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  • Memo to Apple: Ignore the Analysts

    April 16th, 2009

    Now this may be the sort of column that works against my interests, since I’ve long been a member of the crowd that keeps making suggestions about improving Apple’s marketing and product plans. Like others in the tech media, though, I can tell you that I have no experience whatever running a multinational corporation. So I can say without fear of contradiction that none of my ideas of that sort have been tested and proven, even on a small scale.

    At the same time, I like to think that, as a customer of Apple (and Microsoft for that matter), I can certainly tell you what I like and don’t like. That doesn’t mean that these companies should listen to me, but when lots of people demonstrate similar tastes and desires, maybe there’s some product potential that can be exploited.

    On the media front, however, it’s all-too-common for commentators to behave as if a company, or even a government agency, is run by idiots and if they’d just listen to a few new ideas, their ideas of course, they’d fix whatever problems they allegedly have.

    Long, long ago, for example, Apple was repeatedly urged to clone the Mac, allow other companies to sell products running the Mac operating system. In the mid-1990s, they listened, and it nearly destroyed the company. The companies that were licensed to build Mac compatible hardware, based on Apple’s own reference motherboard designs, went after the mother ship’s core markets with a vengeance. They showed more greed than common sense, of course, never considering the possibility that, without a prosperous Apple, they’d have nothing to sell.

    Thank heavens Steve Jobs saw the folly of that misguided venture, and put a stop to it when he took over Apple. But with the advent of Intel-based Macs, those clamoring for cloning came out of the closet and, yet again, insisted that the Mac OS should not be allowed to work only on an Apple product. There are those unofficial hacks that allow you to induce Mac OS X to work even on a white box PC. There are a couple of companies trying to make a business out of it, and one of those, Psystar, is, justifiably, embroiled in a legal battle with Apple.

    As I have said before, people who are in favor of opening up Mac OS X to other PC makers just aren’t doing the math. Apple makes the lion’s share of its income from selling hardware. Putting Mac OS X on the cheapest PCs on the planet, even if they didn’t offer a similar customer experience, would inevitably cannibalize sales from Apple. It’s not a question of whether a real Mac is better or not.

    It would also make it far more difficult — and costly — for Apple to do quality testing, since Mac OS X would have to be compatible with tens of thousands of potential system installations. This is one reason, indeed, why Microsoft has always had difficulties delivering Windows in a timely fashion, and the situation no doubt explains why severe incompatibilities inevitably follow a new release. Sure, Apple isn’t perfect, but Microsoft, despite much greater company resources, is constantly playing catch up.

    When it comes to Mac hardware, whatever sales figures Apple reports next week, you just know they won’t be as high as they might have been had the world economy been growing at a normal pace. So, of course, analysts are admonishing Apple to cut prices fast to salvage lost sales. However, Apple looks at the long-term, and it’s clear that short-term price cuts sufficient to fuel sales would make it difficult, if not impossible, to raise prices later on. So they’d be stuck with reduced profits, or the need to shave production costs to the bone possibly at the expense of product quality.

    What the analysts also seem to forget is that Apple has billions of dollars in the bank, and even a few quarters of red ink wouldn’t put the company on the brink. When it comes to inventory management, COO Tim Cook is said to be one of the best in the business, and thus is perfectly capable of making sure Apple doesn’t close out a quarter with too much unsold hardware that they’d be forced to move at fire sale prices.

    One more thing the analysts are requesting is a cheaper iPhone. Produce a “nano” version to grab the lower end of the market. Once again, they fail to realize that Apple doesn’t want to compete head-to-head with full-line mobile phone makers, such as Nokia or the fading Motorola.

    The iPhone succeeds as a high-end product, one that requires lots of development expense and no doubt more expensive parts than the phones you get free in exchange for two-year contracts. It also means that Apple isn’t put in the position of the many companies that simply throw out tons of product, hoping a few will catch on and make up for the ones that don’t.

    Now aren’t you glad Apple doesn’t listen to us or the financial doomsayers?



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