“After signing a peace treaty eight years ago, the friendly rivalry between Apple Computer’s Steve Jobs and Microsoft’s Bill Gates is suddenly not so friendly anymore. During this week’s MacWorld trade show, Jobs is expected to unveil a low-cost Mac pre-installed with a word processor and other office software – a direct assault on Microsoft’s core business. Online rumors say the new G4 machines will cost about $500, but will lack a monitor,” Mary Huhn reports for The New York Post.
“Along with low-cost flash-memory iPods and an iPod-compatible Motorola cellphone, it’s also rumored Jobs will introduce iWork ’05, an upgrade to its own AppleWorks productivity suite which would compete with Microsoft’s Mac Office 2004,” Huhn reports. “Now with Apple’s update to its aging AppleWorks, it gives home consumers one less reason to buy Microsoft Word for Mac. The software could cut deeply into Office for Mac sales, said Joe Wilcox, a senior analyst with Jupiter Research. ‘Consumers aren’t interested in productivity suites. They only want word processing.'”
Huhn reports, “The on-again, off-again rivalry is one for the record books. ‘Apple and Microsoft have an unusual relationship,’ Wilcox said. ‘Microsoft is the largest Mac developer and had its first application success on Mac with Word and Excel.’ Even after the relationship derailed two years ago, Microsoft and Apple ‘kissed and made up again’ Wilcox said. But, now the dust storm has kicked up again. ‘The musical deal is definitely a thorn for Microsoft,’ said Wilcox, who explains Microsoft had the infrastructure in place to make a move in musical market place when iTunes and iPod came from out of nowhere. ‘Consumers went to iPod and Apple doesn’t want to share,’ Wilcox said.”
Full article here.
MacDailyNews Take: As we have always said, even as many short-sightedly waved (and continue to wave) the white flag, the war is not over. And, yes, we shall prevail. For the naysayers: In 1929, Ford held just over 61% of the U.S. market for automobiles. GM’s market share stood at just 12%. Ford was thought to be invincible, with GM regarded as a niche auto maker. Probably, some analyst at the time said, “The reality is, long term, GM will always be a niche player.” But, in 1936, just seven years later, Ford held just 22% of the market for new automobiles while General Motors held a 43% share. No company is invincible. Not even Microsoft.
Related MacDailyNews articles:
Apple Computer will own the living room, not Microsoft – January 10, 2005
Cringely predicts $249 Macintosh, would make Apple the world’s number one PC company – January 10, 2005
Webbyswim,
momentum cannot and should not be confused with inertia!
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this post brought to you by the word ‘week’, as in “it’s a good week to be a mac geek!”
I just go with what works and was within reach for me. For a long time, it was a Windows machine. Now I use both. I imagine for a long time to come, I will use both.
Microsoft is probably Apple’s biggest motivation and vice-versa. If either leaves, I imagine we all lose.
I just go with what works and was within reach for me. For a long time, it was a Windows machine. Now I use both. I imagine for a long time to come, I will use both.
Microsoft is probably Apple’s biggest motivation and vice-versa. If either leaves, I imagine we all lose.
MCCRR:
“The problem with your thinking is that it is, as I’ve previously mentioned, elitist crap which makes it seem that you would rather live in a endangered minority ghetto than have Apple back to a healthy 20% installed market share.”
If you declare someting as elitist crap, you should provide arguments. Actually, the current 3% or so marketshare for Apple is very healthy. Apple is debt-free, has about $4 billion in cash, and is on a very strong roll with undertakings like retail stores, iPod, iTunes Store, the new iMac, and more. And its sales are almost $1 billion a month.
It remains to be seen wether a 20% share would be more healthy. It could, but there are also valid concerns that lower average productmargins combined with rising support costs would eat away from the big R&D-budgets. Also, the larger a company becomes, the more it tends to shift from innovation-driven to control-driven. Perhaps Apple can avoid these risks, but these are legitime reasons for wanting a company to be “small” overall, but “big” in a high-margin niche, with customers willing to pay for lush innovation.
