I would think that the real problem is Microsoft's unwillingness to become something completely new, something other than Windows and Office. Apple was a computer company, then it became a cell phone company, a music company, a lot of other things.

Microsoft now sort of reminds me of Sun circa 1999: yes, they would sort of like to innovate and do something new, and they make the occasional try at it, but right now they have an insanely profitable product, so the easiest thing to do is to just keep milking it.

Inability, perhaps. Unwillingness? You're out of your mind.

Microsoft has had their fingers in smartphones, music players, search engines, touch computing, web mail, [you name it] for YEARS. And they are not just dabbling... they have poured billions into these areas, trying to come up with something that gains traction.

Microsoft doesn't make "the occasional try" at innovation, they are a veritable firehose of attempts to innovate. Microsoft Research is HUGE (and well respected within the research/academic community) and as I mentioned above they spend billions every year trying to develop new products and break into new markets.

The fact that Microsoft's efforts in this area have been largely unsuccessful over the past decade doesn't mean they aren't trying or aren't willing.

Let's take smartphones for instance - look at the Kin. From all reports, killed b/c of politics, in favor of Windows 7. Why not have both and see what the market decides?

The Courier. Killed - who knows why? Most likely politics.

Microsoft has so many innovative ideas that we see in Research - but we never see them in products! It always feels like the right hand is slapping the left hand. Competing fiefdoms are fighting over resources, over pub, and over power.

Microsoft needs to empower it's best leaders to make a product, from start to completion - much like Jobs does with Apple. At the end of the day, the buck stops with Jobs, and his vision goes. What happens at Microsoft? You have 100 PM's working on one project. You work diligently. Your design is "design by committee" but hey, it looks like it's going well.

Then some jealous VP of some other division has a beer with Ballmer expressing some concerns and the project gets killed. This needs to stop. There was no reason that the Kin/Courier should have been killed. If it flops, let it flop. If you don't take chances, you'll never grow.

Microsoft right now is afraid of its own shadow.

Kin was killed after six weeks, the market decided it was crap and only a couple were sold. Actually not so much that the Kin itself is bad, but carriers weren't enthusiastic enough, and Microsoft had marketing problems for a product that would battle WP7 6 months later.

You illustrate another problem - I don't know why MS would view it as "battling" WP7 6 months later: 1) 6 months is a LIFETIME for a phone. The Pre went from amazing, potential company-saver phone to dud in less than that. 2) At the end of the day, all the money goes back to Microsoft. Why is that a battle? Internally it's a battle for mindshare - but MS needs to realize that they're both on the same team. Apple is happy cannibalizing its iPod sales for iPod Touches/iPhones.

3) If Microsoft wants to grow, several products are going to overlap. There seems to be a convergence towards "the one true device". A year from now, MS is going to start worrying if mobile phone sales are creeping into their netbook sales - they already worry that Office 365 sales are going to creep into Office licensing

The problem is that they have a sucky innovation model. They find something that's already successful, throw money at making a slightly better version (or whatever they can convince themselves is a slightly better version).

Sometimes it works, sometimes it doesn't. It worked when they copied the Macintosh to make Windows. It worked when they copied Netscape to make IE. It worked when they copied Playstation to make Xbox. It stopped working when they copied iPod to make Zune, and continued to not work when they copied Google to make Bing.

Why it's stopped working? Either (a) a run of bad luck or (b) folks have learned to preempt Microsoft's move or (c) the really good people don't work for Microsoft any more.

If that's a success I really don't want to see one of their failures.

I'm actually surprised if the xbox hasn't been profitable. It can't have been that costly to develop (get a fancy graphics chip and stick it in a box), they've sold a helluva lot of them, and they only update it once every five years, and they're making a crapload of money on the games too (don't forget they own Bungie) so I would have thought it would be a bit of a cash cow. But maybe they need to sell the consoles at a loss.

Until relatively recently when manufacturing costs dropped Microsoft were selling the hardware at a significant loss which means that you have to sell a certain number of games just to break even. This isn't an uncommon model for consoles (the Wii was an exception being profitable as a console from day one) but it was pretty extreme for Microsoft who were basically making an aggressive play for market share and damn the expense.

