Is Apple's Four Cornered Hardware Strategy A Done Deal Or A Foundation?
July 3rd, 2000

Note taking is probably one that surprises you to see on the list there. That's something we'll be talking about a fair bit today. We've always believed that you should have a digital device, a full-screen device with you wherever you go, so even in an event like this one it's our view that you'd have a full-screen digital device, where you're fully connected and your notes are recognized and searchable, just like all the other material you work with.

Bill Gate's dot-net speech, June 22

Recently Microsoft unveiled the biggest strategic shift in its business since the introduction of Windows. Although the Microsoft dot-net initiative is currently little more than vaporware, it is nonetheless a sketch of all that Microsoft could hope to achieve for the entire decade.

Whether Microsoft's scheme comes to fruition or not, it creates a comfortable atmosphere for investors who now believe they have a grip on what the Redmond behemoth will be focusing its immense gaze on for the next few years. Shareholders who disapprove of the plan can sell, others might buy convinced that dot-net is the wave of the future. But MSFT investors can't complain that they aren't reasonably well informed about Microsoft's business strategy.

No such luck for Apple investors, we don't have a clue as to what Apple's future plans are.

OK, so we have a few clues. We do know that OS X is on track for a beta release this summer, with the shrink-wrapped version scheduled to debut in early 2001. We can also be sure that Apple has plans to continue tweaking the iMac platform and revamping the Macintosh hardware lineup as Motorola and IBM roll out belated PowerPC improvements. We know that Apple is dabbling in playful, if inconsequential, Web-based services like iDisk and iCards. We know that QuickTime has an important future as a key piece of Apple's software strategy. However, none of Apple's known plans seem to directly address the central issues confronting the PC industry. Apple investors have little to hang their hats on. Except on their faith that Apple, so beautifully executing their business since Steve Jobs' return, will continue to do so in the future. Even though to do so means Apple must reinvent the wheel one more time.

Of course, Apple's apparent lack of a master strategy for the future is both an illusion and a defensive mechanism from a company that has found its recent hardware designs much emulated by the entire PC industry. Even worst, at least one PC vendor, eMachine, tried to directly steal the iMac concept by introducing a Wintel rip-off of the bulbous wonder. Only a cease and desist order from a court stopped those mobsters from thieving iMac market share.

And Microsoft continues to shamelessly borrow from Apple's software conceptions. Recently Redmond announced the "innovation" of video editing built right into the OS. Sound familiar? From Mr. Gates speech on June 22: "Video editing has been a tough challenge, because of the size and the speed of the processor required for that application. But with the next version of Windows we include that application." Yeah, Billy, blame Intel. Apparently, just because Apple is secretive to the point of paranoia doesn't mean the whole PC industry isn't out to reproduce Apple's innovations.

Apple shirks the future?

Last July at Macworld in New York, Steve Jobs unveiled the wireless iBook during the keynote address to roars of approval by the audience. It was a moving experience. But even then, I was dismayed when Mr. Jobs labeled the iBook the "fourth corner" of Apple's hardware strategy. The other three corners being the iMac, PowerBook and G3 (since upgraded to the G4). Mr. Jobs implied that Apple's hardware strategy was complete.

What was the purpose of circumscribing Apple's hardware goals so concisely? Was it an over reaction to the Gil Amelio Performa mania days when Apple's hardware strategy was to throw everything but the kitchen sink at consumers and see what sticks? At first, Mr. Jobs' four-corner hardware limit was a welcome affirmation that Apple could learn from its past strategic errors. Now, Apple's recent reiteration of the four-corner strategy appears more like a dereliction of management's duty to meet the future head on. Phil Schiller, Apple's vice president of marketing said during Apple's World Wide Developer Conference in May, "We are focused on the personal computer space, not the handheld space, and that's that, I hate to use these words, but there's nothing going on."

Which future would that be?

A year later and here we are faced with an entirely different PC landscape. We're entering a time of critical transformation for the PC industry away from their sole reliance on "box making". The event of Internet appliances is certainly not going to kill the PC but it presents a rapid growth opportunity beyond the slowing desktop PC market.

