I Know Apple’s Secret Strategy To Beat Microsoft.

Apple’s secret strategy is slowing being unveiled with each product release and upgrade.

OS X. Intel. iWork. iLife. iPod. iPhone. Safari. iTunes. QuickTime. Revenue. Profits. Market share. Beat Microsoft.

Apple CEO Steve Jobs tagged his WWDC keynote presentation with a look at Safari on the iPhone. More directly, the Safari engine—the new tool for developers to write iPhone utilities.

I hesitate to call them “applications” because they’re not. They’re utilities and not much more than Dashboard Widgets. While there’s some disappointment here, Apple simply unveiled another component of the strategy to cut Microsoft. Again.

There’s no doubt about it. The desktop wars are not over. Years ago, Apple bet the farm on OS X, which, as Leopard, is delightfully superior and more enjoyable to use than Windows’ laggard Vista.

Along the way, sales meandered, profits were nominal, but Apple got lucky. The iPod came along and the company was ready to take advantage of a market crying out for a classy standard.

In the meantime, Apple wasn’t just sitting around waiting for the next great thing. A natural extension of the iPod is the iPhone, and by most accounts, there’s nothing like it on the market—perhaps another big hit for the Mac maker.

The Mac? The move to Intel chips and opening the Mac to be able to run Windows now appears as a set of genius strokes.

But there’s more to this than meets the eye. Much more.

Apple is out to cut, slice and dice the Windows maker wherever possible—in markets that Microsoft holds dear but performs poorly. Music and portable players. Apple owns the market.

Movies, TV Shows, Music Videos. Apple’s iTunes Store is leaps ahead of Microsoft and their now suspicious player partners.

How about the living room? Microsoft’s XBox has lost billions and is struggling to compete with a more nimble Nintendo and a re-energized Sony. While Apple won’t get into games just yet, AppleTV has become an easy and inexpensive entry point for more Apple products that Microsoft can’t deliver.

TV show and movie rentals will show up on iTunes, possibly by Macworld 2008. Apple owns the download market and is making strong inroads to the living room.

Any business gains success with a few big numbers. For Apple, the big numbers are in margins and units. Margins are high and units of all products are growing fast. Apple may sell 50-million iPods this year.

Next year, the company may sell over 10-million iPhones. This is all territory that Microsoft covets but hasn’t performed well. In fact, about the only markets where Microsoft dominates are Windows and Office. What else?

What about the iPhone? Apple will install Safari on each phone for wireless web browsing. The Safari engine will be able to run a new breed of application, actually, more of a utility, called “web apps”, similar to Google’s web tools.

This Safari engine is what’s being given to Mac developers for the iPhone, but many of us believe the strategy goes beyond just creating utilities for the web. Enter Safari for Windows.

Make that Safari for Mac, Windows, and iPhone. By Macworld 2008, there will be hundreds of portable utilities that adhere to web standards, so-called web applications that look and run better in Safari than any other browser on any platform.

Microsoft gets left out in the cold again. Internet Explorer’s browser market share will continue to erode, as will Microsoft’s Windows OS market share.

They’re not in critical trouble, of course, but it is a trend they cannot reverse but cannot ignore.

At every turn, save one, Apple has cut Microsoft to the point of bleeding. PC market share. Portable media players. Online media—music, TV shows, movies. Operating system market share. How?

By a combination of persistence, luck, determination, and effective resource allocation, Apple has proven to be fast, nimble, and makes few mistakes.

That description is almost the opposite of what today’s media pundits are using to describe beleaguered Microsoft. The desktop wars are not over. The battleground has merely shifted to include the pocket, the living room, and minds and hearts of digital technology users.

Microsoft is losing on every front—except games and the enterprise, areas where Apple remains a tiny player. For now. Using the highly touted Cider, games will be the next area for Apple growth. Microsoft won’t lose the game market, but Apple will gain share because many popular games will run on Macs, though not necessarily using OS X. That’s the beauty of Cider.

What’s left? The enterprise. Business. Apple has niches and quality products, but no share beyond their comfort markets. The enterprise is ripe for gains that will come from OS X Leopard Server and XServe. Increases in market share won’t be quick or heady numbers, but slow, steady, deliberate gains—at the expense of Microsoft, not Linux.

Across the board, Apple is marginalizing Microsoft by quickly bringing to market better, more capable, more usable products—and they’re doing so with gross margins that are the envy of the industry. With the exception of games and enterprise, Apple has captured the all important, trend setting mind share.

The past 24 months have shown that Apple’s secret strategy to cut and hurt and embarrass Microsoft is a success and no longer so much of a secret. Nearly a decade ago, Steve Jobs set out on a quest to rescue Apple, make the company healthy, strong and competitive, and to get back the respect what was lost over a decade earlier.

How will Microsoft respond?