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  • Apple’s Success: The Vultures Are Circling

    December 10th, 2007

    Let me lay my cards on the table: First and foremost, I am not an Apple apologist, nor do I play one on the radio or TV. Those of you who have kept up to date on my commentaries over the years know full well that I am not averse to criticizing Apple when it has bad products or bad policies. My ongoing Mac OS X wish lists, for example, are designed to show where the operating system needs to be improved.

    In saying that, though, I will not make up or exaggerate a problem just to make a headline and get more hits for this site. I got here, for better or worse, by trying to be fair to all viewpoints. I think you’ll see that in evidence in our Comments section, where I let you tell me off, if that’s what you want. At the same time, I’ll act in kind when I think it’s appropriate.

    From time to time, however, financial and tech writers seem to be hell bent on finding bad news about Apple where it simply doesn’t exist. Again, this is a headline-grabbing maneuver, and quite often they make up stories or exaggerate known facts to make a point that, in reality, lacks a factual basis.

    One example is an article I read recently that cited chapter and verse as to why Apple’s closed ecosystem cannot possibly succeed. You want the link? Well, I think the fellow who wrote that article is just looking for attention, and thus I won’t provide it. But his tall tales are typical of what the naysayers have written over the years, but the latest rant is so off-base, it’s worth mentioning.

    Over the years, the critics have said Apple is making a huge mistake not letting outsiders in when it comes to allowing the Mac OS to run on other PCs, or you to use your iPod with other music services, such as Zune, Napster and all the rest. Now it’s true that Microsoft has succeeded big time in letting any old PC maker buy millions of OEM copies to install on their boxes. However, none of the other music services have succeeded. In fact — and this particular author forgets this — Microsoft created its closed Zune environment to emulate Apple’s success. It’s a case of the pot calling the kettle black.

    Besides, how many people, other than a handful of so-called PC power users, are begging Apple to let them run Mac OS X on their Dells? Most people just want a computer that works, regardless of operating system.

    The critic complains, moreover, that Apple is somehow missing the boat by not offering music subscriptions, as if that’s the way of the future. Yet none of those subscription services has gained traction against iTunes, so where’s the example of success to show the way?

    Steve Jobs is absolutely right when he says you want to own your music. You don’t want to depend on a service that, if it disappears or if you forget to update your credit card information in time, will render your music unlistenable just like that. Long after iTunes is gone — should it disappear — you’ll be able to continue to play the songs you bought. And with the new DRM-free versions, you can play them today on any music player you want that supports the AAC format. You aren’t tethered to the iPod, and that doesn’t seem to be hurting Apple’s sales.

    Of course, the critic in question seems unaware of any of this.

    The other complaint is one of style over substance, that Apple somehow charges a higher price for its products, and people pay them because they’re fashionable. We are reminded that other PC makers are discovering that pretty boxes sell faster than ugly boxes, but that argument totally ignores the operating system. He also is under the age-old illusion that a Mac is more expensive than a comparably-equipped PC, a myth that has been shattered over and over again.

    The same complaint is being made about the iPod, that it is somehow premium-priced above music players from other makers. But, again, when you examine the standard equipment, you’ll find that this claim doesn’t necessarily pan out. Even Microsoft, which has been known to undercut competitors big time, has managed to merely duplicate Apple’s pricing on its Zune players. Sure, the Zune adds an FM radio and Wi-Fi in its imitation of the iPod Classic, but it lacks features that are present on the iPod, so we’ll call the price a wash.

    Then there’s the iPhone, where our critic repeats old and tired inaccuracies and fails to understand the actual facts. Somehow he thinks the iPhone was suffering from a major failure because it didn’t duplicate the original sales of 270,000 units on the first weekend of its release over the ensuing weeks and months. Such conclusions are nonsensical, since the initial sales were based on a pent-up demand that had been building for months.

    Yes, as the critic states, Apple did cut the price by $200, and, yes, Steve Jobs was rather too cavalier about explaining the reasoning behind the price drop. Indeed, many Mac users were upset, and Apple had to do a little spin control and give $100 back to the early adopters to sooth their shattered nerves.

