Today Bloomberg reported Microsoft has “shipped” 2 million copies of Windows Phone 7 to phone manufacturers.  (as opposed to phones actually sold to consumers)

That’s 500,000 more than was reported on Dec. 21st of last month.   Explaining that difference gave me an interesting theory.   I bet that’s roughly the number of phones that have been sold to consumers. 

Think about it.  A company Microsoft’s size has a chain by which information goes through.  The 1.5 million number was released via the marketing dept which means there are all kinds of approvals that had to be involved.   So those weren’t the most current numbers (Microsoft launched Windows Phone 7 only a couple months earlier)

Now remember Windows Phone 7 had a massive launch on October 11th.  10 Phones launched in 30 countries available on 60 different carriers.  That’s a lot. 

Each of those carriers in each of those countries had to supply phones to all their various retail outlets so they could be sold.   Meaning it isn’t hard to imagine 1.5 million phones going out just to stock all the retail outlets around the world. 

Having said that I’d direct you to the Windows Phone 7 Facebook app.  Last month this became the focus of many blogs because Facebook is so integral to WP7.  So in theory the Facebook app is a good indicator of how many actual phones have been sold.  On Dec. 17th that number was around 210,000.  Now it’s at 366,000. 

Not bad but not great.

That brings me to my point.  Assuming 1.5 million was around the number of phones ordered to stock the shelves of the initial offering and assuming WP7 has sold a little over 366,000 (I’m sure there are a few people who don’t install the Facebook app) it sure looks like those 500,000 extra licenses are the phones that actually sold.   Since they’d have to be restocked (hence the additional orders)

But again, just a theory…

Fred Wilson has a post today where he notices two trends.   First that large internet companies that acquire small startups tend to unintentionally destroy them…

We have seen again and again that when a large company acquires a startup, they most often let it wither and die (myspace, delicious, etc). We have also seen that if that web services can be spun out (skype, stumbleupon), they can often be resuscitated.

Second that large companies that can’t acquire the small startup they want set out to intentionally destroy them…

But acquiring innovating emerging web services is not the only thing that big companies do that can be detrimental to the web. Worse is competing head on with them. Look at Facebook. They have ripped off Twitter, Foursquare, Quora, and many more small innovative startups. They haven't "killed" any of these companies but they have muddled the market and caused users to have to make choices that may turn out to be the wrong choices for them.

Which leads him to this conclusion…

What I would like to see (and obviously Albert too) is the emergence of a cooperative attitude on the web and mobile web where the big Internet companies and the innovative emerging web services work together to "succeed by making others succeed."

It’s a nice idea but I don’t see it happening and I’ll explain why. 

In my experience acquisitions fail because the senior management in the acquiring company lose interest. It tends to go like this:

- They see a new concept that excites them.

- They have a bunch of action packed acquisition meetings where they discuss all the great “synergies” the merger will produce.

- They close the deal and realize the exciting theoretical talk is about to become a boring discussion on pragmatic execution.

- And they move on to new exciting things.

Which leaves the startup alone and sinking into the bureaucratic quicksand that dominates most big companies.

The thing to note is everyone in that scenario is working against their rational best interest in order to achieve short term gains. The executives get the excitement of an acquisition, the investors get to cash out and the founders get to believe they’ll have more resources at their disposal. But in the end the executives lose money for the company, the investors make less than they could have if the company had succeeded on its own and the founders get driven out by bureaucracy.

Yet, as Mr. Wilson points out, big companies continue to acquire small startups and startups continue to go along with it because they’re acting on emotion. That’s the issue. Mr. Wilson’s idea requires emotional participants to act rationally and realize their exciting deal will probably end in disaster.

The one solution I can see to this situation is for people like Fred Wilson to push for a different kind of acquisition strategy. If it were me I’d encourage the following steps...

1. Encourage large companies to acquire small startups but leave them independent.

2. Give a small amount of equity to current investors via a profit sharing arrangement and lessen the initial buy out amount.

