Apple, Lose The Hardware, Free The Software

In a just released report entitled Apple Should License the Mac to Dell, the analysts at Gartner got it partially right. They say that Apple cannot get much beyond its current market share of under 5% of PC shipments and maintain its historically fat margins, which are running at 40%. They reason that to further grow share would require becoming price competitive with Windows PCs. At the same time, Intel and other component providers are tiring of giving Apple price concessions that they normally reserve for much higher volume customers such as HP and Dell. A partnership with Dell in which Apple provided the Mac software and Dell manufactured and distributed the computers would, Gartner argues, be the route to a 20% market share.

My advice for Apple is bolder. Quit the computer business. Now that Mac's operating system, OS X, has been ported to the Mac-specific Intel platform, finish the job and free OS X to run on generic Intel compatible PCs. Sell OS X like Microsoft sells Windows, with the initial price hidden for most customers in PCs delivered with it. Make Mac the name of the OS. Make moving (of course, call it upgrading) from Windows to Mac easy. Expand Apple's software business beyond this, focusing on categories where Apple's customer savvy and design prowess can add value and differentiation. Why settle for 20% share?

At Apple's last annual meeting, Steve Jobs, referring to the PC market, said, "One of the nice things about having four or five percent market share is you don't really care if the market is down." Get off it, Steve. Are you just waiting for Zune to be out so you can ratchet down iPod sales to reduce Apple's share of that market to 5%?

Lose the hardware. Free the software. This move would be as bold as Intel's move in the 1980s to quit the memory business and focus on CPUs. Go for it!

Copyright © 2006 Philip Bookman

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