"Gates's refusal to adopt Adobe's technology had something to do with money—Gates was not feeling cash rich in 1984—but it had even more to do with Gates's persistent delusion that Windows be like the Mac."

--Barbarians Led by Bill Gates, a book composed
by the daughter of Microsoft's PR mogul

Summary: Microsoft's money sinks continue to leak; present and foreseen future indicate that Zune, Xbox, and Windows Mobile are still going down the sewer

Zune

Modeling Microsoft's mobile business based on the Zune is an atrocious mistake to make because the Zune was a disaster whose sales decline at an alarming rate. Some time earlier this month we wrote about how Zune deleted music and Microsoft is now acknowledging the problem by assigning a firm to deal with it.

Critics of subscription music have often to pointed to licensing as a major problem. Without guaranteed access, the services can often lose significant value if a licensing dispute takes certain music down or if technical issues prevent access for long stretches of time.

This is the (at least) third time Microsoft screws customers when it comes to music. Previously, there were PlaysForSure and MSN Music.

Xbox

Another area where Microsoft has failed quite miserably (although Microsoft tries to hide it) is Xbox. Sony is laughing at Microsoft's expense and bashes its policies.

Sony's PR strategy in the console war seems to be to point out that Microsoft is a devilish, top hat-wearing fat cat lording over the population with its giant dollar-sign labeled sacks of cash.

Back in April, Sony bashed Microsoft for purchasing most of its exclusive titles rather than creating them, and with the recent release of Mass Effect 2 has gone back to those same tactics. Rob Dyer, SCEA Senior Vice President of Publisher Relations, told IndustryGamers that Sony "counters" Xbox 360 exclusives with its own first-party games, which Microsoft simply has no answer to.

The English-speaking press is fixated on US-only market share, so the overall picture can be very deceiving. Microsoft has the only console not from Japan and the US military prefers to buy stock from a US company (even if it's really made in Asia) only to be declined:

Microsoft restricting Xbox 360 units from Army because the sale wouldn’t give them enough money?

[...]

Argue if you want, but the Xbox 360 with it’s cheap hardware, massive online gameplay and options for scenarios, and rather robust library of war games means it’s a pretty good fit as a training tool for the fine men and women training our country. Common sense also makes a might appearance. It’s simple actually. Why should the Army spend upwards of $1,000 on training computers for each and ever soldier if an Xbox 360 can be had for significantly less and be used for multiple soldiers? It’s basic math.

Microsoft was selling the consoles at a loss for quite some time. And to make matters worse, the defective design cost it billions of dollars and annoyed a lot of customers.

Here is one example of "hard luck" with Microsoft's Xbox 360. It's from two weeks ago:

Many in the gaming community are familiar with a common pitfall of the Xbox 360. Gamers know the syndrome simply as “the red rings of death.” The issue is common and easily remedied, and is a problem that the newest generations of Xbox 360s are supposedly free of.

So I rested easy after purchasing my 360 Arcade and a 20-gigabyte hard drive last winter, knowing that the folks at Microsoft had eliminated this frustrating problem.

Much to my dismay, I recently powered-on my system and was greeted with a distressing noise. I waited and waited but the system never advanced past the logo screen. After 5 minutes of troubleshooting, the screen flashed to black with the words “error 67” emblazoned near the bottom.

Shit, I thought. Red rings of death I can deal with, but what is this ‘error 67?’ This experience would lead me to verify what I had long suspected: Microsoft isn’t as keen on satisfying their customers as they may appear to be.

Another such error is being reported:

Players face a lot of technical errors. Microsoft must offer some kind of substitutes for their products when they simply stop working. Red ring errors can be solved but technical errors like “error 67” is difficult to tackle.

Yes, Microsoft still has a defect problem in its hands and retailers react. Not good, not good at all.

Mobile

The Windows Mobile business is also a money sink and the latest version of Windows Mobile (Microsoft has attempted to rename/rebrand it) is rather disappointing for many reasons that we wrote about before. Could it be the end of the line? Here are some opinions:

● Microsoft's Windows Phone 7 Series: Too little too late?

If you assume Microsoft’s mobile platform share further erodes the Windows Phone 7 launch will have to be big to compete. That’s why you hear the stray rumors about Microsoft buying Research in Motion.

● Windows Mobile 7: Too Late to Save Microsoft?

Microsoft is not too big to fail, and it has done so spectacularly in the past. While we have high hopes that whatever Steve Ballmer shows off on Monday can revive the Windows Mobile name, Microsoft will need a hell of a product and brutish PR to overcome the barriers it has already laid out for itself by sauntering into the marketplace years after the game leaders.

● Microsoft Windows Phone 7 Series Is Programmed To Fail

The two bullets that Microsoft shot at its feet are:

1) Windows Phone 7 Series is a non-free or Slaveware* operating system. That means OEMs don't get to see the code. OEMs can not customize or tweak the software to meet their customer's needs.

2) Licence Fee. Microsoft's deep pockets owe a lot to the heavy license fee Microsoft charges for its Operating Systems and Office Suites. Windows Phone 7 Series continues to follow the same pattern. OEMs will have to pay a license fee to Microsoft to use the operating system, along with the conditions that they can't change the code.

The gainers at the moment are UNIX and Linux, so Microsoft seems to be copying them:

● Microsoft Mimics Apple

● Microsoft Lags Behind Apple, Again...

