Microsoft Chief Plays Down Apple’s Growth

Microsoft chief executive, Steve Ballmer suggested during a trip to New Delhi that the surpassing of Microsoft’s market capitalisation by Apple this week, while trumpeted as a major shake-up by the media, was not a cause for concern at Redmond.

Apple’s market capitalisation yesterday reached $227.1 billion (£155.8bn), based on its stock price, eclipsing Microsoft’s $226.3bn (£155.3bn) . That was enough to make Apple the most valuable US technology company, and place it second on the list of highest-valued American companies behind Exxon Mobile with its $282bn (£193.4bn) market capitalisation.

Competition, not capitalisation is key, says Ballmer

“It is a long game. We have good competitors but we, too, are very good competitors,” Ballmer told the audience, as reported by AFP and other media outlets. “I will make more profit, and certainly there is no technology company on the planet that is as profitable as we are.”

Ballmer also suggested that Windows Phone 7, Microsoft’s upcoming smartphone operating system, will indeed be released by the end of 2010, according to The Wall Street Journal.

Overall, Ballmer reportedly said, “We are executing very well.”

Ballmer’s comments come days after Microsoft underwent a shake-up of its Entertainment and Devices Division, which creates the consumer products meant to compete against offerings from Apple and other companies. Although Microsoft cast the departures of two of the division’s top executives as being motivated by personal reasons, speculation reigned that the sudden resignations were driven by a combination of underperforming products and killed projects.

Those two resigning executives included division President Robbie Bach, who will retire, and J. Allard, the senior vice president of Design and Development credited with shepherding the Xbox into production. Allard will apparently serve in a consultant capacity to Ballmer, starting with as-yet-unannounced projects this fall. Before Microsoft’s official announcement, rumours suggested that Allard would leave because one of his pet initiatives, the Courier tablet PC, had been shut down before it could leave the development labs.

Microsoft’s upcoming smartphone operating system (OS), Windows Phone 7, is intended to represent a fresh start in a market segment where the company has fallen behind competitors such as the Apple iPhone and Google Android. While early previews of Windows Phone 7 suggested an innovative user interface and consumer appeal, the lack of an upgrade path for smartphones currently running Windows Mobile—along with strong rivals in the form of Android 2.3 and iPhone OS 4—could potentially slow its adoption.

During the first quarter of 2010, the Entertainment and Devices Division contributed about 11 percent of Microsoft’s $14.5 billion bottom line. Of its products, some have proven more successful than others: The Zune HD portable media player was praised for its design but suffered poor sales and Windows Mobile smartphones have been bleeding market share; the Xbox game console franchise has only begun to see profits after years of running in negative territory.

“Certainly, the trend has been away from Windows Mobile overall, and Zune hasn’t done well,” Roger Kay, an analyst with Endpoint Technologies Associates, told eWEEK. “And even Xbox 360’s best days may be behind it. That doesn’t leave much on E&D’s plate.”

However, Microsoft has also experienced larger successes in the past year, including sales of more than 90 million Windows 7 licenses. The company likely hopes that its upcoming release of Office 2010 to consumers will also help consolidate its dominant market position in desktop-based operating systems and productivity software.