3. Use the financial resources from step #2 and form an external division that will work as an intermediary between the startup and the larger company to pursue “synergies” between the two entities without disrupting the startup’s normal operation.

This would require a lot of sacrifice on everyone’s part. The Founders and investors get less money while the large company has to give up some control. But fundamentally it still allows each side of the equation to act on their somewhat irrational exuberance while keeping the startup independent.

To me that seems like a good deal.

This is one of those cases where I really hope I’m right.  I, like everyone else in the technology industry, was surprised to hear Apple CEO Steve Jobs would be taking a leave of absence.  In his absence Apple COO Tim Cook will take the reigns (as he did during Jobs’ previous two medical leaves in 2004 and 2009).  Here’s Mr. Jobs’ letter…

At my request, the board of directors has granted me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in major strategic decisions for the company.

I have asked Tim Cook to be responsible for all of Apple’s day to day operations. I have great confidence that Tim and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.

I love Apple so much and hope to be back as soon as I can. In the meantime, my family and I would deeply appreciate respect for our privacy.

Before I go into my theory let me get the obvious fear out of the way…Has Steve Jobs’ Cancer Returned?

Answer: I sincerely doubt it.  You don’t continue on as CEO if you’re battling a resurgent cancer.   Further you don’t hide cancer because the treatment has some obvious side effects (note the normally secretive Jobs was open about being diagnosed in 2004).

That out of the way I have another theory here.  And it revolves around something that everyone else (save ZDNet’s Larry Dignan) seems to be forgetting.  From the ZDNet Article…

Earlier this month, a pension fund proposed that Apple become more forthcoming about its succession planing for Jobs, who is a pancreatic cancer survivor. Details of Jobs’ latest medical leave were disclosed.

In that proposal, which was detailed in Apple’s proxy statement, the Central Laborers Pension Fund in Jacksonville, Ill. argued that Apple do the following:

Apple’s board will review the succession plan each year;

Develop criteria for the CEO position and a process to evaluate candidates;

Identify internal candidates;

Begin a “non-emergency CEO succession planning” process, three years before a transition;

Report the succession plan to shareholders each year.

Apple urged a vote against the proposal.

So there’s recently been talk on creating a succession plan.  Now I’ve been watching Steve Jobs my entire life and one thing I’m absolutely sure of is this: Steve Jobs is going to hand pick his own successor (in fact I think he already has).  

But there are a lot of financial interests in Apple now (like this pension fund) and they’ll pressure Apple into building “criteria for the CEO position” (and probably even conducting a  CEO search).  It’s telling that Jobs himself had to insist on Tim Cook getting a big bonus for running the company in 2009. 

So the finance guys want a succession plan and Jobs is smart enough to know he can’t let a plan be devised lest it derail his hand picked successor. 

That in mind I want you to consider something.  This is the first time Jobs’ absence has been open ended (as brought to my attention by Jonathan Geller of BGR) .   Here’s Mr. Jobs’ 2004 letter…

I will be recuperating during the month of August, and expect to return to work in September. While I'm out, I've asked Tim Cook to be responsible for Apple's day to day operations, so we shouldn't miss a beat. I'm sure I'll be calling some of you way too much in August, and I look forward to seeing you in September.

And here’s the text from his 2009 letter…

In order to take myself out of the limelight and focus on my health, and to allow everyone at Apple to focus on delivering extraordinary products, I have decided to take a medical leave of absence until the end of June.

In both cases he gave a specific date when he’d be back.  This time he didn’t.  Important when you realize this is also the first time he made a specific point of saying he’d stay on as CEO.

Having laid all that out let us look at the position Steve Jobs has built for himself…

-  He’s still CEO so he can come and go as he pleases but he’s on leave so he can get out of any task he doesn’t specifically want to do 

-  His apparent hand picked successor is now running the company for an indefinite period of time and establishing himself as the norm (e.g. years from now Jobs could step down as CEO and it wouldn’t cause a blip because Cook had already been running the company)

- No one’s going to build a succession plan while Jobs is on medical leave (some journalists are bringing it up but Apple would be committing Stock Market Suicide if they started writing up a succession plan at a time when Jobs won’t detail his health issues)

To me this seems like the perfect scenario.  Jobs gets to be the spiritual guide for the company while not having to maintain a busy CEO’s schedule (which probably is putting a legitimate strain on his health).  While Cook gets to prove himself once and for all.  Everyone wins. 

