BusinessWeek: Apple’s niche is safe; Mac maker ‘innovation leader’

“Going by the numbers, Apple Computer Inc. (AAPL ) appears headed for trouble again. While CEO Steven P. Jobs engineered a remarkable comeback after retaking the helm in 1997, one-time expenses, such as plant closures, have pushed the company into the red for two quarters running. For the one ended Dec. 28, Apple reported a net loss of $8 million on revenues of $1.47 billion, vs. a profit of $38 million a year ago. Worse, Apple’s share of the U.S. PC market is hovering around 3.5%, according to IDC analyst David Daoud. That’s down from 13.4% a decade ago and 4.2% in the year after Jobs returned.

But fear not, Mac faithful: Apple may never again pose a threat to Microsoft Corp. (MSFT ) and its PC allies, but its niche is safe. In the $160 billion PC market, a 3% market share should be enough to fund Apple’s research-and-development push. So long as Macolytes keep paying Apple’s high prices, its 28% gross margins should far exceed PC rivals–especially if it keeps expanding its portfolio with non-PC products such as the iPod MP3 music player. ‘The battle for market share ended 10 years ago,’ says UBS Securities analyst Don Young. ‘But there’s a place in the PC world for an innovation leader,'” writes Peter Burrows for BusinessWeek. Full article here.

30 Comments

  1. Actually, Macs ARE more expensive – even Apple will acknowledge that fact. (But we all know you get what you pay for). Secondly, the write meant non-“Personal Computer” not “Intel Based Hardware”, as the moniker “PC” has come to assume.

  2. I think that the perception about Mac’s being more expensive is finally going away. With the switcher’s ads and more people visiting the Apple stores, they are getting a better idea on why PC’s are “cheaper”. Some get it and right away buy a Mac and scrap their bug and virus ridden PC. While others are still only interested in price and scoff at having to pay a few hundred dollars more. Remember the cost difference between Mac’s and PC’s has come waaay down since the orignal Macintosh and the nock -off clones came out. And with Dell and M$ being hammered in the market like it was on Friday, this could be a good year for Apple.

    Just remember the moral of the “Emperor’s new Clothes”

  3. “Macs are more expensive” – is a myth not a fact. As with any product line there are competative products and not so competative products. If you campare Apples notebook line you will see that it compares favorably to the PC market. Infact the new 12 inch beats the a competitors comparably configured 12 inch PC price by several hundred dollars. Apple might not compare well when you look at the 17 inch laptop or the high-end G4 towers but then again there are features in these that you can’t find in main stream PCs.

  4. PowerMacs ARE most expensive and underpowered compared to Windows in non-altivec processes/apps.
    (maybe with a little luck this will change but for now its the truth, 300$ buys you a cheap PC (with cheap pc parts)700$-800 will buy you a half decent pc with decent parts and it will outperform the low end mac.

    The Labtops are a bargain by comparison easily meeting or beating comparitive wintel labtops.

    The only honest reason I can see in going with a mac desktop any more is if you are doing something in altivec, or if you just are an applefanatic.

    My pervious labtop was an apple, and so will be my next one.

    Though the PowerMacs will have to improve a little bit more to convice me to move up.

  5. Apple’s fastest G4 deskstop will cost you $3300, without a monitor. In almost every category, the apple store won’t let you reduce this base price. Factoring in at least a $200 display, the G4 will total you $3500. And options will cost you extra.

    You can get PCs with up 3 GHz processors (a speed that matches or sometimes even beats the pants off the fastest G4s in most benchmarks) for $2000 and in some cases even lower. Most of these $2000 systems also come not only with monitors, but with speakers and other add-ons, such as cheap additional RAM or tricked out video/sound cards. (You may get nailed if you want DVD burning though). But generally speaking, all of this can be had for around $2000. $2500 at the most.

    Macs are more expensive. End of story.