    But if the iPhone’s price hadn’t been reduced, it would still have attained Apple’s one million sales goal by the end of the September quarter. In fact, sales reached that level only days after the price cut went into effect, which means that it only had a minimal effect on the results.

    There is no indication that iPhone sales are tanking. In fact, industry analysts continue to claim that the sales rate is quite good, and that the iPhone will exceed Apple’s estimates both at the end of the holiday quarter and through the end of 2008. Sure, the other cell phone makers are building competitive products, but lets not forget that the iPhone is more than just a touch screen.

    Well, this particular critic clearly is clueless about the impact of operating systems.

    Worse, these critics will just keep repeating the same old garbage, the facts be damned.



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    20 Responses to “Apple’s Success: The Vultures Are Circling”

    1. Constable Odo says:

      Sour grapes from Apple competitors. Can the iPhone really be considered a flop because it doesn’t gain traction in less than a month. I guess the only way you can call something a success is that it has to sell out completely in a day or two. I didn’t purchase an iPod until the 5G model with video and I positively think it’s great while contemplating purchasing a 32 GB iPod touch when it’s introduced.

      People are always mentioning ways that Apple is hurting their own sales. How darn perfect can a company become in every product line in such a short time. As a shareholder I’m very pleased with Apple’s performance regardless if sales of the iPhone are slow in some countries. Once Apple opens some more stores overseas and people get a chance to play around with the products, they’ll be willing to pay the extra amount and buy all the Apple devices they can get their hands on.

      Apple’s market cap has been leaping over long-time companies like crazy. What the heck have those companies been doing then? You can’t call Cisco or HP failures just because their stock prices aren’t in the sky.

      I can only say “Go Apple.” I’ll sit back and let them make the decisions and reap the benefits.

    2. Tom Hughes says:

      While the vultures have been circling, Apple has been innovating and making money.

      When times were toughest, in the late nineties, they made gutsy, bold decisions that are bearing fruit today… The Apple Stores… OSX… The iMac… The iPod.

      Steve Jobs isn’t some bumbling wizard stumbling from one one accidental success to another. He is a bold, pragmatic leader that systematically leads Apple’s people into innovative directions that result in products people want to buy.

      Apple doesn’t care what the critics think, they just continue to make great products while laughing all the way to the bank.

    3. Roberto says:

      Gene Steinberg wrote:
      “He also is under the age-old illusion that a Mac is more expensive than a comparably-equipped PC, a myth that has been shattered over and over again.”

      I’m not a blind fanboy, either, Gene, but even I can see that a Mac remains over-priced compared to a PC. You can now get a QUAD-CORE machine with twice the amount of standard RAM, hard disk space, graphics memory, expansion, etc etc for a third less than the price of the bottom rung iMac. AND it comes with Firewire 400 ports.

      Before anyone starts calling me a troll, let me just say that I have a 20-inch iMac at home and a MacBook that I use in between (although I use a Windows box in the office because I have to). I enjoy working on OS X more than Windows, as long as we’re talking about Tiger; if it’s Leopard, I’m sorry to say I’d rather have Windows XP than that beta release.

      But to say that a Mac is not expensive would be an affront to citizens of the developing world.

    4. Being the Devil says:

      [I’m not a blind fanboy, either…]

      Uh, maybe you are.

      [… You can now get a QUAD-CORE machine with twice the amount of standard RAM, hard disk space, graphics memory, expansion, etc etc for a third less than the price of the bottom rung iMac. AND it comes with Firewire 400 ports.]

      Where? Please, do inform?

      [But to say that a Mac is not expensive would be an affront to citizens of the developing world.]

      Expensive? What does that actually mean?

      Is extra-lean ground beef more ‘expensive’ than regular ground beef? Remember, digestibility probably gets points.

      Can something ‘more expensive’ ultimately be less expensive than something that is ‘cheap’?

      Does ‘expensive’ mean that Apple doesn’t sell $139 ‘fully-loaded’ ‘PCs’ at 7-11 — that wind up going tits-up by merely turning them on?