Up to 2005 the XBox gaming division (including hardware and games sales) had lost $4 billion (http://www.forbes.com/2005/09/12/microsoft-management-softwa...) on a total investment of over $20 billion and it continued to lose money up to 2009 including a cost of $1 billion for replacing bricked XBox360's in 2007 (http://www.engadget.com/2007/07/05/xbox-360-warranty-extende...). All in all I'd estimate up to 2009 total losses up to or even in excess of $6 billion.

In 2009 it finally posted it's first profit - $165 million, though it's probably worth noting that as a percentage of the $6 billion it had lost to that point this is basically nothing.

They have a total installed user base of 41 million consoles (360s) world wide. This puts it slightly ahead of the PS3 (38 million) - though it should be noted that the PS3 launched a year later and is currently selling faster - but way behind the Wii (79 million) and the PS2 (over 140 million). It's likely that by the start of 2011 once Christmas is out of the way they'll be last place in terms of installed user base - not a great reward for all that money spent.

(If these numbers don't feel representative of what you see it's worth noting that the XBox is far stronger in the US than in Europe and Japan).

On the positive side Kinnect is apparently priced so that it will be profitable from day one, they do have a decent installed user base for new games sales and live subscriptions, and console production costs are now a lot lower than they were which means that the next three or four years (the likely remaining life of the console) will all be profitable, however it would seem unlikely that they'll be able to bring the total investment to break even for the life of the XBox range.

Maybe we have different definitions but for me that's not only not a success, but it's not far off being a disaster, particularly given that this isn't a tale of a couple of years of growth at the expense of profit, but a decade long tale.

IIRC they've always made money off of the special edition elite consoles, they've been making a profit off of the elite as a whole for a while now, however these represent a small amount of their sales compared to the big sales of the arcade consoles they had.

PS3 made huge losses to try to stay competitive with 360, and never really dropped much in price and lost huge market share because of it.

However, both have been ridiculous profit makers for their parent companies as the entire devision makes wheelbarrow loads of cash from selling games for ridiculous prices (again something Sony fucked up with by getting greedy in the beginning, although Xbox eventually followed).

Sorry, this is completely untrue for the XBox which has haemorrhaged cash for it's entire life as a division, not just on hardware sales. I've linked to the figures in my post above.

The PS3 is in a similar position - it moved into profit on the hardware sales earlier this year and total losses are estimated at around $3 billion to date. I can't find any figures on the whole division profitability (other than that it is profitable) to know how likely it is to recoup this, though there are statements that they do expect it to make money over it's full life (though I suspect it will be questionable how much for an investment of that size).

If you're wondering how this can be possible, the console subsidies at launch were of the order of $250 - $300 per console. That's a lot of money to make up off of game sales and live subscriptions (remember you're making it off the profit on each game - maybe $10 - $20, not the revenue of $50).

> PS3 made huge losses to try to stay competitive with 360, and never really dropped much in price and lost huge market share because of it.

In terms of global (not US) market share the PS3 will pass the XBox360 shortly which isn't great news for the 360 given that it launched a year earlier so had a head start. Given that Microsoft's sales figures are based on shipped to retailers and Sony's are on sold to consumer's it's possible that the PS3 is already in the hands of more people (rather than sat on shop shelves). In the US the figures are better (18 million vs. 12 million) which might explain why you think it's doing well but that picture isn't reflected in Japan (1 million vs. 5 million) or Europe.

But if you're wondering where the next generation of consoles are, these figures should make it clear - they're nowhere. Both companies need to eek out the life of the current consoles for financial reasons before looking at further significant investment.

Indeed it may be the case that the XBox360/PS3 generation of consoles will prove to be a one off in terms of the level of investment made given the difficulty in recouping it, and that future consoles will be based on smaller, cheaper increments in power and functionality.

Just to be clear, I'm not knocking MS for the sake of it (I actually really like the look of Kinnect and give them great credit for the innovation) but the economics of consoles aren't quite what some people seem to think they are.

If you disagree and think that Microsoft's leadership is willing to change and has just not been able to, then their leadership must be phenomenally incompetent. Just ask yourself, what's their cohesive product strategy? Where's their commitment to excellence? How many of these research projects are designed to build on the strengths of Microsoft's offerings or fix their weaknesses? Why aren't these research projects winnowed down into economically viable and marketable products and services? What's the corporate vision?

