Editor's Outlook: Apple: Then and Now

Two years ago, I wrote in my first Editor’s Outlook about the resurgence of Apple, due in no small measure to the overwhelming popularity of its iPod personal music and video players, the first of which has recently celebrated its fifth birthday. In that column, I wondered how Apple’s growing market share in the PC realm would impact the software landscape for Mac users, particularly in terms of programs for investment analysis and tracking.

Fast forward two years to Apple’s recently reported results for the fourth quarter ending October 31, 2008—overall sales increased 27% as the company sold 6.9 million iPhones, 2.6 million Macs, and 11.1 million iPods. Despite Apple’s continued strong growth, it has yet to crack 10% market share in the U.S, according to Gartner Inc. Furthermore, few, if any, financial software makers are jumping on the Apple bandwagon, and for very good reason: They can choose to cater to less than 10% of the U.S. PC market or go after 85% to 90% of the market by writing a Windows-based application. As a result, the historical dearth in investment analysis and tracking programs continues. It is for this reason that I continue to recommend Windows-based PCs for those looking to use the best computer-assisted investment tools on the market today [see the “Annual PC Buyer’s Guide” in this issue].

Unfortunately for avid Mac users, it is Apple’s own business strategy that leaves you wanting for software or having to purchase additional software—such as Boot Camp or Parallels—that allows you to run Windows XP or Vista on an Intel-based Macintosh computer. Over the last several years, the biggest growth in the overall PC market has been in the so-called budget notebook systems, which usually cost less than $1,000. Meanwhile, only the most sophisticated investment titles require more computing power than these “low-end” systems offer.

Apple has chosen a contrarian approach, focusing on high-margin products and avoiding the low-end of the price scale. Currently, Apple’s “low-end” next-generation MacBook sells for $1,299, while the average Windows-based laptop on the market today with very similar processing power costs around $900, or about 30% less. If the current economic downturn has any legs, consumers looking for a new PC may begin to question the rationale for paying the “Apple premium,” which could reverse the market gains Apple has been making.

Meanwhile, potentially “hurting” Mac users even more is Apple’s apparent disregard of the new netbook trend. Already, these mini-laptops, which often sell for less than $500, are accounting for roughly 5% of all U.S. mobile sales. But if Apple CEO Steve Jobs’ comments provide any indication, there won’t be a Mac netbook anytime soon: “We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that.”

To their credit, Apple has been very adept the last several years at anticipating consumer trends. I look forward to looking back on these words in two years to see if Apple has succeeded once again.