Steve Ballmer was Right About the iPhone

I'm always fascinated by the way people try to rewrite history. Case in point: Steve Ballmer's fantastical comments about the iPhone in 2007. Guess what? He was right.

Let's roll the tape.

"$500, fully subsidized with a plan," he said at the time, in 2007, laughing, "I said, that is the most expensive phone in the world. And it doesn't appeal to business customers because it doesn't have a keyboard. Which makes it not a very good email machine."

Most people end the quote there and proceed directly to mocking the man because the iPhone, as we all know, has gone on to sell in the several hundred millions of units. But let's keep listening, shall we?

"Now, it may sell very well or not, I don't know. We have our strategy, we have great Windows Mobile devices in the market today, you can get a Motorola Q phone right now for $99, it's a very capable machine, it will do music, it will do Internet, it will do email, it will do instant messaging. So I kind of look at that and I say, you know, I like our strategy. I like it a lot."

When asked how Microsoft could compete with the iPhone, Ballmer said, "Right now, we're selling millions and millions and millions of phones a year, Apple is selling zero phones a year. In six months they'll have the most expensive phone ever in the marketplace, and ... let's see. Let's see how the competition goes."

What a jerk, right?

Wrong. Let's step through what he really said.

The iPhone is too expensive. When Apple first launched the iPhone in June 2007, it sold a stripper 4 GB model for $500 and an 8 GB model for $600. And Ballmer was right: The iPhone was significantly more expensive than the smartphones of the day. So much so that, just two months later, Apple dropped the price of the iPhone by an incredible $200. It killed the 4 GB model and re-priced the 8 GB version to just $400.

The iPhone did not appeal to business customers. Here again, Ballmer was right, though time has proven that the virtual keyboard isn't the reason why: The original iPhone didn't work well with the Exchange (and Exchange ActiveSync) systems that were common in businesses at the time, a fact I outlined in great detail in the summer of 2007. In 2008, when Apple launched the second iPhone, guess what? It made a big point of highlighting its business acumen, thanks to dramatically improved support for ... wait for it ... Exchange/EAS. And a ton of other enterprise features.

The fate of the iPhone was indeed an unknown in 2007. If you actually watch the Ballmer video I link to above, this is what you see: Ballmer doing his joking, blustery, pro-Microsoft persona upfront and then getting serious. And his calmer comment that "it may sell very well or not," and that Microsoft was selling "millions" of phones at the time, and Apple wasn't ... was absolutely correct. The thing I think we lose sight of here is that the iPhone was a stretch for many reasons. Apple fixed the price, and over time it filled in the f...

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