BusinessWeek looks at Apple's niche future

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Writing for BusinessWeek , Peter Burrows suggests that Apple's niche in the computer business is safe and sound. Growth opportunities may be difficult to find, however, according to Burrows' commentary, entitled How to milk an Apple.

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Apple has reported losses for the past two quarters and its marketshare is at 3.5 percent, down from 4.2 percent in 1998 and 13.4 percent a decade ago, according to Burrows. Regardless, that 3.5 percent marketshare should sustain Apple given that the total PC industry is about $160 billion. Presuming Apple can keep its margins high enough, that is.

The key to keeping up that pace? Burrows says it's innovation -- the big difference that separate Apple from its Wintel competitors. Despite a drop in revenue Apple has actually picked up the pace of R&D spending by $66 million from 2000 to 2002.

Apple introduced iLife at Macworld Conference & Expo earlier this month. It's a suite that comprises iTunes, iPhoto, iMovie and iDVD in one retail package, priced at US$49. To get the full effect you'll need a SuperDrive-equipped Mac, and because of the new iDVD 3 that's available only through the iLife package, it's presumed that many current Mac users will buy the software. Burrows seems to think that iLife will eventually end up on Windows, too -- an interesting hypothesis, considering none of the individual iLife apps have been seen on the Windows platform.

Apple has been taking body blows from Dell and other competitors in the education market over the past couple of years, despite high profile wins with sales of iBooks by the thousands in Virginia, Maine, and most recently, Quebec. Apple has long seen the education market as a way to gain a foothold with consumer sales, as kids get older and buy their own systems or as they pressure parents to buy systems similar to what they use at school But Burrows suggests that Apple has compensated by refocusing its efforts on selling to consumers directly. He cites Apple's Switch ad campaign as an example.

Burrows sees 2003 as a transition year for Apple, now that QuickBooks Pro is native for Mac OS X and QuarkXPress seems at last bound for OS X as well. Apple's calling 2003 "The Year of The Laptop," and that's reflected by brisk sales reported by retailers.

Apple continues to pour money into its retail efforts -- the company now has Apple Store locations from coast to coast, close to the most densely populated areas in the country. Apple CEO Steve Jobs hasn't convinced Wall Street that faith in the retail stores is well placed, however.

"But those critics miss the point. Jobs needs to keep dreaming big when it comes to innovation. That's how Apple can turn 3.5 percent of the market into a winning formula," said Burrows.

This story, "BusinessWeek looks at Apple's niche future" was originally published by PCWorld.

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