Jobs' Apple gets down and dirty

National Post - Canada ^ | 1/13/2005 | Paul Kedrosky

[Swordmaker]

You have to love Apple Computer. Not, however, for its products. Those are over-glossy fashion plates designed for the people who like to overpay for products and then brag about it.

No, you have to love Apple for its ability to manipulate the press. Here is a tiny company with 3% market share in the personal computer, and yet Steve Jobs' new product announcements at Macworld earlier this week were treated as if they were auguries of the future of computing from a descending deity.

They weren't. Instead it was mostly Apple -- and more specifically, chairman and founder Steve Jobs -- backing and filling as he tried to put a happy face on a radical and self-refuting change in Apple product strategy.

Why self-refuting? Because Apple has long called itself the BMW of personal computers. In other words, it priced its products 30% to 40% above comparable Windows-based product because of a conscious premium-pricing market strategy, not because its costs were out of control.

Fair enough. While many people would never buy a BMW-style personal computer, the same way many people who can afford a BMW car would rather buy something cheaper and more functional for half the price, there is no denying tastes, so there is undoubtedly a market for people who want to buy opalescent over-priced computers from Apple.

But this week's announcement flies in the face of that prior strategy. By launching products -- its Mac Mini and iPod Shuffle -- at low-low prices, undercutting comparable products from computer-makers and portable music player makers, respectively, Apple is getting down and dirty and fighting it out on price.

Where, in other words, is the BMW strategy? It is as if BMW suddenly tried to undercut Honda's Accord or Toyota's Camry. While there's no denying there is a large market for value-priced cars, by competing directly against those products BMW would be putting its margins at risk. More importantly, it would be ample reason for investors to wonder whether BMW executives had lost their minds. Why would they suddenly abandon what they did best -- engineering interesting products -- and start trying to sell family econo-boxes?

It is precisely the same with Apple. So why is the company doing it?

Because Apple has a problem. Most of the company's growth in recent years has come from its foray into consumer electronics. From a standing start only a few years ago, the company's popular iPod music player has becoming a standout performer, accounting for something like 30% of the company's sales -- and more sales units than the company's Macintosh personal computers.

It is a remarkable performance from a nominally personal-computer-oriented company. It has competed head-on with some of the largest consumer electronics companies in the world and come out on top.

Now, however, Apple has to figure out what to do with all this "success."

Because iPods get lower margins, generally, than Apple's personal computers, so being successful at selling iPods, however glamorous and attention-getting that might be, doesn't contribute to profits the same way Mac sales do. Apple would like to find a way to turn iPod sales into Macintosh sales before the bloom goes off iPod in the fickle consumer electronics market.

Hence the company's announcements this week. Far from being forward-thinking and strategic, Jobs was busily shoring up a currently foundering product line -- Apple's over-priced Macintosh -- by leveraging a soon-to-be foundering product line -- Apple's iPod.

Why did no one call Apple on it? And why do people pay so much attention to this company with so little share of the personal computer market? After all, Dell sells more in personal computers in any three-week period than Apple does in an entire quarter. But when Dell CEO Michael Dell announces new prices for his products you don't get saturation coverage from the major North American business press.

It is partly because people want a horse-race in personal computers -- they want there to be someone selling PCs other than the Windows-compatible sorts. But that is not all. There is also the so-called reality distortion field that surrounds Steve Jobs. He is a mesmerizing speaker, someone skilled at turning sows' ears into silk purses. Case in point: His new iPod product plays songs in any order because it lacks a screen or any way to select songs, so he is pushing the slogan that "life is random." Nice trick.

So, kudos to Apple. It is the consummate media manipulator, a company that, puffer-fish-style, blows out its cheeks and convinces people that it is much bigger and more formidable than it actually is, thus attracting oodles of media coverage -- including, I suppose, this column.

Way to go, Steve.

[Swordmaker]

Interesting take...

[Swordmaker]

Really negative article on Apple's new products from a Canuck...

If you want on or off the Mac Ping List, please Freepmail me.

[Terpfen]

Now, however, Apple has to figure out what to do with all this "success."

They did. It's called the Mac mini. The writer isn't grasping the connection between the Mac mini and the whole "figuring out what to do with Apple's success" line that he's complaining about. The Mac mini IS Apple's response to its current success: more success! I love my PC and I'm thinking of getting a Mac mini.

I'm starting to understand what Mac users go through each day.

[7.62 x 51mm]

"Those are over-glossy fashion plates designed for the people who like to overpay for products and then brag about it."

So true! Bwahahahahahahaha!

[coconutt2000]

Pointless Canuck negativity targeted against one of our own companies.