    5. Dana Sutton says:

      The overpriced argument is both true and untrue. A peecee manufacturer can throw together a bunch of components (of good, bad, or indifferent quality), load it with a Microsoft OS, and slap his name on the box, r. & d. costs practically zero. Apple has to spend a considerable amount on r. & d. for hardware and software alike (and aren’t we all glad that it does?), something that has to be factored into their sales price. Also, despite occasional slipups Apple builds their Macs out of premium-quality components, which is a significant reason Macs are as reliable as they are. Again, aren’t we glad that they do? On the other hand, some Apple products can be grossly and irrationally overpriced . Case in point: what they are asking for their line of cinema monitors has gradually grown to be waay out of line with the rest of the industry, and, while they are of course very good, these monitors are not so much better than the competition that Apple can compete head-to-head with a number of other manufacturers who are selling good monitors for considerably less than half as much.

    6. Mike says:

      “Over the years, the critics have said Apple is making a huge mistake not letting outsiders in when it comes to allowing the Mac OS to run on other PCs”

      I’ve even seen this said with the additional implication that Microsoft were somehow “letting outsiders in …”. People will say things along the lines of “At least Microsoft …”. The fact of the matter is Microsoft has gone to great lengths to try to make sure that the customer can’t get anything other than Windows on an IBM-compatible PC. Ask BeOS refugees, or Linux vendors who’ve had OEMs start and then break distribution deals with them. No “at least Microsoft …” about it. That’s not generosity but rapacity of doubtful legality on Microsoft’s part.

      Maybe it would be nice to have leave to run any desktop OS on any desktop machine — although in practice finding it might or might not work very well, as Linux users find now. However, it’s often been pointed out that the last time Apple tried licensing deals it nearly bankrupted the company. It probably couldn’t be done at a profit unless Apple had the kind of monopoly on desktop OSes that Microsoft has. People should just be grateful that Apple has found a business model that allows it to stay in existence and offer some kind of alternative, so that there is a choice at all. It’s true that the Linux distributions are getting better, but they’re still lacking in polish and usability.

      As for the anti-Leopard articles that have been appearing in the media, they make me highly suspicious. Leopard is not without its share of bugs — what isn’t? — but it’s hardly “Vista Number 2” as some columnists have tried to claim. Most users seem to be using it with great pleasure and few problems. Tiger was already ahead of Vista already; Leopard only widens the gap.

      And the implications about the iPod these people are putting out are pretty wide of the mark if not deliberately dishonest. Not only can you play iTunes Plus tracks on any capable modern player whose makers have actually implemented the specifications for MP4 audio, you can also play tracks from any download service that doesn’t put DRM on its products. Besides most content on iPods is ripped from people’s own CDs. There’s no lock-in here by any means. Neither has Apple struck any exclusive and questionably legal deals with music labels. Apple has a large share of the portable player market, but there’s nothing dirty going on, as with Microsoft and the PC market. It’s a case of Apple’s having good products that people like.

    7. Richard Taylor says:

      The simple truth is that Apple would have to get out of the hardware business to make a software business work because no one wants to compete against a supplier. That isn’t going to happen soon (or, well, ever). If Apple were to become an OS supplier to OEM box makers, it would suffer some (though probably not all, owing to talent) of the problems MS faces trying to make its OS work on so many different machines.

      As it is, buy a Mac, run OS X, XP, Vista or Linux, or all of them side by side. Now what can top that?

    8. Gene Steinberg wrote:
      “He also is under the age-old illusion that a Mac is more expensive than a comparably-equipped PC, a myth that has been shattered over and over again.”

      I’m not a blind fanboy, either, Gene, but even I can see that a Mac remains over-priced compared to a PC. You can now get a QUAD-CORE machine with twice the amount of standard RAM, hard disk space, graphics memory, expansion, etc etc for a third less than the price of the bottom rung iMac. AND it comes with Firewire 400 ports.

      Before anyone starts calling me a troll, let me just say that I have a 20-inch iMac at home and a MacBook that I use in between (although I use a Windows box in the office because I have to). I enjoy working on OS X more than Windows, as long as we’re talking about Tiger; if it’s Leopard, I’m sorry to say I’d rather have Windows XP than that beta release.

