The Apple Flap

Steve Ballmer trash-talks Apple and the PC vs Mac thing starts up again.

The latest salvo in the PC/Mac imbroglio started when Microsoft’s CEO let loose that the Mac acolytes pay something like a $500 tithe to Apple. As soon as this hit the wires, bloggers hit the keyboards like a fish snagging live bait and thoughtful analyses soon devolved into flaming – some of it is entertaining just to see who’s the best at trashing whom.

Arguing the merits of PC vs Mac really has less to do with facts than to recognize that Apple fans by and large are committed to the “vision thing” – Steve Jobs has been hailed as a “visionary leader” and deserves the praise to some degree. Let’s face it – Apple has done some very neat things, starting with the garage-built original Apple that pretty much launched the PC era and the stable of innovative products – not the least of which is the iPod – is notable and has done well for Apple’s investors.

However, let’s be realistic about Apple’s core strategy was, is and will always be:

Don’t kill the goose that lays the golden egg

IBM killed the goose by opening up the PC to unbridled competition, spawning a huge growth industry for IBM “clones” that gave birth to the likes of Compaq (I think the first major clone success) on and on to the likes of Dell. Price competition among the clonies drove PC prices down so that “monopoly pricing” was never evident – prices reflected those one would expect from free market competition.

Not so for Apple – their strategy was to keep everything in-house, including BOTH the OS and the hardware. Some have tried to deliver a MacClone, but to date the Apple dike has not been breached.

So what you have, dear readers, is what’s called “monopoly pricing” – if you want a Mac, you pay what Apple charges or not – absolutely a zero-sum game.

You pay the same thing for a real Swiss watch – the one with tiny gears riding on jewel bearings that you have to manually wind, the one that does not run on batteries. Before digital came along, that was the only game in town. Digital changed all of that and the watch business moved from the Swiss mountains to the Japanese islands. Consumers won out, but there are still people who buy Swiss watches, albeit a paltry number compared to those buying digital.

And so it is with Apple – the suits who run Apple are quite content to sell their Swiss watches to a minority of folks who value Apple’s Swiss watch PCs.

In the current economic environment, there is no doubt that if you need a watch, even though you’d like to buy Swiss, consumers at the margin are going to buy digital. Ergo the Swiss watch company will sell less.

Economics 101 – nothing more, nothing less

If you look at buying trends, the facts are crystal clear – average selling prices are going down and will continue so for the near term.

An outfit called ChangeWave Research released some data on consumer buying intentions that clearly show first that spending intentions are in the toilet, and that “…12% of respondents say they’ll spend more on electronics over the next 90 days, compared to 43% who say they’ll spend less…” The standout continues to be netbooks, with almost one in five stating an intention to buy a netbook in the next 90 days.

Data from NPD Research clearly shows that the price mix is shifting down so that consumers are buying cheaper gear, to the detriment of Apple. For example, January 09 revenues were about flat for PCs and down 10% for Macs, while units were up almost 17% for PCs but down almost 6% for Macs. 

The take-away on all this is that consumers right now are very thrifty with their PC dollars, and those that like Swiss watches will continue to buy them and those that can’t afford to buy Swiss, which is now a larger segment of the buying public, will go digital. Both watches will tell time accurately; the Swiss watch does it in style.

About Joe Citarella 242 Articles
Joe Citarella was one of the founders of in 1998. He contributed as a site administrator and writer for over 10 years before retiring. Joe played an integral part in building and sustaining the community.

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