Posted on 03/31/2009 11:03:33 PM PDT by Swordmaker
Both Microsoft (MSFT) and Apple (AAPL) belong to the Most Innovative Companies category; however, we rarely see anything original from MSFT. Rather, Microsoft is widely accused of copying ideas from Apple. I guess the reason MSFT is in this category is because the Windows OS has an innovative meaning to the entire human being. This type of innovation doesn't necessarily indicate creativity, which, on the other hand, is the exact characteristic that differentiates Apple from the rest.
On the other hand, Microsoft is the indisputable monopolist in the Operating System world, owning around 88% of the market, and Mac OS owns around 10%. However, according to many users with Mac experience, the OS from Apple is so much cooler than Vista, and for years, there have been voices arguing that Apple should license the OS to the OEMs, the same way that Microsoft sells its flagship product.
Here are some thoughts on the rivalry.
1) Why is Microsoft less creative?
With such a dominating market share, you might think that the business operation environment for MSFT won't be that tough. But it is the opposite - MSFT is constantly under immense internal/external pressure, which exhausts its power to stay innovative.
First, internally, the Windows OS, if not the most complex software system in human history, is well qualified to be one of the most complex ones. Virtually it is like a platform of your daily life, somewhat matching the unlimited possibilities in real life. To develop and support such a system is a daunting task for any single company. Think about it: billions of dollars in budget, thousands of developers, hundreds of modules, dozens of versions, iterations, releases, integrations, testings, code bases, documents ... there is an endless task list. If you have the experience managing a one million dollar project, you know it only takes a few mistakes to see your process spin out of control. Then try to imagine this monster at MSFT's hand. I have no clue how MSFT manages the life-cycle of Windows, but for sure it is a process demanding rigor, consistency, cautious planning and solid implementation. I won't say these values prohibit creativity, but for sure, they won't encourage creativity.
Second, Windows is an OS independent of the hardware, and MSFT only specifies the minimum hardware requirements. We understand that this is required for MSFT to maximize its market share. The result is, MSFT has to deal with the compatibility issue with hundreds of hardware variations. On the other hand, the OS is a platform, i.e., it opens its interface for thousands of other software companies to build upon, which creates another compatibility issue. Then adding the challenges created by rapid evolving technologies and backward compatibility, these could easily turn into a disaster that devours the company. Again this is the daily task of MSFT.
Third, Windows is estimated to have more than 1 billion users worldwide, which means it is open to unlimited possibilities/challenges/risks created by the immense brain power of a vast crowd, where exist countless usage patterns/habits, unbelievable stupidity and unimaginable brilliance, geeks, hackers, pirates, virus writers, Windows lovers, Microsoft haters..... As an indicator, MSFT never escaped from the criticism about the security flaws of Windows, even after spending billions of dollars year after year attempting to fix it. Here, code quality actually is only one side of the story, the other side, the enormous user base.
In summary, all these demanding tasks that fill the daily life of MSFT ultimately defined the overall operation atmosphere and corporate culture. Here, the top priority is about being solid, thorough, proactive and making less mistakes. Then how about creativity - stay original and novel? Sure it is nice to have creativity, but it is fine to live without it. It is a shame to copy ideas invented by others. But business-wise, what is the big deal? As long as it is legal, it simply means less cost.
2) Why is Apple more innovative?
At first glance, it looks like in the CPU market we have a similar competition pattern with Intel (INTC) controlling the market and AMD as a challenger. Here, the dominating market share gives Intel extra power over AMD, because it may directly squeeze the margin of AMD by reducing the price of its own chips. You may think that in the OS world,MSFT would have the same leverage over Apple, but not really.
The secret lies in Apple's bundling strategy, i.e., it doesn't allow the Mac OS to be installed on any non-Apple branded hardware. In other words, Apple refuses to open its software to the open public. What does Apple gain from this? It avoids the full-blown competition, as well as the big headaches that MSFT has to deal with (listed above). Furthermore, from the space that the monopolist's power can't reach, Apple created itself a very stable niche market with a group of very loyal users.
First, through bundling, Apple has full control over the hardware platform its software runs on, virtually eliminating all hardware compatibility issues that MSFT has, and rendering the backward compatibility into a minor problem. This translates directly into a lean product management process and less cost.