      But to say that a Mac is not expensive would be an affront to citizens of the developing world.

      Actually, I’ve done this comparison over and over again. Identically equipped, etc., etc., with the version of Windows that is the closest match, rather than the bottom-rung Basic that many PC owners provide.

      Take the Mac Pro for example. Configure Dell’s equivalent, something from the higher-end of their Precision Workstation line, with same processors, memory, hard drives, etc., and you will be shocked at how much more expensive the Dell becomes in this proper matchup.

      Yes, it’s true Apple doesn’t play in the ultra-cheap arena, and you can home-build a PC and save money. But that avoids the issue, which is comparing two mainstream manufacturer’s products.

      Peace,
      Gene

    9. Mike says:

      “Yes, it’s true Apple doesn’t play in the ultra-cheap arena, and you can home-build a PC and save money. But that avoids the issue, which is comparing two mainstream manufacturer’s products.”

      As Steve Jobs himself said:

      “We can’t ship junk. There are thresholds we can’t cross because of who we are. The difference is, we don’t offer stripped-down, lousy products.”

      I’m not an uncritical supporter of Apple either. For example, I thought it was unedifying to see the wolf-pack of Apple fan-sites pursuing David Maynor, who, being under NDA, could not at the time defend himself properly. Indeed, sometimes I wonder if the Apple fan-sites are something of a two-edged sword, putting the undecided off by their very fanaticism about the company.

      But I do think Apple should get credit for what they do do well. OS X is a very good desktop OS; Macs are good value for what they are. And iPod/iTunes are also very well-designed attractive products, and don’t constitute a lock-in. And it’s not difficult to verify any of those statements.

    10. Jack says:

      Your article was right on. I am continually astonished at how persistent are conclusions that the Mac is but an expensive toy. I even had one person comment to me, after learning that I was a Mac guy, “I heard that you couldn’t get to the internet on a Mac.”

    11. In the first sentence of your piece, Gene, you write “….nor do I play on on the radio…” Before computer spell checking, found in the ancient mists of time, we had proof reading. Spell checking did not catch the omitted “e” but proof reading would have. How’s that for being picky? Your article was right on. I am continually astonished at how persistent are conclusions that the Mac is but an expensive toy. I even had one person comment to me, after learning that I was a Mac guy, “I heard that you couldn’t get to the internet on a Mac.”

      What did he think the “i” in iMac was for?

      Peace,
      Gene

    12. Ruhayat says:

      Gene,

      I agree with you about Macs not being expensive when you get to the stratospheres of the workstation class — the Mac Pro costs barely more than comparable pro machines from BOXX etc.

      I’m not even talking about the mainstream market, where it is indeed possible to get a comparatively-specced machine at significantly less cash than an iMac. (If you’re into fashion and style then the extra cost of the iMac might make it worth it; the way 150-dollar jeans is worth it compared to bargain basement garment that does the same thing, more or less, but with a lot less panache).

      Nope. I’m talking about the graphics design market, Apple’s supposedly traditional stomping grounds. Where you don’t need the ‘roided Mac Pro. Just something with a decent graphics card (64MB is enough), space for 2 drives (one for system, one for files), 2GB RAM, etc. Here be Apple’s No Man’s Land: the iMac is too underspecified and non-expandable enough, while the Mac Pro is overspecified and over-priced.

      @Being the Devil:
      Spec a PC feature-for-feature against an iMac and see how cheap the iMac is? You know what they say: a camel for two bucks is still too expensive if a dromedary is not what you need. The fact that it comes with two humps doesn’t matter when what you need to do your job is actually a sleek, lightweight mustang.

    13. Jim says:

      Ruhayat said,

      “Nope. I’m talking about the graphics design market, Apple’s supposedly traditional stomping grounds. Where you don’t need the ‘roided Mac Pro. Just something with a decent graphics card (64MB is enough), space for 2 drives (one for system, one for files), 2GB RAM, etc. Here be Apple’s No Man’s Land: the iMac is too underspecified and non-expandable enough, while the Mac Pro is overspecified and over-priced.”

