Apple Computer Inc.’s chief financial officer Fred Anderson and corporate controller Peter Oppenheimer spoke at Morgan Stanley & Co.’s conference March 1. The wide-ranging 40-minute discussion covers a range of topics, with a particular focus on iPods, Apple notebooks, the creative professionals market, and retail. And the discussion confirms Apple’s aggressive plans.
Apple’s 10 US billion growth strategy
About The Author
Eugenia Loli
Ex-programmer, ex-editor in chief at OSNews.com, now a visual artist/filmmaker.
Follow me on Twitter @EugeniaLoli
Apple needs a very good strategy. It is trying to penetrate a market dominated by Windows and at the same time chase (while being chased by) Linux and open source systems in general.
What’s the only way out? Be competitive by innovating. Apple has lots of things that Linux and MS lack. But it is also lacking in lots of other areas. A well orchestrated attack onto both can only produce good results. But the key is innovation — make it fun to use computers again, make computers what they are meant to be.
Apple has already shown it has what it takes to innovate, now they are down the path, they need to keep it up.
And who is the ultimate winner? You and me, the consumers! Go Apple!
i realize that apple is not abandoning the desktop but the excerps from this article suggest apple will grow by focusing on mobile…laptops only.
yes laptops sales continue to show grow. No apple can’t just focus on the laptop space. they need to grow elsewhere within the traditional desktop/work station space as well.
market share matters. developers matter. Semiconductor partners matter.
“Be competitive by innovating.” Apple already did that with their iMac series, the G5, the iPod and their Powerbook line. The problem is their products are too bloody expensive. Why? Who makes Apple products? Apple. Who makes PC products? Everyone. If you had no competition for your hardware platform and there were lots of organizations who needed what you had, what incentive would you have to offer low prices and respect to your customers? The problem is that Apple would loose tons of money by opening up their platform, so they’re kind of stuck where they are.
It’s a stupid opinion.
You don’t know the history of Mac-clones, isn’t it? 🙂
be nice now.
lower prices would help. they don’t need 3rd party vendors. No one does manufacturing anymore anyhow. Arima, flextronics, etc do the real manufacturing.
apple just needs to cover the R&D on its os and keep its margins from going to hell over night.
I am hopeful that apple will find other ways to achieve these goals than keep their prices high.
They are touting “consumer devices” such as the iPods alot and many people see that area expanding. Then they have the Xserves exploring new ground (and no doubt Apple will slowly expand their too).
Apples laptops are BIG HUGE sellers in laptop world.
All other Macs compete directly with the PC. So, hmm. How to sell more macs? DONT CLICK AWAY KEEP READING ITS NOT WHAT YOU THINK: clones?
BUT NOT THE TRADIONAL way your thinking I wouldn’t dare open that can of worms!!!!
What if Apple just sold LOGICBOARDS and only in say quanities of 50 or greater?
1 – they could price them at say in lots of 50 or more at about 100-150 per board and that would be a good profit
2 – medium size companies/start ups could then build Mac OS X machines with cases/drives/memory etc of their choosings and compete with one another
3 – Apple would still sell its current line up Xserve sales would not be touched. iMac/eMac sales would not be touched (the hypothetical boards are not a small enough form factor). iBook/Powerbook sales would not be touched. The only sales that would be affected would be Powermac towers (and apple could take off a feature or two off of said hypothetical logicboards, to ensure their own PM towers were superior) They could even simply make all PM towers dual proc CAPABLE, even if sold with a single proc. Then use THAT SAME MOTHERBOARD minus its dual cpu capabilities and maybe a PCI slot. Wha-la, now they have a new product/market with no R&D. New PowerMac tower line-up? New Mac Compat Logicboards made available . . . get the picture?
4 – this would give 3rd party periphial manufactures incentive to make mac compatable products.
5 – Unlike a full fledged clone industry – Apple would maintain a LOT of control. Lets say company A started selling Mac Builds, they would look for and find a volume discount on the DVD drive they were going to use. But wait; its not Mac compatable. Oh, well they are a good price – so then they write drivers. 3rd party developement would soar. And no messy liscensing issues or contracts, with traditional “clone companies”.