(and it goes without saying that I wish Mr. Jobs all the best and hope whatever health issues he has, major or minor, resolve themselves as quickly and painlessly as possible)

Edit: One last point I should have made.  From CNN's MoneyBlog...

On Tuesday, Apple will report financial results that are almost certain to shatter its past records. Wall Street analysts estimate that the company raked in sales of more than $24 billion in sales during the last quarter, driven by strong iPad demand during the holiday season.

The rest of 2011 is filled with bright spots. Apple is scheduled to introduce the iPhone 4 on the Verizon Wireless network on Feb. 10. The iPad 2 is on the horizon for this spring, and the new Mac OS X "Lion" operating system is expected to go on sale later this year as well.

When you add to that the successful launch of the Mac App Store and Apple TV's positive sales numbers (still not a blockbuster but selling better than any previous version) you get a company that's in remarkably good shape.  There's never been a better time for Steve Jobs to pull back.

Addendum (10/5/2011): Steve Jobs died today (less than a year after I posted this).  But I'd like to say I'm still proud of this piece for two reasons.  

1.   Because it does lay out a masterful plan on Steve Jobs' part.  Even if he was sicker than I thought that doesn't take away from the brilliance he showed in acting at the perfect time throughout the attempts to subvert his chosen successor.  

2. Because I believed in the Magic.  If my faith in Jobs' amazing abilites made me overlook how sick he was I could think of no better reason to be foolish.  

R.I.P. Mr Jobs.

Jon Evans is a software engineer that sometimes writes for TechCrunch.  He has a piece today entitled Can Google Get Its Mojo Back? where he talks about the decline of Google…

Business Insider’s list of the 15 biggest tech flops of 2010 cited no fewer than four from Google: Buzz, Wave, Google TV, and the Nexus One. Bizarre errors have erupted in Google Maps. Many of its best engineers are leaving. Influential luminaries like Vivek Wadhwa, Jeff Atwood, Marco Arment and Paul Kedrosky (way ahead of the curve) say their core search service is much degraded from its glory years, and the numbers bear this out; after years of unassailable dominance, Google’s search-market share is diminishing—it dropped an eyebrow-raising 1.2% just from October to November—while Microsoft’s Bing, whose UI Google tried and embarrassingly failed to copy earlier this year, is on the rise.

Even their money fount, AdWords, is problematic. An illustrative anecdote: I recently experimented with a $100 free certificate for my own pet app, and found my ad got stuck “In Review” indefinitely. According to users on AdWords’ discussion boards, this is common, and the only way to fix it is to file a help request. I did, and the problem was soon repaired—but what happened to the speedy algorithmic solutions for which Google is famous?

The general tone on the AdWords forums is exactly like that on those devoted to the other Google service I use a lot, App Engine: users on both frequently complain about the way Google neglects and/or outright ignores them. I like App Engine a lot, but it’s prone to sporadic bursts of inexplicable behaviour, and some developers are abandoning it because of Google’s perceived reluctance or inability to fix its bugs and quirks.

He hits on a lot of good points but framing the problem as “Google getting something back” is a mistake in my opinion.  I think Google had a halo around them up until now which hid a flaw that’s always been there.  Namely their lack of a Customer-Centric Focus.  

Google rose to prominence on a Search Engine which isn’t really a consumer product.  It provides information to a consumer but it’s incidental information.  No one calls a Search Engine’s tech support because they can’t find something. 

So from the beginning Google’s culture wasn’t customer centric.

At the same time Google developed a philosophy that gained them a cult following.  Between making everything free and “doing no evil” Google managed to accumulate a group of fans who would defend them no matter what.   In doing so they insulated themselves from a lot of customer complaints because their early adopters were so in love with them. 