● IPhone, Android Gain Market-Share at Microsoft and Palm’s Expense

Here is an interesting observation from the IRC channel. Microsoft is already up to vapourware tricks on the face of it (and Microsoft Windows Phone 7 won't actually be out before the end of the year or one year from now).

oiaohm	http://blogs.zdnet.com/gadgetreviews/?p=12325&tag=content;col1  Boy idiots and MS press releases.	Feb 20 20:32
phIRCe-BNc	Title: Report: Microsoft, Asus partner on mobile phone | The Toybox | ZDNet.com .::. Size~: 101.25 KB	Feb 20 20:32
oiaohm	http://www.microsoft.com/presspass/press/2010/feb10/02-15MWC10PR.mspx	Feb 20 20:32
phIRCe-BNc	Title: Microsoft Unveils Windows Phone 7 Series: New phones designed for life in motion to debut at holiday 2010. .::. Size~: 49.47 KB	Feb 20 20:32
schestowitz	*LOL* http://techdirt.com/articles/20100219/0353358240.shtml	Feb 20 20:32
phIRCe-BNc	Title: Could Looking At London's 2012 Olympics Logo Land People In Prison? | Techdirt .::. Size~: 49.56 KB	Feb 20 20:32
oiaohm	Until the phones are made just because someone has partnered does not mean they will make phone.	Feb 20 20:33
oiaohm	They have to partner to get access to all MS specs.	Feb 20 20:33
schestowitz	oiaohm: yes, seen it	Feb 20 20:33
schestowitz	The Vista phone is nothing	Feb 20 20:33
oiaohm	Ie its FUD.  schestowitz	Feb 20 20:33
schestowitz	It won't have any effect	Feb 20 20:33
schestowitz	oiaohm: it's  vapourware	Feb 20 20:34
oiaohm	MS FUD we have all these unwilling supporters so its going to take off.	Feb 20 20:34
oiaohm	This is way different to android.	Feb 20 20:34
oiaohm	Android they makers could look at almost the full device before deciding if they would partner.	Feb 20 20:35
oiaohm	Even then after companies did partner places like zdnet said nothing about it.	Feb 20 20:35
oiaohm	What you call double standards in reporting.	Feb 20 20:35

It was interesting to find that Microsoft and its bad ally AT&T [1, 2, 3] are also collaborating here [1, 2], which makes one wonder about Apple's AT&T exclusivity.

Microsoft booster Joseph Tartakoff shut his eye in the face of criticism and pretended that "[a]lmost without exception, reviewers have praised Microsoft’s new Windows Phone 7". What does he read? Just Microsoft blogs? As we stressed last week, Android/Linux dominated this event in many ways and Microsoft's phone received its share of criticisms. Why can't Microsoft boosters ever be objective? In context there is more being said though:

Has Microsoft (NSDQ: MSFT) upstaged Google (NSDQ: GOOG) at this year’s Mobile World Congress? Almost without exception, reviewers have praised Microsoft’s new Windows Phone 7 series—but on Tuesday Google got its own chance in the spotlight as CEO Eric Schmidt took the keynote stage. Schmidt’s speech was thinky; holding a piece of paper with his notes, he referred to the rise of cloud computing and faster connectivity speeds as driving mobile adoption. “A device that is not connected is not interesting, it is literally lonely. An application that does not leverage the cloud isn’t going to wow anybody,” he said. “It’s like magic. All of a sudden there are things you can do that we’ve never even (thought of) because of this convergence.”

Business Insider made its "JOKE OF THE WEEK" the fact that Microsoft -- unlike its free/open source competition which is technically better in many ways -- intends to charge for its proprietary operating system.

Microsoft will charge carriers for its OS, while Google is giving Android away for free. (The other big competitors, Apple and RIM, don't license their operating systems to third parties.)

Not everyone is impressed by this decision given Microsoft's weak position (it has less than 10% of the market). Windows Mobile does not have the advantage of compatibility with many third-party applications.

Business Insider has also put up this "CHART OF THE DAY" which it titled "The Collapse Of Microsoft's Mobile Business". The page says:

In any event, for Microsoft, the new product can't come soon enough. After an early lead in the U.S. smartphone war, Microsoft has lost much of its market share and almost all of its relevance, as BlackBerry maker Research In Motion and Apple's iPhone have taken over.

The market share shown there is for the US alone, it's not global (almost double the real market share for familiar reasons). Microsoft-loving publications seem to be more fascinated by the latest Linux phones and this analysis from Reuters indicates that Microsoft may end up just buying a rival platform to replace Windows Mobile.

The new Windows phone software is a big improvement on its predecessor but may not be enough to reverse market share losses, and Microsoft Corp (MSFT.O) may have to eventually buy a Nokia or BlackBerry maker RIM to get back into the game.

That would require borrowing of even more money. Can Microsoft afford it? Can it get the required loans? Microsoft Nick has this to say:

Microsoft Acquiring RIM May Be Bad Idea, Says Analyst

Microsoft is reportedly interested in purchasing BlackBerry maker Research In Motion, but such an acquisition could have negative consequences for Microsoft, an analyst says.

Also in the news:

• Microsoft may end up resorting to M&A in mobile



• Microsoft's Ballmer eyes RIM acquisition

So, in conclusion, Microsoft has just introduced a new version of its mobile platform and sources suggest that it might have to be thrown away and replaced. Microsoft has already failed with Danger/Sidekick as the links below show. ⬆

• Microsoft Pink is Already Declared Dead and Danger Dies with Permanent Data Loss
• Microsoft Sued for Data Loss
• Lawsuits Against Microsoft Turn to Class Action Lawsuit While Microsoft Mobiles Become Dying Breed
• Microsoft Recovers Sidekick Data? Not So Fast!
• Microsoft Sued for Sidekick Disaster, Fined for Using “Money Power” to “Harass” Defendants