6 – Apple would have a lower cost Mac on the market – with its current lineup still hitting their respective niche markets, and not even have to provide tech support to end users – – at the same time controlling the (vast amount of) quality of Mac compatable machines. AND be making some money. Not only of logic board sales, but think of OS sales, iPod sales, iLife sales etc. etc.
Apple is getting their @$$ kicked on the desktop market. They should stick with labtops and other consumer electronics(iPODS,etc)
market share matters. developers matter. Semiconductor partners matter.
Something matters more than that, and that is having customers who are not only prop up the marketshare but are willing and able to purchase software from third parties. The only thing keeping the third party software vendors afloat in the Windows world is the corporate sector and OEMs, NOT retail channels.
Talk to anyone who has worked in the software development industry and they’ll tell you that as soon as they realised customers were pirating their software, the only alternative was to re-focus on the corporate market which is kept in line via the BSA and the need to purchase legit software with support contracts.
Also, there is no use saying, “well, we have 10% of the market place” when 90% of your userbase refuses to pay for software, as demonstrated by the Linux user base. They scream software but only a small minority are willing to pay. What the Linux desktop is made up of currently are those old hats (like me) who moved to Linux because it was a UNIX, then years later; namely the last 2-3years we’ve had an influx of users with an anti-Microsoft agenda who refuse to pay for software.
If you user base is 20million but 18million are willing and able to pay for your software, isn’t that a whole lot better than for example a user base of 100million and yet only 4million are willing and able to purchase your software.
I understand what you’re trying to get at, however, Apples problem isn’t raw price, but price/performance and unfortunately that pain has been amplified by their refusal to tell Motorolla to take a hike.
What Apple needs to do is once the 970FX are made available, move the 970FX into the PowerMac then move the “classic” 970 down into the iMac and eMac, possibly the eMac with the 1.6Ghz processor. The laptop can remain 32bit but they could use the new 32bit PowerPC that is apparently in the pipe line, which IIRC, as a 200Mhz FSB which can be double pumped to 400Mhz.
The fact is, Apple already has competition, what Apple has failed to grasp is how uncompetitive their desktops have become. Even for me, I don’t mind using an eMac with a 1Ghz processor, however, that is me, the average consumer looks for the computer by how much software is included and how “high” the specification numbers are. If they can provide something that is competitive, then it would be interesting. An eMac with a 1.6Ghz 970 processor and 256MB RAM selling at US$799 would be a bargin by anyones definition.
Push the “970 CPU by IBM” as the main selling point, saying that it is used in “super computers” and you’ll have customers drooling at the opportunity to purchase a computer like that.
Thomas Simpson, what you described is almost the exact situation Apple was in with clones before.
Kaiwai, I think you are on the right track, you just have a few specs mixed up. The part about moving the 970 down the line and using the 970FX on PowerMacs wouldn’t happen. More likely they will use the 970FX is PowerMacs and a scaled down version in the other stuff. The laptops are about to go 64 bit, keeping in mind the 90nm G5 in the XServes (compared to the 130nm G5 in the PowerMacs). And I really really doubt they could get a G5 into an eMac for $799. It would cost more than that to make.
“their refusal to tell Motorolla to take a hike. ”
I don’t think you will hear much more from Motorolla from now on. Once the G4 is replaced by something from IBM, Moto is gone.
“their refusal to tell Motorolla to take a hike. ”
I don’t think you will hear much more from Motorolla from now on. Once the G4 is replaced by something from IBM, Moto is gone.
Considering that most networking equipment use MIPs based processors, there is little chance of Motorolla semi-conductor surviving, thus, IBM may later on pick up Motorolla semi-conductor at a fraction of its market price. The fact is, Motorolla killed it self long ago when it failed to deliver a 1Ghz processor in a timely manor. Had Motorolla kept up with AMD at a bare minimum, Apple would be very comptitive, the fact is, they didn’t and unfortunately they (Motorolla) will pay the price.
