Apple's not so subtle shift over the years

There were a couple of common themes tying together my first Apple II computer and my early years at Apple.  One was the belief that computers were an empowering tool.  The second was that part of Apple's role was to take computing power and put it in hand of everyone.

Whether those themes were ever part of Apple's strategy and hopes is an open question that might never be answered.  I know that in the late eighties there was a debate at Apple on whether or not to lower the margins on the Mac II color computers.  At the time their expandability and color capability were head and shoulders about the competition.  Apple chose to keep margins and prices high.

The market share wars were over soon after that decision.

Eventually Apple had to respond with the Mac LC and LC II or as we called them internally, low cost color computers. They were very successful.

Even when Steve Jobs came back to Apple, the original iMac was an attempt to redefine the game and bring low cost, simple computing to consumers.  Things like USB, built-in networking, an integrated monitor, and no floppy drive were seen as ways to drive down cost and bring more computing power to people who knew little about high speed networking.

I have always believed that the core genius of Apple was to take sophisticated, expensive technology, and figure out how to make it easy to use, reliable, and not so expensive.

In the late nineties I can remember attending some management meetings in Cupertino. There were huge concerns that Apple was coming up with all these great technologies and not making any real money off of them.  The stock price was a major concern. 

A year or two after the turn of the century the thought began to circulate that Apple had its whole model wrong.  The idea became popular that trying to make money off a limited number of expensive computers was never going to work.  We started to hear the thought that the real way to make money was by selling countless less expensive devices.  I might be tempted to say the rest is history, but history keeps rolling along, and the strategy that worked a year or two ago might not be the one for the next five years.

Sometime between the late nineties and just after the turn of the century, Apple lost interest in delivering what its core customers wanted.  When I say core customers, I mean those customers who hung with Apple during the very lean times like the days when Wired Magazine had an Apple logo on the cover with the word, "Pray."

Apple really used to care about those customers.  As hard as it is to believe, at one time Apple had customer advisory boards.  My guess is that the only surviving ones might be in education.  Perhaps someone will chime in and tell us if they are just window dressing or actually effective forums for getting feedback to Apple.

It was probably in 2003 when I heard a senior Apple executive make the statement, "Customers do not know what they want, it is our job to tell them."

It is no secret that mostly Apple prices have trended upwards since the switch to Intel processors.  I have no doubt that Apple has picked up many new customers, but the question remains, are those customers as committed to Apple as the ones that Apple has been ignoring for several years.  Will they stick with Apple during a rough spot in its computing business?

I have seen nothing within the last few years to indicate that Apple is trying to drive down the price of computing for users. That is clearly something than many computer users would hope to see. I have seen Apple become a huge money machine.

Perhaps Apple has simplified smart phone technology, but I doubt that Apple has been a factor in driving down the cost.

The protests from Steve Jobs that Apple cannot make a good Mac at a lower cost ring pretty hollow to me.  I just do not believe it any longer.  Having said that I am still willing to pay the difference because I am more productive on a Mac, and I value my time.

Watching the change from a company obsessed with bringing technology to the people to one obsessed with high margins and stock prices is interesting.  I am no longer an Apple investor, but I wonder where Apple is headed?  Will Steve Jobs return the company to its roots with a reasonably priced netbook or are computers with the exception of the iPhone on a downward slope at Apple?

As always time and Steve Jobs will let us know.

Speaking of time, Beach Days are on the horizon here on the Southern Outer Banks of NC.

Comments

[Peter]

"It was probably in 2003 when I heard a senior Apple executive make the statement, 'Customers do not know what they want, it is our job to tell them.'"

There is some truth to this statement. As I've said, nobody in 1984 said, "Y'know, I wish my computer had a bit-mapped display, a mouse, menus, windows, and was a more graphical environment." They said, "I want my computer to be easier to use."

There's also the case that nobody, in 2001, said, "I want to be able to put my music collection in my pocket." Now? We can't imagine not being able to.

In that infamous Businessweek article back in 1996 or so--the one were Michael Dell said he'd shut down Apple and give the money back to the shareholders--Steve Jobs said, "I'd milk the Macintosh for all it was worth and get busy on the next big thing." I always thought this was interesting because, in some ways, this was Apple's strategy as well. Enormous margins (not merely 'high' like they currently are) while trying to come up with the next big thing.

