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Apple's Colossal Disappointment

I heard a rumor last week that Apple would announce they are switching to Intel chips. My first thought is that I hoped that Steve Job's success selling iTunes to the other 95% of the world - Microsoft Windows users - would embolden him to take a strategic step that could shake up the PC business as we know it. I was hoping that he would catch the openness wave sweeping the technology world and apply it to his business. I would love to see Apple's PC market share reverse its downward trend. Few people know it, but I started my tech career as a Macintosh user, ran a consulting company specializing in Macintosh, and even wrote my first commercial application, Network Security Guard, for the Macintosh.

Unfortunately, I was disappointed with Apple's actual announcement on Monday, which revealed not a bold strategy embracing the openness movement but confirmation that Apple is still a company locked in the time warp of the go-it-alone '70s. Apple agreed to switch from processors made by IBM to special processors made from Intel over the next two years - that's it. This is only slightly more significant than Apple choosing to change the hard disk or memory supplier it puts into its computers.

Instead of a brilliant strategic maneuver, it's a step necessitated by IBM's inability to keep pace with Intel. It seems Apple was tired of losing the gigahertz competition to the PC world. Apple had been promising faster computers for some time and had not been able to deliver them. In addition, they were frustrated at IBM's inability to produce a fast low-powered chip for laptops.

Mac users will eventually see the benefit of this move, but will first have to suffer through a period of uncertainty and forced upgrades. Eventually, this switch will enable Apple to offer speedier machines more in line with PC performance. Until then, however, customers will have to make a tough decision - purchase a new computer that is guaranteed to be made obsolete or wait two years for machines to be released and software to be natively working.

My disappointment was captured by an Apple spokesman who commented on what the switch does not mean: "We will not allow running Mac OS X on anything other than an Apple Mac." Future "Mactel" computers will have specially designated Intel chips, not generic x86 compatible chips found in common PCs. My sources say that Jobs is going to use Intel's cryptographic technology called LaGrande to make sure OS X will only boot on Apple-branded hardware. This is a similar technique to the one that Microsoft used to make sure Linux could not be loaded on Xbox - see: MM on Linux on Xbox.

The bottom line is that PC buyers will unfortunately not have the option to install and experience OS X. There will be no low-cost laptops from budget-minded Taiwanese manufacturers. There will be no generic AMD or Via white boxes sold by the millions capable of running OS X. Apple will not be reaching the 95% of the world buying Intel-compatible machines.

I'm sure Jobs remembers a failed experiment in the '90s when Apple embraced a more open strategy. During that time, other companies were permitted to build Mac clones. Those companies targeted the most lucrative customers, siphoning off the high-end users who wanted the fastest machines. Apple depends on those customers to pay top dollar and uses those profits to fund their significant research and development costs. Losing them was a painful experience and Jobs shut down the clone business when he returned to the corner office at One Infinite Loop.

A more open strategy could perform differently this time if Apple put as much ingenuity to its structure as they put into their elegant software and hardware. Imagine a world where Apple encourages clone manufacturers to grow the middle- and low-end markets while keeping high-end products for themselves. Perhaps they limit clone products to a certain speed? Or maybe offer variable pricing so that computer builders would pay a percentage of the computer price for the operating system, meaning Apple would make much more if a top-of-the-line Mac clone was sold. This could significantly grow the Apple market share because price-conscious clone manufactures could attack Microsoft and grow new markets. If these clone makers did poach existing customers, it would be Apple's least profitable ones or they would have to pay handsomely. You may be perplexed why I am inviting Apple to compete with Linspire in the PC-compatible world. I believe another threat to Microsoft would divide its counter-operative forces, and desktop Linux would continue to compete well with Apple on cost and software variety - two critical components for any platform.

Apple would be a meaningful threat to Microsoft and present another target to absorb Microsoft tactics. Instead of putting out bogus IDC reports about how Linux is more costly, and extorting manufacturers and retailers not to work with Linux, Microsoft would have to divide its time between Apple and companies like Linspire. Microsoft couldn't charge more for its operating system just to those that support Linux without doing the same for those that support Apple.


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Secondly, the two biggest factors driving people to consider non-Microsoft solutions are security and cost. While Apple's security is on par with desktop Linux, Macs are more costly than XP machines. Apple's extensive R&D means they can never offer a low cost operating system like Linspire which is able to for $10-15 per computer
to system builders. In addition, after-market software costs more for Mac than for Microsoft Windows, so the cost advantage for desktop Linux is magnified when compared with Apple beyond just the operating system.

Finally, the developer community is always the key to an operating system's adoption, and desktop Linux is enjoying an explosion. There's a substantial library of Linux software such as the 2000+ programs in the CNR (click and run) library, which can be installed with a single mouse click. Apple has superior polish today, but Linux is closing that gap quickly as leaders emerge and natural selection is creating some uniformity. Already Linux has Apple beat on variety and user community. Here's a great chart showing some of the many products available today.

With this news, Apple certainly did gain a faster processor, but it's a shame it missed the greater potential prize - a massive new market for its innovative wares.

-- Michael

record radio; how to record Internet radio


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