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Why I'm Not In Charge of A Big Company

I love Macs and I love my iPod, but I always thought the notion that the iPod's popularity would somehow magically improve Apple's share of the PC market was a bit daft; the information technology version of the "investor class" hypothesis. Apparently, Morgan Stanley feels otherwise and thinks it has the evidence to prove it. I'm still right about the investor class, though. Via Tim Lee.

March 28, 2005 | Permalink

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If it was just iPods alone, I would agree with you. But with the $500 mini mac, which allows me to reuse my monitor, etc., the barrier to entry has just become much smaller.

And then knowing that Darwin is UNIX underneath makes it that much easier for geeks to purchase.

So in fact, knowing that a large number of Linux (that is PC) users are buying and loving their iPods, and that there is now a $500 step into a Mac, I'd say that it is quite possible (possible not necessarily likely) for Apple to pick up some market share.

On the other hand, is this an April Fool's rating, "Morgan Stanley today upgrade Apple Computer to "overweight" Overweight? Jebus.

I can see that amongst the overpaid, overeducated tree hating crowd, that the appeal of Apple may still not be very large.

Posted by: foo | Mar 28, 2005 3:05:47 AM

I think you're wrong on the investor class. It's a truism that people tend to be quite libertarian when it comes to their own business. Therefore, if people have substantial assets, they won't want the government to touch it. Thus you have a built-in small government constituency.

Look at the internet. Most internet users regardless of political persuasion are adamantly opposed to any regulation of the internet or taxation of the internet. The internet comes as close to a libertarian paradise as we are likely to see.

The reason we have a pro-regulation and pro-progressive taxation constituency in America is because most of the people who support this stuff aren't negatively affected by it directly. As more Americans start businesses as opposed to getting jobs with corporations, and more Americans own stock, more Americans will be opposed to legislation that messes with this, just as internet users are opposed to internet regulation while non-computer people could care less, or worse, have heard horror stories about the internet and want Congress to save them from its depredations.

Like you said, you're not in charge of a big company, so naturally you don't mind heavily regulating and taxing big companies. The people in charge of big companies naturally have a different view.

Posted by: Adam Herman | Mar 28, 2005 7:00:51 AM

"Like you said, you're not in charge of a big company, so naturally you don't mind heavily ... taxing big companies. The people in charge of big companies naturally have a different view."

And thank heaven we live in a democracy, as there are more of us than of them.

Posted by: Petey | Mar 28, 2005 8:19:58 AM

As a mac proponent, I think the analysis is overly optimistic. Apple sold $1.2B in iPods in the holiday quarter, but I don't think we're going to see that level of sales again for a while. This puts the 25% conversion rate on thinner ice. Apple at its peak in 1995 reached $12B IIRC, and is heading there now thanks to the iPod, but is still 20% under its 1999-2000 more recent peak in Mac sales. The $25B/yr sales numbers for CY06 seem opiate-produced, that's like doubling Apple's sales in 1 year... no company can do that.

Posted by: Troy | Mar 28, 2005 8:29:49 AM

Apple's busines model is more insidious than Microsoft. A century from now, Apple will be Big Brother. They have much tighter (almost religious) control of their Aposotles, and they are vertically integrated.

Anyone ever notice that Apple sells the hardware AND the software. Monopolistic opportunities greater than even for MS.

But don't ask me, I drank the Kool Aid long ago, never buying anything but Apple computers (except the kids are split 2 with Apple 2 with MS, have I failed as a father?).

This may be off topic, and probably in the wrong blog, but I don't get around much: I have one of the first Macintoshes in my basement. Bootable, I'd warrant. I spilled coffee on the keyboard more than 20 years ago and just put it aside and got an upgrade I was planning. To my knowledge it has the original ROM as it was a very early version. What should I do with it? Or is it just a medium-tech doorstop now?

Posted by: epistemology | Mar 28, 2005 9:04:07 AM

as for the 128k mac, ebay it. Looks like it'll go for $200 or so.

Posted by: Troy | Mar 28, 2005 9:31:12 AM

Your basic intuition is correct. Whatever virtues Apples may have in home and small business environments, they are a massive pain in the butt in the large corporate environment - which is where the bulk of the dollars are found. So Apple will never get out of that 3-5% ghetto again.

Before the Apple fanatics flame me: I have been around since the beginning. It didn't have to turn out that way. But it did, and the cement was drying by 1995. Apple won't get another chance at the large corporate environment. Sorry.

