Old Macs Getting More Valuable & Charging For Jaguar Makes Good Sense...For Apple

by , 9:00 AM EDT, July 19th, 2002

[Editor's Note: The byline for this piece was incorrectly attributed to Bryan Chaffin. Nicolas diPierro is the actual author, and the byline has been changed accordingly.]

The man is no dummy.

Between the launch of .Mac services and the release of Mac OS X 10.2 with it's new iApps, Steve Jobs is guiding Apple just where it needs to go right now. Sell to the installed base and entice new customers to the Mac. If you're a creative professional, there's not much announced yesterday that will radically alter your work life. That may come soon, but this show was all about the consumer.

I own a PowerBook G3 Pismo: not the newest kid on the block by any means. The most recent PowerBook G4 really had me thinking about replacements, but the keynote changed all that. Mac OS X 10.2 should be even speedier on my G3 than version 10.1.5. I have FireWire for an iPod and USB for a BlueTooth adapter. I've got a broadband connection to the internet at home and work for .Mac. I've got everything I need. I don't need to buy a new Macintosh! Woah. I think I just traveled through Jobs' reality distortion field and came out the other end. What happened?

My thinking before the keynote was that I'd hold onto my G3 for another 12-18 months, and honestly, I wasn't looking forward to it. Now I am, and that's what got me thinking today. How is it that Apple's announcing all this, apparently ambivalent about luring me to buy new hardware? Apple's a hardware business, right? That's why cloning failed, right? Well, that was a long time ago.

I think what that keynote audience witnessed was a new Apple Computer business. Smart market analysts will note the company has shifted its footing off of the hardware business, to balance on hardware, software and net services. Balance. If this works, Apple will not only make the whole widget, but gain revenue from the whole widget. Apple can't entice me to buy with blazing fast processors. Processor development is largely out of its control. What it can do, it has done. It's settling for making a few hundred dollars off me in software (Mac OS X 10.2) and services (.Mac), and that's not bad at all.

An AAPL investor should be pleased at this news. By releasing 10.2 as it planned, suddenly Apple creates revenue streams, and subscription-based ones at that! Recurring income! The holy land. The magic force that fortifies companies through economic downturns. You may not have $2000 for a new Mac, but you probably won't cancel an $8 per month service during a recession. Have any of you canceled your cable service? Broadband? Magazine subscriptions? Cellular service? Apple's betting not many of you have.

An Apple customer might not be so happy. "Now I gotta' PAY for it?" will probably be the refrain. I do think Apple's going to get an absolute inferno blast of anger from iTools customers that have no free recourse to keeping their limited service, and indeed we are already seeing that. Hotmail IS free and can be checked with the free Outlook Express. My parents get maybe five e-mails a week through mac.com. Even if I explained iDisk, they wouldn't care. Customers like these do not need to have Apple say "gimme $50 or the POP account gets it!"

And $129 for a 10.1 to 10.2 update? Really? Well okay, it's a down economy, the company needs to generate some cash. It's been giving away all kinds of goodies (iTunes, iPhoto, etc.) and I've been benefiting without buying a new Mac. My PowerBook has become a lot more valuable to me since Mac OS X got released. Not many people would think of it that way. It's not becoming more obsolete, It's keeping up. It's getting better!

Still, US$129 is an awful lot of money for many. I think Apple would have made lots of money and goodwill by offering, say, a free year of .Mac and QuickTime Pro with every Mac OS X 10.2 purchase.

But much as I grumble as a consumer, I will grudgingly fork over the cash because I will use .Mac. I will use iCal, iChat, etc. Mark my words, my next wireless phone WILL be Bluetooth enabled.

My investor self is very pleased at the way my consumer self is thinking.