Monday, September 17, 2007
Did Apple Blow Its Chance With Vista?
A lot of people lately have been, more-or-less, dicing a recent article by Randall Stross, from the New York Times, for his recent articled: "A Window of Opportunity for Macs, Soon to Close." The question is, is it really? I don't think so, because in business its really not a case of one competitor against the other for so called market share, but rather, more of a case of achieving the highest profit and margins.
In the article, Mr. Stross opines on the rage that erupted last year when Apple delayed Leopard a few times and thus eliminating any possibility that Apple could capitalize on Microsoft's own delays and really take market share from the Redmond giant.
He looks at figures provided for June 2007 of 3 percent market share for the Mac and states, " ...according to Roger L. Kay, president of Endpoint Technologies Associates, a consulting firm in Wayland, Mass. That forlorn number looks even worse compared with Apple's peak worldwide share of 14 percent in 1984, the year the Macintosh was introduced and sales of Apple II computers were the company's mainstay."
Well, the most important numbers for Apple, something he and others like to overlook, is not the world market share numbers, but the market numbers in the U.S. It is here were Apple shines and makes most of its revenues, and, naturally, its were Apple has and Apple will continue to concentrate its marketing efforts. It is also important to note, that as a computer provider, Apple has chosen to concentrate most of its efforts at the consumer level and not big, or for that matter, small business's as do most, if not all, as do the other computer providers do.
Here, the story really gets interesting, as close to 6 % percent of the U.S. market clearly not only belongs to Apple, but it could, some estimate, be much higher then most people realize. Why? Its simple: most computers sold, be it Windows or Linux systems are mostly sold to business's, where as most Mac systems are sold to consumers. Estimates of Apple's real market (consumer) share in the U.S. may, in fact, according to some in the know, be anywhere from 15 to as high as 21 % of the market. Now those, my friends, are really, really interesting numbers and would help explain the profit machine that is known as Apple Inc.
After all, as Apple's charismatic CEO, Steve Jobs said, and I paraphrase here, "Even though we could make cheap systems, like others, for $500 or less, we choose not too. Its not our style." This is exactly what is going on at Apple, a company that has the brains and vision to see that systems that sell for less, bring less profit and less potential other than that of increasing its over all market share. But why market share - why bother beating your brains out for a large percentage of the market that results in very small profits, and in some cases, no, many, many cases, in NO Profits at all, in fact sometimes big loses?
Not only is it not Apple's style to go after the extremely low-end of the market, style wise, but from an investment point of few it makes good business sense not too. These low-end systems are just that, and are barely worth the time, money, expense and effort to bother with, other than for bragging rights in market share. This is why most computer companies are not making any profit because these low-end systems simple don't and can't make money, they simply have or little or no profit margins built-in for anybody to make a real buck on. So, why should Apple follow the same path? I see no reasons, no reasons what-so-ever!
This, my friends, is why the over all world market share numbers are really not that important to Apple and why the American market is where Apple, or any other manufacturer, should be concentrating on. I much rather make $200 profit on a million $2,000 computers than $5 bucks on 20,000,000 units sold from these cheap systems. Remember: Apple is a business, a very big business, and the first rule of any successful business is profits and it is here that Apple has and is continuing to put all other computer manufacturers to shame, even though they may out sell Apple ten-to-one and despite their higher market share, as does Dell does compared to Apple. Apple looks small, in numbers of units sold, compared to Dell, but Apple easily equals or blows past Dell in profits and margins on far few units sold then overall world market share would have you believe.
Mr. Stross also wrote, "The best time for gaining market share is when your main competitor stumbles while introducing an entirely new version of its core product. Thanks to Microsoft's lumbering pace, Mr. Jobs had six years to look forward to the moment when XP would be replaced by Vista."
This is not so, simply because Apple is not competing for the lower-end of the market. It doesn't matter how many low-end computer units are sold, or how much higher that segment is compared with the high-end, high-quality segment is, and that is exactly where Apple is at, the higher priced and higher qualitative segment of the market place. In other words, it really doesn't matter if GM sells a thousand times more Cavilers compared to BMW's top-end sport cars, because both BMW and Apple, thank you, are doing very nicely in their targeted market segments - the higher-end segment.
In this area, I agree mostly with Paul Thurrot, one of the really big technology writers out there when he said, "This guy (Mr. Stross) goes out of his way to explain how poorly Vista is doing from both a sales and compatibility standpoint, which is sort of astonishing given the overwhelming evidence to the contrary. This poor reporting of facts may invalidate the entire article somewhat. (He gets market share data from Endpoint, which presumably measures sales, and then compares it with data from Net Applications, which measures Web usages. These are two completely different things.)
My own analysis of Apple's market share in the PC market shows that the Mac is up, year-over-year, and has been steadily rising for some time. It's hard to grow market share dramatically when you're starting from such a low place, as I've also demonstrated in the past. My conclusion is that the Mac is gaining on Windows at a slow pace, sure, but gaining nonetheless. The reasons are simple: Apple makes good products, people like the iPods are are willing to investigate the Mac, and some Windows customers are tired of the issues that naturally arise in a non-monolithic ecosystem where ever piece of what makes a PC a PC comes from a different company. That Apple bobbled its chance during Vista's innumerable delays in not debatable. But now that Vista is out, there's no change in the big picture, and Apple will simply continue its small market share gains for the foreseeable future. In short, this article is all over the place, and doesn't really hit on the reality of what's happening here at all."
In-other words, Mr. Stross article is seriously flawed. Likewise, his answers are naturally flawed because he based them on the wrong questions. He lumped the Macintosh market numbers into the overall computer market, one based mostly on cheaply performing and cheaply priced systems. He should have asked the question: "What is Apple's share of the high-end, high-quality segment of the market?" I'm not sure exactly what that would be, but I do know that it is near the top, if not the very top. It would be foolish to ask, "What is the percentage of the $10,000 sub-compact automobile share does BMW have?" Mr. Stross's article and conclusion, in my opinion, are just as flawed and equally foolish.
And that is my 2 cents 4 this glorious sunny Monday, September 17, 2007.