Submitted by When Mac sales dropped off in 1985, Bill Gates personally wrote John Sculley suggesting that he license the Macintosh design to companies like Apollo, DEC and Wang, and establish the software as the industry standard. Apple declined, and Microsoft published Windows. Sculley was enraged, and eventually filed suit. After five years, Apple lost, but not before severely damaging its relationship with Microsoft (which accounted for 2/3 of all Mac software sales).
Many have forgotten — or never knew — that Microsoft provided many programs for the Mac, and has made a ton of money as a result. Microsoft even bought a stake in Apple so that this lucrative market could continue.
Actually their first mainstream desktop application was for Mac and Mac only: Excel. It would be 2 years later before it was ported to Windows.
For some insight into MacBu (MS’s Mac business unit) have a look at Rick Schaut’s blog: http://blogs.msdn.com/rick_schaut/default.aspx.
I’d say it’s more along the “never knew” lines. MS and Apple have had a very long (and relatively good) working relationship.
Why is it that everytime I see some really silly Apple executive decision, it’s made by Sculley. Giving away the interface for Word and Excel? Brilliant!
My take:
Jobs understood the technology and potential yet could not run the company realistcly. Scully could market and manage the company in the right way yet never understood the true implications of the technology.
Because Sculley’s gone, and Jobs gets away with blaming him for all the mistakes.
You see the fatal delusion of Cupertino in those years in the report about Gassee’s view:
“Gassée reasoned that the Macintosh was so vastly superior to the existing PC graphical environments that Apple would never face any serious competition and would be able to rely on profit-rich hardware sales (with margins over 55% until the early 90s).”
They had a brilliant vision of the future of personal computing at the interface level. The thing they were totally blind about was the future of the market. Gassee’s view of the world implied one of two things.
One case would be, there would be Apple selling a gui, and everyone else selling a more or less crippled gui, or even DOS, with Apple having a 5-10% market share and the market growing more or less as it did. To go for this you had to fail to see the power of demand of the rapidly growing market. One way or another a market of this size was going to deliver to its customers what everyone could see was the future of the interface.
Alternatively, you could believe that Apple would have huge market share, and more or less monopolize hardware and software both. But to believe that, you had to believe that the market growth would be tiny. Any realistic view of how big the market was going to be meant accepting that one manufacturer was not going to dominate it in the way Gassee’s view required.
An instructive comparison is Philips with the CD. Philips seems to have understood both the future of music – digital – and the future of the market – so big that insisting on being the only supplier of one technology would lead to that technology being marginalised.
Not that it worked out badly in the end. Apple with MS market power would probably have been at least as bad as MS.
What triumphed was really the Windows business model, rather than Windows. A model which allowed enough hardware manufacturers to meet the demand. What Apple’s management team effectively did was to ensure that if the world was going to buy the computers they wanted, they would necessarily not be Macs.
Its very interesting to look at the sales charts from Ars Technica and reflect on what was happening to Mac sales and market share while Gassee and the team were indulging their delusions. Of the two things you had to understand in those days, it was far more important to understand the market than to be able to deliver refined product. As the early Windows snaps show, if you were willing to deliver something, people would buy, almost regardless of how unrefined it was. Apple simply could not, or rather would not, deliver to demand. It drove the market to MS.
People often say that it was MS anti competitive tactics that won. Never seen that. When MS was a $25m a year company, and Apple $1 billion, it didn’t have the power to indulge in them. What you have to explain in those years is how MS ever got to the position where it had the power to use anti competitive tactics.
What you have to explain in those years is how MS ever got to the position where it had the power to use anti competitive tactics.
They leveraged the IBM monopoly to their advantage and IBM’s regret.
If it hadn’t been the forces entirely outside of Microsoft’s control that led to the ‘exact clone’ pc clone market, coupled with MS’s providing IBM with the OS for the PC, MS would have just been another of a dozen players in the software provider business.
