Apple 2.0

Covering the business that Steve Jobs built

Behind Microsoft's 'Apple tax' gambit

April 10, 2009: 2:56 PM ET

What price cool?Microsoft (MSFT) raised the stakes in its anti-Apple (AAPL) PR offensive Thursday by issuing a 10-page "white paper" that puts a price tag on what it calls the "Apple tax" -- the premium paid by consumers who choose Apple computers over those that run Microsoft Windows.

It's a theme that was first raised last month by CEO Steve Ballmer, who told a Business Week-sponsored forum last month that Mac customers were paying an extra $500 to get the Apple logo on what is essentially the same hardware. And it has been repeated with slightly more subtlety every week since in a series of 60-second TV mini-dramas in which ordinary price-conscious Americans choose PCs over Macs. (The third is pasted below the fold; for more on the first two, see here and here.)

But the white paper, written by Endpoint Technologies Associates' Roger L. Kay and entitled "What Price Cool," goes a few steps further. Not only does it slap a considerably higher tax on that Apple logo -- $3,367 for two computers over five years -- but it turns up the rhetorical temperature to something approaching the boiling point.

The white paper is available here as a pdf file and summarized as a faux U.S. tax form by Brian LeBlanc at Microsoft's official Windows Blog.

"What Price Cool" is a curious document. "White paper" is a term of art in business and politics for an authoritative report that lays out facts clearly and concisely to help readers make informed decisions.

But no one would mistake Roger Kay's white paper for objective statement of the facts. It's a tendentious piece of work, dripping with sarcasm. Take, for example, this paragraph from the section that briefly summarizes the history of personal computers:

"All during this time, even in the darkest of ages, when Apple hung onto a 2% share with its fingernails, the Mac community held vigil.  Their inner belief was sheltered against the cold wind  of market sentiment by secret thoughts that they were, well, better.  Fewer crashes, less clutter, and, as time wore on, fewer viruses.  But it was more than that, the Mac was just more elegantly done, nay, cooler."

Kay seems obsessed with what he perceives as Apple's "cool," a word he uses in various forms 25 times -- an average of 2.5 times a page -- culminating in his conclusion:

"Macs are pretty cool, Jack thinks, but at a $3,367 premium over five years?  Now, that's not cool!"

It's an odd approach, especially given the fact that the Apple premium is quite real. Macs do indeed carry higher sticker prices than PCs with comparable specs. You would think that for an industry watcher with Kay's experience, making side-by-side comparisons would be relatively easy. But as several of Apple's defenders have pointed out, Kay seems unable to keep his fingers off the scale.

Technologizer's Harry McCracken, who worked with Kay at IDG and describes him as a "friendly acquaintance," says that Kay's spreadsheets are riddled with errors, comparing old versions of Apple computers to current versions of Windows PCs. (McCracken has done his own cost comparisons and come to very different conclusions.)

Similarly, Ina Fried at CNet found several instances where Kay added in the cost of software on the Mac side -- for example, $70 and $149 for Quicken and Office, respectively -- but not on the PC.

In his defense, Kay says that he took great pains to make sure his charts were correct. Some of the errors, he says, were due to changes Apple made in its specs after he wrote his piece; others to Microsoft's in-house production team grabbing the wrong versions of his charts.

"I don't think the main theme is destroyed by what is essentially a production error," he says. "But this is the methodology of the Mac Brownshirts. They find a discrepancy and use it to invalidate the entire thesis."

Kay stands by his piece, and his rhetoric -- in particular the games he plays with the word "cool" -- although he admits that he would not have called what he wrote a white paper. "White papers are boring. You have to have pity for the poor reader."

"I actually believe most of this stuff," he says. Although he adds that Microsoft did call for changes in his text -- particularly in those place where he praised Apple. For example, he wrote in his original draft that Windows "copied" Apple's graphical user interface. That raised legal red flags for Microsoft's lawyers. In the final version, the verb was changed to "followed."

Perhaps we shouldn't be surprised by any of this. After all, Microsoft paid Kay to write this paper and it's unlikely to have released anything it disagreed with.

Kay, for his part, is hardly a disinterested observer. He's been consulting for Microsoft since 2006, offering among other services, according to his webpage, "message tuning, spin management, press release support [and] high quality writing."

In the past he has written, in reference the Mac's apparent immunity from computer viruses, that "those living in shiny houses of self-righteous glass often end up surrounded by shards of their former sanctimony" -- predicting (incorrectly so far) that Macs and iPhones would soon be infected.

And he is often quoted by the press as an independent Apple expert, as when he said this to Wired about Steve Jobs: "I think he has cancer. They talk about digestive this and digestive that, but ... forget all the buzz you're hearing. Just look at the photos."

Kay's notebookYou can read more of Kay's previous work here and here. For me, one the most revealing pieces is his paean in Business Week to his 10-year-old Hewlett-Packard (HPQ) Jornada notebook, which he dusts off every year to take notes at the Consumer Electronics Show in Los Vegas. "Every time I open this device," he writes, "I of course have to endure the mockery of my peers."

Now that's not cool.

See also:

Below the fold: the third Laptop Hunter ad.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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