Second, Apple has full control over the look and feel of its product, thus retaining the leverage to consistently maintain the luxury and sleek style of its product, which caters well to its target customer.
Third, fat margins. A Mac normally costs twice as much as a PC with similar processing power.
And fourth, Apple has a small but friendly user base, characterized by higher income and education, which frees the company from dealing with all sorts of malicious behaviors that are very common in the Windows world. As an example, the user doesn't even need an anti-virus software on his or her Mac.
In summary, with MSFT taking on all the hatred and accusation, Apple operates under an environment with much less internal and external pressure, thus gaining the luxury to be internally focused, thus more innovative.
Disclosure: Long AAPL, no positions in MSFT.
The court is wrong. MS does not have a monopoly on the desktop OS market. To say otherwise rewrites the long-held definition of a monopoly—TOTAL DOMINATION, 100% market share.
So your opinions are superior to the courts system of the United States of America? LCF, the economic and legal definitions of "monopoly" are not the same. Economically, MS does not have a monopoly... they have a dominant position. Legally, they have been adjudicated to have a monopoly position in the Desktop Operating System Market... and further that they have abused that position.
Standard Oil didn’t have 100% market share when it was broken up.
Crock.
don’t think apple promotes conformity and uniformity? walk into any apple lab or store and you will seen all the exact same hardware from all the same vendor.
Walk onto the lot at a Chevy dealer, and you will see all the exact same hardware from all the same vendor.
Name one.
You can call a tail a leg and say a dog has five legs but it still only has four. Calling a tail a leg doesn’t make it so.
Feel free to bash the quality of Microsoft’s products, I do it all of the time (in addition to being an econ nerd, I’m a computer engineering student). But I also know that they have no monopoly regardless of what some idiot judge thinks. Real monopolies do not last long in a competitive free market, and the computer industry is one of the freest and most unregulated in the world. If a monopoly (or for that matter, a cartel) exists indefinitely in a free market, then it has only done so by providing what consumers want better than any potential competitors. But as I said, most monopolies in a market economy only exist for a very short while before a competitor arrives. As MS already has competitors (Apple, Linux, etc.) on the desktop OS market. The very existence of successful competitors shows that MS is not a monopoly and has not infringed on anybody’s rights in anyway, thus the government should back off.
For a fact-based and historical view on this (rather than the economically illiterate garbage you usually hear in the mainstream and techno media), see this fine article on the equally fine Concise Encyclopedia of Economics:
http://www.econlib.org/library/Enc/Antitrust.html
What was the situation *before* Mac OS became a Unix? I kid, I kid. :-D
Not to be a jerk, but can you provide links to these articles? All I find are articles reaffirming the commonly-held viewpoints that Macs are pricier.
FWIW I’m a UNIX/Linux guy who grew up on the Apple IIE and early Mac, then switched to PCs for its abundance of software (i.e. games).
Try looking at post #1. That’s regarding the VERY NEWEST 2009 version of the mid ranged iMac.
Here is a 2007 comparison vs the Gateway all in one.
http://www.systemshootouts.org/shootouts/desktop/2007/0927_dt1300.html
Try Google. You will not find any “Spec by Spec” third party report that shows a mac being “twice” the price of a comparable PC. Mac is actually CHEAPER in dollars. Every time.
Mac is WAY WAY cheaper when you factor in all the bonus reasons in Total Cost of Ownership.
The ONLY claims where anyone says “Macs are pricier than PCs” are from liars or the ignorant. Mostly liars.
Kidding aside, the old Mac OS (OS 9 and under) had 114 known self-replicating, self-transmitting, self-installing viruses... with a far smaller market share or installed base.
Good article. It didn't tell me anything I did not already know though. As I said earlier, the LEGAL definition of monopoly and the economic definition of monopoly are two different things. The enabling legislation, as mentioned, was not explicit in describing what it was. As a result, the judiciary had to establish case law over the years to provide definitions. That is still going on.
As to competition proving that Microsoft was not a "monopoly", it was not too long ago that Apple had just 2% of the Desktop OS market. Linux was not even considered anything except a hobby toy on the desktop. There were a few other OSes such as THEOS, the remnants of Amiga OS, and the like, but combined, those did not account for even 1% and in enterprise far less. That left Microsoft in the position of having 96% of the overall desktop OS market and better than 98% of the enterprise desktop OS market. Only in the last year has that percentage of the overall market dropped below 90% as Apple approached 10% and Linux started to become relevant as a usable desktop OS.
