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MacRumors
Dec 23, 2003, 02:26 PM
FastCompany has posted (http://www.fastcompany.com/magazine/78/jobs.html) their most recent magazine article on "Steve Jobs, Apple and the Limits of Innovation".

The in-depth article covers Apple's legacy of innovation and explores why that model has not yet been successful in placing them on top in the competitive computer market. Howard Anderson, a venture capitalist notes "Innovation isn't the key to economic growth. Management is the key to economic growth."

The article explores Apple's early attitude to "build the perfect machine" and ignoring the importance of a value-driven business model. The iPod and iTunes are also seen as Apple's most recent innovations which are quickly becoming a key part of Apple's business. Apple needs to remain wary:
Once again, Apple has pioneered a market--created a whole new business, even--with a cool, visionary product. And once again, it has drawn copycats with the scale and financial heft to undersell and out-market it. In the end, digital music could turn out to be just one more party that Apple started, but ultimately gets tossed out of.

copperpipe
Dec 23, 2003, 02:33 PM
Steve's a smart guy, yes? Well, let's hope he learned his lessons and this time he's gonna end up owning the market. So far, ya gotta say he's doing a bang up job...

blueBomber
Dec 23, 2003, 02:40 PM
I read this article about a week ago, and it really is well written. It talks about Apple the way the company really is, warts and all.

mainstreetmark
Dec 23, 2003, 02:42 PM
why pay for innovation when you don't have to?

In smaller cases, this is what copyright law is supposed to protect - gives the inventor some time to reap the benefits. Don't know why you can't patent or protect a "hard-drive based portable digital music player" or "internet based pay-per-item digital music download service" or "computer that you don't have to build from a kit" or "word processing platform where bolded text looks bold, instead of green"....

altair
Dec 23, 2003, 02:45 PM
Does it seem to anyone else that there are more and more articles being writen about Apple and Steve than in years past? Seems everyone is out to slam us just as we start lookin good.

Regardless of whether we will get kicked out of the party I really am amazed by the amount of people switching from windows.

Its a good time for Apple, regardless of what these guys say.

x86isslow
Dec 23, 2003, 02:53 PM
most of the recent articles are a lead-up to the 20th anniversary of the macintosh. its really quite impressive that the moniker has held for so long. Perfoma, Lisa, they've come and gone, but macintosh has stuck around.

Sir_Giggles
Dec 23, 2003, 03:07 PM
Reading the article reminded me of the iMac's fate.

It seems lately the iMac has become pricier and pricier with newer form factors designed to gain new customers to the Apple platform, but it seems the opposite is happening and iMac sales are suffering.

I think it's time they re-purposed the iMac line as a low cost (meaning lower quality build) computer to get people to switch to Mac. Make it as cheap as humanly possible by employing some of Dell's business model.

It's only a matter of time that these new iMac owners upgrade to the pro lines or continue upgrading their macs, and the iMac is the perfect opportunity for them to do so. Lately the iMacs are expensive and starting to look to "nichey" for general consumers.

iMac don't need to be faster as much as they need to be a whole lot cheaper.

desdomg
Dec 23, 2003, 03:08 PM
I dont know. This confict between innovation vs management is a bogus one to me. Looks good on paper, in a magazine article, but doesnt really mean anything at the end of the day.

There where a whole host of reasons why Apple didnt hold its dominance of the PC market 20 years ago. To summarise the situation as this guy has done is plaiin wrong.

And from where I am sitting Apple is not getting kicked out of the digital music party any time soon. Although to be fair I cannot see someting as important as the delivery of music being the monopoly of any one company at all. All Apple can and should hope for is for a big chunk of the pie, at best. But not the whole cake.

And although it seems hard to imagine from where we are now, in the future no one company will dominate the computing world either.

Silencio
Dec 23, 2003, 03:14 PM
Originally posted by Sir_Giggles
Reading the article reminded me of the iMac's fate.

I think it's time they re-purposed the iMac line as a low cost (meaning lower quality build) computer to get people to switch to Mac. Make it as cheap as humanly possible by employing some of Dell's business model.

iMac don't need to be faster as much as they need to be a whole lot cheaper.

eMac, anyone?

Kid Red
Dec 23, 2003, 03:17 PM
I didn't read the article but the gist of it seems to be that Apple does something cool and innovative but once others copy it, their better management ends up over taking Apple. So, innovations starts the show, but management finishes. Steve has never been good at management, so I hope he's smart enough to surround himself with winners at management.

A $100 iPod will go along way, but imagine a $800 iMac or $600 eMac? Or what about a new iPod with..gasp..a removable battery? Steve has to realize that some steps need to be taken to assure Apple grows. Competitive prices and strategies are needing to be addressed. Dare I say, Apple's fixed prices are a bad thing?

iJon
Dec 23, 2003, 03:17 PM
i dont think apple will get tossed out of this. the reason apple got tossed out of being the best computer company back inte the 80's was because apple didnt copyright their stuff so when billy boy got a hold of it and copied it there was nothing apple could do, i think apple has a better legal team now.

iJon

mproud
Dec 23, 2003, 03:17 PM
COLOR!
Yeah!

stingerman
Dec 23, 2003, 03:18 PM
The article is only partly true, people don't remember that Steve was not in administration when Apple lost a majority of the market share, he was out of Apple around 1986 and returned around 97 were he spent 4 years fixing the organization, the product lines, a new OS, building a new foundation and in the last two years really has moved ahead innovation wise, now that a solid foundation has been built. Apple has never been stronger.

Silencio
Dec 23, 2003, 03:20 PM
Originally posted by desdomg
And from where I am sitting Apple is not getting kicked out of the digital music party any time soon. Although to be fair I cannot see someting as important as the delivery of music being the monopoly of any one company at all. All Apple can and should hope for is for a big chunk of the pie, at best. But not the whole cake.
One point the article missed is that if Apple can't make much of a profit on iTMS, despite being the early leader in marketshare, what does that portend for all the other competitors scrambling over themselves to get in on the action, especially those that don't try to tie their music store to a hardware player? The fallout is going to be brutal and swift.

Speaking of hardware, it's going to be critical for Apple to stay ahead of the curve with the iPod. The rumored mini-iPods will be quite helpful, even if margins on them are fairly slim.

And although it seems hard to imagine from where we are now, in the future no one company will dominate the computing world either.
I sure hope you're right.

blueBomber
Dec 23, 2003, 03:25 PM
The really funny thing about this article is that John A. Byrne is the editor of Fast Company, he's the guy who helped John Scully write his memoirs in 1987. If you pick up the actual issue, he writes about this in his letter from the editor. He admits to being a huge Jobs fan (and even is pictured with a Steve-esque mock turtleneck. It's a great read.

mproud
Dec 23, 2003, 03:26 PM
Originally posted by Kid Red
A $100 iPod will go along way, but imagine a $800 iMac or $600 eMac?These things exist. You can get a refurbished eMac 700MHz as a student for a low as $529 ($499 without Ethernet).

iMac for $949 (darn good for a premium family computer).

shadowself
Dec 23, 2003, 03:29 PM
In my estimation innovation is critical.

Sure Apple's products cost more than Dell's. Apple spends three to four times as much as Dell on research and development and Apple sells fewer items and has much smaller over all revenues.

Apple's plan has been, and hopefully always will be, to invent the next great thing while continuously evolving the things it already is shipping. This keeps the industry from stagnating. This takes money. Money to hire the most innovative people and money to market it. Thus, on average, Apple's machines (no matter what variety you pick: Macintosh, iPod or whatever) are more expensive to purchase than Dell's.

If everyone were to follow the Dell model and what until someone else has established a market and someone else has established the best of breed, then there would be virtually no innovation. Everyone would just sell the cheapest items possible. Who cares about making things better for the users/customers.

This is the only reason why I forbid the purchase of Dell computers at my work. I have had this position in my prior job too. I lead the engineering aspects of aerospace companies. If I expect my people to be innovative and push the envelope, then why would I ever support companies or systems which have the opposite attitude.

While there are many things wrong with Apple (I could probably list a dozen or more things right of the top of my head), Apple not following Dell's business model is not one of them.

In response to the individual who says the iMac should go back to being a "cheap" machine. Apple should NEVER sell cheap machines. Apple attempting to go cheap and sell primarily to gain market shares is one of the many things that got them into trouble in the early 90s.

If you want an inexpensive Macintosh there is the eMac. Those are within the price range of any common user. Sure, they are not in the same league as the G5 machines, but they are serviceable for most home users.

iJon
Dec 23, 2003, 03:35 PM
Originally posted by shadowself
In my estimation innovation is critical.

Sure Apple's products cost more than Dell's. Apple spends three to four times as much as Dell on research and development and Apple sells fewer items and has much smaller over all revenues.

Apple's plan has been, and hopefully always will be, to invent the next great thing while continuously evolving the things it already is shipping. This keeps the industry from stagnating. This takes money. Money to hire the most innovative people and money to market it. Thus, on average, Apple's machines (no matter what variety you pick: Macintosh, iPod or whatever) are more expensive to purchase than Dell's.

If everyone were to follow the Dell model and what until someone else has established a market and someone else has established the best of breed, then there would be virtually no innovation. Everyone would just sell the cheapest items possible. Who cares about making things better for the users/customers.

This is the only reason why I forbid the purchase of Dell computers at my work. I have had this position in my prior job too. I lead the engineering aspects of aerospace companies. If I expect my people to be innovative and push the envelope, then why would I ever support companies or systems which have the opposite attitude.

While there are many things wrong with Apple (I could probably list a dozen or more things right of the top of my head), Apple not following Dell's business model is not one of them.

In response to the individual who says the iMac should go back to being a "cheap" machine. Apple should NEVER sell cheap machines. Apple attempting to go cheap and sell primarily to gain market shares is one of the many things that got them into trouble in the early 90s.

If you want an inexpensive Macintosh there is the eMac. Those are within the price range of any common user. Sure, they are not in the same league as the G5 machines, but they are serviceable for most home users.
actually believe it or not dell spends just as much if not more on r&d.

iJon

patrick0brien
Dec 23, 2003, 03:41 PM
Howard Anderson
"Innovation isn't the key to economic growth. Management is the key to economic growth."

-Bzzzzzt!

This is why Venture Capitalists should not teach economics.

Economics 101: Equilibrium between supply and demand of a product facilitates micro and macroeconomic growth.

Management is simply keeping the finger on it.

I will agree with his other point that Apple has consistently not had a low-end to garner market penetration. The other boys do.

Of course, this factor is what leads some short-term thinkers into believing that Macs are more expensive.

Wash!!
Dec 23, 2003, 03:41 PM
I don't think they getting their money's worth for it.. I found dell equipment to be build in the cheapest matter possible and they feel and function that way remember you get what you paid for...;)
Even their so call ipod killer it feels and looks cheap, it does not matter how many bells and whistles they put on it.

lem0nayde
Dec 23, 2003, 03:43 PM
I really enjoyed this article and thought it was very well written. He makes a very good point that innovation alone cannot carry a company. The Windows platform just steals Apples innovation - and then uses it's widespread acceptance to one-up Apple with marketing and sales.

Apple is doing the same thing with iTunes that it did with the Mac OS. It's offering a closed system that requires ONLY Apple products - the iPod and iTunes. Unless Apple can make the iPod available to everyone (as is rumored that they will) then it's a hopeless situation. Eventually the desire for choice and lower prices will drive the consumer elsewhere.

