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| Microsoft founder Bill Gates speaks during a news conference in New Delhi in 2008. |
Windows is dead. Let’s all salute it—pour out a glass for it, burn a CD
for it, reboot your PC one last time. Windows had a good run. For a
time, it powered the world. But that era is over. It was killed by the
unlikeliest of collaborations—Microsoft’s ancient enemies working over
decades, in concert: Steve Jobs, Linus Torvalds, and most of all, two
guys named Larry and Sergey.
Late on Monday, Microsoft announced its unsurprising, $7.2 billion
plan to buy Nokia’s smartphone division. Nokia is the world’s largest
manufacturer of phones that run Microsoft’s Windows Phone operating
system (which is a bit like pointing out that, at 5-foot-6, I’m the
tallest member of my immediate family). Microsoft is buying Nokia in
order to control both the hardware and software in its devices; this
move, Microsoft promises, will improve the phones themselves and make
them easier to sell.
But this is the antithesis of the company’s Windows strategy. Though Microsoft
insists otherwise,
when this deal is done, the thing sold as Windows won’t be what it’s
always been—it won’t be software that that runs on lots of companies’
hardware, a platform to unite disparate manufacturers’ devices. Instead,
Windows will be much like Apple’s operating systems, iOS and Mac OS.
Windows will be proprietary software attached to proprietary
hardware—Microsoft’s code running on Microsoft’s devices.
In a
document that lays out the “strategic rationale”
for the deal, Microsoft makes a stirring case for vertical integration:
for a single company that makes both mobile software and hardware
together. By purchasing Nokia, Microsoft says it will be able to create
better phones by reducing “friction” between hardware and software teams
that now reside in separate companies. Combining the companies also
improves marketing “efficiency” and “clarity”—Microsoft can sell a
single Microsoft device that bakes in the best services from both firms
(Skype, Office, Nokia’s mapping systems).
Finally, vertical integration helps Microsoft’s bottom line. Today,
for every Windows-powered phone that Nokia sells, Microsoft gets less
than $10 in software licensing fees. When it owns Nokia, Microsoft will
be able to book profits on hardware, too. Rather than make less than $10
per phone, it will make more than $40.
Steve Jobs long pushed against Bill Gates’ idea that hardware and
software should be made by different firms. And back in the PC era,
Gates was right. Gates recognized that most computer users didn’t
understand hardware. We couldn’t tell the difference—and didn’t really
care much about—the processors, drives, displays, and other physical
components that made up one PC versus another. As a result, making PC
hardware was destined to be a bruising commodity business, with low
brand recognition, constant price battles, and dwindling profits.
But software, Gates saw, was a different story. Software had a face.
Software imprinted itself on users—once you learned one Windows PC, you
understood every Windows PC. Unlike hardware, software enabled network
effects: The more people who used Windows, the more attractive it became
to developers, which meant more apps to make Windows computers more
useful, which led to more users, and on and on. Finally, software was
wildly, almost unimaginably profitable. After writing code once, you
could copy it endlessly, at no marginal cost, for years to come—and make
money on every single copy you sold.
But mobile devices altered that calculation. Today, hardware matters.
Unlike in a PC that you kept hidden under your desk, the design of your
mobile device affects its usefulness. Things like your phone’s weight
or the way your tablet feels in your hand are all important
considerations when you’re buying a device; you won’t choose a phone
based on software alone, and you might pay a premium for a device that’s
particularly well-designed. In the mobile world, as Apple has proved,
hardware can command just as much of a profit as software.
You might argue that once the basic design of a good phone or tablet
becomes well-known, lots of companies will copy it, and that hardware
will again become a commodity. That’s the tide Apple is now battling
against. At some point mobile components will become good enough and
cheap enough that a $50 phone might function just as well as a $100 or
$200 phone. When that happens, people will again start choosing devices
by price, and hardware profits will dwindle to nothing. And, as happened
with PCs, software, not hardware, will become the industry’s dominant
business.
All that may well occur. (The fear of commoditized hardware explains
Apple’s languishing share price.) But if mobile hardware does become a
commodity and software once again becomes the determining factor in your
choice of phone, we won’t see Microsoft profit from the shift. That’s
because, in the last five years, a brutal, profit-destroying force has
emerged in the tech world: Android.
Google’s mobile operating system—which is based on Linux, the
open-source OS whose fans had long dreamed would destroy Windows—is
free. Any mobile phone manufacturer can use and alter Android however it
pleases. This accounts for Android’s stunning market share—close to
80 percent, according to IDC—and
that market share gives Android the benefit of the network effects that
once worked so well for Microsoft. Nokia was paying Microsoft $10 for
every phone it sold, and in return it got an OS that can’t even run
Instagram. Microsoft says that it wants to keep licensing Windows Phone
to other manufacturers even after it purchases Nokia, but because they
can always choose Android (which runs Instagram and everything else),
few phone-makers are likely to take it up on that deal.
That’s why the Nokia purchase signals the end of Windows as a
standalone business. There are now only two ways to sell software. Like
Apple, you can make devices that integrate software and hardware
together and hope to sell a single, unified, highly profitable product.
Or, like Google, you can make software that you give away in the hopes
of creating a huge platform from which you can make money in some other
way (through ads, in Google’s case).
But you can’t do what Windows did—you can’t make profitable software
on other companies’ commodity hardware. Thanks to Android, code is now a
commodity, and Windows is dead.
During the week, we consume words in snackable, tweetable bites. But
on the weekends, we have the time to take a dive into the murkier,
lengthier depths of the Internet and expand our attention spans beyond
140 characters. We can brew a cup of coffee and lie back with our iPads,
laptops, smartphones and Kindles.
The recent history of mobile computing has shown that once a couple
of platforms establish a firm foothold, namely Apple’s iOS and Android,
it’s pretty hard for a new player to break into the race. 
Internet giants Google and Facebook once again said they want to be more transparent regarding their dealings with the most secretive court in the United States.
In early August, Meg Faure, founder of The Baby Sense Company, with Jeremy Pepper,
a Los Angeles-based social media and public relations consultant, to
see if Faure could up engagement and sales conversions among her
(already sizable) Facebook and Twitter communities.
Facebook will begin testing a new mobile feature Thursday that plays videos automatically as users scroll through their News Feeds. The videos will begin playing as they come into view on the screen, and users can preview them within the News Feed without clicking on or opening them. 
An ad for birdwatching from Australia's Christmas Island appears have run afoul of Facebook's rules. 
Facebook has often been regarded as one of the best places to work in the tech industry. After all, their interns make $25,000 more than the average citizen.
Microsoft's $7.2 purchase of Nokia's devices business, paid for entirely out of Microsoft's stockpile of offshore cash, is probably the no-brainer acquisition of the year.
