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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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    6 Responses to “Memo to Apple: Ignore the Analysts”

    1. MichaelT says:

      I notice they’ve also ignored your pleas for a mid-size, configurable tower. 😉

    2. @ MichaelT: The market for that sort of thing is, alas, fading.

      Peace,
      Gene

    3. Davdi says:

      At last you suggested something they will do! 🙂

    4. Apple is a hardware company that makes great software in order to sell more of its hardware.

    5. yet another steve says:

      Fortunately, since the return of SJ, Apple has come up a very clear vision of who they are and what they do and how they make their money. And… they absolutely have their eyes on the future. One of the most impressive things is the deft timing of the first iPod, killing the iPod mini with the nano, launch of the iphone (not until the power was there to actually be a modern computer.) Buying PA Semi to keep ahead in the mobile space (yet the modern Apple is pragmatic…. if generic ARM or Intel choices make more sense, they’ll stay that course.)

      And how about modern supply chain management including total domination of the Flash RAM market?

      Not only does Apple not listen to analysts… I wonder if they even pay attention. Because, honestly, the analysis going on INSIDE of Apple is much better. OF COURSE they’re watching netbooks, banging on the products, doing the math, investigating the many possibilities. And just in case, that investment in iLife and iWork is looking awfully smart right now (more ease of use and value added factors ignored by the so called “apple tax” calculations.) Well it was always smart: consumers want a solution not box. iLife vs. craplets is at least as big a difference as OSX vs. Windows.

      And then there’s just the stupid stuff that you and I have figured out ourselves. Anyone who thinks OSX should be licensed needs to go back to community college and take remedial algebra and computer literacy (to learn how to use a spreadsheet.)

      Isn’t it a joy to have a company that just tries to build the best products it can given the current state of technology and what its customers can afford? Whenever SJ says thinks like “we just try to build the best personal computers on the planet”, I think about it and realize, YES, it really is that simple. But he’s got people and they’re damned good with spreadsheets and supply chains and the future as well.

    6. MichaelT says:

      Another investment Apple has made that will have long-term value is MobileMe/.mac. Apple made its first (clunky) move to the cloud and made its mistakes before cloud computing became big. And it learned from that early effort. So when they REALLY move to cloud computing (maybe with the new mystery product?) the transition will be smoother.

      That transition won’t be as smooth if you are a major software OS producer who chooses to shoehorn your current product lineup into the latest buzzword.

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