I believe further that most people can buy a Mac if they really wanted to. It’s mostly about choice. I don’t spend money on holidays, and drive a cheap second hand car. Thus I can buy a decent Mac. Apparantly, a lot of people don’t put the same value on a good computer, but instead put value on other things that are important to them. They settle with a less adequate, but also less expensive computer. Well, nothing wrong with that, just as cool. I always found it a wise decision by Apple to not pursue this (indeed large) market segment, because of the low margins and the inertia that a very large market segment oftens bestows upon a company.
I see nothing elitist in these kind of considerations, and the Porsche example from Ary is a good illustration of this kind of thinking.
Finally, your ad hominem attack on Aryugeatu is utterly tasteless and totally uncalled for. You provided not a single argument for your ‘elitist’ accusation, and then spent the larger part of your message on something clearly personal, aimed ar Aryugeatu. You can – and should – do better than that, I’m sure.
In my previous post: ‘MCCRR’ should be ‘MCCFR’. Sorry for the typo.
Play devil’s advocate for the moment, MDN’s same analogy can be said for Apple’s current dominance in the MP3 player market.
But I would still rather 7 years of market dominating bliss using Apple’s solutions in my digital life-style than M$’s crapola offereings all of which would have some “plays for sure” label smacked over every square inch of their partners products and packaging because they need to remind consumers that they have a choice.
Bitching, whining bastards!
Keyword “BUILT” as in Apple really BUILT the digital-hub, life-style market, vocabulary, killah products and killah solutions.
I don’t want more people using AppleMacs!
It is like F1 vs nascar in the USA; F1 is not for everyone that is why it has the ‘perception’ that it has.
nuff said
Off topic, but do those annoying advertisements obscure the text in your browser in the article above (at the New York Post site I mean)?
It’s a cheap shot or poor coding.
I say we follow the dream of Douglas Adams and send all advertising people into space to some useless planet (but not Earth this time).
Ton:
3% market share for Apple is as a company is a healthy business, 3% market share for the MacOS as a platform isn’t.
Why? As much as anything, Apple has to to prevent the Macintosh from becoming irrelevant within Apple, given the success of iPod and the “music” division.
At the next earnings call, Apple will announce around $3 billion of sales for Q1/05, with around $1.0 billion of iPod sales and $1.4 billion of CPU sales. WIthin one or two quarters, there is a more than reasonable chance that “music” division sales will exceed CPU sales.
So far so good. But what would happen in the event of a MacOS slump? The board, pressurised by shareholders, may choose to either a) spin out the “music” division or b) get out of the Macintosh business altogether and neither of those ideas bode well for Apple Computer, or the Macintosh developer or user communities.
contd.->
Don’t think this would ever happen? Think again.
Some years ago, Data General pioneered “affordable” fully-featured fibre-channel SAN technology in the form of Clariion. Eventually, sales of DG’s proprietary MV series computers and UNIX-based AV systems (initially based on Moto’s 88K, but latterly based on Intel’s Xeon-based SHV architecture) became so marginal that DG had to accede to the advances of EMC.
Now, DG is but a memory although the Clariion brand still survives (I believe) as EMC’s entry-level storage offering.
Apple is, and it’s worth trying to remember this, [B]a company which exists to find new customers[/B], not to restrict itself to an existing customer base as if it were some kind of ancient priesthood.
xMac could – within five years – create a solid bedrock in Apple’s market capitalisation of around $9 billion (around a third of the current value), and the “music” division will consolidate that market cap with a potential value of around $15 billion.
You, Ary and many others may not like sharing the Apple brand with “the great unwashed”, but – with the greatest respect – money talks and bullshit walks: Apple needs a solid foundation – based on historical profits – to fuel the next leap, and xMac + the Windows-friendly “music” division is that foundation.
As for lower product margins, a complete red herring!
