The Day Microsoft Lost the War

I happened on this 2012 post by Dave Winer about how Microsoft blew the opportunity with Netbooks.

You can point to almost anything as the cause for Microsoft's downfall, but I think Netbooks exemplifies it best: They were willing to sacrifice even promising and obvious growth areas to sustain the existing business model, until it was too late.

Up to only recently, Microsoft was organized around and obsessed about one thing: Defending Windows and Office, in that order. Everything else was on the table to offer as sacrifices towards that goal.

A Happy Accident

Netbooks came completely out of left field, from previously unknown Taiwanese OEM Asus. They caught everyone including industry watchers completely by surprise. But when it finally dawned on folks at Microsoft and Intel that Netbooks would actually be a significant market segment, they were seen as a threat not an opportunity.

Microsoft and Intel went out of their way to cripple the capabilities of Netbooks by imposing arbitrary limits on screen resolution and OS capabilities, among other things.

Believe it or not, Microsoft created a whole separate edition of Windows with the sole purpose of shaming users into upgrading. E.g., you could only run 3 apps at a time. They eventually removed this limitation, but there were others like it. Intel similarly refused to allow more powerful processors in Netbooks, choosing instead to fight Apple at their own game with far more expensive “Ultrabooks”.

Now, hindsight is 20-20, and I'm sure there were very well thought out MBA-reasons to do this. Netbooks are low margin, so push people to higher margin products, even ones they may not want to buy.

That's not the point.

The point is this shows just how misguided the thinking at Microsoft and Intel was. In the years just before the iPad, they were so obsessed about defending margins that they willingly ignored the obvious opportunities of Netbooks:

Netbooks weren't cheaper laptops. They were more mobile ones.

This is not revisionist history. I've owned several Netbooks, including the famed EEEPC 1000HE. I took that thing everywhere. That's what everyone loved about them. Even five years later, the 9.5 hour (real world) battery-life on the 1000HE beats most so-called Ultrabooks. And it is still an order of magnitude more capable than a Surface.

But the leadership at Microsoft could not, or would not, adjust their worldview to fit a world that had clearly changed.

And so, even though they were tremendously popular, and might have continued Wintel indefinitely, Netbooks were deemed to be an illegitimate child, an unplanned accident, and summarily aborted.

Related: Business.