Monopolies are not inherently illegal. It is what the holder of the monopoly does with it that determines whether they are using it to suppress competition.
Microsoft tied its secondary and tertiary products to its primary Windows OS by requiring that they MUST be included with Windows. They established self-serving contracts that required computer makers to pay for a Windows license for every computer they made regardless that some computers were shipped without OS under threat of having their OEM status pulled and their business essentially crippled. Predatory pricing is evidenced by Microsoft including its Internet Explorer with Windows at no charge when its primary competitor was selling Netscape Communicator browser for $30, effectively destroying Netscapes profits. Microsoft's refusal to allow competitors such as Wordperfect to have access to the new printing APIs built into the new Windows 95 which benefited Microsoft's Word but put Wordperfect and other vendors of Windows word processors at a severe competitive disadvantage where their printing ability—something that was extremely important to a word processor— was essentially crippled.
These "empirical" examples of monopolistic practices are what got Microsoft into trouble.
If it waddles, quacks, and has feathers, it's likely a duck.
$1100 Notebook Shootout - Apple vs. PC Free Republic— May 2006—comparing Apple Macbook with Dell Inspiron.
Total price as configured:The Ultimate Xeon CAD Workstation is a Mac Pro - Apple Clobbers Dell on Price and Flexibility Arcatosh—August 2006—Comparing a Mac Pro to Dell's equivalent Workstation computer.
Apple Mac Book $1099
Dell Inspiron $1095.
"Both at the low end of the Xeon 5160 workstation market and especially at the higher end, Apple is beating Dell -- the industry price leader -- on the price of cutting edge workstation technology. That is the conclusion today."Apple's Mac Pro - A True PowerMac Successor Anandtech—August 2006—Review of Mac Pro... and finding that they could not even BUY the components at Internet Prices to equal the RETAIL PRICE of the Mac Pro.
With our plan of attack laid out, it's time to dive into the Mac Pro and we'll start where very few Mac users like to: at its price. In the past we've generally shied away from getting too caught up in the price debate, because honestly if you're buying a Mac, you're doing so because of the OS and assigning value to that is difficult. Some users are content with other OSes and see no value in OS X, and to them the value in a Mac is simply the total cost of the components that make up the machine. At the same time there are other users who prefer OS X and thus find additional value in a system that is able to run that OS. Regardless of which camp you fall into, the Mac Pro is competitively priced. We'll let the table below do the talking:The Dell is clearly more expensive, although you can knock off $100 - $200 thanks to the bundled LCD (unfortunately Dell gives you $0 credit if you remove the monitor from your order). We're able to come close with our own configuration by shopping at Newegg and other vendors through our shopping partner, but note that the $2390 total does not include an OS, case or power supply.
Apple Mac Pro
Dell Precision Workstation 490
Home Built Config
CPU
2 x Xeon 5150 (2.66GHz)
2 x Xeon 5150 (2.66GHz)
Memory
2x 512MB DDR2-667 FB-DIMMs
2x 512MB DDR2-667 FB-DIMMs
Graphics
GeForce 7300 GT
Quadro NVS 285
Hard Drive
250GB SATA 3Gbps
250GB SATA 3Gbps
Optical
SuperDrive (DVD+R DL/DVD+-RW/CD-RW)
16X DVD+-RW
Notes
Free 17" LCD, had to add sound card, mouse and 1394a card
Includes Supermicro X7DAE motherboard priced at $474; does not include price of OS, case or power supply
Price
$2499 ($2299 with educational discount)
$3110
$2390
Comparing prices: Mac Pro versus PCs MacWorld—August 2006—Comparing Mac Pro against Dell Precision 690 1Kw
"My reaction: Wow. I mean, seriously: Wow . The Mac Pro is more than $1,000 less expensive? That’s not pocket change. In fact, the difference in price here is nearly a reverse of late-90’s Dell vs. Mac pricing. (If you’re skeptical of this comparison, even The Inquirer —far from a Mac-sympathetic publication— came to a similar conclusion: “Apple thrashes Dell on Mac Pro pricing.” And that was using a Precision 490, a less expensive Dell machine that isn’t really comparable to the Mac Pro in terms of expandability. Another comparison, with a similar result, can be found at systemshootouts.org.)
