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  • Does Apple Have a Magic Formula?

    July 22nd, 2009

    As I write this, Apple’s stock price is soaring, and that’s a surprise. Usually, after they release record-breaking financials, Wall Street seems to react negatively. No, I’m not about to explain the workings of the financial community, and I doubt anyone can with any meaningful level of accuracy.

    The biggest difference this time out is the fact that the world economy is on life support, yet Apple still managed to report record revenues for a non-holiday quarter. Those Wall Street analysts, who always seem to on the wrong side of Apple’s numbers, are now surprisingly bullish.

    How things have changed!

    You have to wonder whether Apple is somehow using magic to defy gravity, but it may come down to something that you can understand with simple common sense, and that is that they simply build products people want to buy. This despite the fact that Apple has some serious competition in all their market segments, yet they’ve managed to surprise the naysayers again and again.

    When it comes to what used to be the company’s core business, personal computers, the biggest improvement appears to come from folks waking up one day and realizing that Windows isn’t for them. They’ve had enough of a bloated, buggy operating system that requires constant attention and powerful malware protection to work properly. Sure, a properly-configured Windows box can function reliably in the workplace, and certainly most businesses have them. But most of the employees who use them restrict themselves to a handful of apps that are preconfigured for them, and thus they exist within a fairly narrow confine and thus don’t need to stretch the boundaries. In many cases, these are customized applications designed for specific business functions, such as a bank or medical office.

    To be sure, there is also an IT staff that, assuming they are appropriately qualified, will keep make sure those computers are properly maintained as far as deploying critical operating system updates. The company will also make sure that their security software of choice is regularly updated.

    When it comes to home users, most are not nearly as careful about maintaining their computers. They are apt to allow allow the malware update subscriptions to lapse, which is a big mistake, because they might suddenly find themselves inundated with unwanted popups and other symptoms of an infected PC. Indeed, a recent issue of Consumer Reports, which is not quite Mac friendly, reported the results of a survey that indicated some $5.8 billion in losses could be attributed to malware outbreaks over a single year. Although there was no breakdown by operating system, it is clear to most anyone that all the losses can be blamed on Windows.

    In recent years, Apple has claimed that 50% of the people buying Macs at their retail stores are new to the platform. While they aren’t being so specific about how those stats are compiled — and isn’t it strange the analysts don’t seem to want to ask this question? — I’m inclined to take those figures as accurate. If that’s true, it means that there is a growing customer base that has embraced the Mac way.

    Time and time again I read reports about people buying their first Mac and experiencing what some might consider a revelation. Suddenly most things simply work. They don’t have to waste time messing with their computers. Instead, they can actually get some work done.

    When it comes to mobile phones, the critics said Apple couldn’t possibly succeed. The market is saturated, and there’s no segment where they could possibly make a difference and earn good profits. Those critics forgot about smartphones, but Apple didn’t. So now there’s a fully-featured mobile device that regular people can actually master without having to resort to poorly-written manuals, or dealing with inscrutable user interfaces.

    All right, I did actually read the complete iPhone user manual. You can download it from Apple’s site, or retrieve it online right on your iPhone. But most of the tricks of the trade are reasonably obvious. In contrast, take the free phone you get from your wireless carrier and see what you have to do in order to discover and use some of the basic features, such as managing your address book or even using the Web browser, assuming there is one. Does anyone really use those dreadful things?

    These days, the public is voting with their wallets, even though they are slimmer than they used to be. Apple concedes that supplies remain constrained on some MacBook Pro models, and the iPhone 3GS has yet to be released in a number of countries, simply because you often still have to wait for one in the countries in which it is available.

    None of this is magic. It’s a matter of hiring smart people and focusing their creativity into the right areas, so they can build great products. Far too many companies don’t seem to understand how to exploit the talent their employees possess, and that may be the biggest disadvantage of all.



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