There is every reason to believe that xMac will be based on a rationalised eMac mobo, which is probably a close cousin of the iMac mobo. That particular bit of R&D paid for itself years ago, so now it is a cash cow that it would be good business to milk for as long as humanly possible to any audience that doesn’t require gamer-level video performance or Pixar-level CPU performance.
Also, xMac will be smaller than eMac: so it will be lighter, and cheaper to ship when air freight companies start doing their volumetric voodoo mathematics.
Also, let’s say you’re a school board in Arkansas – you bought into Dell’s BS proposal and now you have a shedload of CPUs and CRTs, but you’re sick to the back teeth of maintaining of what I’ll call the Windows Experience. xMac gives Apple a solution that preserves investment where necessary, both in K-12 and in business – but God forbid, Apple should go and get some more customers.
Do you want me to carry on ripping “Apple is an exclusive club” canard to shreds, or can I go back to my real life now?
The Ford comparison is flawed, like all comparisons to the auto market. All cars can drive on standard roads. But microsoft controls standards. If they feel apple is becoming a real threat, they can simply whip up another MSJava, ActiveX or whatever and then, “unfortunatley, you cannot use this website/technology/open this document/Watch this video/listen to this music/read this article. We recommend you purchase a computer running Microsoft Windows and Internet Explorer and blah blah blah. Could Henry Ford control the nature of the highway? Could he change the nature of gasoline to run only in his cars? The Railroad is just slightly better of a comparison. Folks need to understand ya gotta pay attention what Microsoft does, not what Apple does. And folks needs to demand more from their governmement in regulating monopolies. The DOJ simply patted ole Bill on the hand and let them off with a pathetic settlement.
One thing everyone forgets is that Microsoft is stubborn and has the cash to last inmoney losing businesses far longer than ANY other coporation except maybe Walmart.
Thya can wade in and spend 5 or 6 billion a year on R & D and marketing and not run out of cash for about 10 years with their current reserves.
Monopolistic practices have paid them well and now so well that they can be in every market. Xbox, cell phones, set top boxes, IPTV, car control systems, and so much other stuff your head spins.
Apple has some opportunities, but it’s unlikely they can unseat the behemoth. They CAN, along with the open source folks, provide credible and I think much more stable & useful products.
But MS will still be around since he US Justice Department simply slapped them on the wrist for being the bullies they are.
MCCFR,
Well, excuse me for commenting on your statements and keeping you from real life, I guess. But if your highness still can spare some more time…
I am not sure what you are thinking of having ripped to shreds, and why you believe you have accomplished that.
There is a plethora of business models to go for, with very different choices with regards to market segments, strategies, profit margins, corporate culture, and so on. They have in common that they all can work, and all can fail. You provided an example where a particular choice for a particular company failed. But that proves nothing in itself with regards to Apple.
Apple is above all a hardware company. The OS brings no cash in, the Macs do (in large part driven by the OS offcourse). Likewise, while iTunes is doing well, it is dwarfed by sales of the iPod. As a hardware company, Apple is doing very well. Current stock price, cash reserve, no debts, high public image profile. And there have never been more developers for the MacOS than now. Where is the problem?
Last time comparisons among hardware companies were made, the only other company that did well was Dell, completely at the other end of the business model spectrum (low margin, high volume).
What I tried to voice was that Apple’s strategy up until now is actually quite good, and that an ‘xMac’-strategy just may not nescesarily work. Profit margins would be low, while customer support and internal overhead would rise. I am not convinced it would be a cash cow. The xMac segment would not want to stay too far behind with the other higher profile Macs. So if these would continue on their pace of innovation, the xMac would have to follow.
I would much rather see the rumoured ‘xMac’ to be part of a classic Apple strategy (innovative hardware, relatively expensive, high margins, great ease of use) in a new market as a kind of Home entertainment device, media centre kind of thing. Like they did with the iPod in the music download business. But that may fail too offcourse, who is to know beforehand?