Apple thrashes Dell on Mac Pro pricing The Inquirer—August 2006—Comparing Mac Pro with Dell Precision 490.
"This is quite incredible. Any major OEM has trouble matching pricing with Dell, considering the massive volume discount Dell gets from Intel. But Apple aren't only matching them on the lower specs, they're thrashing them on the higher specced systems - relatively huge margins of pricing difference."
Mac vs. PC cost analysis: How does it all add up? Everybody knows PCs are cheaper than Macs, right? Wrong! (At least sometimes.) Computerworld—June 2007—Comparing Macbook Pro to name brand equivalent equipment computers.
"Bottom line: Assuming that you want a high-end notebook PC designed to work, play and be your everyday machine with style, the MacBook Pro is a surprisingly good value. The models that I compared it with, the Sony and the Dell, had some extras here and there, but they were also more expensive. The key to the perception that Macs are more expensive is that Apple offers very few in-between models."Are Macs More Expensive? Let’s Do the Math Once and For All Technologizer—August 2008—Comparing four equivalent notebook computers including the Macbook.
"So for consumer notebooks, the official Technologizer answer to the question “Are Macs more expensive?” is as follows:
“Actually, a MacBook is in the same ballpark as a roughly similar Dell or HP, and less than a Sony. If you’re tempted by a MacBook and can afford its pricetag, go ahead and buy one–it’s a decent deal.”. . .
- MacBook: $1299 (white case)
- Dell XPS M1330: $1287 (including an “instant rebate” of $100)
- HP dv4t: $1218.99 (including an “instant rebate” of $100)
- Sony VGN-SR190: $1608.99
We Build a PC to Match a Baseline Mac Pro Tom's Hardware—August 2008—Buying just the parts to equal a Mac Pro.
"The above is essentially a baseline Mac Pro replicated using the cheapest minimum required components to build. The difference? A negligible $5.67. Those who claim that they can build "the same" PC for half the price are at this point baseless."Oppenheimer: New iMac a better deal than Dell, HP Fortune Magazine—March 2009—Comparing a 24" iMac with Dell XPS-ONE 24 and HP Touchsmart IQ800t.
"“A side-by-side comparison suggests the new iMacs match up favorably against Dell and HP’s All-in-One’s on a price-to-performance basis. For example, the (iMac) $1,499 model has a faster CPU and RAM with better or comparable graphics, and is still $100-$250 cheaper (though it lacks a TV Tuner, ~$60-$100 upgrade).”
In the markets which Apple chooses to compete, they are often either completely competitive or actually less expensive that the PC competitors.
Quite an impressive list, Swordmaker. It’s nice that someone collects and organizes the data — which is basically what we all know anyway (the Mac users) but don’t always have the data at our fingertips...
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And to RachelFaith, you were saying in post #40 — “And then you get the BONUS of adding in resale value, ease of use and total cost of ownership.”
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I would say that the ease of use (while also being a very powerful and useful computer, at the same time) is very valuable. It saves a lot of time, which should be valuable to almost everyone. We just don’t have the time to do what the computer should do for itself, which is, to make “it” easy to use for the user of that machine.
This is the one factor that dramatically lowers the cost of ownership, because you don’t have to pay for all the time you waste, pay for additional programs for managing those nasty worms and viruses, pay for the maintenance of it (either software, or other people to do something for you, or “pay yourself” for all the time that you take out to “manage” the thing yourself).
And you’re right, in regards to selling your older machine at a higher price — if — one would ever want to sell it anyway... LOL... I’ve got a couple of older iMacs, that I can’t quite get rid of and I can still use for odds and ends, and they will probably end up being some “hand-me-downs” to someone else, once I get around to getting rid of them... :-)
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And for LifeComesFirst, since you’re into UNIX/Linux, it would seem that you would be happy and satisfied to work with a Mac and its Mac OS X, with its UNIX architecture, and have “several computers in one” with a Mac. I can’t see why (since “Life-Comes-First”) why one wouldn’t want the ease of use for mundane tasks, while opening up time for things you’re more interested in...
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And to antiRepublicrat, you were saying in post #36 (to E Rocc) — “However, you really have to call Microsoft a former monopolist because Microsoft has been prohibited from doing either of those things for years.”
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They may be prohibited from doing some of those things, however, they’re still “riding high” on the benefits that they gained from those things they did in the past. Things haven’t been “balanced up” yet...