I love Apple, and hope they continue to innovate their butts off. I just wish there were some way they could do so - and still make a crapload of money off of it.

I, for one, have invested too much money in their platform to have it go away. I hope they find a strong niche, climb their way up to maybe 8% and nestle in for the long haul.

winmacguy
Dec 23, 2003, 03:49 PM
Originally posted by Silencio
One point the article missed is that if Apple can't make much of a profit on iTMS, despite being the early leader in marketshare, what does that portend for all the other competitors scrambling over themselves to get in on the action, especially those that don't try to tie their music store to a hardware player? The fallout is going to be brutal and swift.

Speaking of hardware, it's going to be critical for Apple to stay ahead of the curve with the iPod. The rumored mini-iPods will be quite helpful, even if margins on them are fairly slim.


I sure hope you're right.

Ah product profit margins... yes you need them to make a profit (the bigger the margin the bigger the profit) but you also need market share and volume distribution which works when your catering for a lower profit margin bigger market. If Apple can get this bit right with the iPod and iTunes penetration into the PC market ie higher production runs and great supply distribution more wharehousing for their product which is "the tech toy" this christmas/new year then they will succeed. There is nothing wrong with having a higher quality product that is innovative out in the market. Even a higher quailty product that costs more that the rest. As long as you can get it to stores in time, and keep your customers happy if they have product issues. happy new customers maen that you should be able to maintain a greater market share with a quality flash new product with out necessarily lowering the price

iJon
Dec 23, 2003, 03:49 PM
Originally posted by Wash!!
I don't think they getting their money's worth for it.. I found dell equipment to be build in the cheapest matter possible and they feel and function that way remember you get what you paid for...;)
Even their so call ipod killer it feels and looks cheap, it does not matter how many bells and whistles they put on it.
well they are doing something right cause they are making more money than apple and they are the #1 computer maker in the world.

iJon

psxndc
Dec 23, 2003, 04:01 PM
Originally posted by mainstreetmark
why pay for innovation when you don't have to?

In smaller cases, this is what copyright law is supposed to protect - gives the inventor some time to reap the benefits. Don't know why you can't patent...

I gotta nitpick... copyright law protects creative works like poetry or music. Patent law (and patents) protect inventions.

-p

desdomg
Dec 23, 2003, 04:03 PM
Dell's R&D spend goes on how to make stuff cheaper. You know production issues, cutting cost corners, etc.

What I dont fully undrestand in all this though is the obsesion with market share. Sometimes market share dominance just shows you are good at winning market share - a bit like how some academic rusults just show you are good at passing exams. Market share is not the be all and end all to life. And is certainly no indication of the quality of a companies products, their managment or their ability to survive in the market. What is clear however is that eventualy, all monopolies come to an end.

iJon
Dec 23, 2003, 04:05 PM
Originally posted by desdomg
Dell's R&D spend goes on how to make stuff cheaper. You know production issues, cutting cost corners, etc.

What I dont fully undrestand in all this though is the obsesion with market share. Sometimes market share dominance just shows you are good at winning market share - a bit like how some academic rusults just show you are good at passing exams. Market share is not the be all and end all to life. And is certainly no indication of the quality of a companies products, their managment or their ability to survive in the market. What is clear however is that eventualy, all monopolies come to an end.
it's all about money.

iJon

johnnyjibbs
Dec 23, 2003, 04:13 PM
It costs a lot of research effort and money to find ways of offering more for less. Dell is always looking at ways to make their computers cheaper. R&D doesn't always have to equate to innovation.

brhmac
Dec 23, 2003, 04:24 PM
Apple makes beautiful, well-crafted, refined, highly functional -- occasionally eccentric -- machines that catch the eye and stir the imagination.

Then there's the sticker shock.

And that, my friends, is the core issue.

Innovate all you want. Manage all that you can. But if consumers can't -- or choose not to -- afford the goods, then Apple has a choice. Compromise its standards. Sacrifice artistic integrity for market share.

We here love Macs. We see the quality and the "value," even as we can acknowledge that Macs are overpriced vs. the competition.

Fortunately, there's a place for Apple in this world -- just as Jaguar doesn't have to sell as many cars as Chevrolet to be profitable and relevant -- even a leader -- in its industry. What matters is that Apple keeps making excellent products and we all are smart enough to recognize them and well-funded enough to buy them.

rjwill246
Dec 23, 2003, 04:24 PM
Originally posted by Sir_Giggles

I think it's time they re-purposed the iMac line as a low cost (meaning lower quality build) computer to get people to switch to Mac. Make it as cheap as humanly possible by employing some of Dell's business model.

There's nothing that Apple needs to do more suicidal than to come up with cheap junk. The after effects of that on their high end gear would, by what would become a rapidly growing public perception, would be that ALL of Apple's gear was overpriced and that the prudent course of action for the prospective buyer would be to sit on the fence before buying any more products from the company, waiting for major price drops. The only sensible thing I have seen in this regard is the suggestion that Apple comes up with a headless box that only runs off a secure server: quite a model of innovation this could be but it does not fit the 'el cheapo' box model that would really be the final nail in that otherwise elusive Apple coffin. Quite simply, Apple cannot start turning out cheap boxes anymore than they can put OS X on Windows boxes... at least, not for now.

zoltamatron
Dec 23, 2003, 04:34 PM
People seem to forget that when Jobs was ousted from the company in 1986 (basically due to investors having this backwards thinking about innovation) and Sculley and Spindler and Amelio took over until 97, this was when Apple started to lose share. At one point in the late 80's Apple had 30% marketshare of personal computers. It was during this time that they thought they could just sit on their butts and act like a clone company and still sell computers. Perhaps in a clone market Howard Andersen's article applies. But Apple has always driven itself by innovation and has created a market that cares about it. Apple's customer base is one that wants more than just something new, we want something better as well.

machinehien
Dec 23, 2003, 04:35 PM
Apple is a Jaguar in a Chevrolet world

Seeing as how Jaguar is owned by Ford and a lot of it's technology is subsidized in part by Ford I think Jaguar is a poor analogy to Apple Computers.

Even without Ford, Jaguar would be a poor analogy. I was never partial to the Jaguar mystique. If anything I think Apple has always been closer in spirit to VW or BMW. They are both still independent companies and emphasize quality and inovation over mass apeal.

hmmfe
Dec 23, 2003, 04:37 PM
The author makes some valid observations, but in the end it reads like an undergrad term paper. There is nothing like reading history backwards to make you *seem* smarter. The worst part of the article, though, is the end where the author feels obligated to offer us a summary of the top-5 most brilliant things I wrote in this article - just in case we missed them the first time.

Innovation for its own sake is not a good long-term business strategy - yeah, I get it. I'd hope the target market of Fast Company would have figured out that simple concept before leaving high school.

If this article is a representation of the magazine, I am glad I have resisted the urge to subscribe.

johnnyjibbs
Dec 23, 2003, 04:39 PM
Originally posted by rjwill246
There's nothing that Apple needs to do more suicidal than to come up with cheap junk.
Too right. I may have struggled to afford my PowerBook but it is quality and the perception of quality gives me "oohs" and "aahhs" wherever I go with it. Sony, for example, makes high quality products that are genreally a little more expensive than its competitors. But if Sony were to bring out a really cheap version, or undercut their competitors, their perception of quality would drop and they would lose out (i.e. people would stop buying their products!). It sounds stupid, but a lot of people would pay more for a Sony over, say a Philips, even if they were told it was *the same camcorder/TV/whatever* with a different name badge on it.

sosumi99
Dec 23, 2003, 04:42 PM
Originally posted by machinehien
Seeing as how Jaguar is owned by Ford and a lot of it's technology is subsidized in part by Ford I think Jaguar is a poor analogy to Apple Computers.

Even without Ford, Jaguar would be a poor analogy. I was never partial to the Jaguar mystique. If anything I think Apple has always been closer in spirit to VW or BMW. They are both still independent companies and emphasize quality and inovation over mass apeal.

Exactly. This "Jaguar" analogy keeps on getting trotted out in the case of apple but it is flawed in another sense. Jaguars actually are sold at a very high margin so that the company does not have to move as many units to get good shareholder returns.

In the case of Apple, if you read the article, you'll see that their operating profits are at 0.4% when the industry standard is 2%. I imagine this is due to the high R&D costs as well as not being able to lower production costs sufficiently. This is definitely news to me, and if true, shockingly bad news. If Apple has a low market share _and_ it is not doing a good job getting high returns on the units that they do sell, then it's no Jaguar. This really is something to be worried about.

Like someone else said in an earlier thread, we need a blend of Jobs and Sculley. Sculley knew how to get operating profits up. Apple right now needs to keep the Jobs mentality but inject itself with a good dose of Sculley too.

reedm007
Dec 23, 2003, 04:44 PM
One of the things that has always fascinated me, and perhaps is a good reason why there's such a devoted crowd of Mac users, is their unfailing ability to ignore analysts and just keep doing what they do best: making awesome products.

It seems in this world today that this a concept that is getting more and more lost as low-cost becomes the only thing that means anything. Although this hits the computer industry harder than most industries. People do still pay a premium for a better built car, or a nicer stereo, or things like that.

But the point is, why can't Apple survive with their method. Part of their charm and their ability to maintain their innovative status is how they *don't* act like all the other companies out there. They aren't SO concerned with the bottom line that they'll never take a risk. They're willing to push the boundaries farther than any company with "business sense" would ever do, but that's exactly what makes them appealing.

I guess I just don't understand why Apple has to turn into a generic company in order to survive, as the article suggests. Somehow I feel like that would either a) spell the end of Apple entirely or b) spell the end of Apple as we know it, and, while surviving, would not longer truly be the company we know -- and the quality and innovation would be lost.

sosumi99
Dec 23, 2003, 04:54 PM
Originally posted by reedm007
I guess I just don't understand why Apple has to turn into a generic company in order to survive, as the article suggests. Somehow I feel like that would either a) spell the end of Apple entirely or b) spell the end of Apple as we know it, and, while surviving, would not longer truly be the company we know -- and the quality and innovation would be lost.

For me, an equally good question is why people assume that if Apple were to focus a little more on gaining market share and cutting costs and making a bigger profit, it would no longer be "Apple as we know it." The challenge is to figure out a way to innovate as well as milk that innovation for money. Just because no one so far has figured out a way to do both in the same company doesn't mean it can't be done.

Sir_Giggles
Dec 23, 2003, 05:07 PM
Market share, well duh means a bigger share of the market which means more revenue for Apple. The more money you make, the better your chances of survival in a really tough economy.

If another great depression were to happen tomorrow, Apple would not survive.

Apple was once on the razor edge of going insolvent, and even a misstep like the Cube would put Apple on the chopping block so it's always important for Apple to always try to gain marketshare, and honestly the only way I see them doing that is making computers cheaper so more people can buy them.

No one has ribbed Apple about releasing cheaper iPods, but to get to their rumored $99 price point, expect to see reduced features or even a lower level of craftsmanship. Only on Jan 6 will we see what he has, but it wouldn't surprise me one bit to see how the iPod is built. You can tell Apple is serious about dominating the music market with their aggressive advertising, and now aggressive pricing.

