When Apple launched the iPhone in 2007, Steve Ballmer, who was Microsoft’s CEO at the time, was one of the biggest and loudest skeptics of the device.
In an interview with Bloomberg, the former CEO said he wishes he realized how Apple’s pricing structure for the iPhone would work (through carrier subsidies). He said:
“I wish I’d thought about the model of subsidizing phones through the operators. You know, people like to point to this quote where I said iPhones will never sell because the price at $600 or $700 was too high. And there was a business model innovation by Apple to get it essentially built into the monthly cell phone bill.”
Ballmer also said that it was a mistake for Microsoft not to get into the smartphone and tablet business sooner.
“I would have moved into the hardware business faster and recognized that what we had in the PC, where there was a separation of chips, systems, and software, wasn’t largely gonna reproduce itself in the mobile world.”
Microsoft’s hardware business never really took off under Ballmer and that is mostly because of the company’s late entry into the mobile space. You can watch the full interview with Ballmer from this link.
[via BGR]
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But… that wasn’t an Apple innovation. Cellphones were already being subsidized by carriers. Had he never bought a cellphone before that? How did he think the carriers were advertising free phones with contracts?
You are right. He made a terrible business mistake almost 10 years ago, and he tries to justify it today relaying on people’s bad memory. I got my first subsidiated phone in 2005, a Sony Ericsson at 0$ on a 3 years contract
Steve Jobs’ exclusive agreement with AT&T at the time was unprecedented in the mobile industry, as Apple was allowed to have full control over software on the phone, instead of carriers (and their bloatware) calling the shots. Turned out to be a good gamble for AT&T to jump on board.
But Ballmer is specifically talking about the phone subsidy model and indicating that somehow that was a new thing when the iPhone was released. He’s indicating that the subsidy model was the reason for the iPhone’s success instead of acknowledging that it was the iPhone’s packaged innovation that lead to it’s success.
The fact that Jobs made carriers to offer a “real” internet package was the breakpoint for smartphones. Before the iPhone, mobile internet was measured (and paid) in term of KB and the deal with AT&T got unlimited internet into the picture. When Rogers got to sell the first iPhone in Canada (3G), they offered 6GB @ 30$ … before that, Canadians were paying 50$ for no more that 100 KB.
He’s referring to the fact that when the iPhone first went on sale it was not subsidized. Without subsidies it was too expensive and was not selling well. They discounted it by $300 dollars early on and then moved to carrier subsidies.
My memory was that Steve Ballmer was commenting on the iPhone being too expensive at $600 when it came out. And he turned out to be right since Steve Jobs agreed and reduced the price to $400 just two month after its launch.
Well, he also said the iPhone doesn’t have a keyboard, so it won’t appeal to business customers. That turned out to be wrong, because physical keyboards are a thing of the past.
Steve Balmer has been wrong pretty consistently throughout his career. It’s amazing to me people still take note on what he has to say at all.
Just my opinion.
Yeah I agree. But I thought it was weird that Ballmer could have legitimately answered the question and not looked too bad, but decided to make something up instead.
Ahhh, this Windoze guy is still dozing off. The era is the PC is over. It is mobile.