After all, the power of desktop systems has reached a point that for many consumers a new PC won't become obsolete in two years as they have in the past. Many computational activities have increasingly become Internet related and while bandwidth remains relatively narrow, 500 MHz is more than adequate for most consumer PC activities.

Moreover, the easy-pickings cycle of upgrades from the early PowerPCs (and even old Performas) to iMacs, G3s and G4s has probably run much of its course. Macs last so long that the new Macs recently sold will knock many consumers out of the desktop market for years. But many if not most, of those same consumers will feel compelled to augment their desktop Mac with a mobile web device in the next few years and they'll want that device to also be a Mac and to have access to their desktop hard drive at home.

The real growth market is in creating a way to take your computing platform with you every where you go.

The urge among consumers to take their desktop life with them on the road is growing. On a recent camping trip to Mexico, sitting around the fire at night with a dozen non-geek PC users, the topic of conversation turned to what we missed the most while in the wilderness. A chorus of voices rose in a wail not for their TVs or air conditioning or a hot bath -- what everyone wanted the most was to check their e-mail!

PC vendors want to become indispensable information utilities

Microsoft's answer is a virtual desktop accessible through a Microsoft tollbooth on the info highway. Cha-ching. They'll charge you for access to their software and your files. Hey, it's a feature. Intel wants to rent you a funny hybrid box that serves as a portal to Net and doubles as a phone and has more in common with Oracle's thin client concept than a PC. Again, charging for a service is the common theme. Intel is not going to sell these boxes to the public, they want you to rent them from your ISP. Gateway and Dell also have schemes to hook the public on Internet services that add monthly costs to whatever hardware they sell. Even Apple has a kickback fee it collects from Earthlink for every new customer Apple draws to their service.

The rush to be a first mover in the info appliance market space is on.

Almost everyone is coming out with some hardware variation on the Internet appliance theme. Yet, no one knows what is going to stick with consumers. More than likely nine out of ten of the first wave of Internet appliance offerings are going to lose money for their manufacturers and become obsolete faster than a refrigerator in an arctic summer.

When PC's were first introduced there were questions about how popular they would become but there was little concern about what the form factor would be. It was the internal circuitry systems that presented the real challenge to engineers. Today with the emergence of Internet appliances the situation is reversed. There is no doubt that Internet appliances are going to flood the landscape and it's well known what the internal hardware parameters are for such a device, but the form factor that will emerge as the most functional to consumers is entirely unknown.

Perhaps most important to Apple, the operating system standards for Internet appliances isn't locked up in the Microsoft monopoly. Intel's Web device uses a Linux OS, signaling the openness of this unstandardized market.

We know that there is no consensus on exactly what the consumer desires because the major Internet appliance offerings from Motorola to Intel differ so radically in design and function. No one can say how the Internet appliance market will evolve. No one knows what device concept form will fit your palm as well as ergonomically wrap itself around your lifestyle. But there is a killer app(liance) out there, just waiting to be invented. It's as wild a frontier as the desktop space was in 1982 and the stakes are even bigger. The winners could end up as the 21st century equivalent of today's electric utilities.

Chess Masters

The emergence of Internet appliances seems like a challenge specifically tailored for the incredibly savvy design team Steve Jobs assembled to build the iMac, G3 and 4, and iBook. Instead Apple is leaving the first wave of Web appliances to Sony and Ericsson, to semiconductor giants like Intel and Motorola and to the Wintel PC vendors who never have understood good design. In fact, the PC vendors have proven that they have no expertise in consumer product design by their inability to bring to market a single competitive design alternative to the iMac in the two years since the iMac's introduction. Dell and Gateway's expertise lies in optimizing returns and streamlining marketing processes, not in designing killer consumer products. But you have to worry about Sony.

The complexities of the next wave in the PC biz will require the game strategy tactics of a grand master. Apple's strategy is completely opaque at this point. Either Steve Jobs is a Kasparov or he's a chump. Macworld is just days away and then we'll all find out what Apple has planned for us during the next 6 months. Perhaps we even get a clue as to what Apple's strategy is surrounding the Internet appliance market. And maybe, just maybe, will get some implicit, if hidden, leads towards Cupertino's master strategy.

I can hardly sleep at night wondering…

Your comments are welcomed.