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  • Apple and the Cheap Stuff

    February 16th, 2017

    So let’s consider this: For years, Apple has sold premium-priced gear. With few exceptions, sales are high and profits are high. Even when sales fall, as they did for the iPhone over several quarters, and the iPad since 2014, Apple doesn’t lose money.

    But the critics have other ideas. You can see it implicit in their ongoing demands about Apple, every single year. So there is the long-term demand that Apple license its operating system. It was made even before the first really useful version of Windows came out, Windows 95. So in that year, you could buy an official Mac OS clone from several third-party companies, such as Power Computing.

    Before then, some companies unofficially built Mac clones by using the ROMs from an older Mac to assemble a computer that sort of worked, although they tended to be buggy.

    Well, the official clone program was a disaster. Not just because Apple charged a mere $50 for each clone license. It was due to the fact that Apple is a hardware company, and every sale lost to another company is a lost sale. They probably believed they’d be expanding the market in ways they couldn’t manage themselves, but it ended up that the cloners merely went after Apple’s high-end corner of the market with a vengeance.

    With Apple on the ropes, the new iCEO, Steve Jobs, found ways to short circuit the deal. That’s a key reason why Mac OS 8 arrived, since the cloners were mostly licensed to distribute computers with Mac OS 7. Apple also bought out Power Computing for $100 million, effectively killing that company.

    Unfortunately, some people continue to demand that Apple license macOS, and even iOS. They labor under the delusion that Apple needs to focus more on market share, and it’s all about having more devices with an Apple OS on them, rather than selling more hardware. Don’t forget, Apple gives away the OS, which is designed to be tightly integrated to their own hardware. Even if third party products were supported, it would create additional problems for techs to manage a wider range of configurations. That’s a chronic issue that Microsoft has had to deal with over the years.

    All this while Apple’s stock price has hit record levels. Obviously, investors like what Apple is doing.

    Specifically, Apple has, in recent years, earned over 90% of the profits in the smartphone industry. The critics want them to sell cheaper gear, so they earn less money per unit. Customers clearly love their iPhones, and while I’m sure they’d like to get them cheaper, Apple has managed to carve out a sizable market for itself. Samsung may sell more copies, but Apple dominates in the high-end smartphone space.

    Why change?

    Over the years, the critics have also demanded that Apple sell cheap Macs, but how much in the way of profits are the other companies making anyway with their low-end machines? Apple dominates in high-end desktops and notebooks. There are legitimate reasons to suggest ways to improve the Mac lineup, and there are also legitimate reasons to be concerned over the small number of product refreshes.

    But some of that, a lot of that, doesn’t even appear to be Apple’s fault. Don’t forget that Intel hasn’t been exactly speedy in getting new processors out. Year-over-year improvements are usually slight, even as the critics complain that Apple is cheating its customers by using older silicon.

    But then there’s the Mac Pro.

    So what, if anything, does Apple plan to do to upgrade its flagship workstation? The last model refresh, a whole new design, arrived in 2013. It’s still being sold at the same price, mostly, except for a $200 reduction in the price of a 1TB SSD upgrade. There are faster Xeon processors, and faster graphics chips. It would have been fairly trivial to offer models with upgraded parts, so what’s going on here?

    At its price, the Mac Pro is, I am sure, quite profitable even if sales aren’t very high. There is also a segment of the market willing to pay maximum dollar for a computing workstation. If it doesn’t come from Apple, it’ll come from the likes of Dell or HP. Does it make sense to let it slide? Remember that if a company gives up on buying the most powerful Mac, they are likely to switch an entire company to Windows too, which can mean plenty of lost sales.

    Such concerns aren’t going to be addressed by selling cheap Macs, cheap iPhones or cheap iPads. Apple’s product positioning has been shown to be successful. Many of the people making complaints about pricing and cloning have no knowledge about running multinational companies, and thus are way out of their league.

    In case you’re wondering, I have plenty of criticisms about Apple. There are things I’d like to see changed. But I do not pretend to know how to design tech gear or run a multinational business. I have to assume Apple does based on the degree of their success. It’s also unfortunately true that many of the people who claim to know better usually end up being wrong.



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