      What “Graphics Design Market” are you living in? What specs you claim might have been fine a long time ago in the early 90’s, but if you’re a designer using CS3, 2G of RAM is just not enough…and then there’s Photoshop, which literally gobbles all the RAM you can throw at it.
      Often Deisgners are also running mulitple programs which further taxes the RAM and ultimately the HD space in the end. That is the REAL graphics market.

    14. Tom Hughes says:

      There is more to a products value than its monetary price.

      Just because someone can put the same parts together and sell the result at a cheaper price doesn’t necessarily make it a better deal.

      The notion that Apple is somehow shafting their customers by overpricing their products is a specious argument.

      Every company purports to add intangible value to their products, Apple is one of the few that actually does it.

    15. Mike says:

      “There is more to a products value than its monetary price.”

      I’m not sure what you mean, but I really doubt there’s very much difference in price between any given Mac model and a comparably specced machine from another maker. As has already been said, there are areas of the market where Apple simply doesn’t compete. Where it does there seems no longer much of a price differential, if any.

      To test that out for myself I just looked up the price of the entry MacBook. I then went to Sony — because I don’t think some hardware from a dodgy OEM that’s going to fail just out of warranty would give me fair comparison. There’s a bewildering variety of lines, but some seem to be aimed at business and/or are very high-powered and expensive. The closest match I can find is the NR Series. That starts a fair bit cheaper, but if I look for a 2.0GHz Intel Core 2 Duo, I find something called the NR 11Z. That costs about the same. It’s got a larger hard drive and more memory than the Mac. So I guess Sony just squeaks in on specs. Frankly, I wouldn’t care. It’s close enough. Apple’s after-sales service has a better record; and I wouldn’t have to clean crapware off the Mac before using it. And, even after cleaning that stuff off, or at least stopping it starting at boot-up, the Sony would be booting slower, as Mossberg at the WSJ found. He found a brand-new Vaio booted considerably slower than an old Mac. (That’s down to Windows.) Those three considerations more than makes up for the slightly better spec on the Sony in my eyes.

      And after all that, you’re still only getting Vista Home Premium, not the top version of Vista, whereas every Mac comes with the “top” version of OS X. No-one’s short-changed by the OS vendor. And here’s the biggest difference of all. By buying the MacBook at a stroke I get freedom from viruses and spyware (at least currently). I also get a more modern OS with no Registry, and no consequent need to reinstall every year or so, and a more usable, solid, refined, and attractive OS. Heck, the application architecture of Windows is so dated it doesn’t even have per-application menuing: menus are per-window and come bolted to the windows.

      When it comes down to it — and despite what we’ve been encouraged to believe by tech sites — the MacBook would seem to be roughly comparable in price to a laptop from another good hardware maker. However, the difference is OS X. In short, no contest.

    16. Gerald says:

      You can’t win with the “Mac is overpriced” crowd.

      They’ll say things like “has a quad-core processor” and ignore that it’s an entirely different CPU – often substituting a 32-bit CPU in place of the Mac’s 64-bit. They’ll say things like “has the same amount of memory” ignoring the fact that the RAM in their bargain-basement spec machine runs at half the speed as the RAM in the Mac. They’ll say “has the same sized hard drive” as if an IDE and a SATA drive perform anywhere near comparably.

      And if they’re gamers, forget it! Gamers believe a “computer” made up of only 5 parts (CPU, RAM, Hard Drive, and optical drive) and it’s sole purpose is as a life support system for a video card.

      …and every “Mac is overpriced” believer also believes that either software is free or that you don’t need any, because it’s never listed on the price sheet.

    17. Being the Devil says:

      You asked me to…

      …Spec a PC, feature-for-feature against an iMac – and see how cheap the iMac is?…

      So, FWIW… Do you mean that a 250GB HD in a ‘PC’ is ‘better’ than a 160GB HD in an iMac? And, that I shouldn’t consider HD brands? Or models? Interfaces? RPM? Internal connectivity? External connectivity? Data rate? Physical size? MTBF? Power consumption? Platters?