Hum, I agree with some of your points… but you seem to ignore the fact that by the time Apple introduced the Mac. MS was already a huge company, since PCs were selling by the dozens.
The initial licensing scheme of DOS is what allowed to squash other players in the GUI arena that were competing with somewhat supperior offerings than Windows 1.x/2.x, like GeoWorks, and GEM. Those anticompetitive practices are what forced every other player out of the PC OS market. This allowed MS to have the huge momentum behind being the quasy exclusive supplier of the OS for the defacto computer platform that a lot of the emerging personal computing manufacturing was standarizing about. If you did not see that, then you were not paying much attention during the 80s.
What apple was trying to do, is to hold on to the onslaught from MS the best they could. And so far they are still in business…
“The initial licensing scheme of DOS is what allowed to squash other players in the GUI arena that were competing with somewhat supperior offerings than Windows 1.x/2.x, like GeoWorks, and GEM. Those anticompetitive practices are what forced every other player out of the PC OS market.”
That is revisionist bullshit.
‘Revisionist bullshit’ is a bit impolite, but its true that the argument has little merit. Go to:
http://www.pegasus3d.com/total_share.html
Go to the years 1982-1989, a little down the page. These are absolute numbers shipped. There is also, a bit further down, a chart of market share.
I don’t think it shows that anti competitive practices were what did it for MS. Certainly the IBM compatibility issue was very important and gave legitimacy to the PC.
But you still have to ask about Apple management: how on earth did they expect to meet global demand under their business model? You can see from the chart that they never got much over 10% with the Mac, and that was in the nineties. They couldn’t, and must have known they couldn’t, supply the level of demand shown in the charts all by themselves. If they did not expect to meet global demand themselves, and if they wouldn’t let anyone else help them, then what did they expect to happen? Were people to give up and do without computers?
What in fact happened is that they bought PCs. As they were bound to. As we would have done. You were General Motors in those days. If you had ordered what you needed from Apple, they couldn’t have supplied you.
The same thing, by the way, has happened all through Apple’s history. They just run out of supply. As evidently they are doing right now.
The business model is not necessarily a problem if you are bound and determined to be a niche player. But people should realise that the niche status is the result of a strategic choice made by the company. It is not mainly due either to anti-competitive machinations by others, or to idiocy on the part of buyers. It is intrinsic to a business model which prevented them from supplying more than a tiny fraction of demand.
Edited 2006-08-26 14:50
Apple seems to be cautiously shifting strategies from niche to commodity market, now that they’re on x86 processors with a UNIX OS … pretty industry standard. It’s interesting that MS dropped VB macro support in Excel for Mac just recently, or else it would have been too easy for many businesses to adopt Macs over Dells in droves.
Edited 2006-08-26 16:14
“It’s interesting that MS dropped VB macro support in Excel for Mac just recently, or else it would have been too easy for many businesses to adopt Macs over Dells in droves.”
Well, it’s still possible, in theory, as Mac Excel still supports VBA, and there’s no release date for the next version. I read some MacBU blogs a couple weeks ago, and there’s still an outside chance that VBA support will continue, but it’s very slim. It depends on how great the demand is; apparently, porting the Mac VBA to intel is hard as hell, and the current thinking is that the effort wouldn’t be worth it because the demand for VBA on Mac is so small. The effort would also delay the release of the next version of Mac Office, and many Mac users are looking forward to the next version since it’ll be a universal binary; and 98% of those users don’t care about VBA and wouldn’t want any delays due to VBA (I got the 98% figure because I read that less thatn 2% of Mac users use VBA).
Note that since Mac Office98, the object models for Mac Office and Win Office have diverged so macros aren’t 100% compatible between the two, and this has gotten worse as time has gone on and the suites have added features unique to themselves.
