Microsoft’s loss of $1.7 billion on Surface

CITEworld wrote about Microsoft losing $1.7 billion on Surface so far.

total loss for FY2014 was then $680 million ($2.192 in revenue minus $2.872 in cost of that revenue).

But that was small potatoes compared to what Microsoft lost on the Surface the previous fiscal year. Using Microsoft’s stated revenue of $853 million and some arithmetic to backtrack to the FY2013 cost of revenue, Computerworld concluded that the cost of revenue for the 12 months starting July 1, 2012, was $1.902 billion.

The total loss for FY2013 was thus $1.049 billion ($853 million minus $1.902 billion in cost of revenue and adjustments).

Since Microsoft started selling the Surface nearly two years ago, it has lost $1.7 billion on the line. (Microsoft, SEC filings.)

Viability of a cheap iPhone

Benedict Evans discussed about how cheap iPhones would fare.

The narrative generally splits the market into four rough segments:

  • $50-100 smartphones: currently these are dominated by companies you’ve never heard of using off-the-shelf chips from Mediatek, Spreadtrum and others, and though they run Android and have 3G they often have only 256 meg of RAM, which makes for a pretty poor experience. And the build quality and screens are not great.
  • $100 to (say) $200 – this is where the branded companies start playing. At this price devices like the Lumia 520, the Xiaomi Hongmi and the Motorola X provide an experience that you would not, actually, be unhappy with. I describe these phones as like driving a Toyota or a VW: you know you’re not in a BMW (or a Bentley), but there’s nothing wrong with them at all and some of them are pretty cool.
  • Then, $200-450 (or thereabouts) counts as mid-range, and
  • $450-500 and up counts as premium. Arguably there’s a super-premium segment further up.

So what is the cheap iPhone that people like to talk about?

When people talk about whether Apple should do a ‘cheap phone’, it’s important to be clear about which of these segments you’re really talking about. When people say ‘Apple is missing out on the next x billion people’ – that is, the portion of the market that’s still on feature phones – they’re actually talking about the first category. Even Samsung doesn’t really play here, nor Xiaomi. This is is the land of the $200 PC – very low margin commodities with a poor user experience.

Where a cheap iPhone might come in:

However, the second and third categories are rather more interesting. Apple says, over and over, that the objective is not to sell the most phones, but to make phones that it can be proud of. In 2007 the iPhone was an MVP lacking industry standards like 3G and a decent camera, yet it still needed to be $600 or more to deliver the vision. Today Apple could perfectly well make a phone it could be proud of at $300. Indeed, there’s nothing that it would be ashamed of in the Lumia or Xiaomi at $150 and below.

Yes, if you were wondering, the existing iPhones are in the fourth segment.

The reliablity of IDC & Gartner data

AppleInsider reported on how Apple’s double digit growth contradicts estimates by IDC and Gartner that Mac sales fell.

Earlier this month, IDC (above) reported that Apple’s U.S. Mac unit sales in Q2 (Apple’s fiscal Q3, the quarter ending in June) fell by 1.7 percent, while Gartner (below) reported a drop in Mac unit sales of 1.3 percent.

Globally, Apple reported that Mac sales jumped from 3.75 million to 4.41 million year-over-year for its fiscal Q3, a unit increase of 18 percent and a new June quarter record.

18 percent increase is a big difference compared to a drop of 1.7 percent.

Shocking? Not if you’re aware of how these analysts portray data:

IDC, Gartner and Strategy Analytics have a long history of presenting carefully contrived data in press releases clearly designed to flatter their clients and denigrate their clients’ competitors, with Apple being a common target.

In addition to excluding iPads from their PC sales (while counting Windows tablets and including every other new form of PC device), IDC has also (like Strategy Analytics) radically revised its tablet figures after the fact, inventing, for example, Samsung tablet shipments that retroactively disappeared in the next year’s figures.

At the same time, IDC inflated its year ago estimates of the number of tablets attributed to unnamed “other” vendors by nearly ten million units, creating unflattering market share numbers for Apple in 2012, followed by unflattering market share growth figures for Apple in 2013, all coaxed from shifting numbers presented without any verifiable source. Apart from Apple, no other significant tablet vendor reports its unit sales.

IDC has also obscured the reality of Apple’s iPad sales by comparing them to kids tablets and toys, in order to water down Apple’s “market share” and imply that iPads are falling out of fashion—while distracting all attention away from the fact that nobody is selling premium tablets in volumes like Apple with margins like Apple.

