Apple's Rainbow Reality

For years success in computer market share has always been just around the corner for Apple.  First moving from the Motorola 68000 to the PPC was going to do it.  Then the G3 and the G5 were going to provide the magic. Unfortunately finding success in computer sales for Apple has been like chasing pots of gold at the end of the rainbow. 

While Apple sold 1,254,000 in the quarter that ended last December, it only sold 1,112,000 or 11.3% less in the quarter that ended in March.  Now Q2 is a tough quarter in the computer business, but Apple introduced its first Intel based Powerbook, Mac mini, and iMacs in the quarter.  Yet Apple only managed to grow their computer sales 42,000 units from Q2 of last year or a meager 3.9%.

Dell however managed to grow their unit sales 10.2% or approximately 875,382 units if you use IDC numbers.  In case you're having a hard time figuring out the Apple growth comparison to Dell's numbers, it almost twenty times the number of units that Apple grew their business.  Of course since Apple isn't keeping up with the industry pace of 13% unit growth, Apple's market share is shrinking.  Again using IDC's 53.2M Q1 shipment number for PCs, Apple now has barely 2% market share.  Another successful computer sales quarter like this one for Apple, and they will be under 2%.

There's a good article, "No Magic Bullet for the Mac," on "Apple Matters."  It has this to say.

It isn’t the case that Boot Camp, the mini and OS X are the purest wastes of time. All these things helped the Mac market share, they just were not the instant cure the faithful had hoped for. The reality is that an instant fix simply doesn’t exist. Any software advance Apple comes up with can be quickly copied, any hardware coolness will have to be peddled to users who are happy with the “good enough” state of the Windows machine.

I would go much farther and say that the problem with Apple's market share is at the feet of Apple management.  Isn't it time to face facts instead of continually believing that there is a market share pot of gold at the end of the perpetually moving rainbow? 

Apple doesn't know how to take some of the best built computers in the world with what is arguably the best OS in the world and turn it into a real success.  There are lots of reasons for this.  One is the Apple attitude best exemplified by an old Dilbert cartoon, where Dilbert's pointy-haired boss tells him that they have fired the sales department because profits are down.  The new company strategy is people driving to warehouses and begging for products.  That's pretty well been Apple's computer sales strategy for the last several years.

The computer sales force at Apple has been an afterthought.  Because of Apple's penchant for secrecy, Apple's field sales people have been the closest connection with the customer. Yet almost all of the input that they provide the company is regularly ignored.  My favorite example of how much Apple trusts and values its sales force is the way the Apple sales people are treated when the very rare non-disclosure happens at a Cupertino executive briefing.  The Apple reps are asked to leave the room while their customers get to hear the "non-disclosure information."

Over the years, Apple's sales force has been managed with a mixture of fear and humiliation.  Current Apple sales management cares more about telling upper management what they want to hear than about actually addressing many of the issues that customers have with Apple.  When was the last time Apple had a real customer feedback group that actually got the time of day?  The Apple management response to poor sales has always been blame the sales force.

My worst nightmare is that Apple has so mismanaged its opportunity to take computer market share that it actually might be too late.

Yesterday I was shopping MS Office prices for our office when I saw Dell's latest offer which is a laptop with a 14" screen and wireless connectivity for $399.  In price sensitive markets like education, the value equation has changed so rapidly that Apple's policy of sticking it to the customer with higher prices, less warranty, and questionable post-sales support is only going to work for a small part of the market.  I wrote about my personal tug of war on my next laptop purchase in "The Apple value proposition?."  I have pretty well decided that what I really want is Apple's OS X on someone else's hardware.  It's not that Apple's hardware is bad, it just that Apple is a pain.  I have a PowerBook G4 with a bad lower memory slot.  Apple replaced some motherboards with the problem but not all of them.  The reality is that at the premium Apple price, I should have gotten a new motherboard.

Apple should be the Lexus or Acura of computers with the best products, the best sales people, and the best service and support.  That way they could gain some market share.  Apple will never be the largest hardware vendor, but it could be larger than it is now. 

Right now Apple might have the best products but the rest of the company falls woefully short of providing the best experience.  Sure if you happen to live near an Apple store, you can have a "great buying experience." There will, however, never be enough Apple stores to really drive Apple market share.

Try living someplace besides a major metro area and getting Apple support. Just try to find a replacement for your older style Airport card. It will cost you a fortune as I mentioned in my post, "A growing problem with original Airport cards?."  If that doesn't frustrate you, try to solve some of the more complex OS X problems and see how much real help you get from Apple, if you can get to Apple.

At the end of December I wrote a post, "The year of no excuses."

This year will be whatever Apple makes of it.  It doesn't matter what we write or speculate.  It doesn't even matter what is leaked, this is Apple's year to go head to head with the competition. It's a year of no excuses.

So now the excuse is that applications aren't optimized for the Mac.  Give me a break.  I've heard that one before.  It's just chasing more pots of gold at the end of the rainbow.