Yet somehow, when it comes to computers, we are so adamant that they be built like swiss watches (and priced to match ~ yes I know that is debatable too). That's great and all, but the mass of employees working at their computer stations could care less if their CD is slot or tray loading, or if its made of plastic or forged aluminum. Apple isn't going to make any headway selling to already converted Apple fanatics, they need to appeal to an employer's bottom line. Apple doesn't have to build really junky machines to achieve a lower price point, just innovate on Dell's strength of logistics.

Apple sold some 6.4 billion dollars worth of hardware and software, yet their net profits are only in the millions. I don't know about you but that is staggeringly bad. Even though they are making money, they are not thriving. I'd like to see Apple prosper.

mproud
Dec 23, 2003, 05:24 PM
Originally posted by Sir_Giggles
If another great depression were to happen tomorrow, Apple would not survive. Apple's got a boatload amount of money in the bank - that's a fact.

There will never be another "great depression". The U.S. government would intervene much more than it did 74 years ago - hell, today, they close the markets whenever the Dow's at a loss of more than 5%. There are simply too many controls and international ties and dependencies which would make Adam Smith puke. Obviously anything's possible, but one thing is for certain: it's not happening any time soon, and in my view, it's entirely unrealistic in the lifetime of the current incarnation of the personal computer!

alset
Dec 23, 2003, 05:30 PM
Great article, but inaccurate. First 64 machine? Only on a consumer level. First legal music download service? No, first successful service. Blah blah, I could go on.... But the article is very flattering and insightful in many areas. Fun read.

Dan

ktlx
Dec 23, 2003, 05:31 PM
Originally posted by sosumi99
Exactly. This "Jaguar" analogy keeps on getting trotted out in the case of apple but it is flawed in another sense. Jaguars actually are sold at a very high margin so that the company does not have to move as many units to get good shareholder returns.

The whole car analogy is wrong. Whether I buy the cheapest Hyundai or the most expensive Bentley, they both run on pump gas and can use the same roads. I don't care if Bentley has a trivial market share because as long as Bentley can make money selling cars, I can buy one and it will work just fine. I do not need anyone else to be profitable.

Computers do not work that way. If Apple's market share becomes trivial, it becomes harder and harder to get the software that I want. It also becomes harder for them to spend money on R&D to keep up. Making a car go faster is not the capital intensive process that making a computer go faster is.

mproud
Dec 23, 2003, 05:39 PM
Originally posted by sosumi99
For me, an equally good question is why people assume that if Apple were to focus a little more on gaining market share and cutting costs and making a bigger profit, it would no longer be "Apple as we know it." The challenge is to figure out a way to innovate as well as milk that innovation for money. Just because no one so far has figured out a way to do both in the same company doesn't mean it can't be done. It's hard to do 3 things at once, isn't it:
Innovate
Gain Market Share
Make Money

Can it be done? Perhaps. But if you're going to play ball with the big boys with the market share, and I mean really play ball - with the likes of Dell, HP, and Gateway - then you're going to have to abandon a LOT of innovation and you're going to lose a HELL of a lot of money trying.

If Apple changed into a one-dimensional company of having the computer #1 in households, Apple would spend it's way to death. The fact is Apple has other interests, and is finding newer and creative ways to make money. Market share, although somewhat important, is not the holy grail that many people speak of.

Also, nothing happens overnight anymore. Progress of any type takes time, for anything. We all know this - there is no "right" answer - business is not that easy.

rjwill246
Dec 23, 2003, 05:57 PM
Originally posted by Sir_Giggles

Apple sold some 6.4 billion dollars worth of hardware and software, yet their net profits are only in the millions. I don't know about you but that is staggeringly bad. Even though they are making money, they are not thriving. I'd like to see Apple prosper.

Not many analysts agree with you on the thriving bit. Apple has a problem that is unique in the computer industry. It's an all-in-one company with an OS that is not THE standard. This whole scenario means that, by conventional wisdom, they should have died long ago. I share your sentiment about seeing them do better. I wish that they WERE the world standard OS, but they aren't. Unlike John Dvorak though, I still can see where, over time, they can make some major inroads into enterprise, if they can get reasonably priced boxes on the average clerks' desktops and have a fast speed interconnect to the servers housing all the applications (as just one example). It would be stunning if they could get cheaper home computers that did not make the iMac line and desktop line seem to be absurdly overpriced. This is very risky for Apple as they might end up doing 3 to 4 times more in volume and still have profits in the millions or hundreds of thousands --and plummeting.
Every one seems at one time or another to have offered some thoughts on how Apple is going to make it. I wonder too. It is absolutely clear that there are a few people (30 to 50 million-- who knows the real number) of computer users who demand the Apple experience. But the vast majority of computer users want cheap/mediocre machines that just get them by. They have no other aspirations. Dell et al. can offer what they want because they sell billions of dollars worth of machines to enterprise and thus they have a broad and solid base. Apple doesn't. Will they ever? Who knows? It's not altogether impossible as OS X plays reasonably well on Windows networks and it is thus NOT improbable to see Apple servers and boxes eventually make their appearance in enterprises. This, it seems to me, is the fuel for the fire. There may be other ways too. The fact that Apple continues to hold on, ebbing and flowing, is at least a testament to good moves lately and shows what a dingbat the author of this article is... but he is true to type: let's have cheap mediocrity, full of holes, unsafe as hell but jeez if it's cheap, really cheap, I'll still be happy waiting for my next worm/virus and other nasty waiting to take me out. But then I have come to rely on patching, erasing, reformatting and installing as something to look forward to in an otherwise Dull world. Who wants great? is the question posed by this article. Not most people, that's for sure, and America has really sold out to one of its former greatest ideals... to strive for the best. Now, cynicism and penny-pinching have made mediocrity the gold standard and unless this attitude changes Apple may well be in trouble in the long run. If it does fail, the computers I own will indeed be the last ones I own! Pad and pen are much more palatable than living with that monstrosity called Windows, the noose of MS ever tightening and the bitterness that is the gall of Dell.

mactarkus
Dec 23, 2003, 06:09 PM
"Where Apple was once one of the most profitable companies in the category, its operating profit margins have declined precipitously from 20% in 1981 to a meager 0.4% today"

How can this be true? 0.4%?? I've always read how Apple maintained high profit margins even recently. Can anybody confirm that number?

iomar
Dec 23, 2003, 06:14 PM
I think is very ture.

sosumi99
Dec 23, 2003, 06:16 PM
Originally posted by mproud
If Apple changed into a one-dimensional company of having the computer #1 in households, Apple would spend it's way to death. The fact is Apple has other interests, and is finding newer and creative ways to make money. Market share, although somewhat important, is not the holy grail that many people speak of.

Also, nothing happens overnight anymore. Progress of any type takes time, for anything. We all know this - there is no "right" answer - business is not that easy.

Agreed. But it is frustrating to me to see Apple spending all this money on the retail stores and not being able to move the market share needle in two years. The article quotes an analyst as saying "they are probably losing as many people to the WinTel world as they are gaining." That is alarming to me.

Two years seems long enough to see if such a strategy is working, and I don't see Apple coming up with new ways to make the Apple Stores move more units. Maybe it's time to try something else.

Here's hoping that the $100 mini iPods are cheaply made and work "well enough" (they just have to work as well as the Dell laptops, which are crappy and fail all the time, but Dell sure sells a lot of them). Maybe Apple will really solidify itself in this market for digital music players and outcompete Dell.

MorganX
Dec 23, 2003, 06:21 PM
Originally posted by iJon
i dont think apple will get tossed out of this. the reason apple got tossed out of being the best computer company back inte the 80's was because apple didnt copyright their stuff so when billy boy got a hold of it and copied it there was nothing apple could do, i think apple has a better legal team now.

iJon

That sounds nice but lets get real, Lotus 1-2-3, Dbase, and WordPerfect had something to do with that.

Windows was a miserable failure for a long time until Excel and Word for Windows matured.

The single biggest reason other than the software, is that no one at Apple envisioned an Apple computer on every desktop. As a matter of fact, I believe Jobs said he didn't want everyone to own a Mac, didn't he? He was satisfied with high margin, low volume, small market willing to worship him and make him rich.

edit: I give him, credit. He got exactly what he aimed for.

TomSmithMacEd
Dec 23, 2003, 06:27 PM
Originally posted by Sir_Giggles
Reading the article reminded me of the iMac's fate.

It seems lately the iMac has become pricier and pricier with newer form factors designed to gain new customers to the Apple platform, but it seems the opposite is happening and iMac sales are suffering.

I think it's time they re-purposed the iMac line as a low cost (meaning lower quality build) computer to get people to switch to Mac. Make it as cheap as humanly possible by employing some of Dell's business model.

It's only a matter of time that these new iMac owners upgrade to the pro lines or continue upgrading their macs, and the iMac is the perfect opportunity for them to do so. Lately the iMacs are expensive and starting to look to "nichey" for general consumers.

iMac don't need to be faster as much as they need to be a whole lot cheaper.
But the whole point of a mac is to be a high quality - high price - low matenence computer that is easy on the eyes.

simX
Dec 23, 2003, 06:36 PM
Originally posted by sosumi99
Here's hoping that the $100 mini iPods are cheaply made and work "well enough" (they just have to work as well as the Dell laptops, which are crappy and fail all the time, but Dell sure sells a lot of them). Maybe Apple will really solidify itself in this market for digital music players and outcompete Dell.

Good god I hope not. The one thing that creates the Mac fanaticism above all else is Apple's overarching strive for top-notch quality computers and equipment. If Apple started breaking this trend with cheap mini iPods, and they broke all the time, you can be sure that many Apple fanatics would be disgusted.

The way Apple dealt with white spots on the Powerbooks shows that Apple is committed to delivering quality products, because they quickly (as well as can be expected from a computer company) fixed the problem and also repaired the problems with existing PowerBooks, whereas they could've just said it's a "normal" condition. Although it was a widespread problem, Apple didn't hesitate to correct it.

If making quality products means keeping the price of the entry-level iPod over $200, then so be it. I could care less if Apple had more marketshare, even in the digital music arena. The fact that the iPod and the iTMS are the market share leaders is just icing on the cake. In the end, the fanaticism of Mac users can carry Apple through more than you would think -- just look at the Performa years, or even the years where we were stuck at 500 MHz with the G4; by all accounts for a normal company, Apple shouldn't be alive after having gone through both of those times. But Mac users stuck by Apple's side, because they know that Apple is doing all that it can to make an excellent quality product.

eazyway
Dec 23, 2003, 07:00 PM
Originally posted by iJon
well they are doing something right cause they are making more money than apple and they are the #1 computer maker in the world.

iJon

yes , DELL is number 1 right now and has been for a few years. Apple was no 1 for several years and Gateway was right there and Compaq was No 1 just before DELL.

Each got there by being inovative and they all then stood still or made huge mistakes and did not move on as other companies invaded their space. Dell was the first big time seller on line but now others are in the same space. Dell has the lead but their lead is not accelerating anymore and over the next few years they will slip unless they reinvent themselves.

Windows is on the verge of rewritting their operating system and it will bring with it problems to overcome. Computer makers no longer need to use MSFT's OS.

IBM for example is converting all their 75,000 in house computers to Linux. Linux , Apple and Sun(all thre are UNIX based) will gain some market share in the OS world as MSFT goes through Longhorn problems. The extent will depend on the marketing of each platform and the continuing use of UNIX.

