Hi Jill,
1) iPod market might eventually be fairly good-size, but my point is that I don't see AAPL's future as depending on continuing to ramp up iPod sales, that they understand this, and that they therefore plan to use iPods as a bridge to bigger, more stable markets that will bring them bigger and more stable revenues based not on fickle consumers so much as outright need. And, I don't think AAPL can count on dominating that market indefinitely. What I posted might have been somewhat misleading. Last quarter, iPod sales brought in $1.2 billion, which is not really a trivial piece of the pie.
biz.yahoo.com
I see the barrier to entry into this market as being rather low, and rife with wannabees who could compete effectively. Some might eventually supplant AAPL there. All that would be required is for some company to carefully learn the lessons of AAPL's success and emulate them, but cut prices to compete. And I don't think we can count on continued growth in that market like we have seen so far. I think AAPL knows this very well, and is planning carefully.
2) Yes, in a way software is a problem, but it might prove to be a fatal one for PCs. On one hand, there are fewer and fewer issues related to compatibility between Macs and PCs. For Macs, there are superior alternatives for any Windows-based software out there, and a great deal of this is free. Software might prove to be the undoing of the PC because of the unbelievable complexity that is written into Windows-based software that attempts to overcome fundamental problems by very complex solutions that bring an increasingly annoying set of new problems to the user. The next Windows operating system will likely require years and years and untold millions of lines of code to develop. And the next version of Windows after that will be even more complicated. And so it goes, building in deeper and more profound problems both for users and for software designers.
3. I think it would be a big deal if one company converts, provided it is highly visible, and the company has a lot of competitors, and also provided that (as expected) switching to AAPL gives them a competitive edge.
4. As you point out, one of the barriers to the home PC market has been price. Another is garnering loyal customers, which is key because AAPL knows once they get a customer, that person rarely will ever switch back to a PC. So now, they sell a PC at a price that's comparable to the iPod. And the Mini Mac could almost fit into one of your pockets. That's both cool and cheap at the same time. With that price, the fact that you would probably never have to spend a penny on software, that all the software works well with little or no problems ever, that there are tons of free software available with AAPL's full blessing, and the fact that the vast majority of security concerns are obviated with Macs, why would you not consider switching? I think the vast majority of iPod users would in fact consider that, and many have and will continue to switch. And once they do, their next upgrade and the one after that and the one after that will be a Mac, you can be very sure of that.
5. I don't think they have to innovate further, they are already technologically superior. My point is that the last hurdle is for key people to conclude they are also economically superior. That said, AAPL has been a leader in innovation, and this will only continue.
Your example of IE is a good one, and analogous too. IE is a clearly inferior browser. It attracts problems like a magnet. Yet people still use it. How long will this go on? Until somebody comes along with a better browser (that has already been done), AND somebody effectively markets that and gets people to use it (GOOG and others are on to this). Eventually, IE will only be used by people who are completely clueless, if at all. You'll never see somebody who uses Mozilla decide to switch back to IE, that's for sure.
Perhaps you don't have brand loyalty, but I think that defines most AAPL customers. Dell or Compaq or HP certainly has nothing like that, but people who buy Macs generally eventually conclude that switching back to a PC would be the same as going back to the Bronze Age. But the sort of brand loyalty AAPL breeds tends to be very subtle but very powerful. That's because it is based to an important degree on image. And scoff if you like, but the vast majority of people (myself included) are in fact strongly influenced by image, even though we may not like to admit it. You haven't gone out and bought a competitor, or evidently even seriously considered it. Yet, there are cheaper competitors and some of these have technology that is fully adequate, and fulfills the need. Are you sure your decision is solely based on pure technologic and economic considerations?
For most, these are only some of the determinants, and may not even be the most important ones.
T |