Of course, Steve is much better at coming up with the next big thing than Sculley, etc. were.

[Jim]

Customers don't know what they want. They ask their geek friends who look for and some how end up creating trends. It doesn't mean those trends will yield something user-friendly for the technophobe.

Apple didn't invent the MP3 player, they perfected it. Ditto for the smartphone. And going back, yes the personal computer too.

[Ashgrove]

Although I do agree with the article about the general direction Apple thing to be taking (less and less consumer friendly, more and more corporative), I find there is a flaw in the reasoning, IMHO. To be brief: If you go to EveryMac.com and compare current Apple pricing with the prices in the olden days, you'll see that the tendency is actually toward LOWER prices. For instance, ten years ago, the iBook (the consumer oriented laptop of the era) cost a whopping $1599, and the cheapest pro laptop, the 333Mhz Lombard, $2499. Right now, the white Macbook costs $999; the lowest-tier MBP, $1799. And that's without factoring inflation in, and the changes in the cost of life... Bottom line, it's not that clean cut an issue.

[ocracokewaves]

While Apple prices have drifted slightly lower in some cases, the rest of the industry has lowered prices massively.

The Mac Mini costs more now than when it was first introduced. Apple for years had price bands that they adhered to. One was $1,595 for a low end tower. By 2004 that risen to $1,795. By last year that was up to $2,795 before falling back this year to $2,495.

As to laptops, I walked into Best Buy the other day. They had 27 laptops on display, 26 of them were priced under $1,000. Many of them were in the $600 range. The one over a $1,000 was a new MacBook priced at $1,299.

You can likely get a better configured Sony with a Blueray player and a 15" screen for under $1000.

It is pretty cut and dried as far as I am concerned. Relative to other brands Apple has either raised its prices or certainly not lowered them as much. The white MacBook doesn't even count. I have one and the design is nearly three years old. It should be out of production. Apple reduced its price $100 and actually raised the price of its replacement by $200.

Remember Apple is the company that should have the advantage, they are selling their operating system to themselves not buying it from monopolistic Microsoft.

Many of the components are the same. Apple is in no danger of going out of business. They're just making as much off of each system as people are willing to pay.

Unfortunately according to the latest numbers, fewer people are willing to pay the Apple tariff for computers, and Microsoft is pointing that out in an ad campaign which effectively targets Apple's soft spot.

[Neil Anderson]

As Apple sells more iPhones and is assured a guaranteed steady quarterly I think we'll see lower Mac prices. Apple prices are fair for the quality of the hardware and software. After all, it doesn't take long to make up the price difference if one values one's time.

At work last week I tried for over half an hour to print a document. When even the tech guy couldn't get it to print I e-mailed it to my home and printed it out that evening from my Mac.

[Dan the Barbarian]

Two things.

First, the idea that Apple's job is to lower computer prices is a faulty assumption. Apple's job is to make as much money for the company and its stockholders as it can. This goal must constantly be balanced with market forces, i.e. what people are willing to pay for what they want. It is this balancing act and not any one company (unless they're a monopoly) that determines what things cost in a free market.

Secondly, the argument that Apple computers are overpriced is spurious at best. Sure you can buy cheaper computers, but that's comparing apples and oranges (as it were). If you buy one of those cheap laptops and upgrade it to the specs of an iBook, you're going to incur a similar cost. Likewise, the $1500 iBook I bought 5 years ago had a G5 processor and a 17" screen. If I spend that same money now I get a 24" screen and 10x the computer in every component. So, while it's technically accurate to say that prices are not coming down, it's disingenuous since you're now getting a whole lot more for the same money.

[ocracokewaves]

Actually Dan, I completely disagree with you. The only way that any company has been successful in the computer business is to lower prices and deliver more computing power. Giving more for the same price works for a while but not forever. In your second paragraph you basically argue that same point.

I cannot ever remember an iBook being 17".

Perhaps you are talking about iMacs, but I still don't think your argument flies.

http://en.wikipedia.org/wiki/PowerBook

There were Aluminum Powerbooks at 17" but if you bought one at $1,500 it wasn't anywhere near retail. My 15" Aluminum PB at employee prices in August 2004 cost over $1,600 and retailed for well over $1999.