Cranky

Posted by: Cranky Observer | Mar 28, 2005 9:38:26 AM

Sorry but I don't buy it for a moment. They never broke out who owned a Mac then bought an iPod. And only 16% put a Mac as their first PC choice compared to 19% currently ownign a Mac. So Apple is acutally turning off a good portion of its base.

Posted by: Rob | Mar 28, 2005 9:42:16 AM

There are several IP skirmishes going on that will moot this. One of the most potent is the one over MS allowing anyone to read and write Word files via XML. The crux of that is that if anyone can send or receive docs it doesn't matter whicp WP you use. The WP drives the sale of the PC. If I can buy a $250 Linux box and still read all the company's memos, there's spit reason for my boss to spend the extra $500 MS monopoly fee. And no reason at all to pony up Apple's monopoly fee.

Most databases are accessible via web browsers. Word processor docs will soon all use XML. And as WPs go so go spreadsheets.

So, what doodad does your computer have that makes a monopoly fee so important? Seriously. Considering how virus-ridden the monopoly OS is/are, why add to one's headaches? MS will go the way of IBM before it. And Apple will never be again what it was before.

Posted by: Jeffrey Davis | Mar 28, 2005 11:05:03 AM

So Apple will never get out of that 3-5% ghetto again

I don't think they will, but I think they could, at the cost of some significant changes to the way they do business. From what I understand about Apple, they're characterized by the marriage of their operating system to powerpc-based boxes. In order to challenge MS on the corporate turf, they'd have to break that marriage up, make a version of their OS that will boot on Dells.

It would be a huge and risky investment, but potentially one with a big payoff. However, I doubt they'll ever do it. They seem to be happier waiting for Java-based applications to overtake the market (which they've been promising to do for about a decade now), in the hopes of closing the software gap with Microsoft.

Posted by: Tom Strong | Mar 28, 2005 11:05:50 AM

So Apple will never get out of that 3-5% ghetto again

I don't think they will, but I think they could, at the cost of some significant changes to the way they do business. From what I understand about Apple, they're characterized by the marriage of their operating system to powerpc-based boxes. In order to challenge MS on the corporate turf, they'd have to break that marriage up, make a version of their OS that will boot on Dells.

It would be a huge and risky investment, but potentially one with a big payoff. However, I doubt they'll ever do it. It's important to remember that at root, they're a hardware company, and they see themselves as competing with Dell, etc., at least as much as with Microsoft. They seem to be happier waiting for Java-based applications to overtake the market (which they've been promising to do for about a decade now), in the hopes of closing the software gap.

Posted by: Tom Strong | Mar 28, 2005 11:07:16 AM

Wouldn't one expect the percentage of iPod buyers who plan to purchase Macs to decline fairly quickly as the number of iPod sales rapidly increase, especially in as much as the new sales are going to customers who lag others in tech-envy. That percentage has to peak sometime, and I'd expect it would have happened at some point just after the rapid growth in sales started last year. Certainly it must be in the past, right? What am I missing here?

Cranky, care to explain why Apples are so bad on a corporate-wide level? I'm not familiar with the specifics involved in that question.

Posted by: SamAm | Mar 28, 2005 11:20:26 AM

The 800 Mac Mini is good, but it still forgets one huge thing...what about the cost of all the software you have to replace?

When it comes to companies, the problem is that if you're expecting that fixture (meaning computers+licenses), to last you 10 years, because of Apple's control over the PPC market (which surpasses Microsoft's...or Intel for that matter control of the x86 platform), which leaves you in a doublebind situation.

I think there's an undercurrent of mistrust under the whole situation, people expect something crazy like a necessary security update will be withheld from corporate customers unless they pay an arm and a leg. Do I think that will happen. Nah. But conservative (money wise) companies might not want to take that risk.

Posted by: Karmakin | Mar 28, 2005 11:34:55 AM

From what I understand about Apple, they're characterized by the marriage of their operating system to powerpc-based boxes. In order to challenge MS on the corporate turf, they'd have to break that marriage up, make a version of their OS that will boot on Dells.

What everyone forgets when they fantasize about Apple breaking out of their os/box straightjacket and overtaking microsoft because Apple's system is so superior is Apple's system is superior because it is designed specifically for the box. If it had to run on whatever processor Intel or AMD threw at it along with UNIX, Windows, and LINUX, then it would have to make comprimises too and it would have all the same problems.