I absolutely do not understand where you get that priesthood vibe.
Actually, I quite left open the possibility that a strategy for a larger marketshare could work. As such I don’t care. If a lot of people whould switch to (current) Macs, that would be fine with me. In fact, all the Apple afficionados I know would happily support their friends, collegeas and acquaintances if they wanted to switch. Likewise, I never saw or heard from die hard Mac lovers that iPod marketshare was to high, and should be much lower. Nothing sectarian here.
In fact, the canards that I encounter, and for a very long time, are that Apple’s marketshare is too low, that it ‘needs’ to hugely enlarge it, that it is ‘beleagared’, that it should port to Intel asap….
You did not voice this, but this long time bombarbment from (a loud part of) the PC-world, sometimes leads some Macusers to a sentimental attachment to having just a tiny market share. Irrational, but understandable.
But that should not divert away from the fact that – besides strategies for a larger market share – there can also be very viable business reasons for high margin niche strategies, and that they should be discussed with respect and based on arguments. And not typecasted in the way you do as ‘elitist’ and other such nonsense
Last time I checked, Apple’s strategies worked just fine.
Ton,
Actually, Apple isn’t a hardware company – it’s a technology company that has found that the best solutions are delivered when the software is highly integrated with the hardware and leverages that integration to the maximum degree possible. In this respect, it is the same as high-end hi-fi company, like Meridian or Lexicon, that delivers a reference implementation of the MacOS when used on the high-end Power Macintosh and a slighly less capable version when delivered on an eMac (or potentially xMac).
So when you contradict yourself two sentences into the second paragraph (“[I]The OS brings no cash in, the Macs do (in large part driven by the OS offcourse[/I]”), you’re actually destroying your own argument. The OS is everything, and its the degree of integration that Apple brings to a particular hardware implementation that creates the innate “Macintosh” experience.
With the best will in the world, Apple’s strategy for recovery up until now has been been to slowly diffuse the product down to the low-end: before the second coming of SPJ and the iMac, can you remember the last AIO Macintosh? Did the Performa 5200 (if memory serves) hardly set the world on fire, being neither cheap, particularly pretty or expandable?
What some people seem to forget is that the first iMac bought Apple back to being a relevant company, when most people had given it up for dead given that every Scully/Spindler/Amelio software initiative (Copland/Talligent/OpenDoc) was coughing up blood.
contd: ->
I remember the same cries of “we don’t want a cheap Macintosh” from a vocal minority back in 1998. Of course, they’re probably the same people who bought stock and profited from the temporary revival, but what price consistency.
It’s worth remembering that the high water mark for Apple’s stock in October 2001 (the iPod launch month) was around $19.42. By this time, iMac sales were plummeting in readiness for the launch of the flat-panel iMac in January 2002, and 41.8% of Apple’s CPU revenue came from i-series products. CPU revenue for the period was $1,071M
In the last quarter, i-Series products generated 38.3% of Apple’s CPU revenue and the real winner in Apple’s product mix since that time has been the PowerBook. CPU revenue was $1,231M.
So, Apple has increased sales by some 15% by value, but only 12% by unit sales in [B]three years[/B]. Acceptable, but hardly incendiary performance given inflation or the growing computerisation of the former Eastern bloc or China.
In fact, Apple’s comeback is fuelled almost completely by the ultimate “cheap” diffusion product – namely iPod. In the first quarter of discrete identification (Q4/03), iPod accounted for a mere 7.05% of Apple’s total revenue. In the last quarter, that figure had trebled to 22.85% of the revenue mix. If you include the other $98 million of “Other Music Products”, that figure increases to 27.02% of revenue.
contd: ->
So you’re right: Apple’s strategies are working fine, so long as you include all of the strategies and not just the ones that suit you case.
As I’ve opined before, it’s highly possible that Apple now has more real profit potential from a Windows PC user than the manufacturer of the machine, what with iPods, protection plans, iTMS, Airport Express et al. Why not press home that advantage? Why not convert 10% of those users to the Macintosh experience? Why not sell them two OS X upgrades every three years? Why not sell them an iLife upgrade?
