• From the Expo Floor #2: Apple’s Great Gamble

    January 15th, 2005

    Although I am sure some of you believe Steve Jobs to is really close to becoming a prophet, I am pretty sure Apple didn’t know it would be creating a cultural phenomenon when the first iPod came out. How could he foresee that its name would become synonymous with the product category, in the same way the Sony Walkman was once synonymous with portable cassette and CD players?

    I also wonder how the president of Sony felt when he took the stage at the keynote and had to deliver a few embarrassed smiles while, at the same time, extolling the benefits of the company’s cooperation with Apple in some areas.

    To be sure, Apple in its own way is seeking overwhelming market dominance, just as Microsoft once did. The real question, of course, is just how long the excitement is going to last. The marketplace is littered with the remnants of companies that thought they had it all, only to find that one day the fickle public found something else to get excited about.

    No doubt Apple is simply going to mine the iPod market for all it’s worth and when the excitement dies down, move on with what it hopes will be the next great thing. How long will that take? If I knew, I’d be rolling in cash from my consulting services to major companies. For now, Apple is sitting pretty and apparently doing its best to take advantage of the situation.

    Just consider how it changed direction, or at least its public posture, over the past year. During his keynote address just a year ago, Steve Jobs was quite skeptical of the value of a Flash-based music player. But it’s obvious that his product designers were already putting the pieces of the iPod shuffle in place. You can’t simply create something like that from scratch and bring it to market in just a few months. The same is no doubt true for the Mac mini. Yes, it probably uses its share of parts from the eMac component bin, but building and testing that casing and preparing the appropriate advertising campaign is definitely not a short-term project. So when Apple’s financial people were telling us three months ago that the company didn’t intend to enter the cheap PC arena, they knew it wasn’t so. Or at the very least knew that some key decisions about whether to move ahead with the product were being made behind the scenes.

    Today, Apple Computer can’t be considered the BMW of the PC world. Call it a Volkswagen perhaps, since its affordable products retain the sense of style that the company is known for? VW? Indeed, while its sales may have fallen in recent years, the interiors of the VW and its luxury sibling, Audi, set the standards for the auto industry.

    So why do I say Apple’s new posture is a gamble? Well, it isn’t large enough to release a bunch of new products, in the hope that one might take off. A single failure can cause an incredible amount of bad publicity, since every step the company makes is viewed under one huge microscope. Even rumors are taken seriously these days, and the wrong rumors could actually cause the stock price to suffer. The failure of the Cube may not have been such a big deal a few years ago, although I’m sure Steve felt pretty bad about it. But if the Mac mini tanks, the chance for the company to gain substantial market share will go down the tubes at the same time. There is no room for second chances here.

    In the movie business, most films must garner huge box office figures right away, or quickly fade from the theaters. But movie studios always have plenty of product in the wings. Apple has to hit a home run every single time.

    It’s not that I think the Mac mini will fail. Far from it. Both Mac and Windows users have been begging the company for years to build a cheap computer. Just as the iPod became an impulse purchase, I can well believe that folks entering an Apple store for something else will take a look at that cute little Mac, take but a moment to consider the checkbook or credit card balances, and buy one on the spot. Or maybe two or three if the family unit requires it. Businesses looking to dump their malware-prone Windows boxes are now without excuses. Schools looking for a way to deploy those old monitors and input devices are suddenly going to become highly skeptical when the Dell salespeople come by to write some orders.

    A pipedream? Vindication? No, far from it. Sure, some of the technology pundits are already saying the Mac mini is still a little too expensive, that you can save $100 or more if you buy a fully outfitted PC box. They just can’t see the difference, and imagine that the low-end Gateway, for example, is somehow comparable. They also once complained that other music players were cheaper and more fully featured than the iPod, and thus better values, and we all know what happened to that argument.

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