A simpler explanation is that the leadership of Microsoft is afraid of anything that competes with their two cash cows: Windows and Office. If this explanation is correct, then any product or service that Microsoft makes (or participates in) will be sufficiently hobbled in order to keep Windows and Office at the forefront of their offerings. It's their "strategy tax." Mobile devices and web services both compete with Windows and Office, in some way, so the company has done relatively little to advance in these two areas.

It doesn't matter which way you look at it, though: spending billions and having little success to show for it isn't a merit badge, it's a mark of failure.

Yes it does. That is exactly what it means.

Throwing crap against a wall and hoping it sticks, even if you spend billions, isn't innovation, that's flailing.

End-user sales of Office may well decline, but if there were a good online version, Microsoft could sell two versions. A cloud-based, subscription version for smaller businesses, hosted by Microsoft. The second version would be a for larger corporations that want to host their own.

For a large corporation, licensing could then be simplified to some fashion of a site-license; the cost of upgrading ALL computers would be simplified.

Note that I'm NOT suggesting that Microsoft give up on a fat client for office, just that there's room for Microsoft needs to pivot if they wanted to, but that's easier said than done.

Though that might not happen before they've spent too much of their reserves (and don't have enough coming in) to do it.

They believe that they can put a bunch of smart people in a room and they'll come up with stuff people want to use, and this has largely been self fulfilling because of the dominance of Microsoft in the computing space.

Now that dominance is fading away, you are seeing the problem with the strategy. When Microsoft wanted to come up with a web Development framework for Web Developers they came up with .NET (built by a bunch of smart people for web developers), but it was a top notch web developer ... DHH who came up with Ruby on Rails. I remember using Rails for the first time and going "wow ... this just solves all the problems I have as a web developer" ... .NET never gave me that feeling, but to be fair ... it was a nice change from ASP spaghetti code days.

Why isn't Microsoft hiring the best Javascripters, CSS, html5, and backend web developers it can get its hands on? This is something that Google did like crazy when it started growing, and it has allowed them build badass web products like Google Maps, Google Calendar, Gmail etc ... while Microsoft is stuck playing catch up.

Even in releasing new versions of IE you can see this problem rear its head. Instead of listening to Web developers who actually determine the direction the web moves in, the IE team tries to come up with new bullshit web standards and with no buy in from digerati, it fails.

Microsoft is no longer calling the shots, and by the time they realize this, it might be too late ... which is a shame, when you think of all the good that would come from Google having some serious competition.

This is why most people in the tech field at the top of the game aren't afraid of their past-rivals, but more afraid of the guy in the garage they've never heard of. Odds are more likely that this is where the big innovation is going to come from.

There is a problem here: the best web people will not work with MS tools and that's exactly what MS management will demand.

> Why isn't Microsoft hiring the best Javascripters, CSS, html5

They can't even ship a browser with proper HTML5 support. How do you expect them to be able to hire the best Javascripters, CSSers and HTMLers on the market? They lack the tools to distinguish between them and the low-end of the spectrum.

They appear to be catering to people who think people with phones are douchebags who walk around staring at their screen all day.

I'm not sure how well this marketing strategy will work, because I am one of those douchebags, but it doesn't make me want to get one.

"We've focused in on how real people want to use their phones when they're on the go -- we want you to get in, out, and back to life as fast as humanly possible."

First of all, some of the animations on some of their apps have a bit of time to them and don't really fit in with that mantra. But more importantly, I'm not sure what market they are heading for and what they want to say. Do they want their apps to be immersive or lightweight? Do they want people to enjoy their phone or try to use it as little as possible?

In the end the message to me makes their phones sound non-engaging. Not the greatest selling point in my opinion. Imagine the iPhone commercial where they run through 5 apps in 30 seconds. The Windows Phone 7 equivalent would be a 5-second commercial with someone quickly hitting two buttons and saying "Done. Glad that's over.". Interesting marketing strategy.

By all accounts, they were remarkably successful.

I know people who don't like phones and they buy the minimum phone necessary to suit the need... A £30 handset on a top up based tariff.

I don't know people who will spend a lot of money on a phone they intend to use as little as possible.

I think that sums up a lot of the Blackberry owners I know. Company mandates a smartphone, but employees want to use it as little as possible.

Then again, it will be interesting to see if that resonates with a less technical market segment.

Dentyne got this right.