There's monopoly, then there's abuse of monopoly. When your marketshare is that big you have to be more careful than everyone else not to abuse your monopoly, but you can have a far lower marketshare than that, less than 50%, and still get nailed for monopolistic practices.
Monopolies can do good or bad. Standard Oil brought efficient production and use of materials, providing cheap oil to the masses. It deserved to grow big. The main people who lost out were the less efficient competition in the early days, but even then serious competition was already forming before the breakup in the form of Shell, Gulf Oil and others. IMHO, pure market forces would have killed the Standard Oil monopoly by the 1930s.
I agree.
When your marketshare is that big you have to be more careful than everyone else not to abuse your monopoly, but you can have a far lower marketshare than that, less than 50%, and still get nailed for monopolistic practices.
Can you give an example of a company with less than 50% of the market getting "nailed" with monopolistic practices. One of the tests for such judicial involvement is SHOWING that the defendant company is in a monopolistic position. Having less than 50% of the market would be prima facie evidence that they were not a monopoly.
Wanna play you ITunes on something other than an IPod? BWAHH!
Now who's the monopolist?
Even at that rate it is technically possible to be judged a monopoly. British Airways got nailed with something like 30+% domestic marketshare. They were doing travel agent loyalty programs with rebates and other incentives to squeeze the then-growing Virgin out of the domestic market. They had the cash to do it, and Virgin didn't.
Let's see. A vendor is not a manufacturer, it is a seller of the product. While Dell, HP and Apple all sell direct, they also sell through vendors. Apple sells through their Apple Stores, Frys, MacMall, OWC, BestBuy and others.
Exactly where do you go to buy a Honda automobile? Do you go to the Toyota dealer? Maybe you buy at the Ford Dealership? Honda, just like Apple, is a BRAND... and under our perfectly reasonable brand name system, it is not monopolistic to sell your brand through the channels that you prefer.
iTunes. Well, you can play your iTunes on your Apple Mac, your HP, your Dell, your Fujitsu, your Sony Vaio, your PC of any make... and you can play the MP3s you have ripped from your own CD using iTunes on any player you like. It is perhaps true that Apple is approaching a monopolistic position on portable digital music players... they have ~70% of that market. However, there are 30% of that type of device that are not Apple, that are competing with the iPods. As of May, all iTunes songs will be DRM free and playable on anything you choose. It may be a little more difficult to load on your third party player, but it is perfectly possible to do.
You buy a Dell from Dell, an HP from HP and a Mac from Apple. How many vendors, other than authorized Dell retailers, sell Dells?
BTW, there are lot of authorized Mac retailers around the country, not counting the Apple Store chain.
You can start calling Apple a monopoly when they start using their money or market position to leverage other OEMs out of markets. Let's say Apple starts undercutting everyone else's laptop prices, taking no profit, to educational institutions to sell to students. Then say they offer steep discounts to them for their IT infrastructure, making it all Apple. Then Apple starts making Macs less compatible with Linux and Windows so that students now have to have a Mac if they want to go to those schools. Then Apple stops the cheap laptop program and rakes in the bucks because every student at these universities has to buy Apple. That program would catch the notice of the DoJ when it starts getting big enough.
Wow, some of that brings back memories of how Microsoft operated its monopoly.
But Apple doesn't do that. They offer educational discounts like most other OEMs do, and Microsoft does (and Microsoft's educational discounts are rather steep).
British Airways, explained in post #57.
Numbers don’t matter so much as leveraging what power you do have in an anti-competitive manner. Of course the bigger the numbers you have, the more power you tend to have, so such practices tend to be found in the 50%+ group.
For example, Apple is acting in an anticompetitive manner against Psystar, trying to not allow competition. Yes, I know the judge denied that. But their monopoly is a legal one based on the limited granted copyright monopoly Apple has on OS X (the extent of said monopoly still to be decided).
It’s like if you invented a revolutionary optic mechanism for a rifle scope and sell a scope based on it. You’re a small part of the market, but 100% of the market for scopes with your mechanism. Your patent on it keeps out the competition legally. BUT, if you manufacture and sell that part, you can’t keep others from making scopes based on it (your rights were exhausted at the time of sale as with, IMNSHO, copyright). Selling the part but still trying to keep others from making competing products is anticompetitive.
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