That’s the accretive revenue that Ary and yourself are failing to take into account. And you’re failing to take into account the fact that the extra revenue generated by an eMac (a unit you seem to have no problem with) over an xMac is probably then consumed by the cost of the CRT, the larger power supply and the costs of shipping. Do you guys work for Airborne Express or something? Because they must be the only people who want Apple to keep any CRT based systems in their product matrix?
The priesthood vibe comes from my ridiculously long background in this industry: Ary’s opinion amongst others is all too redolent of the way IT professionals have behaved for far too long: this is our little secret, and we’re not going to tell you how it works! or (even worse) reminiscent of the self-satisfied witterings of hi-fi sales people: oh you want the Aubergine 2000? Well, that was OK last year – but now we’re recommending the TVC15!.
Here’s a question: would I (a 42-year old male with Walkman-compromised hearing in one ear be able to tell the difference?
Will I use even 80% of the functionality of the TVC15?
No, I won’t – so just sell me the fscking Aubergine 2000, seeing as I can afford it and stop trying to upsell me so I fit your idea of a “worthy” customer. BTW, I have a dual 1.8 G5 and a broken (at this time) PowerBook, so this isn’t just me trying to build a machine for myself – it’s me knowing what would sell and how it would create a $1 billion/year renaissance in the Macintosh software market.
And you’re right, it is irrational to want to cling to a small marketshare, especially when the one success story that is propelling the company’s share price could disappear tomorrow and we’d be back to a $15 share value and wondering when Sony is going to come to our rescue.
And just to close off my side of the argument�
I have a feeling that Apple will report total revenue of around $3 billion for the quarter just ended (12/31), broken down $1.4 billion CPU, $1.0 billion iPod, $600 million miscellaneous, including $120 million in the “other music products” category.
Back in April 2003, Apple sold $1.4 billion worth of CPUs and the share price was around $14.00.
Hands up, anyone who wants Apple (and the developer community) reliant on that position in the financial marketplace again.
Anyone�Bueller?
I just like to say thanks to both MCCFR and Ton Palmans for an extremely entertaining read – keep posting
MCCFR,
Sorry, but I find your arguments not convincing.
I agree with you with on the technology integration argument as key to Apple’s succes, for a large part indeed due the MacOS. But only because it leads to Apple hardware sales. This does not destroy my argument at all. Even if Apple quadruppled it’s OS and iLife sales, this would do nothing for them. They have very low margins on these.
For instance, when Apple licensed the MacOS tot 3rd parties, they ate away Apple marketshare instead of broadening the customer base. These 3rd party Macs were a lot cheaper than Apple’s Macs – as they didn’t need big R&D budgets – and made MacOS computers a lot more affordable. But overall marketshare didn’t increase, and sales of high margin Macs plummeted. Steve Jobs rightly killed the MacOS licensing as soon as he got back. Apple needs decent to high hardware margins in the markets they operate in, to be able to keep innovating based on big R&D budgets.
And yes, succesfull high end companies in the hifi market like you name, are this also because of great technology integration. Do you see them chasing after ‘market share’ with cheap, low margin products?
One cannot use the iPod succes as a pricepoint indication for Apple’s computer line, as they are in totally different markets with a largely non-overlapping customer base.
In fact, like Apple”s computers, the iPod is relatively expensive with not to much fetaures. It’s selling point is not its price, but (indeed) the technology integration with the ITunes Music Store and great ease of use. And further key to success: porting iTunes to Windows, where the bulk of iPodders come from, combined with keeping the music store closed for other hardware manufacturers.
So Apple’s succes with iPod should not be subscrided to a low pricepoint (which it doesn’t have) but to tapping into a new market alltogether, where Windows-users are the main customers. On the MacOS-computer side, this is not an option.
