS X could bring iPhone features, notably iTunes, to nearly the rest of the entire market (Verizon prefers to tighly restrict their customers ability to interact with other networks, devices, and services, so perhaps those customers would remain locked out, but at a minium, Palm could open up half or more of the otherwise untapped market, potentially doubling the market penetration of OS X with a single partner, Palm. In addition to established relationships with several carriers, Palm has an enormous retail distribution channel, including its own stores, many prominently placed in Airports where they have access to a trapped pool of pre-selected high value customers.

As a maker of "smart phones", Palm's share of the overall cell phone market is relatively small. Apple could license OS X to Palm and virtually guarantee a much deeper penetration into the market than Apple could secure alone.

When the other handset makers realize that Apple and Palm are taking market share, premium customers, and bottom line revenue, they would face a choice. Motorola, Nokia, LG, Samsung, HTC, and everybody else, would be tempted to license OS X, to get iTunes and the iPhone application development toolkit. Some of them undoubtedly would.

The Cell Phone Handset Market Thinks Different

In the PC desktop or laptop market, consumers have been trained to think that they have an "investment" in the platform, and that the cost of switching is high. This really isn't true for many home users, but they think it is, and that's just fine with me. We do quite a bit to help instill that fear of change in them, so that when they need a new computer, they pick up another Windows machine.

In contrast with the PC market, the barrier to switching from one handset to another is so low for the average cell phone consumer, that they don't even think about it. In fact, the vast majority of them dont' even realize when they've changed from one cell phone platform to another.

Nokia could switch to OS X over the course of a year as they introduce new models, and consumers would not miss Symbian for even one second. Nokia engineers wouldn't either. Nokia customers would get the cool new features from the iPhone OS X and Nokia engineers could spend their efforts making games and other user level applications to differentiate their products, rather than re-inventing the operating system wheel. Same goes for Motorola and Linux.

Basically, the other handset makers continue to struggle to copy Apple features on top of diverging variants of Linux, Symbian, and Windows Mobile, or they could adopt an underlying platform that lets them immediately exploit the Apple design effort that went into OS X and the iPhone.

My Deepest Fear and The End of The World as We Know It

None of that would be all that bad for Microsoft, since undoubtedly some of the handset makers will continue to back the Microsoft horse in the race. Except for one thing. Far more people are going to own the hand-held portable computer that the cell phone is evolving toward than will ever own a desktop or laptop computer. If Apple licenses OS X to Palm, the djinni is out of the bottle, and Apple is no longer boxed in. They could license OS X to anyone for any device, grabbing market share in significant percentages on a platform that will evolve to be more powerful and more important in the long run than the traditional PC desktop. Once this has happened, even the Microsoft dominance of the PC desktop is at risk. At what point will licensing the Mac OS X be a negligible risk for Apple? When Macintosh desktop and laptop sales are 30% of Apples total revenue, with iPhone, iPod, iTunes and other stuff making up the rest? Maybe not until PC hardware is only 20% of revenue? Eventually it will happen. Then the unthinkable will inevitably occur, and Apple will license the Mac OS X to Dell, and everybody else, too.

Sigh. This could be The End of the World as We Know it, and I still want an iPhone so badly I can hardly stand it.

Damn, but I really do feel better, now that I've got this off my chest! Maybe Oprah is right about this whole "closure" thing, too. I might try that some day.

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