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  • Apple Doesn’t Have to Be Number One

    April 8th, 2011

    There’s a meme that’s been played out in the media for years. Unless Apple is number one in every market they serve, they cannot possibly succeed. If a competitor has a bigger market share, Apple has to be chastened, retreat into obscurity, and stop building “insanely great” products.

    A lot of this started years ago, when Windows first grew into the dominant PC OS by a huge margin. Nobody could come close. Apple’s Mac OS was strictly a niche player, and they might as well give it all up and close shop. In an infamous quote that came back to bite him, Dell Founder and CEO Michael Dell once suggested that Apple shut down, and return the remaining funds to stockholders. When Dell ran into their own difficulties a few years back, both in support and sales, you had to wonder whether they should have heeded the advice originally served to Apple.

    When the iPod became number one with a huge bullet, conquering the nascent digital music player market, I suppose financial and media analysts expected that trend to apply to every market Apple decided to enter; well, instead of traditional PCs of course, where the OS wars ended long ago. Then again, don’t you remember all those supposed iPad killers that ended up committing suicide instead?

    So when Apple decided to build a smartphone, they were pretty much told it was the wrong thing to do. Steve Jobs raised modest expectations, suggesting that Apple would do well to have one percent of the mobile handset market by the end of 2008. Apple did far better, despite entering a well-established industry with several highly profitable players.

    The iPhone became an iconic product almost overnight, while other smartphones were mostly disposable or dispensable, with little to often distinguish one model from the next in a given price category. Yes, the Android OS, comprising loads of handsets from different makers, is exceeding the iPhone’s market share, and, by dint of the larger number of products for sale, is likely to continue to grow faster than Apple.

    That, however, means nothing. So long as the iPhone sales continue to grow at a fast clip, and Apple makes huge profits from those sales, it isn’t important if other products or operating systems have bigger numbers to boast. There’s plenty of room in the smartphone market for several large players to succeed, without forcing any of them out of business. Anytime someone tries to waste your time telling you how bad the iPhone is doing because Apple’s single model lineup can’t compete with dozens and dozens of Android OS handsets, the best thing is to ignore them. Fewer hits means they will look for another subject to write lurid headlines about.

    This doesn’t mean Apple can’t or won’t fail. Certainly if iPhone sales were flagging, that’s a fact that needs to be reported. If Apple builds buggy, defective gear, that should also be reported without prejudice. My pitch is for balanced coverage, not lame attempts to find out negatives about Apple that may not actually exist.

    And don’t forget that, whatever the iPhone’s true market share is, Apple continues to have problems meeting demand. I suppose you’ll hear an update on the inventory situation at the next quarterly conference with financial analysts set for later this month, not to mention how the earthquake in Japan has impacted component supplies.

    As to the iPad, I realize that Apple has overwhelmed every contender. In some respects, the tablet market is similar to digital music players. There were a number of existing contenders, but sales weren’t terribly high, despite years and years of boasts that the “year of the tablet” had arrived.

    Indeed, as you recall, the iPad was originally dismissed as little more a bloated iPod touch. Sales took off like wildfire, but its potential wasn’t fully realized until users began to download and use loads of apps specifically designed for the platform. Contrast this to all the other consumer tablet contenders, where there are very few apps, and sales don’t seem to be going anywhere. Despite recent statements about satisfactory sales of the Motorola Xoom, surveys of potential sales don’t bear this out. They talk of 100,000 units sold in the U.S. during the Xoom’s first few weeks on sale, compared to millions of iPads being moved in the same timeframe. Consider also how much money is being spent advertising the Xoom.

    The problem, of course, is that the people who built the Xoom devised a meaningless campaign, and set price points that were ridiculously high. You don’t compete with a market leader with an inferior product at a higher price point. I realize that there is now a Xoom priced closer to an iPad, but it’s too little and too late. Of course, Consumer Reports somehow mistakenly believes the Xoom to be comparable to iPad 1, but that’s their problem to confront.

    Besides, shouldn’t a successful Apple inspire other companies to build on their success with better products, at a cheaper price? Seems sensible to me, even if far too many consumer electronics makers can’t grasp that simple fact.



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