Also, I don’t see how an eMac – a fine machine with decent margin – could lead to an xMac without monitor for $499. I can’t believe the CRT costs Apple more than $50 or so. More featues need to be downgraded, or the profit margin needs to be lowered. I don’t believe that increasing OS and software profits would compensate for this.
A better option for an xMac to me would still be the Home entertainment, media centre road. Exploring new markets all together’ like with the iPod. But that maybe wishfull thinking…
To be clear, if a xMac strategy within their computer range like you adhere to would be succesfull, fine with me. But if Apple remains succesfull with its current niche strategy for their computers, and exploring new markets with new products otherwise, fine with me too. I happen to believe the latter.
Finally, it is beyond me why you keep maintaining that ‘elitist’ vibe when confronted with other opinions on marketshare strategy than your have, when these other opinions have rational merit on their own. One may not agree with them, but there is no reason to interweave these with some personal bad experiences on the path of life or some bad tasting aubergines. That is indeed quite irrational.
BTW A performa 5200 was my first Mac..
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it’s viruses…not virii
yomama,
There’s a tenuous truce around here right now between the ‘virii’/’viruses’ camps. PLEASE don’t be the one to start THAT battle again…
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(for the record, I, too, am on the English grammarian side, not the Latin abuser side. But at the end of the day, it has no real bearing on my life, so I just let it slide. Check out this Wikipedia page that deals with this wonderful debate.)
Ton,
I will continue this debate with you at some point today (probably later in the evening) as I have to visit a customer who pays me to lecture them in my slightly dismissive, self-opinionated manner
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Enjoying the intellectual mind-trip so far, it’s a shame it’ll be academic for one of us by about 8pm GMT tomorrow.
BTW, aubergines are good vegetables and I have nothing against them as a group or against any indiviudal aubergine. Asparagus, now that’s a different matter�
MCCFR,
Well, congratulations! You – like many others – are right on the strategy that Apple has chosen to take. Not a totally surprise to me though, because ThinkSecrets trackrecord did get me worried, as you may have noticed…
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Kudos to TS by the way for keeping to publish rumors after their close encounter with the Appel Legal kind, they have some balls.
Time will tell if the Mac Mini will do for marketshare what it is intended for. But there are some encouraging elements that I did not realize or read about before.
The Mini is unbelievably small, I read somewhere that the box it is in is smaller than the one for the iPod. That opens up some possibilities in usage. Also, it is beautifull, it may get some cool-factor going for it. They did some serious R&D for this design – one of my worries that did came through – but I guess it’s good that it is not a cheap knock-off of a decapitated eMac. A daring strategy for sure, but in this way it does have a chance of taking off via the coolness road. I do like it when Apple makes a bold descision.
Also, the iWork with Pages (which has .doc import and export functionality) can be a main selling point. I hope Apple includes it.
I wonder if a bunch of Mini’s can be made into a cluster, with X-Grid?
I’m wondering that it maybe very important to get the Min in retail stores, not just Apple Stores. Alongside iPods.
I hope it sells well, but I feel a bit sorry for the eMac, because its sales will hurt. I got one a year ago for my 75-year old father, and he couldn’t be happier with it. I feel it is – even within parts of the Mac crowd – an underrated Mac with nice design and great all-in-one ease of use.
On the bright side: the Mini will slash some serious dents in the prices of second hand Macs. At least where I live (The Netherlands) these are way too high.
Thanks for the discussion, at least we did agree – and were eager so – for Apple to succeed. And as a non-native English speaker it’s a good excercise, though it does take some toll on me if it gets lengthy and stressed. Nothing like a fierce discussion though to juice up foreign language skills.
But I’m afraid I will be deep asleep when you return here in the evening (some serious time difference). I enjoyed it last night, but I went on till almost 5 AM. But did manage to be only half an hour late on work. Can’t afford that tomorrow though…
We will meet here again somewhere in the future I’m sure.
In the meantime: enjoy.
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