Wednesday, October 1, 2008

Old logic, new clothes

Bits asserts that Apple is heading into a down period, as weak consumer spending and business contraction will ding Mac sales. Worse, the iPhone is a high-end consumer product too, and the iPod is saturated. Bits sees major trouble in the lack of a sub-$1000 Apple laptop, and weak Mac Mini desktop offering.

The "iPod saturation" argument aside, these are old ideas in new clothes. A beleaguered Apple will lose to cut rate competitors, some of whom are "more openish", because they charge extra for what is a commodity. Why? Because they did in 1994, and now that Apple has re-ascended, they will surely re-collapse.

Not true. Apple lost in a walled garden era where acreage was all that mattered. Divisions were high between proprietary platforms, and control of formats set de facto standards and won the day. Business drove volume and volume buying drove prices down and sales up. The biggest seller won, and "everyone" who mattered sold Windows. Apple was run out of the industry after hitting a max of 10-15% Mac market penetration (perhaps higher with the Apple II.)

These days present a far different context, though, and Apple is not failing to compete in the high volume market, but choosing not to. They did in 1994 too, by hook and crook and failure, but now it is a completely voluntary aversion. And, in changed contexts, owning 35% of the dollar share of the PC market, but under 10% of sales, has proven to be a profitable niche. Apple sells a computer that is wholly compatible with Windows, and offers its own compelling alternatives in spades. It is perhaps a better PC than a traditional non-Mac, as an infected or broken Windows instance can be easily replaced from a Mac "hypervisor."

Really, Windows and Office are luxuries, like Photoshop and Final Cut Pro. The base PC, whether it is $700 or $1000, is no longer seen as the only operative cost going forward.

The iPhone will also have its legs taken out from under it by Android which will make smartphones/MIDs commodities, too, right? Just as desktop Linux has taken eons to evolve, Google Android/iPhone OS X parity is a long way off. Windows Mobile parity perhaps not, but the goalposts have moved.

Apple, as always, is selling a different product than the mainstream. Even in a recession they have a clear field of hidebound smartphone OS competitors and a crippled Vista-based PC industry the web continues to wedge open. Even in a recession, Apple is a very strong company, and will continue to break sales records going forward.

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