The Power PC chip from IBM is showing huge potential and over the next 3-5 yrs it could have a huge impact on the market.

MSFT may lose a lot of its OS sales but it is so diversified now that other software will carry it on .


But right now Apple is has the opportunity to regain a lot of market share if the PPC road map takes of , if the new IBM compiler really does increase a programs speed by 50% , if MSFT has large OS problems , if a lot IT really do like UNIX , if the porduce more new products , if Apple develops a more of a business mentality...

iJon
Dec 23, 2003, 07:05 PM
Originally posted by eazyway
yes , DELL is number 1 right now and has been for a few years. Apple was no 1 for several years and Gateway was right there and Compaq was No 1 just before DELL.

Each got there by being inovative and they all then stood still or made huge mistakes and did not move on as other companies invaded their space. Dell was the first big time seller on line but now others are in the same space. Dell has the lead but their lead is not accelerating anymore and over the next few years they will slip unless they reinvent themselves.

Windows is on the verge of rewritting their operating system and it will bring with it problems to overcome. Computer makers no longer need to use MSFT's OS.

IBM for example is converting all their 75,000 in house computers to Linux. Linux , Apple and Sun(all thre are UNIX based) will gain some market share in the OS world as MSFT goes through Longhorn problems. The extent will depend on the marketing of each platform and the continuing use of UNIX.

The Power PC chip from IBM is showing huge potential and over the next 3-5 yrs it could have a huge impact on the market.

MSFT may lose a lot of its OS sales but it is so diversified now that other software will carry it on .


But right now Apple is has the opportunity to regain a lot of market share if the PPC road map takes of , if the new IBM compiler really does increase a programs speed by 50% , if MSFT has large OS problems , if a lot IT really do like UNIX , if the porduce more new products , if Apple develops a more of a business mentality...
and i completly agree, i think apple is in one of its best positions that it has been in a long time, i was just stating that dell is still doing better and probably will be for a while.

iJon

aldo
Dec 23, 2003, 07:37 PM
I also agree.

The main thing that was wrong with Apple over the last few years was ****ing motorola.

Motorola made Apple loose a _LOT_ of it's pro-line customers. It's only just managing to get them back with final cut pro and the G5.

Another problem was (and is) what I call the 'Joe Average' problem. Joe Average walks into a computer store. Joe sees a Dell PC with a flat screen monitor, 2.4ghz CPU (it's celeron and its crap, but he doesn't know) and 256mb 'intel extreme' graphics. He can get all of this for $699, and Dell will throw in a free color printer too.

He then walks down the isle and sees an iMac. It looks better than the Dell, but it costs $500 more. He then looks at the CPU speed and it's only... 1.25ghz. He thinks this is half as fast as the Dell.

Feeling smug, he thinks that all that money is going to the good looks and not to a good computer, so he walks out with the Dell, thinking hes got a great deal.

Sadly, this is what is happening ALL the time. Apple's high pricing and low CPU speeds will lock it out of the market.

However, if Apple can get some 'wow-factor' CPU speeds (aka the G5) then it will start making real inroads. Dell knows the bottom of the market has fallen out for the desktop PC price wise and also the notebook market is starting to do the same.

Apple needs to take advantage of it and hit microsoft and dell where it hurts while they are down. People are more than happy to spend $1000 on a good machine, and the Apple machines are great. But the CPU speed problems are really holding potential customers back, sadly.

kangaroo
Dec 23, 2003, 07:57 PM
Originally posted by aldo
I also agree.

The main thing that was wrong with Apple over the last few years was ****ing motorola.

Motorola made Apple loose a _LOT_ of it's pro-line customers. It's only just managing to get them back with final cut pro and the G5.

Another problem was (and is) what I call the 'Joe Average' problem. Joe Average walks into a computer store. Joe sees a Dell PC with a flat screen monitor, 2.4ghz CPU (it's celeron and its crap, but he doesn't know) and 256mb 'intel extreme' graphics. He can get all of this for $699, and Dell will throw in a free color printer too.

He then walks down the isle and sees an iMac. It looks better than the Dell, but it costs $500 more. He then looks at the CPU speed and it's only... 1.25ghz. He thinks this is half as fast as the Dell.

Feeling smug, he thinks that all that money is going to the good looks and not to a good computer, so he walks out with the Dell, thinking hes got a great deal.

Sadly, this is what is happening ALL the time. Apple's high pricing and low CPU speeds will lock it out of the market.

However, if Apple can get some 'wow-factor' CPU speeds (aka the G5) then it will start making real inroads. Dell knows the bottom of the market has fallen out for the desktop PC price wise and also the notebook market is starting to do the same.

Apple needs to take advantage of it and hit microsoft and dell where it hurts while they are down. People are more than happy to spend $1000 on a good machine, and the Apple machines are great. But the CPU speed problems are really holding potential customers back, sadly.

If Joe's requirements are email, surfing, word processing, number crunching and other basic computer tasks and his new $699 Dell can do that for him without breaking a sweat--why isn't that a 'great deal'?

djmeen
Dec 23, 2003, 07:58 PM
I just got a new iMac after having a Dell the past 4 years and I can truly say that while the cost was "high" compared to the low end entry models, I never felt ripped off buyinf the iMac.

In fact, after using this for about 4 days I can only wonder why more people are not using these machines.

I had an Apple IIc way way back and since then had worked on various PC clones. My first impression on the iMac is how NICE it is.

I like working on it and there's a logic to it that seems to be missing from the PC market.

Now when it comes to the article I think the author has really over simplified the problem here.

Do you really want to position your product in a low margin high volume market segment when your true product differentiation comes in the form of quality?

Trust me, I'll be telling ym friends about the apple experience for awhile and wouldn't hesitate to suggest starting out with an eMac which is reasonably priced.

I chose the iMac cause I needed something a bit more powerful and also because my wife wanted a computer that wasn't so honking big. When she saw the iMac, she loved it. Now that she's using it, she loves it more.

Keep on innovating.

Photorun
Dec 23, 2003, 08:56 PM
regardless, price DOES matter to consumers, and it's arrogant and naive to think Apple couldn't be hurt by being more expensive. In the end it'd be nice if it was about as expensive as the median AND kick ass, not super expensive and kick ass.

MyLeftNut
Dec 23, 2003, 09:06 PM
Thats why they're called ANALysts.....

When it comes to anything creative they havent got a clue....money is not everything...Apple's interest in computers and the user experience is as much about intrinsic value as about monetary 'value' that all the clueless twits talk about...Why do we climb mountains time and time again? Why bother with art and design? Why go to the moon? All these things have an experiential value that goes beyond money...especially where creatives using Apple's products are concerned. As long as there is a creative segment of the market there will be an Apple...peace.

patrick0brien
Dec 23, 2003, 09:20 PM
Originally posted by Photorun
regardless, price DOES matter to consumers, and it's arrogant and naive to think Apple couldn't be hurt by being more expensive. In the end it'd be nice if it was about as expensive as the median AND kick ass, not super expensive and kick ass.

-Photorun

Apple isn't more expensive, they just don't have a low-end.

And let's face it, there's very few of us discussors here who are interested in a $500 box - if we didn't make it ourselves.

drewmcd24
Dec 23, 2003, 09:26 PM
The article says that ipods are only compatible with itunes. Does this matter now that ipods and itunes are available for PC users?

Also, can't you play anything on an ipod as long as it's one of the industry standard formats (mp3, wav, etc.)? It doesn't matter where you get it.

They also failed to mention that ipods are the third most requested christmas gift in the electronics category this year after DVDs and video games (not one specific DVD or game, all of them). Despite their higher price they are still vastly outselling the competitors.

http://biz.yahoo.com/prnews/031216/dctu054_1.html

It seems to me that, with the ipod at least, Apple is doing a pretty good job marketing and distributing. Or maybe people are just starting to prefer quality and originality over cheap knockoffs.

iJon
Dec 23, 2003, 09:26 PM
Originally posted by patrick0brien
-Photorun

Apple isn't more expensive, they just don't have a low-end.

And let's face it, there's very few of us discussors here who are interested in a $500 box - if we didn't make it ourselves.
exactly, apple isnt aiming at the people who just want to check mail and browse the web. getting those computers that cheap involves cutting many corners. but with the ipod apple wont be cutting corners with these new ipods, they will simplly be ipods for the rest of the world who dont have a gazillion songs or at least 300 bucks to spend. this will be a very smart move for apple. only people they wont have ipods for are those who need more than 40gb.

iJon

iJon
Dec 23, 2003, 09:28 PM
Originally posted by drewmcd24
The article says that ipods are only compatible with itunes. Does this matter now that ipods and itunes are available for PC users?

Also, can't you play anything on an ipod as long as it's one of the industry standard formats (mp3, wav, etc.)? It doesn't matter where you get it.

They also failed to mention that ipods are the third most popular christmas gift this year after DVDs and video games (not one specific DVD or game, all of them). Despite their higher price they are still vastly outselling the competitors.

It seems to me that, with the ipod at least, Apple is doing a pretty good job marketing and distributing. Or maybe people are just starting to prefer quality and originality over cheap knockoffs.
no it doesnt matter at all becuase for the regular consumer, itunes is going to be the best option for anyone, way better than the musicmatch crap they used to offer.

iJon

respin4
Dec 23, 2003, 09:40 PM
Very well written article. However it is not the first time these kind of arguments are made about the iPod business model:

"Still, Apple may have learned these important lessons only partially, and too late. The iPod works only with the iTunes service, and has a $0.99 fee-per-song pricing structure. Dell/Musicmatch and Napster offer consumers more choice. "

I beg to differ, kind of... Anyone that assumes that an owner of a music player is going to fill it up with 10000 or more songs from a music store is a pothead. That's the only case in which these kind of arguments make sense. Any of those players are mainly used to play mp3's and as such they are all much alike. The fact that one can also play .acc files while others also .wma makes almost no difference. From that point of view the iPod has the adavantage mainly because it offers a better user experience (thanks to its superb design and to iTunes). It is however, in my opinion a fragile edge. Overtime Dell will put its act together and improve the design and experience of its player and even get a nicer piece of software. By then I hope Apple had improved the iPod to be still ahead of the game.

Regarding the issue of innovation as a good business, I believe Jobs and company understand that innovation is not a ticket for success and that it might at most be the only way to maintain their actual base. That is why they are trying to get the brand as close to as much people as possible. I believe Apple's retail efforts (and exposure like the Pepsi Superbowl deal) are maybe their only and last resource to try to lure Wintel and non-initiated users.

Mr.E.

eazyway
Dec 24, 2003, 12:13 AM
Originally posted by Sir_Giggles
Market share, well duh means a bigger share of the market which means more revenue for Apple. The more money you make, the better your chances of survival in a really tough economy.

If another great depression were to happen tomorrow, Apple would not survive.

Apple was once on the razor edge of going insolvent, and even a misstep like the Cube would put Apple on the chopping block so it's always important for Apple to always try to gain marketshare, and honestly the only way I see them doing that is making computers cheaper so more people can buy them.

No one has ribbed Apple about releasing cheaper iPods, but to get to their rumored $99 price point, expect to see reduced features or even a lower level of craftsmanship. Only on Jan 6 will we see what he has, but it wouldn't surprise me one bit to see how the iPod is built. You can tell Apple is serious about dominating the music market with their aggressive advertising, and now aggressive pricing.