I worked at Sprint and we had production job streams that took data from a Teradata box, ran through a IBM System 390 mainframe, jumped over to a AS400 system that ran in UNIX and ran ORACLE jobs that took input from a Visual Basic GUI with ACCESS Tables in Windows 2000, sent some of the Data back to the mainframe, sent it back to the midrange for more Oracle processing. We ran weekly and monthly job streams that ran between 3 and 5 days routinely processing 20 to 40 million records . The whole mess ended up on the mainframe, in Teradata, in Oracle in a data warehouse, and in Windows 2000 in a MicroStrategies reporting program. I don't think Apple will ever be competitive in that kind of market which still consumes a huge percentage of the comuputing power consumed in the world.

Posted by: Freder Frederson | Mar 28, 2005 12:17:10 PM

If Microsoft stays exactly where it is and announces no new software, the Mac will most likely overtake them eventually.

Posted by: theCoach | Mar 28, 2005 12:33:02 PM

Matt, a note here about your comments on "Tapped": you correctly note that this Administration really isn't about "free markets", but I don't think "pro-business" is an accurate description, either.

I consider myself pro-business in the sense that I favor creating a good climate for competition, availability of capital, etc.

The prsent Administration is nore accurately "pro-management" - the fact that contributors write their own legislation, seek protections from their consequence of their own business practices, weaken enforcement and propose loopeholes, etc. To me, a notworthy difference.

Posted by: Ed Tracey | Mar 28, 2005 12:56:42 PM

"It's a truism that people tend to be quite libertarian when it comes to their own business."

No they aren't. They believe that their own business is so crucial to the overall social good/so innovative/etc that it deserves special protection and subsidy.

Posted by: Julian Elson | Mar 28, 2005 2:03:22 PM

As a price/performance technophile, I find brand loyalty in computers particualrly offensive.

More than suburban gas-draining SUVs, or unwalkable 900$ shoes.

Posted by: Ron | Mar 28, 2005 3:44:18 PM

What everyone forgets when they fantasize about Apple breaking out of their os/box straightjacket and overtaking microsoft because Apple's system is so superior is Apple's system is superior because it is designed specifically for the box. If it had to run on whatever processor Intel or AMD threw at it along with UNIX, Windows, and LINUX, then it would have to make comprimises too and it would have all the same problems.

I completely agree. I don't think Apple would beat Microsoft at the software game; far from it. They could expand their market by challenging Microsoft, but the risk would be huge. I actually think they're far wiser to stick with their niche, and waiting around for the game itself to change.

Posted by: Tom Strong | Mar 28, 2005 6:24:54 PM

Must Apple metastasize into a Microsoft shape and size before it can be considered a successful company? Why is it not enough to consistently create and develop award winning, elegantly designed, cutting edge yet user friendly products for an intensly devoted following and the occasional new buyer, while earning a profit?

Posted by: abigail | Mar 28, 2005 8:47:39 PM

So what if Apple never becomes a behemoth? Ferrari will never become General motors either. Everything about them is top drawer right now. If they become big, that will cease. They are doing some of the only good design to come out of any American company right now. Their ads don't pander. The place is a dream to work for, I hear, with the constant excitement of blazing new trails. We Americans have a mistaken idea that making mega-bucks is the ultimate achievement. Quite the contrary, changing the world is so much more satisfying. Personally, I hope Apple remains an inspiration and never tries to catch IBM.

Posted by: James of DC | Mar 28, 2005 10:11:35 PM

"And thank heaven we live in a democracy, as there are more of us than of them"

The idea here is that eventually there won't be a majority in favor of taxing the rich because the majority will be rich. Even today, Matt and many liberals miss the point about why Americans are anti-taxes.

I make $30,000, less than the median, I think. The Bush tax cuts(or actually the Democratic add-ons to the Bush tax cuts) saved me $1000 last year.

So I'm supposed to be opposed because someone richer than me got millions in tax breaks?

Posted by: Adam Herman | Mar 29, 2005 4:23:53 AM

We need more companies like Apple. The innovation of the products--from the Ipod to the Shuffle to the Mini--is above and beyond so much of the other generic stuff out there. to me, Apple remains much like VW; a quirky company that has unique products and a cult following.

-MH
Boston's Hidden Restaurants

Posted by: MH | Mar 29, 2005 11:15:05 AM

We need more companies like Apple. The innovation of the products--from the Ipod to the Shuffle to the Mini--is above and beyond so much of the other generic stuff out there. to me, Apple remains much like VW; a quirky company that has unique products and a cult following.

-MH
Boston's Hidden Restaurants

Posted by: MH | Mar 29, 2005 11:15:47 AM

Mac is the Sony of the 21st century. And why pay a premium? Yeah, who would buy a Lexus when a Geo Metro gets you there just as fast, and cheaper? Yeah.

Posted by: epistemology | Mar 29, 2005 3:01:40 PM

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