According to release information retail price on a 17" PowerBook at release time in 2004 was $2,799

http://www.apple.com/pr/library/2004/apr/19pb.html

Guess what the price of a 17" PowerBook is today on the Apple Store?

$2,799 Strange coincidence. Does it have more memory and hard drive space. Of course it does. Even Apple customers have a few demands.

But the whole point of my article is that Apple has its greatest success when it drives down the cost of technology like it did when the decision was made to include wireless or CD drives.

HPs 17" Laptop in 2004/05 retailed at $2,549 and weighed 9.5 lbs.

I just built online a new HP 17" laptop with the same specs as the base level MacBook Pro 17" with the exception that the HP comes standard with a much better ATI Mobility Radeon HD 4650 graphics card with 1 GB of dedicated graphics memory.

The MacBook Pro has a better screen. The HP weights 7.74 lbs. The MacBook Pro weighs 6.6 lbs.

Apple even brags, "remains the same price as the previous-generation model.." Certainly the Apple has some other enhancements including battery and construction but are they worth paying the additional $1,261 for a Mac?

The HP costs only $1,538 or 45% less than the 17" MacBook Pro.

I have been using a HP laptop for almost two years, so don't tell me that it is junk because it isn't. Vista that's another story.

[lnm]

Right on. I'm a long time Mac user (first one was an LC II actually), and I feel abandoned by Apple. Maybe most people don't know what they want. I, and many long time Mac users, do. I want a reasonably priced expandable desktop (under $1k). I want a netbook.

People have been asking for both for some time (although the former for much longer than the latter), but Apple will have nothing to do with either (perhaps because the margins would be too low for their fine tastes). So I now I have a desktop and netbook that run Linux. The polish of the software isn't as good as Apple's, but it's better than many think and it's rapidly improving. At any rate, the lack of polish of the software is far outweighed by the advantage of having hardware that fits my needs.

At least on the software front, there's hope that open source software will become the force for bringing technology to the people. KDE 4.2 is really innovative and a pleasure to use. It reminds me a lot of OS X 10.1 actually. You can see that great things are in store for it, but it's not there yet. Even if I'm wrong in my predictions, worst comes to worst, open source developers are the equals of Apple and Microsoft when it comes to copying ideas.

[LK]

My original 128k Mac sits proudly on a shelf in my home. It cost me about $3k (with an external floppy and printer).

The Quad-Core I'm using now cost me about $3k.

My Powerbook 180c, cost me about $4k if I remember correctly.

The MacBook Pro I have on order is about $2k.

I won't bother to detail all the other Macs in between.

Quite a spread there in capability, $/byte, however you'd like to compare.

Yeah, that damn Apple does nothing to lower the cost of computing for its customers.

[ocracokewaves]

I am glad you enjoy buying things at $2K, $3K, and $4K.

You can probably tell a similar story about cell phones. My first one cost a few thousand. The last one was free.

The point of my article was not to say that Apple has not delivered more for the money, they would be out of business if they hadn't.

However, Apple has raised prices or held onto to price bands when other companies have driven prices much lower with essentially the same components.

I have continued to say that Apple is a great value. However I believe they have kept their hardware prices higher than might be good for their business.

A lot of us cannot afford to drop $5K for a laptop and a desktop. I am glad you can, but you are in the minority.

And in case you haven't noticed Apple's unit sales dropped for the first time since 2003.

I wonder why? Perhaps Apple needs to be a little more price competitive.

[Stephen Lang]

While I question some of Apple's product/pricing decisions lately, I think there is a false dichotomy being created regarding Apple's "mission" vs. profitability.

As a corporation, Apple seeks to maximize total profits, not price per computer, or profit margin per computer. If Apple completely overshoots on pricing, their profitability will suffer in the long run as customers increasingly buy from other companies.

So I think the issue is not whether Apple should try to improve the computing experience vs. improving margins, but whether their current strategies are right for the long-term.

I think a iPhone/Touch OS based product will be Apple's answer to the netbook (whether it has a keyboard or not.) I think it's great the technology has improved to the point that we can buy essentially full notebook computers for $300-$400, but those desktop OS's and hardware come with some baggage. If people really just want netbooks for web browsing, email, etc. then a iPhone/Touch OS based product might be the best fit.

Otherwise, I would still far rather buy an older MacBook or even 12" PowerBook secondhand, than a current netbook. Hopefully we'll have more choices soon.