Yet somehow, when it comes to computers, we are so adamant that they be built like swiss watches (and priced to match ~ yes I know that is debatable too). That's great and all, but the mass of employees working at their computer stations could care less if their CD is slot or tray loading, or if its made of plastic or forged aluminum. Apple isn't going to make any headway selling to already converted Apple fanatics, they need to appeal to an employer's bottom line. Apple doesn't have to build really junky machines to achieve a lower price point, just innovate on Dell's strength of logistics.

Apple sold some 6.4 billion dollars worth of hardware and software, yet their net profits are only in the millions. I don't know about you but that is staggeringly bad. Even though they are making money, they are not thriving. I'd like to see Apple prosper.



Apple has never been close to going under yet. They have not had any debt and they could lose money for ten years at the rates they were losing it and still survive.


More revenue does not equate to more profits. That only happens when your margins are high enough to cover costs. If your margins are too low for the type of business you run then that is a problem.

Apple and Dell have approx the same R & D budget but Dell has about 6 times the revenue. Thus Apple has to have larger margins than Dell to cover the costs of R & D.

In the past 2-3 years when Apple went from $8B in rev down to the low of $5.3 they had to cut staff and shut down locations. Reorganization costs a lot of money and usually impacts the bottom line. That is now over and they can return to 27-30 % gross margins and look toward 7-10 net profits in years ahead. The past quarter Apple had net revenues of approx 2%. The next Q I bet that the net Revenue will be 4% or better. Apple right now has traction on its side.

Producing low cost products or loss leaders as they are called is only good if you can switch the buyer to the higher brand. How many low end systems does Dell actually sell. Go to their site and ask for a suggested system and you never get near the low end. Bait and switch on the net . Real neat. Very few buy the low end system.


Apple is finally learning that each part of the business must become profitable on its own to survive. That is why you here about the stores , the enterprise channel the software etc all going to ward profitability.


Bad numbers on $6.4 B in sales? Any profit is not a bad number. Just look at Nortel , Luscent, JDS Uniphase and such if you want to see bad numbers. Bad quarters occur in troubled times but when you come out of it strong then you will get back to good margins.

IMO Apple right now is on the road to much better things. It may take 2 or 3 Q's to get complete traction but it will happen.

The iPod may or may not a vehicle that drives the business but the G5 and G6 will be along with a greatly expanded product offering both from themselves and from 3rd parties.

looking for 450,000 G5 sales in Q1 ... a record high end Q

Portable sales up 5%

700.000 iPods ...

Good revenue from MAC OS X

Increased Software Sales...

New enterprise sales..

Good traction at higher Ed

Lower iMac and eMac to education and consumers

More peripheral sales..

Stores become profitable...

No real staggering announcement at macWorld SF..

Stock price to double by Mid Feb before a pull back on softer Q2 data .

By June release of G5 PB and super fast G6 desktops with new IBM's new software compiler being a big hit with developers.

Stock starts to gain traction again could hit $50 per share in August (with a PE ratio of about 80)...assuming no major world events occurs before then.

ipiloot
Dec 24, 2003, 12:50 AM
Originally posted by shadowself
In my estimation innovation is critical.

Sure Apple's products cost more than Dell's. Apple spends three to four times as much as Dell on research and development and Apple sells fewer items and has much smaller over all revenues.



Hey! That's not quite the whole picture. In one hand Apple invests more in R&D, but a lot of that transforms in to the price of OS. In other hand Dell gives big amounts of money away to Microsoft for OS licences. I once calculated, that Apple gets nowadays their OS cheaper than any PC-maker buying OS from Microsoft. One can wonder, where does the scale momentum go. Answer is simple - it goes in to the Microsoft's 80% margin.

northstar
Dec 24, 2003, 12:53 AM
A well written article. Critques apple without undercutting its accomplishments. They may never never have a huge dominance in the market, but rest assured, they will continue to have 100% of the industry innovation.

ipiloot
Dec 24, 2003, 01:07 AM
Originally posted by MorganX
As a matter of fact, I believe Jobs said he didn't want everyone to own a Mac, didn't he? He was satisfied with high margin, low volume, small market willing to worship him and make him rich.

Not quite. In he's first period at Apple, Steve was speaking a lot about a computer in every home, every school, everywhere. I'm sure he didn't mean IBM by saying that. You have to see that old video when Steve introduced Mac in 1984. It was almost like spitting in IBM's face. Nowadays a hope for every computer sold being Mac in any forseeable future is just insane. Apple has to grow market leader first.

Nermal
Dec 24, 2003, 01:24 AM
Where Apple was once one of the most profitable companies in the category, its operating profit margins have declined precipitously from 20% in 1981 to a meager 0.4% today, just one-tenth the industry average of 2%.

I'm not sure I can trust someone who can't do basic maths.

Gymnut
Dec 24, 2003, 01:32 AM
Since Apple's now got a competent CEO let's hope Apple remains ahead of the pack instead of being trampled over. Go Steve.

Marble
Dec 24, 2003, 01:34 AM
I'm afraid I didn't have time to read the thread, but I don't think that Steve wants to own the market. He's a good economist, and I think is very comfortable with a "minority" position in the computer world - a position known for its unparalleled quality, style, and gravitass. People who claim that Apple's innovation strategy isn't a successful business model are just totally missing the point. The thing I love about Apple computers is that they are a constant competitor. They are the underground subclass that is *always* rebelling. It gives us a kind of patriotism that is a hundred times better and more secure than a "reliable business model", pshaw!

u2mr2os2
Dec 24, 2003, 02:46 AM
I noticed a few errors in the print version of the article. One was corrected, one was removed:

1. The print version mentioned that some thought Apple lost out in market share because it didn't license it's OS in the 1970's. Try the 1980's. But this does not appear in the online article, except a weak reference to licensing.

2. Xerox PARC being notorious for not having made any money at all. A myth. The laser printer has made Xerox quite a lot of money.

3. The print version of the magazine mislabeled the G5 as a 64-Gigabit processor. Corrected in the online article.

j_maddison
Dec 24, 2003, 03:13 AM
Originally posted by patrick0brien
-Bzzzzzt!

This is why Venture Capitalists should not teach economics.

Economics 101: Equilibrium between supply and demand of a product facilitates micro and macroeconomic growth.

Management is simply keeping the finger on it.

I will agree with his other point that Apple has consistently not had a low-end to garner market penetration. The other boys do.

Of course, this factor is what leads some short-term thinkers into believing that Macs are more expensive.

Michael Porter is not the be and end all of economics my nescient friend! While low cost products to facilitate market penetration, a cheap product can also destroy a brands sence of worth especially in todays capatalistic economic hegemony. Then again perhaps I'm constrained by a bounded rationality because odly enough I agree with you! hehe, sorry festive fun. just thought it was nice to see someone writing about economics and strategy for a change and wanted to jump onto that train too!!

Jason

Sabenth
Dec 24, 2003, 04:24 AM
all that i can say is this i used pcs i now use Macs. I like the Mac I enjoy using the Mac and they seem to have lasted a long long time.. Fingers crossed they go the whole nine yards and go for a 100 years if not longer... good on em i say

grouse
Dec 24, 2003, 04:47 AM
It is an interesting thing that apple, for the first time in many a year, has a product that crosses into the general consciousness.

For a company that, for its computers, has such a small market share, it gets an awful lot of attention, especially now in the case of the iPod, but do you remember the coverage of the ill-fated cube? It was everywhere. But no-one bought it.

I seem to remember one of the Business Week regulars, who writes "Byte of the Apple" defending his space, and justifying why there was a regular column for a small computer manufacturer. His argument was simply that if you want to see where the industry is heading, look at Apple. First to come up with a mass-market user-interface, first to remove floppys, first to come with CDs, first to promote wireless, first to bring out a working music store which convinced the big five to come on board, and so on.

Maybe Apple is like some government think tank, that publishes policy papers, that others then implement.

Apple's mind share is still out of all proportion to its market share. And in some ways this must both delight and bother the company. I'm sure there is some management rule book that says that visibility is all, but in our case, it somehow, isn't (yet?) enough.

D*I*S_Frontman
Dec 24, 2003, 09:23 AM
Economists who don't consult their marketing friends are quite blind to reality.

Remember the "PET ROCK?" Let me explain to the less than 30-set here @ MacRumors. In the mid 70's a novelty company decided to sell a gag gift known as a "pet rock." It was literally a smooth rock from a quarry in a nice cardboard box with a 1 page "owner's manual" in which directions for training you rock to "sit" and "stay" were explained. They sold for a few bucks.

This company marketed their cute little gag and sold MILLIONS of them. Let's look at what conventional economics would tell us about this.

Rocks are everywhere. A dumptruckload on your driveway of literallly hundreds of thousands of units would cost you about $100 from your local quarry. Let's say it's a small load, only 100,000 rocks. That means each one costs you 1/10th of a penny. Heck, just walking along the roadside and picking one stone up costs you absolutely nothing. The laws of supply and demand would indicate that this should drive the price down unless demand rose to meet the supply. Well a few million pet rocks sold, but nothing close to the kind of demand necessary to make rocks more expensive--not to mention that the control of the supply of rocks is nonexistent. They're everywhere.

The pet rock phenomenon makes absolutely no sense apart from marketing, but behold what marketing could do here. By using clever packaging and a great sense of humor, these guys were able to convince millions of people to buy a rock and it's packaging (probably no more than $.05 for the whole thing--I'm sure shipping it cost tenfold more than making it) for $5 bucks or so.

There were dozens of mp3 players before the iPod, for less money. Sounds stupid to enter that market, right? Not if you create a product people perceive as clearly superior to the rest, and above all else, perceive as "cool" to own.

The PC crowd who are on the commodity model supply & demand marketing merry-go-'round all think Apple will die with its tiny market share. Too pricey, too exclusive, doomed if they don't sell millions of cheap units for razor-thin margins. Like they are forced to do.

WRONG. Apple sits on a huge cash reserve war chest and defines itself and its own market, thereby sidestepping the price-gouging cutthroat PC world almost completely. They sell productivity, ease of use, stability, asthetically beautiful design, and a good user experience overall. As long as people continue to value these things, Apple will thrive.

I hope Apple NEVER sells an iPod cheaper than $199 or a CPU cheaper than the current eMac. Keeps perceived brand identification of quality high, profits high, R&D money flowing, and keeps resentment/buyer's remorse for those who purchased pricier iPods in the past lower.

sivartris
Dec 24, 2003, 09:43 AM
There is the philosophy in business that companies have to grow, grow, grow to be considered successful. I don't agree.

If Apple's innovation causes them to make a profit each year, but they fail to capture any greater share of the market, have they failed?

No. Not by a long shot. If that money is being returned to investors and being used to further innovate then they have been successful.

Not only that, but by innovating they are contributing to the computing industry as a whole.

Now if they innovate and end up loosing money and going out of business, then they haven't been successful. But then not only Apple has lost, the computing industry as a whole has lost. This includes the consumer.

If a consumer makes purchase decisions solely by the price tag that's fine. But they should be aware that it will crush innovation and quality.

