The Real Cause of Nokia’s Crisis

Image via CrunchBase

Steve Ballmer was on a mission during his keynote at CES. His mission was twofold. Defend the successes of Microsoft in 2010 and offer a glimpse of what the company intends to do in 2011 and beyond.

The problem with Ballmer’s keynote is that he played defense instead of offense. And that I think is the issue at Microsoft in general. Innovation is about offense and Microsoft’s defensive posture seems to be getting in its way.

Microsoft did have consumer successes in 2010. The company sold more than 50 million Xbox consoles worldwide, and there are now more than 36 million members of the Xbox Live gaming network. 8 million Xbox Kinect sensors, shipped to retailers in the first 60 days worldwide, which seems quite remarkable, but Ballmer stopped short of mentioning actual consumer sales numbers.

Steve talked about nine Windows Mobile phones on six carriers in 30 countries, with 20K registered developers, and 5500 apps in the store, but again, no mentioned about actual consumer purchases. Ballmer announced Windows mobile will get cut and paste features and the work on the device types for Sprint and Verizon will be finished in the first half of 2011– he stopped short of actually saying whether the operators are planning to make the phones available.

Frankly without consumer numbers the defense mission was not only weak, but feels like Ballmer squandered air time in a preeminent spotlight that he could have used to tell the world what Microsoft, the consumer company, was going to become.

On the positive side, Xbox is getting Netflix, Hulu and both will support Kinect gestures. Xbox will get some new games. Frankly theses were expected additions and I consider them table stakes to keep Xbox in the hunt. Another new feature coming is Avatar Kinect, which Xbox Live Gold members will get for free this Spring. The technology uses facial and body recognition to generate the avatars.

The big news from Microsoft was upstaged by its own pre conference press event.
Microsoft is porting a next iteration of Windows to a System on a Chip (SOC). In consumer terms this means it will take everything you know as the Windows operating and put it inside a semiconductor chip the size of your fingernail. The result will be faster performance and longer battery life in handhelds. This is formidable task and will require very close integration and open working relationships with partners. I suspect Ballmer anticipated the raised eyebrows that would come with such announcement by not only naming the active partners including Qualcomm and NVIDIA but also demoing live prototypes. Frankly that took guts. Though frankly when Microsoft announced Windows CE back in the 90’s for industrial class handhelds I thought the company was headed in the direction then – had they – its quite unlikely they would find themselves in the position they are today.

In the end, Ballmer played it safe. He stayed away from the tablet buzz, he didn’t take head on how Microsoft was going to counter Google TV, or Apple TV if at all, and finally I think underserved Microsoft’s interest in their detailing visions for evolving their Azure cloud offerings for consumers.

Did Ballmer get it down? Well no, but he didn’t get hurt either.