So they charged into the consumer market.  Development tools, Office Apps, Social Networking and so on.  Suddenly Google was in competition with customer centric companies like Microsoft but with virtually no support mechanisms to speak of. 

Google’s idea of support literally seems to be support forums.  Support forums their employees don’t seem to visit.

I remember one incident a while back when Google decided to strip Google Apps of its ability to edit the raw html of a file.  No warning or explanation was given.   The forums were flooded with questions and complaints (too many to have been missed by Google) and yet no answers ever came.  This is not a unique experience.  Look in any Google forum and you’ll see loads of support requests that simply go unanswered. 

This problem extends to features.  The problems with their search engine are hard to solve because there are too many out there for the company to find.  But if Google just had a mechanism to listen to their customers they could allow those customers to find the problems for them. 

Proof of this came very recently.  Jeff Atwood had a problem with people scraping his content and passing it off as their own.  These sites then used SEO to show up higher in the Google rankings.  But Mr. Atwood’s blog is read by Matt Cutts of Google so the problem was fixed in a matter of DAYS.  There’s no reason Google couldn’t do that for other customers.

No reason except the expense.

That’s where we get to the final part of this problem.  Google is a public company that’s been built around high margins.  Them acknowledging they need a support infrastructure now would be disastrous.  It would send their stock price tumbling downward and stunt their growth for years (which in turn would cost them even more valuable employees).

This puts Google between a rock and a hard place.  They either go on a massive hiring spree to build a support structure and sacrifice their incredible margins or they ignore the problem and allow their brand to continue deteriorating.  It’s not an easy choice to make.

Before anyone calls me a ‘hater” I’d point out my full throated defense of Google ChromeOS a  mere three weeks ago.   Before travel plans interrupted I even had a mini-debate with Paul Buchheit  on Hacker News which is pretty brave if you think about it.

(let’s be honest, if you’re debating web apps with the creator of gmail the odds of you being right aren’t great)

Bottom Line: I believe in the Web App vision.  But this doesn’t surprise me…

In December, after months of anticipation and discussions with third-party developers, Google finally unveiled the Chrome Web Store — an online portal that lets users purchase and ‘install’ web applications like TweetDeck, MOG, and hundreds of others. It’s one of the first platforms that helps developers monetize web applications using a unified payment system (in this case, Google Checkout), and it’s going to be deeply integrated into Google’s Chrome browser. Unfortunately, as far as we can tell, nobody is really buying anything on it.

The cogent point is here…

There are some free applications that are getting far more attention, like Quick Note, which has 8,000 installs this week. Obviously it’s common for free applications to get more installations than premium apps, but the discrepancy — 65 paid installs versus 8,000 free — seems pretty steep.

So what’s the problem?  People don’t pay for the web and Google Chrome Store is just the web repackaged. 

If Google wants to have a “platform” they need to differentiate it from the web.   Platforms have common interface elements, common storage locations and ways to talk to each other.  Apps in the Chrome store have none of that.

To give an example,  Aviary is a graphics editing program in the Chrome Store that is really very neat.  But when you get into it the app looks nothing like Google Docs.  When you save a file you have to register with Aviary and save the file on their server (separate from your Google docs).  And don’t even think of copying a picture from Aviary to Google Docs using the much maligned “Web  Clipboard” because it won’t work. 

So what happens if I want to switch to another web based photo program in the future?  Because there’s no standard for storage in Chrome Apps I’m going to have to deal with getting them out of Aviary somehow. 

The same is true throughout the Chrome App Store.  These “apps” have absolutely nothing in common.  They’re just categorized web pages .  So People don’t accept them as any different from a normal web page and almost no one is willing to pay for access to a web page. 

It’s time for Google to go back to the drawing board.  They need to establish some very basic guidelines and hold the store apps to those guidelines.  Otherwise not only will the Chrome Store fail but ChromeOS will be right behind.