  6. I think you are all confused by the way he worded it. He isn’t saying iPods aren’t for the PC. He was trying to say they are a non-PC (personal computer) product. In context he is saying Apple is primarily a seller of personal computers but they are expanding their business with other products in different categories, ex. the iPod, a digital music player. He probably should have put it better though, to avoid confusion.

  7. article written by another peeceer. all you have to do is put a new mac next to a new wintel machine and you will know instantly why the pc’s are cheaper! buy cheap you get cheap! a buddy of mine just bought a new wintel unit for 1 grand and i cant tell you the problems or the cheapnest he has discovered! this HP didnt even have a videocard nor agp slot! only pci! Mac software rules period! If you want the most for your dollar the mac ends up winning. sure you may have paid more but in the end you have gotten way more!

  8. And when in the world are writers/pundits going to forget that entirely irrelevant and worthless number known as “market share”? Who the freak cares what percent of sales went to Mac vs. Windows? If any software author worries about that, they deserve to fail! The *important* quantity is INSTALLED BASE! The press generally make the false conclusion that you can multiply the 3% market share number by the estimated installed Windows base and get something other than garbage. Macs, as a rule of thumb, have twice the useful lifetime of Wintel PCs. (This, in fact, may UNDERestimate things.) So, estimates of the installed percentage of Macs/Wintels run in the 7-10% range.

    [And since other studies in the past have shown that Mac users are typically proficient with 10-15 applications, vs. (IIRC) 3-5 on the Wintel side, this means that each installed Mac potentially represents 3 software purchases to 1 on the Wintel side.]

    And, of course, this doesn’t even count the Linux contingent… So the tired old thing about Wintel being 95+% of the market is just plain wrong, by a large margin.

    So, why do allegedly knowledgeable writers continue to call all their other conclusions into question by repeating such an easily disproven myth??

  9. We Mac users allow our love of the platform to get in the way of reason. Let’s acknowledge the platform has its shortcomings. One of them is price.
    Up until recently, Mac prices had finally leveled off, and were a better value compared with PCs. But now, when it comes to the entry level, Macs ARE AGAIN more expensive. I just specd an entry level Dell and the iMac G4 with similar features. I even upped the Dell to Win XP pro (vs. home edition). The only MORE Macs come with is Firewire, an add-on in most entry level PCs. When similarly configuring a Dell, the price still came a full 500 dollars below the iMac. In addition to added-on Firewire and CD-R, the Dell had a 15″ LCD, speakers, Ethernet, video and photo editing, jukebox software and a 1-year warranty. (The Dell also came with a floppy, which have not gone away. I work in IT and get plenty of requests for USB floppy drives from Mac users).
    Ease of use is difficult to argue, as is cost of ownership. Folks who are unfamiliar with Macs often find them difficult to work with, just as Mac users new to PCs. Both platforms have interface shortcomings.
    We Mac users would do a service to our beloved platform and company of choice if we were a bit more honest with ourselves. Informed consumers drive better products.
    As the article states, the Apple niche is innovation. But it does not say how difficult it is to STAY innovative and on the cutting edge. Everyone now offers Firewire, USB, Ethernet, CD-R and even DVD-R as cheap add-ons. It is time for some new, REAL innovations. Rendezvous, Safari, Firewire B, and 802.11g are nice, but logical steps forward: smarter, faster connections, efficient, small clean apps. Apple needs to keep blowing the top off things. Firewire was the last real innovation Apple has put forward; it was and is undeniably great and useful, truly revolutionizing Video. But it is a tough act to follow. What is more, Apple has long lost its speed title. We Mac users are now the snail crossing across the screen in the old commercial as the Pentiums raw (albeit dumb) horses blow by us with 3GHz and a 400 MHz system bus. In-spite of dual processors, quartz extreme and a pumped L3 cache.
    Apple needs to reclaim the speed crown, or at the very least give us something competitively faster. We also need the next revolution, new ground must be broken to keep the high prices justified. Currently paying a 500-dollar premium for ease of use and great looks is not cutting it.