“I don’t think it shows that anti competitive practices were what did it for MS. Certainly the IBM compatibility issue was very important and gave legitimacy to the PC”
Nice strawman,but if you look at the actual marketshare of the PC by the late 80s, it is well over 70%. Guess what? MS licensing for DOS was such that if you as a manufacturer wanted to sell DOS on any of your computers, every other PC that you sell as a company had to have a copy of DOS. They were strong arming OEMs first with DOS, and then showelling Windows down every body’s throats. That is indeed quit the keen business model, it is however not an approach that deserves my respect.
You can put graphs that have nothing to do with the actual licensing of DOS all you want, next I recommend you also show how the average temperature for each of those years clearly proves that MS was doing nothing uncompetitive.
Edited 2006-08-26 17:38
Funny!
Jeez – not another MS apologist.
MS’s OEM license required that manufacturers of PC Compatible hardware that wished to supply MS-DOS/Windows with their machines would have to pay MS a license fee for ever machine they shipped. This was irrespective of whether the machine was even capable of running DOS/Windows, so long as it was based on an Intel chip. This is how MS came to completely dominate the OS market on IBM PC Compatible hardware. It also helped to prevent alternative Intel-based platforms from becoming established.
Windows 1 and 2 were abysmal pieces of software. GEM and GeoWorks really were technically superior. PenPoint was a real OS, crushed by MS’s Windows for Pen Computing which was vapour. All those OSes suffered through the fact that MS had to be paid a license fee for every machine that shipped with them installed, inherently making them significantly more expensive.
This does not explain how the PC market came to be dominated by clones of the IBM PC and their descendants rather than something else. That is explained by diversity of supply – corporate buyers were happier knowing they were not tied to a single PC manufacturer.
Agreed on the anti competitive aspect. And no, not an MS apologist. The anti competitive practices they followed are inexcusable. But, two points.
One is you have to account for why MS could get away with its licensing scheme. Answer: the threat of withdrawal of DOS. Now why was this a viable threat? Market power and demand is unfortunately the answer. It occurred, I believe, in 1988, by which time the threat was viable. But what you have to explain is why Mac was not a viable contender before the arrival of per processor licensing, ie the years 1985-8. That is the value of the charts. They show when the decisive moment really was.
Two, there was no alternative available from Apple during those years. Suppose MS had lost out to one of the other OSs that would run on IBM compatibles. It would not have helped Apple. They were absolutely refusing to supply. The key moment was the Compaq bios suit. Once Compaq won that, there were only two choices for Apple. One was to license other manufacturers on Intel. The other was retreat to the niche. Again, the charts show the timing of this.
javiercero1 – the years you have to explain are 1985-7. This is when the market decisively chose compatibles instead of Apples. I believe it was not until 1988 that MS began to introduce the infamous per processor licensing, and that was in response to the DR Dos threat. Maybe you are differently informed on the history of this though?
If that is correct (my source is the Utah law suit brought by Novell), then it was not the per processor licensing that advantaged MS against Apple. It was the business model issue that was decisivie. That and the consequent inability of Apple to supply. By the time per processor licensing came in, and all the other anti competitive practices were viable for MS, it was all over.
Please don’t call me an MS apologist, I am not. I simply strongly believe in understanding the real lessons of business history as it was. The mistaken explanation based on Apple victimisation, when the reality was that what happened was a consequence of an Apple free choice, doesn’t do Apple any favors.
The initial licensing scheme of DOS is what allowed to squash other players in the GUI arena that were competing with somewhat supperior offerings than Windows 1.x/2.x, like GeoWorks, and GEM. Those anticompetitive practices are what forced every other player out of the PC OS market.
The licensing scheme of DOS wasn’t paricularly relevant, since both PC/GEOS and GEM ran on top of (and thus had a hard requirement for) DOS. I still run PC/GEOS (in the form of Breadbox Office) on MS-DOS, PC-DOS, and in OS/2 VDMs to this day.
Just in case someone missed it, the Gates Sculley memo can be found here:
http://www.scripting.com/specials/gatesLetter/text.html