As for IBM, I wish them all the best. Keep developing the PowerPC further and you’ll find that some customers will prefer to step out of the Opteron vs. Intel64 grudge match.
MS x86 is a monopoly. The US government isnt going to do anything about it because they don’t want to tear down the entire computer market, plus they are getting big bucks from redmond to keep mouths shut.
Apple will never be able to regain a significant amount of marketshare in the desktop area. By focusing on laptops, they get to start fresh (almost) all over again. You can’t “build your own” laptop. You cant upgrade any and all components of your laptop. If you could, your laptop would look like a POS and would fall apart when you try to pick it up. This fact favors apple greatly in the laptop space. All of a sudden, those super cheap PC companies that throw together bargain based components can’t compete the same way. Good engineering and design count much more.
And the entire consumer space is going over to laptops. in 3 years, 80% of all PC purchases in the US will be laptop. The desktop space will have to move international to stay alive. Everyone in china will soon be getting a desktop. By this time, developed countries will have made a computing shift. Laptops will be like everyone’s desktop, PDA’s (or superphones) will be like today’s laptops, and Desktops will be like today’s server/workstations.
Apple is very smart by focusing on the laptop space. When everyone all of a sudden decides to get a laptop, Apple will be ready.
Apple is very smart by focusing on the laptop space. When everyone all of a sudden decides to get a laptop, Apple will be ready.
True, also, if they move their focus to developing higher margin laptops, ipods, and possibly Apple branded addons. As fo the desktop, I think you’re on the wrong track there, what they should do is team up with IBM and use IBMs excess capacity to assemble desktop Macs, possibly creating a sleek black Mac using the Thinkcentre Desktop case.
I think its a mistake to assume that laptops will remain computers that you can’t put together yourself. You can replace ram, hard drives, and in some models the GPU, and I think even the CPU (may be mistaken on that part, but it shouldn’t be impossible). IMHO, Apple needs to increase desktop sales, that’s where the profits are. Its all very well and good that Apple can get a 30% profit margin on an iPod. But, 30% on a device that sells for at most $500 dollars is going to require Apple to move a hell of a lot of them to gain amount of profit. Laptops suffer from a different problem. Some people want them to have great battery life, some want them to have the full power of a desktop that is more portable. Those two features are pretty much mutually exclusive. So, Apple would be forced to play a hard game of inventory management to make sure they met the demands of both types of consumers correctly. That also gets costly.
The other thing is that laptops play to Apple’s strengths of the all-in-one, well-designed unit.
You can replace ram, hard drives
You can do this on desktops too. But you can also BUILD a whole desktop if you are crazy enough to waste your time one such pursuits.
But, 30% on a device that sells for at most $500 dollars is going to require Apple to move a hell of a lot of them to gain amount of profit.
And they are. They have sold more iPods than desktop Macs in the past 2 years.
Laptops suffer from a different problem. Some people want them to have great battery life, some want them to have the full power of a desktop that is more portable. Those two features are pretty much mutually exclusive. So, Apple would be forced to play a hard game of inventory management to make sure they met the demands of both types of consumers correctly. That also gets costly.
Yes, and product line management too. Apple is doing this fairly well right now. That’s why their in business, to manage such issues, so we don’t have to.
I think the laptop strategy may work well for a few reasons:
1. Harder to make really good laptops. Witness Dell. You can’t just slap laptops together. There is actual design that needs to happen.
2. They can sell to people that already have a Wintel box…saying this can be your “companion” computer. We’re very compatible, etc.
