Tuesday, February 6, 2007

iPod & Windows: Tail Wagging the Dog?

I don’t know if anyone saw this blurb [registration required] on the stock pages of the Wall Street Journal this morning:

The Dow Jones Industrial Average crept higher, helped by Hewlett-Packard but hampered by Microsoft. … Microsoft shares slid 1.9% after Apple warned that iPod users might experience compatibility problems with Microsoft's new Vista operating system.
The story didn’t say it, but Apple shares also fell 0.96% on Monday to 83.94.

[iPod Nano]The implication is that Microsoft Window Vista (henceforward Windows V) needs the iPod more than the iPod needs Windows V. Music playing is an important part of the reason that teenagers and young adults use a PC, and several hundred million iPods hold a majority of the U.S. market. It must really hurt Steve Ballmer’s feelings to know that this key part of his consumer ecosystem is controlled his OS rival, who’s using the iPod to raise (if ever so slightly) Macintosh market share.

To add insult to injury, during Christmas season the Zune earned barely 3% of the US market (less than that, actually, since it’s not counting Wal-Mart or Apple stores). Bryan Lee fell on his sword but that doesn’t solve the problem.

Apple and Microsoft have different roll-out strategies, however. Apple’s PR-driven strategy depends on making a big splash the first time, while Microsoft has enough money to pay for as big a roll-out as it wants. Apple (at least under Jobs) tries to come up with something “insanely great” to build momentum. Microsoft has released a few duds over the years (think Windows 1.0, 3.0), but uses its wealth and market power to keep making it better until it’s pretty good. Windows 95 nearly put Apple out of business, so it would be foolish to assume that there won’t be a much better Zune every 6 months or so for the next few years.

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