      Indeed. Not buying exactly what you need, IS ‘too expensive’.

      But, I’ve noticed two things during my life.

      1) EVERYTHING is a compromise. You have to figure out what compromises are best for YOU. [I can figure out what’s best for ME. Most of the time ;-)]

      2) Everything costs time or money. And I try to shop value, not price.

    18. Lantrix says:

      What annoys me about “Apple somehow charges a higher price for its products” is not that the prices are higher, but the difference for an e-delivered product when it comes to different countries.

      Apples currently charges USD$0.99 per track for a standard audio track in the US. The AU music store gets the price of AU$1.69 per track.

      With the current great exchange rate that equates to USD$1.46 per track! Why do Aussie users pay a 45% premium over the top of US users for the same product. I’m sure its the same for the other stores.

      Does this make me a critic or an annoyed end user?

    19. Mitch says:

      Apple did a nice job with Leopard. I am using it on 3 Macs (new iMac, 1.5 yr old Macbook & 3 year old iBook G4 867MHz) and it is NOT buggy. I think it is a nice upgrade. Leopard is no Vista!!

      I think Apple is great. I own 3 Macs, 2 iPods and an iPhone. Over half my investment portfolio is in AAPL. I am pro-Apple.

      I believe that Apple computers do cost more than PCs. In my mind they are (easily) worth the higher price.

      There are certain instances where Macs compare very favorably (in terms of pricing) with a comparable PC but most times they cost more. Note: I am not assigning $$ for the better OS or included iLife suite. Apple has almost 30% margins on their computers, their competitors have much lower margins. That higher profit has to be coming from somewhere (hint – it’s in the selling price).

      I have a friend who is buying a new PC – we are comparing a 24″ iMac with a Dell.

      24″ iMac – $1799
      Dell Inspiron 530 (Windows XP home) w/ 24″ LCD ($729 for PC & $469 for monitor = $1195). The Dell is on sale for $150 off.

      That’s $604 more for the Apple but the configuration was not exactly the same:

      Dell didn’t have webcam
      Dell didn’t have Gigabit ethernet (comes with 10/100)
      Dell didn’t have Optical Audio out
      Dell didn’t have Bluetooth
      Dell didn’t have 802.11n wireless (no wireless)
      Dell didn’t come with Firewire (400 or 800)
      Dell comes with XP Home (not the $130 more expensive XP Pro)

      Apple didn’t come with Digital Card Reader
      Apple didn’t come with Fax/Modem

      Take away the sale price, choose XP Pro and add ‘missing’ features and the prices are very close.

      Thing is most people don’t want/need all the features (firewire, bluetooth, gigabit ethernet, webcam, etc.)

      Also consider, the Dell is a tower and separate monitor, webcam, speakers, etc. It doesn’t look nearly as good as the iMac.

      Also consider the crapware + need for anti-virus & spyware.

      Dell has no access to Apple Store / Genius Bar service.

      PCs are cheaper but not a better value (in my opinion).

    20. Bo says:

      I went shopping for a laptop a couple of months ago. While running Macs most of the time the main use for this computer is running a few Windows apps (Visual Basic 6, SQL Server and Access 2003). On a MacBook I would have the need for a licens for Windows as well, but I didn’t add this to the value equation while shopping.

      A white MacBook with 160 GB HD and 2 GB of RAM is priced at US$ 2150 at the going exchange rate here in Sweden.

      I found a “similarly” speced Asus PC laptop – Intel Core2Duo (albeit a bit slower than in the MacBook, it’s fast enough for my needs), 160 GB SATA HD, 2 GB RAM, firewire, E-sata, DVD-RW DL, webcam, 15.4″ screen, (1280X800, same as a MacBook). It also has a dedicated graphics chip (ATI HD 2400 with 128 MB VRAM) that I can’t get in a MacBook, a 6in1 card reader, an ExpressCard slot, TV Out, VGA and DVI, a fax modem, gigabit ethernet and wifi. Vista Home Premium is fine with me – I don’t need the functions in Ultimate. Price? US$ 1230

      I bought the Asus…

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