Apple and the fruits of hardware superiority

Half of Mac sales in Apple Stores were to non-Mac users.

It's easy for people to think of Apple as 'that company that sells iPods, iPhones and iPads'. Indeed, those items have made an indelible impression.

Apple has sold millions of them - in fact, Apple sold a million iPads in just 28 days. That's impressive - it took the company over a year-and-a-half to sell its first million iPods, and over two months (74 days) to sell its first million iPhones.

Although a far greater proportion of people out there have Apple-branded devices than have Apple-branded computers, one can't go about discounting Apple's venerable line of Macs.

In Apple's last financial figures, it was revealed that fully half of Mac sales in Apple Stores were to non Mac owners. So, welcome to all you switchers!

'Apple Stores', of course, are Apple's brick-and-mortar shops, of which we have none in New Zealand.

Macs here are sold here by authorised 'Resellers'. Australia has several actual Apple Stores; not many countries with populations as low as New Zealand's have actual Apple Stores, but since New Zealand is treated as a de facto state of Australia as far as Apple is concerned, it cannot be discounted that we (and by 'we', I guess I mean Auckland) may get an actual Apple Store. One day.

If the rise of Macs doesn't make dyed-in-the-wool PC/Windows fans quake, share prices tell another, also disquieting, story.

Apple's stock has been up over US$3, pushing it past the US$230-a-share mark. Microsoft's, meanwhile, went down US$0.25, pushing it below the US$30-a-share mark.

That's a huge discrepancy, but of course there are many, many more outstanding shares of Microsoft stock out (ten times more, in fact, reckons Tech Crunch. That's why Microsoft's market cap is higher than Apple's, despite the individual stock price difference.

But Apple looks poised to get within $50 billion of Microsoft's market cap very soon. Currently, Apple's market cap is $208.76 billion; Microsoft's is $261.01 billion. US$50 billion may seem like a huge chasm to me and you, but since December 31, 2009 Apple added about US$20 billion to its market cap, while Microsoft lost about US$10 billion over the same period. The gap is closing quickly.

However, that hoary old desktop computer war may already be over. Not that Windows 7 and OS X need to stop duking it out, and not because Dell or HP or Asus or whatever may make more powerful, cheaper and maybe even better computers than Apple (or vice versa). No - because the desktop computer era may be passing.

But Apple is right there, still - whatever it's doing with Macs. Apple now refers to itself as "a mobile devices company". Laptops, by the way, are included in that category. Using Apple's 'mobile devices' grouping, most of Apple's money comes from mobile devices and the infrastructure around them already.

(Here's a heretical thought: why shouldn't Apple enable MacBook Apps in the iTunes Store too? The developer environment Apple built, on Macs, around the world and on the iPod touch/iPhone/iPad can do with a lot more satiating.)

And when I talk of the 'infrastructure' around Apple's mobile devices, let's look at iTunes music sales. Music sales in the US fell by more than a billion American dollars last year (and by US$17 billion in the rest of the world), but Apple's iTunes is doing better than ever. It now represents the biggest single market for US music sales, notching up over a quarter of US music sales.

But competitor Microsoft is a long way from being a mobile devices company. The only device Microsoft makes itself is the Zune, despite its very able hardware division.

Windows Mobile ... need we go there? Although there's probably still life in the project, it's a bit hard to imagine it will glean any great success in the future.

But it looks like Apple saw all this coming a long time ago and has assiduously positioned itself accordingly - and not just with hardware, or just with devices, but all together and in a unified way with music sales, App Store, even movie and TV program sales, not to mention the Vox Popular of podcasts, the academic iTunes U arm of this and, lately, even digital book and magazine publishing.

US blogger Charlie Stross reckons Apple's CEO Steve Jobs is betting Apple's future on an all-or-nothing push into this new market. Meanwhile, the computer industry is staggering.

What's interesting is that it's the traditional - and as many commenters here point out all the time, extremely successful and ubiquitous - PC industry that's taking the biggest hits.

For like I said, Apple's Mac computer sales are still going up. People might be ditching PCs, but more than ever are turning to Macs. It may be part of the swan song of the desktop computer we're witnessing, but Apple's going down very profitably on the wings of it. And it's plain to see Apple's mobile devices have added to Mac popularity.

Stross says Apple is trying to force the growth of "a new ecosystem", which would need to mature in five years flat. (The Macintosh computer is already 26 years old.) Stross thinks Apple expects the cloud computing revolution to completely kill the existing PC industry and turn PC manufacturers into suppliers of commodity equipment assembled on shoestring budgets with negligible profit.

Although operators like Dell look like they're already doing that.

Stross' prediction indicates a long-term goal in which Apple stops being a hardware company with a software arm. Apple would morph into a cloud computing company with a hardware subsidiary. Stross: "This is why Apple [has] turned into paranoid security Nazis, why HP [has] just ditched Microsoft from a forthcoming major platform and splurged a billion-plus on buying up a *near-failure; it's why everyone is terrified of Google. The PC revolution is almost coming to an end, and everyone's trying to work out a strategy for surviving the aftermath."

(*HP just bought Palm.)

So, it looks like Apple has a strategy. If there's any fillip for Microsoft in all this, cloud computing was one of its cleverest development participations. Microsoft's networking has supplanted Apple networking on all Macs - that's why they fit into your PC networks so easily, in case you were wondering.

There's hope for Microsoft yet - and it certainly has power in employees, experience and capitol.

But there's a lot more hope for Apple.

- Mark Webster www.mac-nz.com