Apple's cozy niche

Latest strategies show computer maker continues to market itself as premium alternative to Windows

  • Pin It
Perhaps the greatest fear of the Macintosh enthusiast is that someday, the predictions of Apple Computer Inc.'s detractors will come true.

It seems there's always an expert explaining why Apple can't last against the Microsoft Corp.-Intel Corp. juggernaut, that its market share is shrinking, that its products cost too much, that it's increasingly irrelevant.

The day Apple's chief executive, Steve Jobs, introduced several new products at last month's Macworld industry show in San Francisco, Michael Hillmeyer, vice president of Merrill Lynch & Co.'s Equity Research operation, reinstated coverage of Apple with a "sell" recommendation.


"Although Apple makes great products, in our view, the product pipeline looks skimpy, and we expect continued market-share losses," Hillmeyer said in his report. "We don't think their retail store strategy will work."

Apple's "skimpy" product line announced at Macworld included new 12-inch and 17-inch versions of its PowerBook G4 laptop; Safari, a new Web browser; Keynote, a presentation program; and updates to three of its multimedia applications.

As if that weren't enough, Apple disclosed upgrades and price cuts to its pro desktop line last week, and the same for its iMac line this week.

It would seem that when it comes to Apple, fortune-telling is a perilous enterprise.

Granted, Apple's peculiar position in the computer world makes it difficult to compare to its peers. It is the only maker of consumer PCs that builds the hardware and the operating system, as well as several significant software applications.

What makes sense for a hardware maker like Dell Computer Corp. or a software company like Adobe Systems Inc. doesn't necessarily make sense for Apple, and vice versa.

Apple's business model, by definition, must differ from that of other hardware makers. As Hillmeyer points out, Windows PCs have become commodities. PC makers like Dell and Gateway Inc. compete primarily on price, not features.

True enough, but Hillmeyer seems to view this as a disadvantage. Apple cannot compete with the Windows box makers on price, so it competes by offering customers something else: machines that can do sophisticated tasks -- editing movies and burning them onto DVDs, for instance -- so easy that even novices can do them effortlessly.

But can that sustain, much less grow, Apple's slim 3 percent slice of the computer market -- which is a far cry from its peak of about 12 percent in 1992?

From time to time, Apple has been compared with Sony's Betamax videotape format, edged out of the marketplace by VHS.

But the difference between Betamax and the Mac is that Betamax did not offer a compelling alternative to VHS. The features and price -- even the quality, some say -- virtually were identical, but VHS' early ability to record as much as six hours' worth of material on one tape became a critical factor.

Betamax's market share slipped rapidly, and the public quickly became wary of a format in decline. Sony Corp.'s attempts to keep Betamax technology ahead of VHS quickly were matched by VHS-makers. In 1988, Sony capitulated and started making VHS-format recorders.

Even the most ardent Mac supporters will admit that Apple has almost no chance of seriously challenging the Windows hegemony, but unlike Betamax, the Mac represents a legitimate and quantifiable alternative.

Many potential Apple customers have little or vague knowledge about the Mac and how it compares to a Windows PC. And if they don't know much about Macs, it's very unlikely they'll buy one -- even if the Mac ideally suits them.

Since the Mac is only going to appeal to a certain consumer, it's vital that those people see and experience the Mac, which is exactly the mission of the Apple Stores, one of which opened last October in Towson Town Center.

If Apple can reach enough of these people, many of whom simply may be using Windows because they haven't been exposed to the Mac, it actually could increase its market share.

  • Pin It