Personally, I will continue to support companies such as Apple that continue to innovate and pay close attention to quality and the details of the overall consumer experience.

rjwill246
Dec 24, 2003, 10:11 AM
Well done, folks! Some of the best thoughts I've ever read in these fora. Well done, again, and the best of the Season's Greetings!

Ted Witcher
Dec 24, 2003, 11:22 AM
Market share, shmarket share. Steve Jobs' prime objective as CEO -- as is the prime objective of all CEOs -- is to enrich their shareholders. Nobody gets on Porsche's ass because they only have 5% market share. Apple is profitable, they have little or no debt and much cash on hand. Jobs flies around in a G5 (the plane, not the computer). In some cases, you actually can get rich building the best mousetrap, not just the cheapest one.

iPC
Dec 24, 2003, 11:30 AM
Originally posted by stingerman
The article is only partly true, people don't remember that Steve was not in administration when Apple lost a majority of the market share, he was out of Apple around 1986 and returned around 97 were he spent 4 years fixing the organization, the product lines, a new OS, building a new foundation and in the last two years really has moved ahead innovation wise, now that a solid foundation has been built. Apple has never been stronger.
Actually, all Jobs has done is shift the company back in "pretty things" mode, and sell iPods. All the important stuff that analysts and investors look at (profits, units sold, market share, etc) are unchanged.

Originally posted by altair
Does it seem to anyone else that there are more and more articles being writen about Apple and Steve than in years past? Seems everyone is out to slam us just as we start lookin good.

Regardless of whether we will get kicked out of the party I really am amazed by the amount of people switching from windows.

Its a good time for Apple, regardless of what these guys say.
See above.

desdomg
Dec 24, 2003, 12:02 PM
iPC looks like a troll to me. Whats up?

Rincewind42
Dec 24, 2003, 03:15 PM
Originally posted by kangaroo
If Joe's requirements are email, surfing, word processing, number crunching and other basic computer tasks and his new $699 Dell can do that for him without breaking a sweat--why isn't that a 'great deal'?

It's only a deal until he gets the latest virus or worm and has to spend hours dealing with it himself or (much more likely) spend hundreds of dollars getting a professional to do it. Or any number of other problems that come with the PC. If he had spent the extra money up front he wouldn't be spending it again and again every time something went wrong.

After all, wouldn't you spend $200 on a radar detector if it saved you from two $120 speeding tickets?

patrick0brien
Dec 24, 2003, 03:48 PM
Originally posted by desdomg
iPC looks like a troll to me. Whats up?

-desdomg

No, he's not really.

-iPC

I would have to disagree with your points save one. First off, design is far more that "pretty things", and it's actually laughable when a stiff-collar financial analyst tries to make sense of that.

Profits have changed: They have them. In 1997, they didn't.

Revenues are way up.

Visibility is up.

Market share, I agree, is down. But that relevance is less and less every day. Only the analysts care about market share - it's an old premise from other markets they cling to. Share in the computer industry can change very rapidly.

I for one appreciate Apple's stability and upward impetus they have.

Apple is always 'dying' because noone can make sense of how they do what they do - and neither do I for that matter, I just hope they keep doing it.

patrick0brien
Dec 24, 2003, 03:48 PM
attempted delete

kangaroo
Dec 25, 2003, 11:37 AM
Originally posted by Rincewind42
It's only a deal until he gets the latest virus or worm and has to spend hours dealing with it himself or (much more likely) spend hundreds of dollars getting a professional to do it. Or any number of other problems that come with the PC. If he had spent the extra money up front he wouldn't be spending it again and again every time something went wrong.

After all, wouldn't you spend $200 on a radar detector if it saved you from two $120 speeding tickets?

Good point. But on the other side, as a Windows/Mac user, if you follow the news and install your (daily) weekly or monthly Win Updates as required--you'll be ok.

allpar
Dec 25, 2003, 01:59 PM
Problems with some arguemnts.

#1 is quality. Apple quality is falling - plummeting even. ibooks with broken motherboards. All sorts of teething problems in every system release. This reminds me of the Dodge Neon - a terrific car in every way that sold at a premium when new, but enough people had enough problems with the early models that the reputation was permanently destroyed, even when all those problems had been fixed and quality was above average (1998+). Chrysler's 1957 models had the same effect and damaged sales for years afterwards. So did the Volare/Aspen of 1976-77, to the point where even after quality was recovered, they had to rename and restyle.

#2 is market share. Apple needs at least triple their current market share to gain and retain support. I think a lot of developers are going with Apple because the owners are vociferous and because they see the OS X and G5 as being drivers of market share. But with nothing but crippled machines at reasonable prices - and by reasonable I mean about $900, which will buy a dandy PC to run Linux or Windows - Apple's going to suffer with a 2-5% share indefinitely. Look through a software catalog - e.g. at Journeyed.com - and see how many things are PC only.

#3 is ease of use. OS X isn't System 6. Since System 6, Apple's operating systems have been getting sluggish and hard to manage. 10.3 is admittedly fast on current systems, BUT it's ten times harder to manage, and they are screwing up the simple things - for example, having cron tasks that ONLY run when few people have their computers on, having tens of thousands of tiny files that aren't needed (Fink 10.2 unstable on a 10.3 install?), making upgrades that break the machines, and of course not having a simple cron tasks (and pre/post install) to fix preferences. I mean, really, how hard can it be to have some Apple employees watching how ordinary people use their computers and adjust the systems to match?

#4. This is kinda irrelevant in some ways to the article, but Apple really needs to work on getting a decent replacement for GoLive/Dreamweaver which isn't incredibly buggy and sluggish, and they also need to stop being pissy with their loyalists who want system 9 features moved into system x.

Rincewind42
Dec 25, 2003, 02:00 PM
Originally posted by kangaroo
Good point. But on the other side, as a Windows/Mac user, if you follow the news and install your (daily) weekly or monthly Win Updates as required--you'll be ok.

True enough, but I figure that most users out there follow the "parents" test - and if they are anything like my parents with computers then they are in for a long annoying time with that computer...

allpar
Dec 25, 2003, 02:14 PM
Apple makes beautiful, well-crafted, refined, highly functional -- occasionally eccentric -- machines that catch the eye and stir the imagination.

They they aren't Jaguar, they're some other company. Jaguar made beautiful, awful quality cars, until they were bought by Ford, when they made some "real" Jaguars and some Fords with Jaguar sheet metal. Perhaps you meant to use the usual BMW comparison, except BMW tries to be faster than everyone else in their segment. Perhaps you meant Mercedes, which is also low quality - oops, I mean perhaps you meant Lexus? Wait, they don't stir the imagination. Maybe you meant, wait, help me out here...maybe car analogies don't work.

Fortunately, there's a place for Apple in this world -- just as Jaguar doesn't have to sell as many cars as Chevrolet to be profitable and relevant -- even a leader -- in its industry.

Jaguar was bought by Ford because they were not a leader in their industry, not for many decades, and because they lost gobs of money on their overpriced, wonderfully styled rolling rubbish.

allpar
Dec 25, 2003, 02:16 PM
Originally posted by Ted Witcher
Market share, shmarket share. Steve Jobs' prime objective as CEO -- as is the prime objective of all CEOs -- is to enrich their shareholders. Nobody gets on Porsche's ass because they only have 5% market share.

Perhaps that's because Porsche makes a profit. Or more likely because they make sports cars. Ferrari doesn't make a profit. Neither does Lambo. Or as I recall Maserati. People keep the companies alive for status.

Porsche runs on the same gasoline as Chevrolet. They probably use the same spark plugs, starters, headlights, etc. as VW... they don't have to worry about when the only maker of headlights in the world decides not to make any for Porsches.

PS> Computer companies generally can't be compared to car companies. And I know this because (see my tagline).

sushi
Dec 25, 2003, 06:36 PM
Originally posted by sivartris
Personally, I will continue to support companies such as Apple that continue to innovate and pay close attention to quality and the details of the overall consumer experience.
It is much cheaper to keep a current customer than to gain a new one.

Look at Apple's brand loyalty.

Never seen this type of loyalty on the PC side.

Seems most folks go for the cheapest route when it comes time to buy/upgrade their PC.

Sushi

balconycollapse
Dec 26, 2003, 02:15 AM
Does anyone else forsee this?

At some point in the future computers are going to reach a point where they simply can't go too much faster save a major technical breathrough (which will happen too and open a new can of worms). A point where if they did go faster it wouldn't matter though for what we currently view and require of computers. 500mhz to 1 gighz is a big jump. But 100ghz to 130ghz isn't. Same goes for RAM hardrive space. Like if you have 200 billion dollars what is another 5 going to matter. The "comfort" level at which modern web browsing and basic word processing/business software operates is quite low. A $500 PC. What application is paramount to daily home computing that will eventually require more machine or can't be better solved with a proprietary device (DVR, iPod)? I see a gap that will grow between government/research/hi end and consumer computing. All of us can purchase a hemi but few require it. At this point when the guts/horses of a computer becomes so transparent and seamless then the GUI, usability, and software applications, aesthetics, or screen size come to the forefront (think televisions, video game machines, dvdplayers). I think we have basically reached the first stages of this. There is still some ground to be covered in appeasing hobbyists in terms of raw horses on computers but for the most part i think the decline in computers is that bell curve middle of the road consumers have reached a saetity that doesn't require them to upgrade like they did going through 3-4 (packard bell :))computers in the 90s. More sales will be a second or third machine or portable devices that interface with the computer. The people are realizing that a super fast processor and tons of RAM doesn't make up for a blue screen of death or virus threats but well engineered software does. Apple has positioned itself well in both the consumer and professional areas. Provided the theory comes true and we reach a point of transparency then apple has the clear advantage for the surface level variables like gui, usabilty etc. Take the ipod for example...eventually all mp3 players will be nearly identical in features but lack the interface. They also have the advantage by making inroads into the pro world with software that creates avast amount of the media we consume. Eventually these things will become more transparent as well but hopefully apple will continue to innovate and find ways to make the competition look ridiculous by comparison.

Christmas ramble! Whew. Happy Holidays!

kingtj
Dec 26, 2003, 09:40 PM
I might be in the minority here, but I find the eMac to be a very unattractive machine. For starters, it looks too much like a rehash of the colored, original style iMacs - which are a little dated-looking by now. They're fine as "utilitarian" machines for school computer labs and the like, but they aren't going to win over many of today's PC users with their styling OR features. (The integrated display screen is a negative for folks who want the ability to upgrade to larger screens or sharper LCD flat panels in the future.)

The original poster is correct, IMHO, about the need to get the prices down on the current iMacs. They're unique-looking, in a good way, to most people - and the LCD panels on them are good enough to stop people who worry about needing a better display down the road. Being rather "non-expandable", by nature, they're not going to appeal to the "power users", but would to many other PC users, *if* they didn't cost any more than the average PC + LCD panel combo. Right now, a cheap P4 class system with CD burner and 15" LCD panel is often under $600. I don't see the 15" iMac going for $599 and under yet. Do you?


Originally posted by Silencio
eMac, anyone?

kingtj
Dec 26, 2003, 10:02 PM
Apple quality needs some work, yes. But I think it's inaccurate to claim it's "plummeting" or even "falling". They're simply following their long-standing trend of screwing up whenever they first release entirely new products.

