ITES: It's the ecosystem, stupid!

Microsoft CEO Ballmer braces us for a 'fundamental shift' in strategy with more Microsoft-designed devices

What Google and Microsoft have been learning over the last year is that there's more to Apple's magic than just the devices. Apple has succeeded in created an easy-to-use media ecosystem that virtually anyone can understand. That's no small feat in an era of PCs, game consoles, and mobile devices, each of which has a slightly (or severely) different interface.

One of the reasons I'm so bullish on Microsoft's futures it that they really have the biggest ecosystem out there right now. They just need to tie it all together. If every Windows PC user with an Xbox was suddenly given a new device that tied the other two together seamlessly, they could really give Apple a run for their money.

It's going to be a difficult transition, but I think this is the right move for Microsoft. They can't let their dominance in the desktop erode any more, or they simple won't be able to catch up.

AAPL 1K: Let's start talking about it

From the New York Times:

Tongue in cheek, Mr. Cook called the 37 million “pretty good,” drawing laughs, but then put it in stark perspective: “As I see it, that 37 million for last quarter represented 24 percent of the smartphone market. So three out of four people bought something else. And it represented less than 9 percent of the handset market, so 9 out of 10 people are buying something else.

“The smartphone market last year was a half billion units,” he continued. “In 2015, it is projected to be a billion units. When you take it in the context of these numbers, the truth is, this is a jaw-dropping industry. It has enormous opportunities to it. Up against those, the numbers don’t seem so large anymore.”

It doesn't seem far fetched to think that Apple could achieve iPhone unit sales of 200 million per year. For the sake of argument,  let's say they can simultaneously grow iPad sales to 100 million unit sales per year, and Mac sales remain relatively flat.

What would that mean for the stock price?

Whence the Windows App Store?

We know Microsoft is working on an app store as part of Windows 8. Is anyone going to build an app store for the half a billion Windows 7 users?

Since Windows 7 is easily going to be around as long as XP, it seems like a huge opportunity to sell software to a few hundred million people who don't have a modern software store that lives on their desktop.

The Android Backlash?

I've been wondering something about the existing consumers of Android devices for a few months, and some recent data may be now be proving it out. My hypothesis is that there may be a large group of users who were lured into buying an Android device under the guise of it being basically the same as an iPhone, but cheaper and in some ways better. They bought into the argument that it's 'more open' and that they would have 'more control'. But no one took the time to explain battery management, or killing background tasks, or security.

Let me take a moment for a brief qualifier. When I refer to 'Android users' here, I'm not talking about the people who root their device, install CyanogenMod, or genuinely prefer Android for all the technical 'freedom' it offers. I'm talking about the average, everyday user. The one who checks their email and browses the web, takes pictures and videos, and just expects things to work. They don't know how fast the processor in their phone is, or how much RAM it has. These average Android users, who bought into the platform early, may be feeling a little burned right now. The vast majority of them have never received an OS upgrade from their carrier. Many of them can't run the most popular apps for the platform, because their device isn't supported.

And that's where we get to the backlash...

Over the next year, a lot of these users are going to be looking for a new phone. In fact, many of them may have been looking for new phones at the end of 2012 (as evidenced by smartphone sales numbers of the quarter). By all reported metrics, the iPhone outsold all Android devices during the critical holiday quarter. I wonder how much a lackluster experience with their first Android phone is going to drive people to a competing platform. I think there may be a large group of disgruntled users who feel like they were deceived by Android marketing, and they might be hesitant to continue with the platform.

I truly believe the Android OS will certainly mature into a fantastic mobile operating system...eventually. Many early reviews of v4 (Ice Cream Sandwich) indicate that great progress has been made to this effect. But in the mean time there may be a difficult road ahead.