Earlier this year, IDC was found to have added Windows 8.1 “2 in 1” PC notebooks into its reports of tablet shipments, another effort to portray Apple’s “share” of the “market” as diminishing, and a direct reversal of IDC’s staunch policy of not counting iPads as PCs, ostensibly because they are completely different product categories with no perceivable market impact on each other.

A former IDC researcher spoke to Fortune:

So, the mantra became, preserve the growth rates; to hell with the actual numbers. Even the growth rates are fiction. The fudge is in the “others” category, which is used as a plug to make the numbers work out. In fairness, we did do survey work, calling around, and attending white box conferences and venues to try to get a feel for that market, but in the end, the process was political. I used to tell customers which parts of the data they could trust, essentially the major vendors by form factor and region. The rest was garbage.

Microsoft’s Samsung action

Microsoft made a statement regarding its filing of legal action against Samsung.

We don’t take lightly filing a legal action, especially against a company with which we’ve enjoyed a long and productive partnership. Unfortunately, even partners sometimes disagree. After spending months trying to resolve our disagreement, Samsung has made clear in a series of letters and discussions that we have a fundamental disagreement as to the meaning of our contract.

Samsung and Microsoft are both large and sophisticated companies. In 2011, after months of painstaking negotiation, Samsung voluntarily entered into a legally binding contract with Microsoft to cross-license IP – an agreement which has been extremely beneficial for both parties. Samsung had been complying with the contract and paying to use Microsoft’s IP.

So what changed? Since Samsung entered into the agreement, its smartphone sales have quadrupled and it is now the leading worldwide player in the smartphone market. Consider this: when Samsung entered into the agreement in 2011, it shipped 82 million Android smartphones. Just three years later, it shipped 314 million Android smartphones. [Source: IDC, WW Quarterly Mobile Phone Tracker – 2014 Q1, Published: May 2014] Samsung predicted it would be successful, but no one imagined their Android smartphone sales would increase this much.

After becoming the leading player in the worldwide smartphone market, Samsung decided late last year to stop complying with its agreement with Microsoft.

How much is at stake? Microsoft reportedly makes $2 billion from Android patents.

Xiaomi steals photos to pass off as images taken by its phone cameras

John Gruber wrote about Xiaomi blatantly stealing copyrighted photos taken with DSLRs and passing them off as photos from its phone cameras.

They have updated the page to remove the photos after their theft has been exposed. Here’s a link to a screenshot of the original page.

New Android ‘Fake ID’ flaw empowers stealthy new class of super-malware

AppleInsider reported on a new Android flaw that allows malware to gain extensive control over a user’s device.

This is particularly serious because Google has granted a variety of trusted apps in Android broad permissions; by pretending to be one of these trusted apps, malware can can fool users into thinking that they are installing an app that doesn’t need any special permissions, then trick the system into giving it essentially full control of the device, with access to the user’s financial data, contacts and other private information, even data stored in the cloud.

Here are some possible apps for malwares to spoof.

Adobe Flash:

While Google eventually gave up on Flash for Android, an Adobe Flash plugin privilege escalation flaw remained embedded in Android’s webview—the browser component that gets embedded into third party apps that present web content—until the release of Android 4.4 KitKat last fall.

With Flash so deeply integrated into Android’s webview component, any malware using Fake ID to pretend to be Flash can subsequently escape Android’s app sandbox and take control of other apps, including Salesforce and Microsoft OneDrive, grab data from those apps, sniff out all those apps’ network traffic and gain any additional privileges held by those apps.

The solution is simple: upgrade to Android 4.4 KitKat. However, not every Android user can upgrade even if they want to.


Using Fake ID, a malware app that asks the user for no special permissions at installation can subsequently pretend to be the Google Wallet app; Android will then provide the rogue app with all the permissions it gave its own NFC infrastructure, which includes users’ financial data.

Because Wallet, 3LM and other apps do not depend on the Flash / Android webview flaw, these other vectors of attack weren’t fixed in KitKat. That means Fake ID affects all versions of Android, including the latest Android 4.4.4 and the upcoming “Android L” (aka Android 5.0 beta).

This happens because Android apps are signed but not verified, unlike iOS apps.

However, Bluebox discovered that “the Android package installer makes no attempt to verify the authenticity of a certificate chain; in other words, an identity can claim to be issued by another identity, and the Android cryptographic code will not verify the claim (normally done by verifying the issuer signature of the child certificate against the public certificate of the issuer).