People don't fiddle with their phones while walking because the phones are hard to use. They fiddle because the phone is fun and addicting.

There's no desire for a phone that lets you get in and out quickly. On the contrary. If they could come up with a phone that lets you be online all the time without walking into things, they'd have a huge winner.

Everyone, seems to think that we will be able to see updates on the home screen itself, which I don't think will work.

For example email: What will I see on the homescreen? who sent the email, when it was sent? will I see a brief message on the screen? How much information will I see in a tiny box/slice/tile. I don't think I will be able to see a lot of it.

Twitter: I think, I will be able to see the last tweet. A little helpful.

Facebook updates: I think it would work same as twitter.

The user has to launch an app to get the complete information. I think its bad if MS tries to make the phone into a taskbar notification system.

MS has never understood or indeed wanted the www to happen.

They were able to hold back www development for 5 years+ with their IE6 shenanigans, but the cats out of the bag now.

The XBox uses the web in the best way possible for a games console - on-line gaming. Maybe it's just me but I find a console a rubbish browsing platform - I've got browsers on my PS3, PSP and Wii and never use them. It is possible that Microsoft just don't have a browser in the 360 because it's not a great place to put a browser.

Microsoft own Hotmail, they've ported Office on-line, XBox supports on-line gaming, they make what is still the most popular single browser (which is under very active development), they produce web servers and a massive range of developer tools for the web from Visual Studio to Silverlight, they're working their arse off to get back into the mobile web market.

If they're not into the web they're doing their best to hide it with their actions and investments. They were, by their own admission, slow to get to it but I don't think that's a valid criticism now.

Now they're just all over the place but that's different to being anti.

I don't know a single person using the online Office versions, because, well, they don't compare to the desktop ones.

Yesterday, I saw a graph showing Hotmail losing about 10% market share, mostly to Gmail.

Their new Xbox website broke every existing link on the domain.

Mocrosoft does not get the web, even if they might get the internet.

(Yes, websites are software).

When MS announced support for facebook on the xBox, I thought "hmm why not just give users a browser". Then they announced twitter integration... "Umm how about just stuff a browser on there".

It's farcical. But OTOH, it fits right with MS's plan - they detest the www. It's open. It's free. It's not a walled garden they can monetize.

Last time I heard the web division at MS still makes a huge loss. Which leads me to believe they're not in it to make money. They're in it to mess it up, stifle progress, and keep people buying their installable software. They did an absolutely fantastic job of that for 5 years or so.

One has to navigating the web with a joystick (have you tried it? It's fifth circle of hell terrible), the other has you suffering from cramps in 10 minutes flat.

If you've used the browsers, you know just astronomically bad those ideas are. A browser doesn't not belong on a joystick-driven device, it's slow to use and frustrating as hell. So why would MS put a browser on the Xbox?

And how exactly would a browser on the Xbox decrease their lock-in?

But taking all of that out of the equation - assuming that magically the Wii and the PS3 are both capable of interacting with USB mice and keyboards... how many people do you know who have an (extension cord required) USB connection to a keyboard and mouse combo on their couch? I can count these people on one hand. In fact I can count them on 3 fingers, and all are pretty hardcore tech geeks to boot.

[1] http://en.wikipedia.org/wiki/Xbox_360

[2] http://www.top500.org

* edit: formatting

The Wii browser, having used that also, is pretty much the same, plus muscle pain.

I know a lot of gamers and have yet to meet a single person who uses the browsers with any sort of regularity. In fact, the only instances where people use browsers on consoles nowadays are when the game brings it up by itself (DLC purchases, news updates, etc), and even then it's always more painful to use than a native menu would've been.

You need to cite your sources, because from where I stand - which is that of an avid gamer heavily involved in the gaming community, I simply do not see any significant usage of console browsers at all.

> "Even when a tiny DSi has a very capable browser, smart phones have browsers. And a big gaming console from a supposed software company doesn't even have a web browser?"

The major obstacle with browsers is not platform hardware, it's usability. Smartphones and the DSi have browsers because the web is (as we discovered with the iPhone) very easy to navigate with a touch device, particularly a finger-driven touch device.

It is significantly less awesome when it's driven with a joystick. In fact, the experience is downright terrible. Implementing a browser on a console with joystick (or Wiimote) controls is a waste of time and energy, and can only serve to tarnish your brand as your users struggle with why the hell you implemented such a dumb thing.