3. Good margins (as a result of #1)
The reason why PC’s killed Apple earlier on was that computers were all bloody expensive, lacking in features, and getting outdated within a years release. The landscape is different now. If Apple can get good desktop systems starting around $800 and notebooks starting around $900 (and when I say good, I mean good, not the cheap stuff noone can really use), they will start taking over market share. Price isn’t the ultimate factor in deciding everything now. People are willing to pay a few hundred dollars more for a brand name computer and higher quality standards. For example, I might look at HP and Dell, but I won’t ever buy an Emachine. I am willing to pay a few hundred dollars more for a better mother board, video card, DVD-burner, hard drive, memory. When the price was $700 versus $1300, I always went for price especially since the computer became useless within a year. Now that the computer lasts many years and the price difference is $400 versus $700, I’m willing to pay extra for better stuff. They are both very affordable and quality is more important. If a good Mac costs around $800, I might just be tempted enough to go with that. It’s different and stylish enough where it will warrant an extra $100.
And they are. They have sold more iPods than desktop Macs in the past 2 years.
Are they outselling desktops by a factor of 3-5 (the price difference between an iPod and an average Mac)?
Yes, and product line management too. Apple is doing this fairly well right now. That’s why their in business, to manage such issues, so we don’t have to.
And in the past, inventory management has kicked Apple in the butt when people lost interest in their products.
1. Harder to make really good laptops. Witness Dell. You can’t just slap laptops together. There is actual design that needs to happen.
I’ll agree with you here, but given the problems Apple has (and those they haven’t) had to cop to over their iBooks and PowerBooks, some people would claim Apple could use some help here as well.
2. They can sell to people that already have a Wintel box…saying this can be your “companion” computer. We’re very compatible, etc.
Dose Apple actually do much of this currently? This is supposed to be one of the reasons that people should consider a Mac, but from what I’ve seen, Apple doesn’t truly advertise (print, TV, radio) this point.
If Apple continues to execute and innovate their goal of being a 10 billion dollar company is not unrealistic. It will take more than iPods and G5s to get there though.
I think as a general consensus their prices can stand to be lower. The motivation to have Apple hardware in the enterprise is not as compelling and needs to change.
The things that irritate me is that if Apple intends to grow they really need help from a lot these small independent Apple resellers. Many of which they are killing off or making it impossible to for them to stay in business. Another is that Apple needs to improve developer relationships and stop burning these bridges.
Are they outselling desktops by a factor of 3-5 (the price difference between an iPod and an average Mac)?
I don’t know this. But my answer might be not YET. Besides. They don’t need to outsell them 3-5:1 if the profit on the iPod is the SAME as on the other products. Finally, they don’t need to outsell them at all if iPod becomes just another revenue/profit stream.
And in the past, inventory management has kicked Apple in the butt when people lost interest in their products.
How far in the past? They seem to have this under better control now. The fact is, Apple appears to be operating like a very well run business from product planning to manufacturing to finance to inventory to distribution. Marketing and advertising are (currently) their weakest areas.
I’ll agree with you here, but given the problems Apple has (and those they haven’t) had to cop to over their iBooks and PowerBooks, some people would claim Apple could use some help here as well.
Yes, Apple has had problems. But not chronic or show-stopping problems. They’ve fixed them, and quickly. Finally, I would submit to you that we often HERE more about Apple’s problems than PC laptop problems because there isn’t any ONE PC laptop vendor one can point to. Perhaps Dell. Perhaps IBM. But the point is in this way, Apple is a bit more visible.
I don’t know this. But my answer might be not YET. Besides. They don’t need to outsell them 3-5:1 if the profit on the iPod is the SAME as on the other products. Finally, they don’t need to outsell them at all if iPod becomes just another revenue/profit stream.
I’d partly agree with you here, but if their desktop sales continue to fall off, iPods will have to take up the slack, and the absolute profit on one of them is much lower. If they don’t focus on those products that produce a higher absolute profit, Apple will have a hard time growing.
Yes, Apple has had problems. But not chronic or show-stopping problems. They’ve fixed them, and quickly. Finally, I would submit to you that we often HERE more about Apple’s problems than PC laptop problems because there isn’t any ONE PC laptop vendor one can point to. Perhaps Dell. Perhaps IBM. But the point is in this way, Apple is a bit more visible.
Apple is more visible in this regard because of the lengths to which their customers must go to get satisfaction. Class action lawsuits are front page news. I’ve not heard of too many being filed against the likes of Dell or HP.