  10. I am a long time Mac user. I am also the leader of a Mac User Group.

    1. The article did not say that the iPod did not work with Wintel machines, it simply pointed out that Apple has moved beyond strictly being a PC (personal computer) product only company. The iPod is not a PC, it is a personal entertainment device, like a walkman. It’s simply a different market.

    2. Please drop the argument about price. Apple is more expensive, always has been, and may always be. The point is moot. In the laptop arena Apple provides a much higher value to price ratio and can justify it’s prices. It doesn’t help that most PC users couldn’t care less about Gigabit Ethernet, and Firewire (two of the only Apple items, not available on most stock PCs, though Firewire is becoming more common). You do get what you pay for in terms of quality. But, having worked in Dell environments, I can say that they have mastered the quality and price arena in the Wintel world. That’s why they are burying everyone in that market.

    3. Due to the widening gap between Intel/AMD and Motorola processors, Apple is suffering a speed crisis – that is why you have seen no bake-offs in; at least, the past three MacWorlds. Apple is trying to innovate around this speed crisis. This crisis is real. It also doesn’t help the purchase cycle. I own a Graphite G4/400. Right now, I should be looking at replacing it. Other then Games & Photoshop, I have no reason to upgrade. The difference in speed doesn’t justify the upgrade.

    3. Games sell computers, and Apple has always dragged behind in the area. I think it has improved in some ways, but the reality is that most PC games never make it to the Mac, or do so many months after the PC version does. Blizzard is the exception to this rule, but even they had a delay when Starcraft came out.

    4. Enjoy the fact that you are not a lemming. Revel in the fact that you use a better computer. Get over the price issue. Macs really are better and easier to use. That’s why when my wife and I split, she got the PC and I kept the Mac (I know who got the better end of that deal!).

    5. This is not a religion, it is a lifestyle. Blindness to reality is not a good thing. I love my Mac, and I hope they are around for as long as the Personal Computer is a viable product.

  11. Until we come to an agreement about the definition of a computer’s cost or speed, there will never be a solution. If you look at JUST the box and use the CPU clock speed and the price tag as your criteria, then Macs are slower and more expensive. But, if you compare a computer’s speed as actual application running speed, time to learn the OS, ease of use – half as many clicks to get the same information, crashing/rebooting time, reading thick manuals or numerous web pages; and computer cost in terms of a Mac lasting 50% longer before going obsolete, the loss of productivity due to the previous speed issues, requiring 1/3rd of the IT staff, or free server software with hardware; then Macs are clearly the best bargain. If the ONLY thing you look at are the stickers on the box, then you will never know the REAL value of owning a Mac.

  12. Stickers be dammed… I am paid to support both platforms in an Academic environment which sees very heavy use, especially in design apps. Both macs and PCs are complex machines and BOTH are prone to problems. I spend as much time servicing macs at work, they break down just as much. Yes, I am fluent in using both platforms… and if anything am a bit more mac saavy. I prefer the Mac, at work (G4 dual 1ghz, gig ram) and at home (15″ iMac g4 800, 768 supredrive) but I am realistic. The PC, while not as exciting or elegant works ok. And, uhm, folks… for 3D, Flash, and compositing, it aint half bad and is LOTS FASTER. It is my opinion that the price differential is currently disproportionate to function, reliability and life expectancy.
    I have plenty of old PCs on my network they work just fine. And my crummy old homeade pentium II 233 at home still works fine as well, I use it for QA testing work. (yes, I got a PC too).
    Mac user’s should avoid lemming like behavior and demand more from their favorite company, they CAN do better. I have to make purchases here at work and it is harder and harder to justify the Macs significant cost difference… the old arguments just don’t hold water anymore… The PC has come a long way. The interface usability gap is narrow or non existent. The speed gap is widening in the PC’s favor month to month. Yet macs cost more. If you don’t acknowledge this problem and insted sit happily by in blissful ignorance, Apple has no reason to be truly innovative and your chosen “lifestyle” will eventually end.

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