Now, if Apple was a canadian company, 3% of a huge PC market would be something they'd be bragging about.

[HAL9000]

But when Dell CEO Michael Dell announces new prices for his products you don't get saturation coverage from the major North American business press.

Several years ago, Michael Dell assured us that Apple was doomed. Doomed!

Obviously, Michael Dell's prediction was wrong.

Now Microsoft has announced that the target price for future computer systems should be about $100. That could happen if Microsoft starts manufacturing and marketing their own systems. Microsoft could afford to sell each unit at a loss and make up the difference in software sales. It's unlikely that Dell could survive at that $100/unit price.

In the end, Dell could go the way of Osborne, Kaypro and a multitude of other forgotten system manufacturers.

Apple has a huge advantage over Dell - the Mac operating system. It beats Windows on quality, and Apple doesn't have to split the money with Microsoft.

[dennisw]

 

I won't be buying one but the Mac mini is also very clever in that it's portable. 

I can see some universities providing Mac mini stations in their libraries. With a fixed networking connection, a monitor and usb trackball/keyboard combo. Just plug in your mini and you are good to go
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[Swordmaker]

Turns out the author is a Californian... a Professor at UC San Diego.

[BunnySlippers]

Another bitter PC user.

[sodiumodium]

what i find interesting is that a company might actually make a micro sized personal computer that will sell. via and others who make mini-itx form factor boards and epia chips and what not have a small following with case modders, hobbyists, and saavy industrial designers but nothing near mainstream success. i might buy a mini just to take it apart and put an x86 based comp inside with the new nano-itx boards.. like i did with my g4-cube (not exactly a hot product there)

[John Valentine]

Good grief, why? Because you can?

[pageonetoo]

[tubebender]

This is sour grapes on the part of the writer because he didn't buy Apple stock last year instead of telling his friends to short it at $22 a share.

[SunkenCiv]

Heh... gosh, Apple sees an opportunity to regain market share lost years ago to a huge number of clone-makers. Talk about inability to manage a business. Guffaw. I don't have a lot of use for Steve Jobs, but I've found I have even less use for the op-ed writer.

As long as the product is actually in the pipeline (something Apple has a history of not doing well), Jobs' hardworking little elves should be moving all of it pretty easily. I'm not often a buyer of a new machine, but I like to look at 'em. And what generally happens is, I see the ads plastered all over tv and magazines, go to (for example) CompUSA, and see the floor unit. "Backordered, eight weeks."

I listened to the audio (well, I listened to parts of it) and Jobs claimed that it would be shipping "a week from this Friday".

[avenir]

"He is a mesmerizing speaker..."

That's a slap in the face to Anton Mesmer fans everywhere.

Fire up Quicktime and watch the 2005 keynote, and surrender to the Jobsian drone.

[avenir]

"Apple has a huge advantage over Dell..."

Reality Distortion Field: ACTIVATED.

[Richard Kimball]

I use Apple computers, but I have nothing against Dell or MS. A lot of the guys here on the PC side prefer PCs because they can build them themselves. I don't have the time or interest to do so, and have generally found I have less installation, operating, and color calibrating problems with my Mac.

The article seems kind of goofy to me. Apple approached two product extensions that were a logical extension of their current business model, and they were wildly successful (iPod and iTunes). They decided to expand that strategy, while maintaining their current business model. It's called expansion.

Dell's also had a lot of success, but there really isn't any innovation in the Dell line. They produce good quality products at discount prices. I'm glad both companies are successful.

[antiRepublicrat]

Where, in other words, is the BMW strategy? It is as if BMW suddenly tried to undercut Honda's Accord or Toyota's Camry .. it would be ample reason for investors to wonder whether BMW executives had lost their minds..

This guy's an idiot who hasn't done his research. In Germany, both BMW (the 1-series) and Mercedes (the A-class) offer cars in the lower markets, under 20K Euros including 16% sales tax, and they're making a lot of money off of them.

[Lazamataz]

I walked by an Apple once, and it wasn't working. It may have been turned off.

I TAKE THAT AS PROOF THAT APPLE SUCKS!!!

[Lazamataz]

I use Apple computers, but I have nothing against Dell or MS.

Dell freakin' ROCKS! I got an extended warranty plan, and at the two-year-mark, my Dell had a problem (probably with the power supply). They told me not to worry -- they were sending me the most modern version of that line FOR FREE!

I got the power supply working again, called them to call off the replacement, and they told me not to worry and that it would be too much fuss to stop the replacement on their side.

I asked them what I could do to make up for the unneccesary replacement. Direct quote back: "Just please consider Dell on your next computer purchase."

Damn straight I will!!!