Anyone remember the Powerbook line that could catch on fire? How about the infamous problems with the logic and power boards dying in the original iMacs, causing no screen display/boot? The whole series of Performa towers around the 6400/6500 line were garbage. (Only 2MB of video RAM soldered onto the board and non-expandable? On a system primarily being purchased by *graphic artists*??!)

It's pretty easy to observe that in most cases, you're smart not to ever buy a "first revision" of something Apple releases. Whether it's the folks who got the first generation iPods and now wish they had that dock connector, or it's the people who didn't wait and get the extra 50Mhz or so of speed in a "speed bump" of a PowerMac desktop - this holds true.

As for your 2nd. point, I don't know if Apple needs to "triple their market share" to remain viable. It wouldn't hurt, obviously, but part of their charm is found in the fact they're not all that common. Lots of folks buy Macs precisely because they like having something that's not "run of the mill". I.T. people who work on PCs all day long for a living often buy a Mac for home use, just so they can escape looking at the same stuff they deal with at work. If Apple succeeded in selling enough systems, I fear it would be their undoing - actually. The "coolness factor" would vanish, and authors of virii and spyware/ad-ware would become motivated to target the Mac platform - eliminating some of that advantage too.

I love OS X, my G5 and my new Powerbook 15", but if everyone owned and used these things - a Dell running Windows XP would probably start looking interesting to me. It's all about where you're at in the overall marketplace, really.


[QUOTE]Originally posted by allpar
[B]Problems with some arguemnts.

#1 is quality. Apple quality is falling - plummeting even. ibooks with broken motherboards. All sorts of teething problems in every system release. This reminds me of the Dodge Neon - a terrific car in every way that sold at a premium when new, but enough people had enough problems with the early models that the reputation was permanently destroyed, even when all those problems had been fixed and quality was above average (1998+). Chrysler's 1957 models had the same effect and damaged sales for years afterwards. So did the Volare/Aspen of 1976-77, to the point where even after quality was recovered, they had to rename and restyle.

#2 is market share. Apple needs at least triple their current market share to gain and retain support. I think a lot of developers are going with Apple because the owners are vociferous and because they see the OS X and G5 as being drivers of market share. But with nothing but crippled machines at reasonable prices - and by reasonable I mean about $900, which will buy a dandy PC to run Linux or Windows - Apple's going to suffer with a 2-5% share indefinitely. Look through a software catalog - e.g. at Journeyed.com - and see how many things are PC only.

allpar
Dec 27, 2003, 01:52 PM
I think a lot of Mac development is "on spec" assuming market share WILL increase.

I think making it easier to run Linux software on the Mac would be a tremendous breakthrough. We're getting there, slowly. Then as Linux triumphs, we would triumph too.

Problem with the Mac elitism factor is that you end up without support on popular Web sites, streams, etc; without specialized software; and without people who can help you if you're not totally literate. You should not be out on your own if you buy a Mac.

As for quality, yes,there have been disasters before. However, the run of the mill Mac seems to have been very well made in the past - my wife's SE is still in use, and a bunch of LC IIs that someone gave to me after years of clasroom use, were then stored in a garage attic through an entire year because I couldn't get them, and are now being set up to donate are still working JUST FINE. Amazing, no? I'm not totally confident a current iMac or such could do that.

Also, the boxes are increasingly impractical in many ways. Try replacing a ribbon calbe in a MDD G4. THe mirrored drive doors are absurd - they block off the eject buttons...and you have to remove the drive doors before installing new drives. The G5s are limiting in expandability ... the G4s admittedly will take a huge number of hard drives here and there, but only two optical drives, and you have to work to get 'em in. Want an internal zip? Not in the cards...though that DOES remind me of my beloved Plus!

kingtj
Dec 27, 2003, 04:08 PM
Yep! I agree 110% about Linux support. I'm hoping that at some point, somebody will design a tool or support layer of some sort that allows a Linux binary to execute inside OS X. I believe Linux already does this with BSD code, so it seems feasible.

When comparing quality of the older machines, I think it's important to recognize that it's a whole different "can of worms" than what you've got today (or in the more recent past). Just as I can very likely pull an old Mac SE or LC from a closet, power it up, and have it work just fine - so can I pull an old IBM XT or 286 AT from a closet with good results. This wasn't so much a "Mac thing" as it was a testament to the higher standards of build quality put into the early personal computers, plus the fact that they just weren't as complex.

When you open up a Mac LC and look closely at the insides, there's really not much to it. You've got a pretty basic motherboard with less than half the components on it that you find on boards today. The cooling is quite basic too. Certainly nothing like today's G5's with multiple, processor controlled "cooling zones".

But ultimately, I think folks wouldn't be willing to pay the prices it would cost to build systems as complicated as we've got today - if we still constructed them with the same quality standards used in the 80's and early 90's. People have learned that they really don't WANT to keep using their same computer for 10+ years straight, so they're not being built to last this long anymore.

I briefly owned the MDD G4 tower, and I agree that the mirrored drive doors themselves were impractical. But by contrast, I've had several folks comment that it was a better looking system than the new G5's (which are often accused of looking too "industrial" or "like a portable space heater"). It was fairly easy to get inside of and work on, really. A VAST improvement from Apple's early PowerMac towers like the 8150 Workgroup Server or 8500! The lack of drive bays in the G5 is almost certainly just an attempt to keep the heat down inside. I believe you'll see more drive bays in the next revision, when IBM starts providing G5 CPUs with lower power requirements.


Originally posted by allpar
I think a lot of Mac development is "on spec" assuming market share WILL increase.

I think making it easier to run Linux software on the Mac would be a tremendous breakthrough. We're getting there, slowly. Then as Linux triumphs, we would triumph too.

Problem with the Mac elitism factor is that you end up without support on popular Web sites, streams, etc; without specialized software; and without people who can help you if you're not totally literate. You should not be out on your own if you buy a Mac.

As for quality, yes,there have been disasters before. However, the run of the mill Mac seems to have been very well made in the past - my wife's SE is still in use, and a bunch of LC IIs that someone gave to me after years of clasroom use, were then stored in a garage attic through an entire year because I couldn't get them, and are now being set up to donate are still working JUST FINE. Amazing, no? I'm not totally confident a current iMac or such could do that.

Also, the boxes are increasingly impractical in many ways. Try replacing a ribbon calbe in a MDD G4. THe mirrored drive doors are absurd - they block off the eject buttons...and you have to remove the drive doors before installing new drives. The G5s are limiting in expandability ... the G4s admittedly will take a huge number of hard drives here and there, but only two optical drives, and you have to work to get 'em in. Want an internal zip? Not in the cards...though that DOES remind me of my beloved Plus!

allpar
Dec 27, 2003, 05:33 PM
Agreed on the looks of the G4. It really is a pain to work on the inside, though, and you have to have a LOT of space to open it uip. The G5's removable sides make more sense, as do those of my bargain-basement PC - $40 case has two removable sides, and fits something like four CD-ROMs/Zip drives, three hard drives, and yes! a floppy drive. The motherboard ($100 as I recall) has something like five full length PCI slots. Nice and easily upgradeable. What drives me crazy, of course, is the connectors and cables, all set up wtihout any thought at all. So some good, some bad. I miss the ease of the old sled system from machines like the Quadra 605/LC 475, which was simple, durable, and easy. But of course the 68000 series was incredibly cool, while the G5...isn't. As you pointed out.

'Course the AMD Athlon XP in my PC generates MORE heat than a G5, yet I can have a terribly expandable box that's smaller than a Mac G5. And lighter. I won't say it'll last as long, because it probably won't, but if I had spent more, it would. (PCs don't last nearly as long as Macs in terms of useful life so I didn't get the best parts. Also, replacements are dirt cheap, unlike Mac parts!)

Anyhoo, to the point, I would love to see Apple come up with a cheap dual G4 or low-end G5 at under $1,000. I think they really need to reduce their premium to the point where ordinary people can afford their machines. I personally got a dual G4 with edu discount at $1,400 because I could not afford a G5...certainly not a DUAL G5.

Some say that having a really slow machine is OK for those without as much cash, but that just marginalizes the Mac even more. How many computer labs do you want where everything runs dead slow on Macs, but fast on PCs? How many students will buy Macs if that's their only experience? Too many have that idea already...from their experience with those awful 601- and 603-based Performas. (Not the 603e or 604 or 68040 models...!).

Market share is indeed important...partly because it spreads development costs over a much larger base. That's why Chevy can sell their Cavaliers so cheap, while Subaru charges a real premium for the Impreza. That's one reason why Toyota makes a profit off the Corolla and Camry, while Chrysler has a hard time making one off the Neon and Sebring. That's also why you find luxury cars cost so much - lower production. (Cars cost $500 million [for a variant of an existing model] to $6 billion [for a whole new line at an inefficient company] to develop...you really need to sell a LOT to get the cost per vehicle down to a manageable amount! I imagine that the computer industry is similar - so if Apple builds a LOT more computers, their R&D will be MUCH less per machine.)

Saying market share doesn't matter is the argument of someone without market share!

kingtj
Dec 27, 2003, 06:22 PM
Regarding "market share", it's very over-stated, IMHO. Yes, selling more units brings the price down - but at some point, the sheer quantity of similar items flooding a marketplace automatically drops the product's perceived quality and the public's desire for it.

I can guarantee you that most folks I know would perceive the Subaru Imprezza to be a "more desirable" car to own than a Chevy Cavalier - regardless of facts about reliability, build-quality, and so on.

In fact, people I know who recently did purchase a Cavalier have to go around making excuses and apologies for their purchase - because they automatically assume they'll be attacked or questioned for buying such a vehicle! (And before you think I'm somehow biased, I own and drive an '87 Cavalier wagon!)

Also, the U.S. government and general public seems to have a "double standard" when it comes to success in the marketplace. We want to see companies become successful, but not TOO successful. If you succeed in becoming a very dominant seller in a market, you suddenly become the enemy, accused of being monopolistic (or at the very least, "the man" that we're supposed to fight against for injustices done to the average worker). Look at all the lawsuits against McDonalds. Why not so many against all the other fast food joints like Dairy Queen or Arby's? Seems like it's always McDonalds. Well, they're perceived as among the most successful.

If Apple continues to truly innovate, people who like their products will pay more - knowing the money is going towards useful R&D. Most clone vendors spend their R&D dollars on copycatting innovations of others, or finding ways to cut corners without things breaking before the warranty ends.

I can't really afford Apple's products, but I bought a G5 dual 2Ghz tower anyway - and will be paying it off on my credit card for quite a while.... It's by far the most I *ever* spent on a computer, but it's also the computer I have the most respect for of any I've owned in the last 7 or 8 years. As a guy who works in I.T. for a living, I don't see why I shouldn't put my money where my mouth is - and own a product from a company I believe in.
At least Apple's tech. support isn't answering the phones from India.....



Originally posted by allpar
Market share is indeed important...partly because it spreads development costs over a much larger base. That's why Chevy can sell their Cavaliers so cheap, while Subaru charges a real premium for the Impreza. That's one reason why Toyota makes a profit off the Corolla and Camry, while Chrysler has a hard time making one off the Neon and Sebring. That's also why you find luxury cars cost so much - lower production. (Cars cost $500 million [for a variant of an existing model] to $6 billion [for a whole new line at an inefficient company] to develop...you really need to sell a LOT to get the cost per vehicle down to a manageable amount! I imagine that the computer industry is similar - so if Apple builds a LOT more computers, their R&D will be MUCH less per machine.)