“For example, an attacker can create a new digital identity certificate, forge a claim that the identity certificate was issued by Adobe Systems, and sign an application with a certificate chain that contains a malicious identity certificate and the Adobe Systems certificate.

“Upon installation, the Android package installer will not verify the claim of the malicious identity certificate, and create a package signature that contains the both certificates. This, in turn, tricks the certificate-checking code in the webview plugin manager (who explicitly checks the chain for the Adobe certificate) and allows the application to be granted the special webview plugin privilege given to Adobe Systems – leading to a sandbox escape and insertion of malicious code, in the form of a webview plugin, into other applications.”

It is hard for you to know if you have been infected.

On the other hand, Fake ID requires no user involvement, and can be used by malware posing as an innocent app or game that requests no special permissions. Once installed, the app can take over without the user having any knowledge of being infected.

This underlines the shocking state of Android security.

“The Android malware ecosystem is beginning to resemble to that which surrounds Windows,” the firm observed. By September, Duo Security stated that “more than half of Android devices are vulnerable to at least one of the known Android security flaws.”

Facebook to disable messaging in main iOS app

9to5Mac reported that Facebook will be disabling messaging in its main iOS app this week. Users will have to download its Messenger app.

This might be a good thing for those of us who are trying to spend less time on Facebook. Personally, I tend to get distracted by Facebook when I have to go into Facebook to reply messages. I have cut down distraction a lot ever since I started using the standalone Facebook Messenger app.

It will be interesting to see what Facebook plans to do with a two messaging apps in Messenger and Whatsapp.

Life inside Comcast

The Verge spoke to more than 100 Comcast employees.

One common theme was the importance of retaining customers.

We locked down the ability for most customer service reps to disconnect accounts. We queue the calls for customers looking to disconnect to a retention team who are authorized to give more deeply discounted products to keep subscribers.

Upgrade the customer where possible.

The pay was great and everything else about the job was a nightmare. I remember when a 90-year-old woman called to add phone to her account and my boss told me afterwards, “She was probably senile… but you should have upgraded her cable. I don’t think you are going to be sitting in this seat for very long.”

Sales is more important than customer service.

I would be frustrated because I would tell them we need customer service training as much as sales training, but it came from Philly [Comcast’s headquarters] so that’s what we had to deal with. [Managers] would listen to the call, even have secret shoppers call in. If we didn’t ask [customers] to get more products we would be spoken to. Eventually, selling became part of tech support and billing.

Another Amazon Fire Phone review

The New York Times reviewed the Amazon Fire Phone.

At its best, Dynamic Perspective adds helpful gestures that allow you to get around the phone more quickly. Snap the phone to the right while you’re in the calendar app, you see your daily agenda; snap left and the agenda disappears. But these shortcuts are never reliable; a lot of times you’ll snap and nothing will happen, because the app you’re in isn’t coded for gestures.

Other instances of Dynamic Perspective are downright annoying. Take Auto Scroll, which moves the text on your screen as you tilt the phone back and forth. Because Auto Scroll calibrates its scrolling speed according to how you’re holding the device when you first load up an article, your brain will struggle to find a set rule about how much to tilt to get the right speed. Often I’d scroll too fast or too slow.

Worse, if you put your phone down on a table while you’re in the middle of an article, the scrolling goes haywire and you lose your place. The best thing about Auto Scroll is that you can turn it off.

When you introduce a gimmick instead of making sure the feature simply works.

BlackBerry and Dell not worried about Apple-IBM partnership

iPhone in Canada reported on BlackBerry and Dell’s responses to the Apple-IBM partnership.

BlackBerry CEO John Chen:

I am not afraid of competing when I know I am more nimble. I never think [that] going alone is the right strategy. But we have a value add that no one else can do.

John Swainson, head of Dell’s global software business:

I do not think that we take the Apple-IBM tie-up terribly seriously. I think it just made a good press release.

I have some trouble understanding how IBM reps are going to really help Apple very much in terms of introducing devices into their accounts. I mean candidly, they weren’t very good at doing it when it was IBM-logoed products, so I do not get how introducing Apple-logoed stuff is going to be much better.

This reminds me of the famous quote by Steve Ballmer:

There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item.

Microsoft missed the mobile market under Ballmer’s watch as CEO. BlackBerry and Dell are struggling in the mobile and PC markets respectively. To be unconcerned by the Apple-IBM push in enterprise won’t bode well for them.