Apple's Challenge: 'Innovate or Perish'

Reaction to the new Intel-based MacBook Pro and iMac unveiled by Apple on Tuesday has been largely positive, but David Daoud, research manager for personal computing at IDC, warned: "A company that has a 4% market share cannot afford remaining stable from a product line perspective. They need to innovate, or otherwise they will simply just disappear."

Mr. Daoud made those comments to TG Daily reporter Scott Fulton, who wrote: "The problem facing Apple is innovating the Macintosh to a degree as substantive and as market-changing as its innovations to the iPod." He noted that Mr. Daoud compared the new MacBook Pro feature-for-feature with a comparable offering from Dell and found that while the Apple laptop is just US$200 or $300 more, the reduced price gap wonit be enough to move Windows users en masse to the Mac OS.

"Itis going to be very difficult for a company like Apple, or anyone, to really move market share beyond one or two points," Mr. Daoud explained. "Itis just not going to be possible." Since the MacBook Pro is "geared toward Appleis base, [it] does not break into a new market," he added. "It really is a continuation of a product shift from the previous processors to the new ones, beefing up the system with applications that talk very well to the iPod world. But I really donit think that this is going to duplicate the success that weive seen with iPod, into that computer market."

Mr. Daoud acknowledged that the new computers are "strong systems," but ""if they really want to go after the mass market, theyire going to have to address the pricing element, and that is very critical. At $2,000 entry level, itis very expensive." However, he does think Apple will have "wiggle room" to drop its prices in the future.

The real key, though, is for Apple to look beyond the computer industry and see "the future for this big consumer computing world," which Mr. Daoud said "is very hard to know." Mr. Fulton noted that, for example, the traditional PC manufacturers could face stiff competition from Comcast or TiVo, companies that he said could "argue that expensive PCs are unnecessary, and propose a kind of home-oriented ASP service instead."

And if that happens, Apple has a leg up on PC manufacturers because of iTunes. "I think what Apple is doing is the right thing," Mr. Daoud said. "I think itis looking at the way the marketis moving, and itis playing its cards accordingly, one of which is, how do you first secure a presence in the content world? Perhaps [Apple should] deal with the issue of hardware and the pipelines that are going to carry this content to the end user."