Saying market share doesn't matter is the argument of someone without market share!

allpar
Dec 27, 2003, 09:35 PM
Originally posted by kingtj
[B]Regarding "market share", it's very over-stated, IMHO. Yes, selling more units brings the price down - but at some point, the sheer quantity of similar items flooding a marketplace automatically drops the product's perceived quality and the public's desire for it.

Oh, yes, like the way the best selling cars - Toyota Camry, Honda Accord, Toyota Corolla - have a low perceived quality...! Not to mention the public's lack of desire for the best selling vehicle in the US, the Ford F-series pickup. (I never understand how that thing stays on top, the Chevy and Dodge pickups both beat it...) Lots more people think popularity MEANS quality. That's why Ford used to harp on their "five of the ten best sellers are Fords" before Jacques Nasser realized that Ford was selling so many cars to its own divisions...!

I can guarantee you that most folks I know would perceive the Subaru Imprezza to be a "more desirable" car to own than a Chevy Cavalier - regardless of facts about reliability, build-quality, and so on.

Yes, but it also costs $10,000 more.

In fact, people I know who recently did purchase a Cavalier have to go around making excuses and apologies for their purchase - because they automatically assume they'll be attacked or questioned for buying such a vehicle! (And before you think I'm somehow biased, I own and drive an '87 Cavalier wagon!)

Cavaliers are fine cars with a bad rap. Americans almost all have an idea that ALL American cars are rubbish and ALL Japanese cars are superb. I have had experience with a Dodge Neon and Toyota Corolla, and both were in the shop an equal amount during itheir first three years, though the Neon saw more severe service. Still have the Neon eight-nine years later.

Regaridng your idea that the government automatically accuses companies that are "too big" of being monopolies, I think you're confusing real monopolies like Microsoft which abuse their power with companies that are merely big. GM was attacked because it used underhanded tactics to stifle competition - remember Tucker? Standard Oil for the same reason. Microsoft for the same reason. AT&T, I don't remember why...regarding lawsuits against McDonald's, I think they have all now been dismissed on appeal. Yes, it's because MD is successful. Are you saying Apple, currently the subject of TWO class action suits, would get more if they sold more? Maybe, I guess. But how many people are suing Dell?

I am glad APple isn't using India for its phone support, but you know, that's another argument. We're talking about increasing market share back to 10%, not making it 90%.

kingtj
Dec 28, 2003, 01:22 PM
Well, the Toyota Camry has also been called the "world's most generic vehicle" by some reviewers. Sure, they all rate it as top-notch for quality - but it offers nothing unique in the styling department. Toyota and Honda are generally regarded as building the most reliable cars around - whether or not that's actually the case. (From what I've seen and experienced personally, it's somewhat accurate - but like everything, has exceptions. In particular, I've seen a number of older Corollas that develop serious cases of body rust, and then the trim panels and controls/levers start breaking off. The engine may keep on going and going, but there's not much else left you want to drive around.)

As you said yourself though, many people equate popularity with quality - and that's a ridiculous notion. If that were true, the best food you could get would be from fast food chains, and sitcoms and soap operas would be the best television you could watch!

That, again, leads back to my original point about market share. It's necessary for a business, only insofar as they sell enough units to be profitable. Plenty of "mom and pop" shops run for 50 years or more selling far less than 1/4th. of 1 percent of a market share. (As just one "off the cuff" example, we have several local stores that do nothing but sell and repair clocks. I'm certain they'll never achieve anything like even a 1% market share in clock sales around the country - much less the rest of the world. But they do enough business to remain very viable in our area.)

If you offer something unique (and I think we can all agree that Apple does - especially since you can't just go running OS X on a PC), you have the potential to survive. Magazines like "Fast Company" that want to accuse Apple of basically "wasting too much time and energy on innovation instead of on building market share/sales" don't really get it. Steve Jobs has said he never wants to be "the next Microsoft". I have my doubts he'd be able to successfully manage a business that size - and deep down, he's probably afraid of becoming another Bill Gates, forced to take a completely "hands off" attitude to the company he founded.

That said though, you're right that at the present, we're really talking about getting Apple back to maybe 10% market share - not something like 30% or 40%. I think Apple's on track to earn back the market share they've enjoyed in the past. It's going to take time to undo years of damage though. Fans of the original MacOS won't like it when I say this - but all that sticking to MacOS 9.x and earlier didn't do Apple any favors at all. The classic MacOS was becoming dated even in the mid 90's, when Apple was still hawking it to everyone on Performas at OfficeMax and Staples stores. It takes years to change the public's perceptions, and many still equate Apple with that older MacOS that "crashed with unhelpful numerical error messages and cutsie pictures of bombs", "had limited networking support" and "only supported Apple branded printers". (Yeah, yeah - I know it supported more than that, but we're talking what's seen in the "Chooser" on a default install here.)

If there's one thing I think Apple could do to improve their sales at this point, it's probably putting out more informative commercials. Up till now, they're relied on making very generalized statements in their advertising - but getting people's attention with the cleverness of the ad itself. (EG. Look at the recent ads for the 12" and 17" Powerbooks. What did that commercial really tell anyone, except "Hey - look at this! We've got both this really small new laptop, and this really big new laptop. And here's a cute way to illustrate their relative sizes!)

Did they ever mention any of the really innovative stuff those Powerbooks do? People need to know the 17" Powerbooks have built-in backlit keyboards, for example. PC laptops don't really offer that. Maybe show how the integrated Bluetooth allows people's cellphones to automatically synchronize address books with the laptop? Instead of being content to show folks that a PowerMac G5 will blow them through the walls of their house, they could follow up with a "part 2" commercial that tells people why it's better. The ability to upgrade to 8GB of RAM is worth noting, since 32-bit desktop PCs can't address more than 2GB. At least show someone opening one up, so people can marvel at the ease of access to the insides, and the advanced cooling design in it.


Originally posted by allpar
Oh, yes, like the way the best selling cars - Toyota Camry, Honda Accord, Toyota Corolla - have a low perceived quality...! Not to mention the public's lack of desire for the best selling vehicle in the US, the Ford F-series pickup. (I never understand how that thing stays on top, the Chevy and Dodge pickups both beat it...) Lots more people think popularity MEANS quality. That's why Ford used to harp on their "five of the ten best sellers are Fords" before Jacques Nasser realized that Ford was selling so many cars to its own divisions...!

Regaridng your idea that the government automatically accuses companies that are "too big" of being monopolies, I think you're confusing real monopolies like Microsoft which abuse their power with companies that are merely big. GM was attacked because it used underhanded tactics to stifle competition - remember Tucker? Standard Oil for the same reason. Microsoft for the same reason. AT&T, I don't remember why...regarding lawsuits against McDonald's, I think they have all now been dismissed on appeal. Yes, it's because MD is successful. Are you saying Apple, currently the subject of TWO class action suits, would get more if they sold more? Maybe, I guess. But how many people are suing Dell?

I am glad APple isn't using India for its phone support, but you know, that's another argument. We're talking about increasing market share back to 10%, not making it 90%.

wdlove
Jan 18, 2004, 08:27 PM
I found this to be very interesting, Wired Magazine from 1997 "101 Ways to save Apple" Steve Jobs came back and managed to accomplish the save Apple.

http://www.wired.com/wired/archive/5.06/apple.html

Here is the cover of that magazine. For those without broadband it happens to be very large.

http://homepage.mac.com/jlatour/.Pictures/Pray.jpg

kingtj
Jan 18, 2004, 09:08 PM
Yeah, I remember reading that issue when it first came out - but at the time, I recall not really caring if Apple made it or not. (I was already freshly recovering from being burned on my purchase of a Performa tower that didn't do half of what my less expensive PC setup did!)

Looking at the list now, one can see that Steve Jobs really did take at least a handful of Wired's suggestions to heart. (EG. The suggestion to dump/outsource the digital cameras, scanners, Newton, and eMate, or the suggestion to offer an "Apple Loan" program.)

Of course, in other ways, Wired was dead wrong. (EG. The suggestion at the top of their list to quit building the hardware, and focus on the OS/software instead.) Of course, this is also the suggestion Bill Gates had for Steve before he left Apple the first time - when he asked Bill "What should I do to increase market share?" As long as Apple does a good job creatively designing unique machines, I think they're right to keep on selling them. The best way to ensure the OS behaves like you want is to control the hardware it runs on.


Originally posted by wdlove
I found this to be very interesting, Wired Magazine from 1997 "101 Ways to save Apple" Steve Jobs came back and managed to accomplish the save Apple.

http://www.wired.com/wired/archive/5.06/apple.html

Here is the cover of that magazine. For those without broadband it happens to be very large.

http://homepage.mac.com/jlatour/.Pictures/Pray.jpg

neutrino23
Jan 18, 2004, 11:11 PM
Innovation Marketing Pricing Product Line

All interesting topics. Great thread to read.

As long as the computer market is changing then innovation will be important. Innovation is what drives the market forward. At least for the next several years we can expect big changes in hardware.

Marketing is what convinces the customer that they desire the innovations the factory creates. Creative Marketing creates a new experience for the customer, often with the same materials they had before.

When you talk about the "average Joe" using a computer for just "email and web surfing" you are draining all of the color out of the product. If you advertise that you sell something simple for just "email and web surfing" then the customer will never pay much for that. It is Apple's job to tell the customer "Buy an Apple and you will feel great", "With an Apple your life is enhanced", etc. Then they will pay $1,500 for the experience. It happens all over. You can buy decent athletic shoes for under $10, so why does Nike manage to get kids to line up to pay over $100 for the same thing?

The iPod is a great example of marketing and innovation. The designers and marketers decided on a musical experience implemented in hardware and software. Those who carp about gigabytes or battery life are totally missing the point. iPod sells well because the overall experience is great, it is not a nuts and bolts purchase based on gigabytes and watt-hours.

On the radio the other day I heard about a that in blind taste tests Pepsi always beats Coke. In another test they scanned people with an MRI while they drank unmarked colas. Pepsi did a better job of lighting the parts of people's brains related to taste and enjoyment. However, when they told people whether they were drinking Coke or Pepsi (truthfully) then the Coke drinker's brains lit up in other areas related to fulfillment and motivation and such, not just in the taste areas. Pepsi drinkers didn't have this reaction. The point is that somehow the Coke marketers have created an experience for their customers larger than the simple taste experience they get from sweet, fizzy water.

My point is that if Apple can continue to innovate technically (backlit keyboards, beautiful displays, good sounding speakers, fantastic OS, etc.) then they will have the tools for their designers and marketers to innovate in their sphere to create products that customers will desire and that competitors will not be able to copy easily.

ionas
Jan 19, 2004, 01:24 AM
@ kangaroo

if you installed all the patches and upgrades of windows and internet explorer you would still get more bugwholes and still some mayor issues would be there :p.

thats just the truth.

if you got a hardware (or pseudo hardware, like a netgear router) firewall infront of your system, use alternative browsers and APPS only (openoffice, mozilla, ifraview, footbar2000, and so on)

dont ever use ms PROGRAMs, just the basic OS, update every SERVICEPACK (but not every stupid hotpatch),

dont open any .exe/com/pif/lnk/vbs/whatever file if you dont 100%tly know what you are doing....

then you might be fine.