Apple's new features hit Microsoft where it hurts

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Apple CEO Tim Cook, speaking at the 2014 WWDC, noted that a greater percentage of Mac users upgraded to the most recent software version than Windows users.

“It starts with dreaming the impossible, of can we design and build a device that takes the best of the tablet and the laptop … That's the device that we want to create.”
-Microsoft CEO Satya Nadella, May 20

“We believe you should use the right device for the moment.”
– Apple senior vice president Craig Federighi, June 2

Apple (AAPL) CEO Tim Cook spent a lot of time dissing Google’s (GOOGL) Android at the company’s developer conference this week, but he had Microsoft (MSFT) in his sights as well.

s MacBook Reuters

It wasn’t as obvious. Cook made just one demeaning reference to Windows in the June 2 keynote presentation, noting that only 14% of its users upgraded to the latest version, compared to 51% of Mac users. “Need I say more?” he joked. He was similarly oblique at a new product announcement last October when he mocked Microsoft's purchase of Nokia.
Neither compared with Cook's lengthy rant on Monday against Android, which ended with a quote characterizing the world’s most popular phone operating system as a “toxic hellstew.”
But a quick review of the major new features Apple decided to add to the upcoming versions of its software for iOS devices and Mac computers shows just how top of mind competition with Microsoft remains.
The seamless factor
While Microsoft is trying to convince customers to buy a single device to meet all their needs, perhaps a new Surface Pro 3 tablet, for example, Apple is taking the opposite tack. After all, the company makes almost all its profit on hardware sales. But Apple engineers are cleverly seeking to make connections between iPhones, iPads and Macs so customers still get the seamless experience Microsoft is promising. No need to compromise on a device that does everything in a mediocre way — choose multiple devices, each the best for their size, while your data slides effortlessly among them, Apple argues.
A new feature called Handoff will let a user start an email on their iPhone, for example, and pick up right where they left off on their Mac computer. Or, a spreadsheet on a Mac will be one click away when the user shifts to their iPad. And there’s no wonky setup or configuration process – as shown in the demo, the handoff just works, in typical Apple fashion.
Similarly, Apple expanded its Airdrop feature that lets users share files to include Mac to mobile device transfers, again with no setup required. And new options for sharing data and purchased media among family members will make it more rewarding to keep multiple device purchases all in the Apple family.
In a blow aimed at both Google and Microsoft, Apple reversed course on cloud file storage and restored users' ability to control exactly which files to store and how to organize them. Apple eliminated its similar iDisk product a few years ago and users were limited to storing files separately for each app. Since then, Microsoft’s OneDrive, Google’s Google Drive, Dropbox and others have continued to flourish. So Apple’s new iCloud Drive offers the same features, starting with letting users save any file and have it appear on all their devices and computers.
Slashing prices
Apple also finally cut its previously outlandish prices for extra storage to meet or beat competitors. Adding 50 gigabytes, or GB, currently costs $100 a year. Under the new plan, 200 GB will cost only $48. That’s half what Microsoft charges for the same storage. Google charges $24 for 100 GB or $120 for 1 terabyte (1,024 GB).
Cloud file storage is one of Microsoft’s critical opportunities to leverage its huge Office user base. Although the company is finally making iPad and Android versions of Office, both offer only one choice for cloud file storage – Microsoft’s OneDrive. Once the billion or so current Office users have all their files stashed in OneDrive, they'll be more likely to stick with Microsoft's other products, so the thinking goes. CEO Satya Nadella’s new openness policy applies to hardware, not the cloud.
To be sure, Microsoft appears much less threatening to Apple than Google right now. While Android has greater market share in phones and tablets than Apple, Microsoft’s Windows phones and tablets remain a footnote, with less than 3% share.
Still, new CEO Nadella seems to be making all the right moves to get Microsoft back on track. While reviewers didn’t universally love the Surface Pro 3, it’s a huge improvement over earlier models. And the company could be a sleeping giant in mobile if it figures out how to leverage its customer base of more than a billion people who use Windows computers and the Office software suite.
But what about Microsoft’s Bing search engine? It seemed to gain greater prominence as the default in Mac OS’s Spotlight search and iOS’s Siri Web searches.

Those moves appeared to be designed to create more of a counter-weight to Google, the dominant search provider, than an effort to bolster Microsoft overall. And as Apple makes almost all its money selling devices, revenue from search isn’t all that important. Better to ensure no one player dominates, or better yet, play a couple of giants against each other, sparking a costly arms race.

Meanwhile, Apple will try to make its ecosystem of devices and software all the more appealing. “Apple engineers platforms, device and services together,” Cook noted at the end of the keynote presentation. “We do this so we can create a seamless experience for our users that is unparalleled in the industry. This is something only Apple can do.”

Or, at least, so Cook hopes.