John Gruber has written another insightful article on the nature of the Mac vs. Windows (or perhaps one might say 'generic PC') markets.
There is much in this article about playing the 'cheap' angle, and a comparison to Wal-Mart as such:
They’re a software company whose primary platform no longer appeals to people who like computers the most. Their executives are either in denial of, or do not perceive, that there has emerged a consensus — not just among nerds but among a growing number of regular just-plain users — that Windows PCs are second-rate. They still dominate in terms of unit-sale market share, yes, but not because people don’t recognize Windows as second-rate, but because they don’t care, in the same way millions of people buy metric tons of second-rate products from Wal-Mart every hour of every day.
That’s the business Wal-Mart wants to be in — selling a zillion cheap low-margin items and turning a profit on volume. That’s not the business Microsoft is in.
There is more to this argument of 'cheapness', even. Most people, even those who actually regard cheaper as better value (my in-laws take this to extremes sometimes) actually aspire to the good stuff. They may bring home cheap crap, but more often than not it'll be the cheap crap which is made to look like the expensive, posh stuff. For instance, if they don't buy a Sony Bravia TV, they might well buy a Goodmans or Durabrand with the same pale red brushed-metallic finish. They perceive the Sony TV as the best (or among the best), and like cargo cultists their 'value for money' choices usually echo that perception– it looks like the popular high-end model but costs less, so therefore it's 'good value for money'.
By pitching themselves as the 'value' brand, Microsoft is actually reinforcing Apple's position as the high-quality brand; they are showing people that Windows-based computers are not the targets of aspiration. This just serves to cement them into the same perceived place as 'generic' brands of all kinds: they're cheap, they're low-quality, but they get the job done, so long as you're not fussy. This is not the position of a so-called 'market leader'.
There's a second point to take into account here too: people may go and buy cheap stuff from Wal-Mart, but the perception is that because it's cheap, if it breaks it can be replaced easily and — of course — cheaply. Buy some plastic garden furniture from Wal-Mart for $70, it might not last a long time but it'll only cost $70 to replace. Microsoft doubtless likes that idea because since each computer sold generates a Windows sale for them it means that they will make money every time someone gets another. And sure, for a few hundred bucks a year, people might well be able to afford that. But here's the rub:
People's data is NOT cheaply replaceable.
If I have a computer and I choose to upgrade to a newer model, then I can get that new model and transfer stuff. If my garden chair's back legs snap off I can go and buy another chair. But the two together don't work: if my computer dies or falls apart completely, I can buy a new computer but I don't have my data any more– at least not without potentially costly data recovery services.
Microsoft is preparing for this somewhat with its Windows Live offerings, selling people on the idea of storing their important data on the web. They go so far (rightly so, in my opinion) to integrate this into their applications, and to encourage the use of pure web applications to reinforce this bond, this idea that the computer is just an access node, and the data is elsewhere, separate, and above all safe.
But that doesn't cover everything. I'm not about to use a web-based image editor to do what I could with Photoshop. Not even for what I could do with iPhoto. The issue there isn't about capability, it's about the amount of data. I've got gigabytes of photos. Fancy working on those over your internet connection? No, me neither. And so, for the moment at least, we're tied to our physical computers for storing and working with the products of our digital lives— increasingly so, as our lives become increasingly bound to our capability to manipulate the data that surrounds us (we are what people perceive us to be, and today more people perceive us by the data we create than by our physical actions or habits).
Microsoft evidently employs people who have the right ideas, but the management just can't decide what's most important, so it all comes out in a mush– as though the whole were as great as the sum of its parts. But some of those parts cancel one another out. The more web-based the world becomes, the less reliant it is on Windows on the desktop. To sell lots of computers, you need people to keep buying new ones. To entice people to buy new things you need to make things which they aspire to own. To be the target of aspiration, you can't be the nearest, simplest option.
Microsoft needs to pick one thing to be good at, and be good at it. They need to focus.
I just don't think the current management will ever realize that.