Apple knows how to sell iPods, but it's been a long time since Apple proved it knows how to sell computers.  So I wonder.  Do they just not care or is it really a complete lack of understanding of the resources (including marketing, sales and support) needed to be successful in a very aggressive hardware market?  Apple needs some leadership in computer sales that understands something besides kissing up to Steve.

It's about time Apple's Board of Directors realized that the current team isn't getting the job done.

If there isn't some progress soon, the next "surprise" after Bootcamp may well be Apple releasing OS X for other companies' hardware.  It may soon be the only way that Apple can survive as a hardware maker.  Even overly optimistic articles like the Businessweek one where they're predicting half a million new Mac owners by the end of the year are just ignoring the facts.  Apple needs those half a million new users just to keep their market share from dipping to the 1% range from 2%.

Great service, support, and sales can turn things around for Apple hardware.  It's not like they don't have the money to do it.  It's a formula that many companies use for success. It's just the basics, it's not rocket science.

 

Comments

[RLD]

David, regarding your comment that Apple may soon have to release OS X for generic PC hardware, John Gruber of Daring Fireball wrote a great article discussing a number of issues related to that topic. Be sure to check out the other articles linked in the text.

http://daringfireball.net/2006/04/asinine_and_or_risky_ideas

-RLD

[michael]

Oh, thank you. I love this comment, "I've pretty well decided that what I really want is Apple's OS X on someone else's hardware."

YES! YES! I am so happy and relieved that there are others out there who feel the same way I do. I despise my AlBook. On a machine that is less than 2 years old, the screen is messed up, I have replaced the hard drive twice, replaced both parts of the bottom case, and had Apple tell me it is my fault (so much for AppleCare).

I want to install OS X on a ThinkPad. Is any hacker or someone from Lovano reading this? I will fork over $2k to buy an Intel laptop IF I can install the OS (actually both Mac and Windows) of my choice.

[cre8ive]

What exactly is Steve Jobs problem with Apple having a sales force? He might be interested to know that even in this day and age, people still like face to face contact. Building relationships with customers and selling them your product is still a fundamental way of doing business.

Many sales in any business today, and further repeat business, can still be attributed to good, knowledgable proactive sales people. That’s what can close the deal at the end of the day, not necessarily the product they’re selling. Perhaps Steve feels Apples products are so good they should just sell themselves. Great in a perfect world, but the difference between Apples recent hardware sales and Dells are Dell have some mediocre hardware being sold by a large sales force in the trenches, and that’s reflected in those IDC figures. I’m also reminded of the balls up Apple made with reorganising the K-12 education sales force a few years back prior to the pre-school buying season. Dell took advantage and Apple have never really managed to claw the share they once had back.

Not everyone wants to buy on-line, and while it’s nice that Apple stores are popping up all over the USA, how many do we have around the rest of the globe? I’m still waiting for an itunes store, let alone ever seeing an Apple store in my country.

With a new OS upgrade on its way and particularly with the Intel transition going on, I’d be assembling a strong sales force to muscle in and pitch the benefits of Apples product line in front of businesses in tandem with the existing on-line and editorial marketing. But I’m not Steve Jobs. And you’re right, it’s not rocket science.

[Some Guy]

"What exactly is Steve Jobs problem with Apple having a sales force?"

Apple isn't Sun. Apple isn't DEC. Apple isn't IBM, and Apple isn't Dell.

What you have to realize is that Apple's ENTIRE plan today is to capture the home market. That's where MS is vulnerable, and that's where Apple can make their gains.

Going after MS's cozy relationship with the IT departments who know damn well that they owe their very existence to the difficulty of keeping a windows network working is suicidal.

Macs in the enterprise are a battle for another day. Let Vista piss off the customers for a year or so, and then maybe it will be worth trying.

For my part, I'm going after a very lucrative vertical-market opportunity with an Apple-based solution, and I expect to eat the windows vendors' lunch. I'm going to make a lot of money for me (an individual), but it wouldn't amount to a rounding error in one of Apple's quarterly financial statements. Upshot: I'm not expecting any help from Apple, and that's their prerogative.

[engrish]

> Dell however managed to grow their unit sales 10.2%

Dell is not in the middle of a hardware transition, they're selling Windows PCs, de facto standard, like they always did and they're the market leader. And despite of this their growth is slowing as of late (0.3% year-over-year in the US this quarter, yes, you read this right, see the following IDC link). From your point of view the Intel transition may be a self-inflicted wound in terms of sales for Apple but all things considered (as you noted it's always harder to sell computers after the holiday buying season) the quarter was OK.

> but Apple introduced its first Intel based Powerbook, Mac mini, and iMacs in the quarter.

Yes, the iMac was available in january, but Apple began shipping the Pow… I mean MacBook in february, in the second half of the quarter.
http://www.apple.com/pr/library/2006/feb/14macbookpro.html

Same for the Intel mini, it was unveiled at the end of february.
http://www.apple.com/pr/library/2006/feb/28macmini.html

> Yet Apple only managed to grow their computer sales 42,000 units from Q2 of last year or a meager 3.9%.

Apple is growing, albeit slowly, even though their product line-up is transitioning, and the new models were available late in the quarter. All in all fiscal '06 could be better than the previous year in spite of the transition. That's ok in MacBook… I mean my book.

