Is Apple About To Become An Industry Giant?

Analysis

Is Apple About To Become An Industry Giant?

By: Robin Bloor, Chief Research Officer, Bloor Research
Published: 7th March 2005
Copyright Bloor Research © 2005

Apple is beginning to look like it is going to fulfil its commercial potential. All the signs are there. The Apple stock price rose by over 200 percent in 2004 and, in its final quarter, its revenues rose to .5 billion giving it a run rate of 4 billion. The run rate may be a little misleading because the final quarter revenues were boosted by sales of 4.6 million iPods, which is a Christmas peak. Nevertheless, Apple is clearly outperforming all consumer electronics stocks by a dramatic margin – and Apple isn't just a consumer electronics company, although its financial vitality comes primarily from that market.

Apple has achieved many things in recent years, but perhaps the most surprising is that it has defined and plays a central role in the digital music market, with the twin successes if its iTunes store and the iPod. The iPod is a phenomenon that no-one saw coming. Apple hasn't just done a great piece of marketing and design work, it has established a very powerful brand; one that must be the envy of many. It is also generating significant revenues, and one analyst organization, Generator Solutions Ltd, is predicting that Apple's music revenues will reach US billion by 2007.

However, Apple isn't just doing well in this fashion driven market. IDC reported 25 percent growth in its worldwide shipments of PCs (compared to 13.7 percent for the market as a whole) and the success of the iPod looks to be stimulating sales. The iPod is an invitation to use the Apple PC as a media center.

Apple's recent announcement of the iPod Shuffle, which is a music memory stick and player aimed at the low end of the music player market, and its Apple PC in a box, the Mac Mini, may not have set the world alight with enthusiasm (some observers were hoping for something a little more revolutionary from Steve Jobs this year), but they both make eminent sense as products. If the Mac Mini proves to be a success, and it'll be a while before we know, then Apple will have finally gained entry to the mass PC market – a market it had previously chosen to price itself out of.

The point is that Apple clearly intends to play in the mass PC market and it now has the foundation and a product with which to do that.

The differentiating features of the Mac, in case you've never used one, are:

It doesn't crash; it's highly secure and fairly bullet-proof against PC pests (viruses, spam, hacking etc.). This all adds up to trouble free
It's the definitive digital juke box
It's the premier digital photography platform
It's likely to become the definitive digital platform (it is a little early to pronounce this)
Good lap-top PCs
Ease-of-use (in many ways superior to the competition)
Microsoft compatibility is good (for years, this had been a problem)
Good networking (it happily networks with Windows PCs)

If you read this list, it clearly indicates an uncompromised consumer emphasis; but the PC market, which really ought not to mix the home with the business, has never managed to separate the two. Vendors do little to try to specialize devices for the home or the office, apart from the software that comes loaded. It therefore seems possible that, with Apple's visible resurgence, we are going to see an uptake of Apple PCs in businesses beyond its established niches (for DTP, Photography, Video, etc.). If that happens, it will be because of the first differentiator listed above: trouble free.

Reader Comments

Posted: 7th March 2005 | By Martin Taylor :

Agreed - Apple has had phenomenol success with the iPod, and it is having a positive impact on selling more PCs in the consumer space. But, Apple's continued success in the mass market is dependent on producing products and processes that clearly show Microsoft PC consumers a "idiot" proof migration path. It is dangerous to extrapolate Apple's recent success in the mass PC market to far out in time.

Posted: 7th March 2005 | By Fred :

I happened to visit Apple's store in Soho last week ... middle of the week, in the early afternoon. The place was mobbed. Sure, iPod's were flying off the shelves, but so were iBooks and Mac minis. And PowerBooks. There was a hell of a lot of spending going on. And the crowd was different than the stereotypical "Mac base"; there were a lot of people who, from the looks of them, would need help plugging in a computer, let alone using one. This is where the absolute ease of use of the Mac -- and lack of viruses and spyware -- may be Apple's ticket to mass acceptance. Who knows? One thing's for sure, this is an important year.

Posted: 7th March 2005 | By Douglas Metcalfe :

Nice article, and all very salient points, but I would have expected IT-Director.com to focus on the benefits of Apple products in the IT director's own domain, the data center.

Never mentioned in the article are the Xserve or the XserveRAID. Unlike in the consumer space, Apple has actually become the low cost leader in both these categories.

Try pricing comparable 1U, dual processor, 64 bit systems from traditional low ball providers like Dell and others.

Apple's XserveRAID offer more (up to 5.6TB) GB per buck than any other storage system available.

When you add software into the mix Apple is the clear winner. Consider the per seat costs of a Windows installation, not to mention the man hours needed to keep it patched and up to date.

Even a Linux distribution when coupled with support contract costs, as added by the major players, becomes more expensive than an Apple solution, With unlimited seats at no extra cost and a strong BSD Unix core, OSX offers "trouble free" administration with the excellent OSX server management tools.