I tried to find some information, but the best I could do was from an article written in 2009 (http://www.next-gen.biz/news/ps3%E2%80%99s-web-browser-usage...):

"The PS3's browser has a 0.04 share of the 'internet market', a miniscule proportion when compared to, say, the PC's 88.7 percent majority, yet it's a figure which sits comfortably ahead of the Wii's 0.01 percent."

Granted, those numbers are horribly out of date, but it would seem to indicate that the population (at large) does agree.

In the same vein: A lot of criticism has been leveled at the new WP7 ads, but I haven't seen much coverage from the developers' perspective. Is Microsoft implying that WP7 customers aren't going to spend much time on their phones? Again, why develop for or port to the WP7 platform if Microsoft's ad strategy is based on the idea that the customer won't actually use the device that often or for very long.

Perhaps it's hubris or just ignorance on their part, but making things harder or more confusing for developers isn't going to bring in the profit for third-party developers or Microsoft.

With that said, everything I've heard from people in MS (and some who work on IE) is that this is the first time in MS's history where their goal is to actually make IE the best web browsers against the standards. They are targeting to be able to legitimately say that the best platform for HTML5 apps is IE. Only time will tell on that.

But I do think it is naive to think a phone will fail because it is based on the worlds most popular web browsing engine. Any more than a phone might fail because it has no physical keyboard, no 3G support, no Flash, and no native apps.

Guess how much extra work it has required from the web developers.

> -- it is based on the worlds most popular web browsing engine

The fact that IE ships with every Windows PC makes it the most used browser, definitely, but not "most popular web browsing engine". Browser engines are used by browsers (or developers), not by end-users, and by that definition I would call WebKit the most popular engine.

Printing is also really hit or miss. Weird font sizes, or sometimes blank areas. Not browsing proper, but still worth mentioning.

Admittedly this doesn't happen often, but enough for me to notice.

Reading about "the web" on HN is like reading the story of Icarus. HN'ers are so enchanted by web apps that they forget they can only fly on the web thanks to native software. They would like to replace everything with a browser.

Actually HTML5 is faster, and Flash is slower [for me]. So video on the web is a big deal with HTML5.

> HTML5 is one more step in the direction of web pages pretending to be applications.

No, it is one more step in the direction of web pages becoming applications. You can't possibly tell me that Gmail isn't a full application! It's much faster and more responsive than any desktop mail client I've ever seen: searching mail takes < 1 second vs 1-2 minutes in Outlook. It's better in every way. And it's on the web.

Why are you opposed to web applications?

And as to Windows Phone 7, although a recent ChangeWave survey of potential smartphone buyers pegged interest in a Microsoft phone at 1%, the reviews have been pretty positive:

ars technica: "Microsoft doesn't often get version one releases right, but this time, it has got the release very right indeed. Windows Phone 7 looks great, works well, and is a treat to use."

Engadget: "With terrific Zune and Xbox Live integration, a fast and smart method of getting around the OS, great Office and email experiences, and a genuinely beautiful and useful user interface, Microsoft has definitely laid the foundation for the next several years of its mobile play. Now it's time to get the upper floors finished."

Unfortunately for Microsoft, though, the data shows that they are going to have a major uphill battle with the Windows Phone 7, a battle which they have dedicated half a billion dollars in marketing toward.

The OS is a "computer driver". The browser is the API.

The real target should be that they've got 25%+ market share in three years time. That should be what they're aiming for rather than a success this year.

People replace phones every 12 - 24 months and that's rapid even in tech (most people don't replace laptops that often). Every expired contract is a new potential customer for Microsoft and that churn means that no-one can take their position for granted so it's realistic for MS to make solid inroads over time.

But it was actually a pretty good and if they'd stuck at it I get the impression it could have done better than it did. Perhaps it will revive with WP7 (though I see the software is still under development which is good).

How soon we forget! There would be no AJAX today had Microsoft not introduced XMLHttpRequest to make Outlook Web Access work...

AJAX isn't modern anymore. Don't you see that the AJAX innovation was a game changer, but that the game has moved on since then?

I was loading AJAX data into hidden <frame>s in Navigator 4 using a JSON-like hack in 1998. It worked just fine.