> Of course since Apple isn't keeping up with the industry pace of 13% unit growth, Apple's market share is shrinking.

Well yes, the worldwide marketshare should be down, but according to IDC the Apple marketshare was 3.7% in the US for Q1 2005 (Apple fiscal Q2 2005), and is still 3.7% for Q1 2006 (Apple fiscal Q2). I'm not making this up.

http://idc.com/getdoc.jsp?containerId=prUS20134906

> "No Magic Bullet for the Mac"

When the G5 was introduced you could read silly things all over the Internet like "woohoo, this time Bill Gates should crap his pants!!111" It was quite funny in a wicked way. Apple faithfuls can be at odds with reality, but it holds true for pundits and Apple critics as well. Do you remember all the fuss about the Osborne Effect? "Their sales will shrink sharply during the switcheroo, yadda yadda…"

> My worst nightmare is that Apple has so mismanaged its opportunity to take computer market share that it actually might be too late.

I think it's too late to take massive marketshare, the OS war is over since… forever, MS definitely won it with Windows 95 and 2K (consumers/pros).

> Apple knows how to sell iPods, but it's been a long time since Apple proved it knows how to sell computers.

Selling music players is completely different, this is a new market, with exponential growth, and there was no real leader when Apple entered the fray. Jobs himself explained this during the iPod introduction way back in 2001.

http://youtube.com/watch?v=kN0SVBCJqLs

Ruling the market was piece of cake for Apple. Strong brand, elegant solution, brilliant design, marketing muscle, unstoppable hype machine. In comparison the computer market is old, saturated, commodized, and a nasty 10 ton gorilla is entranched in there with his IT minions and a whole ecosystem of OEMs, a "good enough" operating system and a myriad of Windows only apps, etc. Beware, there be dragons. :-D

Apple knows how to get the attention, now I think (but what do I know…) they need more retail/online exposure, a wider distribution, especially outside of the US. They won't build an Apple retail store every two miles, so, more partnerships like this one (with a big online retailer) should help.

http://62.210.139.140/vals/FR/news.asp?id=181947 (financial site)
http://www.rueducommerce.fr/home/index.htm (spot the Apple)
http://www.mac4ever.com/news/23197/le_mac_fait_de_la_pub/ (Rue du commerce is advertising the Mac, I want to see more of this)

If I can buy a Mac at Rue du commerce, it means Apple is a well accepted computer brand, a brand anyone should at least consider when planning a buy, not some sort of californian niche player selling "non compatible" products to a cultish following devoid of any common sense. What I want to read all over the Internet is: "Anyone can buy a Mac, do you know they can run Windows if/when needed?" Still no magic bullet, but we're getting a little closer…

[ocracokewaves]

Sure Apple is going to capture the consumer, just when will it happen? They just introduced a pretty full suite of consumer products with the exception of the iBook and their results are nothing to be proud of in a market which is growing at 13%. Apple's a worldwide company so worldwide market share matters.

Everyone said that moving to Intel would fix Apple's availability problems. As far as I'm concerned Apple's results are more an indication of lack of demand than anything. I don't think Apple is having any trouble delivering products, I think the trouble is in getting orders.

Apple's products are priced at a point that only a small part of the market, myself included, are willing to pay for Apple's fit, finish and quality OS.

That small group of people will probably never take Apple beyond 5% market share. As some have said the OS war is over and Apple has lost it once again.

Hoping that Vista will tick off enough people to make a difference is just chasing another pot of gold at the end of the rainbow. The one thing we know about MS is that given enough time they will get key products "good enough" for most people.

Two years ago Apple had a real chance to go after market share. MS was on the ropes over security, but Apple was afraid to bet on its own product.

MS has done some interesting things with security in Vista so I'm not sure Apple's going to benefit as much from Vista as we might hope or think.

Apple has always been good at pulling rabbits out of hats, so I'm not writing Apple off, I just believe that Apple will need all those rabbits just to get to 5% market share. At that level it is still debatable as to whether or not Apple will survive as a hardware manufacturer. Perhaps they'll try something like Cringley is suggesting in his post, "Native Speaker."

http://www.pbs.org/cringely/pulpit/pulpit20060420.html

"I also believe that Apple will offer in OS X 10.5 the ability to run native Windows XP applications with no copy of XP installed on the machine at all. This will be accomplished not by using compatibility middleware like Wine, but rather by Apple implementing the Windows API directly in OS X 10.5."

I still believe releasing OS X into the wild and letting it run on others PCs is Apple's best option, but only time will settle this argument. I already have a beer bet on whether or not Apple will have more than 5% market share world wide two years from now. It's not much of a bet but then again getting to 5% market share isn't exactly a huge victory.

[Small Paul]

Sorry, I'm a few months late to the discussion. But I don't quite understand this:

> "the next "surprise" after Bootcamp may well be Apple releasing OS X for other companies' hardware. It may soon be the only way that Apple can survive as a hardware maker."

How would releasing OS X for non-Mac hardware help Apple survive as a hardware maker?