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The Back Page
by Bryan Chaffin

Columnist: New Processor Won't Sell Macs
June 13th, 2003

Do you remember James Maguire? He penned a piece for NewsFactor in December that made our Apple Death Knell Counter (look for the entry dated 12/6/2002). In that piece, Mr. Maguire says that Apple had to do three things, or it was lights out in Cupertino. In fact, I'll let his words speak for him:

So, the challenge Apple faces is a tough one. It has to offer Macs at prices comparable with Windows, at speeds as fast as those of Windows-based PCs, with complete Windows compatibility. If it can't do that, the brand will simply fade away, a quarter of a percentage point at a time. I'll miss it.

Obviously Mr. Maguire has trouble with some technology and business concepts, but that's OK. I meant to write a deconstruction of his editorial back then, but I never had the time. Instead, I offered some very brief notes in the Apple Death Knell Counter. Fortunately for all of us, Mr. Maguire has penned a new piece, and he's still banging the same drum: Apple's too expensive, and has to lower its prices to that of its Wintel competitors to stay in business. Again, I'll let his words speak for him:

The problem is that offering the highest quality product -- which is what Apple has always done -- is not enough. Now down to about a 3 percent market share, the company needs to do something besides create cool computers to survive.

Yeah, I know, Apple's on a roll with its online music sales. And that's good, because based on historical trends, they might not be a computer maker that much longer.

What's killing them, of course, is price. About a year ago, I read about Steve Jobs holding one of the new laptops aloft at a Mac gathering, and it was clear the thing cost more than US$3,000. Still, the audience cheered. Amazing. Try to spend that much on a Dell, and the Dell folks will probably offer to come over and cut your lawn all summer.

I went to Dell's site, and found an ugly, large, thick, and heavy Precision M50 for US$3,244 (US$55 cheaper than Apple's 17" PowerBook), but it had a smaller hard drive, couldn't burn DVDs, had no wireless card, no bundled software aside from Windows 2000, and a smaller display.

Take off the included nylon carrying case (which makes it cheaper), add in the bigger hard drive and the wireless card (a slower card than Apple offers), and the total is US$3,372, which is more than the PowerBook, but you still get no bundled software, you have a smaller display, and you can't burn DVDs. I guess that means that I wouldn't get my lawn mowed by the Dell Interns, after all.

I do wish Mr. Maguire would shoot me a note before he writes these things. I have done interviews for two different NewsFactor writers, and I would be happy as can be to set him straight, too (my e-mail address is on the TMO Contact page, James).

Sigh

This makes me tired. We do a whole series of shootouts at TMO that compares what you get for your money for Macs and PCs. Dollar for Dollar, Apple is very competitive with its offerings. Most of those reading this know that, so I won't bother going into details, but check out the shootouts if you have any questions. The information is out there for anyone who wants to look for it, and I would think that a man who gets linked at Yahoo!'s AAPL stock page because of NewsFactor's contract with Yahoo! would be interested in getting his facts straight.

The editorial goes on about how the future lies with US$159 Linux boxes from Wall-mart, blah blah blah. Apple has to compete with that, or go under, according to James Maguire, and the G5 rumored to be coming out won't do it. Nope, without a cheap Mac to match Dell's pricing, Apple is doomed, or so says the editorial.

I am afraid he is wrong. This summer will mark a turning point for Apple, and you heard it here first. Actually, as I have said it before, you technically may be hearing it again. With QuarkXPress for Mac OS X here at last, a likely move to new processors, and an economy that may be heating back up, everything is in place for Apple. The company's management team has been busy putting all the pieces into place for years, while waiting for those three factors to come together. Well, they have come together, and we will soon see if Apple can grow its market. For my money, Apple will succeed.

Those who think that competition for Apple lies in meeting the price point of cheap computers with no bells or whistles do not understand Apple's business model. Those who think the company can achieve such a goal while still offering the Mac OS X experience as we know it today do not understand business, or economic reality. Those who think that Apple could have afforded to introduce a service like the iTunes Music Store (iTMS), or the iPod for that matter, if it was competing with the Wintel herd on price are similarly deluded or ignorant.

Similarly, they are clearly closing their eyes to the fact that Apple is the only PC company spending R&D resources on products and technology for the user, aside from Microsoft (Dell spends most of its R&D budget on finding new ways to make PCs cheaper). Microsoft's margins are in the 80% range, Apple's are in the 28% range, and Dell's are in the 1-3% range (note that I haven't looked for that number recently, and it may have changed, but it will be close to my figure). The same thing goes for Gateway, HP (for its computers), eMachines, Micron, etc. Do the math. Look at what Apple is offering today, and do the math. James Maguire's vision for Apple is a dead-end to nowhere, and, ironically, one that actually is doomed to fail.

Also, note that James Maguire is one of the only people to be added to our Apple Death Knell Counter twice. Congrats.


began using Apple computers in 1983 in a high school BASIC programming class. He started using Macs in 1990 when the Kinko's guy taught him how to use Aldus PageMaker, finally buying a Power Computing Power 100 in 1995. Today, Bryan is the Editor of The Mac Observer, and has contributed to the print versions of MacAddict and MacFormat (UK).

You can send your comments directly to him, or you can also post your comments below.

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