Xsan was another notable omission, Apple's surprisingly affordable enterprise-class storage networking solution . Xsan lets multiple computers concurrently access terabytes of storage on Xserve RAID over high-speed Fibre Channel. All things that would be more important in the server room than on the desktop.

Posted: 8th March 2005 | By Vaio Owner :

I see Apple as being quite comparable to Sony. Apple has the Mac, Sony has the PC. Both are desirable devices because they look great and perform well.

So perhaps Sony could become the next giant?

Posted: 8th March 2005 | By Samantha Hodges :

#12)Rather than being called zealots - why not think of us as people who care passionately about their computers and systems. This is something that PC owners will never understand! Linux is a good move for the PC because it offers freedom and choice - something everyone is entitled to.

Posted: 8th March 2005 | By Jeff :

What is it with Linux and Mac zealots? You mention them in an article and suddenly there are hundreds of the blighters - like ants! Apples are too expensive. Linux is too difficult, unpredictable and unstable. Microsoft and the PC will always reign the IT world.

Posted: 8th March 2005 | By Macking301 :

Apple has made products that are worthy of "best in class".
They just will not settle for second best in any area. The OS is miles ahead of the competing Windows XP.
In the coming months we will see a breakout of the Mac.
People have had it with XP's problems. Apple's time has come and the time is right now!

Posted: 8th March 2005 | By Tony Crooks :

Surprising you do not even touch on the Mac Mini & Xserve combination. Together, don't they look financially enticing as well as sharing at least 5 of the positive differentiating features that you identified, Robin, not just the 'trouble free' one?

Posted: 8th March 2005 | By Paul Chapman :

Great Article, if any business user actually had an open mind and looked at some of Apple's Professional Software solutions like MAC OS X Server and the like then they would be simply blown away by its ease of use and cost-effectiveness. Lets just hope Apple can keep their innovation coming.

Posted: 8th March 2005 | By anonymous :

I'd say you're right on, but the truth is that Apple still sells for a premium. For those that know better this premium is worth it. For example, viruses, worms, hacks are completely out of control in the microsoft world - its absolutely insane what people put up with - but at the same time, if I want to play Doom3 or Halflife, why does Apple saddle their hardware with the absolute cheapest graphics cards etc.? For the money, wintel still makes a far superior bang for the buck experience.

Apple is still playing the "buy what we want to make" game, which is ok, but for instance, if you want a Mac mini, or powerbook, with a high-end video card then go fish! They are giving up the market here.

This alone will prevent them from becoming a "giant" - if only for the reason that it simply annoys people not to get what they want.

Posted: 8th March 2005 | By thomcarl :

Often over looked and a hugh feature is the OS X operating system, and iLife software that goes with it. There are also thousands of 3rd party apps. written for OS X, most of which are great (Office for Mac being one of them).

Posted: 8th March 2005 | By More than meets the eye :

#9 {Hidden Truths} - whilst not relevant about this article, you do have a valid point! It looks sh*t

Posted: 8th March 2005 | By Hidden Truths :

Great article ... (shame about the new Bloor website, did you four year old design it?)

Posted: 8th March 2005 | By cmvsm :

This article is right on the money. Consumers have to get educated about their choices in the marketplace, which I still believe Apple has not done everything they can do to create awareness for OSX and powermacs/minis in terms of advertising. The bang for the buck goes to Apple hands down, in terms of reliability, productivity, and an overall positive PC experience for the end user.

Whomever said Apple does not cater to the gaming market, this is a falsehood as there are plenty of high end gaming cards available for the Mac, i.e. X800, 9800Pro, 6800GT, etc. In addition, you will be hard pressed to find any retail PC package from any of the major players, HP, Compaq, eMachines, that includes a high end gaming card, unless of course the system is custom. But customization applies to either platform.

Posted: 10th March 2005 | By Gerald W Wilson :

I simply can't agree, Robin.

As a long-time user of Macs in various guises, and something of a Mac expert, I have also long since spotted the excellent value of Apple's OS X server products. But it's hopeless. Corporate minds are 100%, completely closed to the Apple brand, and I believe always will be. There is zero incentive within corporate IT to reduce IT costs (after all - that would threaten jobs) and there is a huge vested interest in continuing to use unstable, insecure systems which create work for life. The day corporate IT realises it can get better value from an Apple solution is the day a pirhana genuinely prefers a light omelette with side salad. So: nice article, but it ain't gonna happen.

Posted: 16th March 2005 | By Ken :

As someone who has moved my one man business (and home) to Macs over the last 2 years I tend to believe that Macs will only get in business through the back door - something like a CEO's spouse getting a Mac, the CEO liking it and then asking IT why it's not used in the company. I believe in many cases you'll be seeing Macs showing up in various areas of a company simply because the user pushes for it.

The other benefit for Macs now is that there is a huge amount of negative press about security problems with Windows and Mac's strength in this area.

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