Tim Cook has tried to reassure everyone that there will be “great” new desktops from Apple. The big question, of course, is what will those desktops be? Apple has focused more and more on portable computing, and desktops have been largely neglected. The MacBook has become their mainstay in the PC world. So what can we expect? I don’t know, but I am allowed to guess (and I’m allowed to be wrong, too).
I read an article on MoneyCentral where the author ponders if Apple is blowing its chance to “dominate the market” in PC’s and smart phones. On PC’s, his assertion is that the Windows Vista debacle was a opportunity for Apple to sweep in and push Microsoft aside. On smartphones, he implies that Apple had a chance to dominate a green field.
From where I sit, I’m not sure the author really understands either market. On PC’s, yes Vista was a disaster, but it didn’t affect the largest and most profitable segment of PC buyers very much: corporations. Many, many corporations continued to buy PC’s running Windows XP, and Microsoft had to continually extend support for it to keep those customers happy. The reality is that, no matter how technologically superior MacOS is, businesses were not going to just dump their Windows machines in favour of it. They have far too much invested in terms of software, infrastructure and employee training/familiarity to abandon it. This isn’t like switching brands of toasters or microwave ovens. Switching PC operating systems is a significant undertaking. The Mac was able to make small in-roads in some businesses, but Apple has not focused on the Mac as an enterprise computing platform. The opportunity for this on the enterprise side was extremely small, if not largely non-existent. The release of Windows 7 won’t cause corporations to suddenly buy more PCs: they were already buying what they needed (or not buying, courtesy of the recession). The Mac wasn’t on most lists to begin with, and didn’t have a realistic chance of being there, either.
On the consumer side, Apple has had some success. But no matter how much better MacOS could be for the average person, again, Apple is up against the fact that buying a Windows machine (even a Vista-based one) is viewed as the “safe” alternative. It wasn’t about price. The average person doesn’t buy a super-cheap $500 PC, they spend $1k or more, right in the range that low-end Macs are positioned. The PC is “safe” because of the vast library of consumer software available, specifically things like games. Its also “safe” because the computer most people use at work is a Windows-based machine, and most of their computer-knowledgable friends are more likely to know how to deal with a Windows PC. Ultimately, running XP Home, Vista or Windows 7 doesn’t really matter to most consumers. Apple is up against a monumental amount of inertia here, and has done as well as could be expected.
When it comes to smartphones, the author of the article appears out of their depth, and seems to focus solely on the US market. Globally, the biggest player in smart phones are those based on Symbian. In the US, most smartphones right now are corporate phones, and that’s were Blackberry rules. The consumer market in the US is still nascent, and Apple is doing very well there. What Apple is doing is avoiding the sorts of things that have made it hard for other players to sustain their profits on handsets: too many models, too many networks and not enough (if any) profitability per handset. Current handset manufacturers have no effective control on what they build: they are essentially told by the networks what to build, and it results in them having to have far too many variants on handsets, with the attendant costs associated with them.
Apple is trying to change that formula by taking control. By limiting their network providers initially, Apple got a chance to “test drive” the market in a controlled environment while keeping their risk and costs low. It appears Apple is going to add other network in the US. They’ve already done that here in Canada, since you can now get the iPhone on Rogers, Fido, Telus and Bell. Apple is moving in the same direction in the much larger mobile phone markets in Europe and Asia. The exclusive AT&T deal wasn’t forever. Apple’s success allows them a measure of control and leverage over other networks. This means they can say “no” to overly-customized variants of the handset that will only work well on a specific provider’s network. That in turns keeps costs down and margins higher.
Google, on the other hand, is trying to go down the road Microsoft has already travelled. Microsoft build Windows Mobile, and left it up to the device makers to do something with it. What Google is doing differently is, first, not expecting a significant revenue stream from Android on handset sales, and second, actually maintaining the operating system consistently. The risk for Google, though, is their loss of control to the handset makers. Some handset makers want to change the look and feel quite drastically (Samsung is apparently looking at this), and the risk is that it won’t look or act like other Android phones. The OS will be a commodity, and could be marginalized to the point people don’t care about it. This means Android’s success is completely at the mercy of the handset makers, and Google has no effective control of the brand. As a result, Google is hedging their bets on this, making sure their software is available on other smartphones as well.
Either way, it is far too soon to tell who is going to dominate the US marketplace, and if Symbian will be supplanted as the leader globally. Apple is doing well and RIM is making in-roads on the consumer side, by leveraging their position on the enterprise side. Android should do well, but the risk there is the handset makers marginalize it and don’t buy into it exclusively. I expect Android to be around, but not necessarily as a well-known individual brand in the minds of the consumer (like Symbian is today).
The last element of the article is the author’s dismissal of Apple’s stance that marketshare doesn’t matter, but being profitable does. On this one, Apple has it right. My only addition would be to say that it should be sustainable profit. Marketshare doesn’t pay the rent, profit does. Why should Apple attempt to bankrupt themselves to try to dominate the PC market? Particularly a market where the entrenched player (Microsoft) is there not because of superior product, but because they are the defacto standard on the business side, and that spills over to the consumer market. For Apple to dominate, they would have to go after the enterprise market in a huge way, and that is a hard sell. That isn’t to say it couldn’t happen. The mainframe dominated the business computing landscape for decades, but was eventually supplanted by UNIX, Windows and now Linux based servers. Changes in the computing landscape are possible.
Going back to a previous post I wrote (The End of Windows?) I believe that the next big battleground is smartphones, or more specifically, high-powered highly-mobile computing. The mainframe didn’t die (IBM still sells billions of dollars worth of them). It was overshadowed by other server computing. I don’t think the PC will die, but it will change form as more and more people rely on computing that fits in their pocket.
So, has Apple squandered some opportunity to dominate PCs and smartphones? Given that smartphones for consumers are still quite new, I don’t think Apple has missed an opportunity there. That battle is just beginning. For PCs, I don’t believe that there was an opportunity to begin with, as described by the article’s author. I think Apple (and Linux) would still have made the gains they have made. The Windows juggernaut may have stumbled a bit with Vista, but not enough to harm it as much as the author implies, because the real fight for the PC desktop is the enterprise, and Vista isn’t the competitor there, XP is. Ultimately, Windows has far too much momentum behind it to be replaced in a matter of a few years.