Apple to Great Recession: 'What, me worry?'

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In case you hadn’t noticed, Apple and Microsoft are locked in a TV ad food fight. Microsoft’s been going on and on about the “Apple Tax,” and Apple just this week fired back with a new round of ads slamming PCs in general and Microsoft in particular.

But ads don’t make success. Sales do. And even in the current recession, Apple’s recent second quarter results showed a rampant disregard for reality. They were good, very good—the results, that is, not reality. And that wasn’t supposed to happen; This recession was supposed to be another “final nail”—the one we’ve been waiting for for over a decade—in Apple’s coffin. Surely with consumers cutting back, we’d see again the rise of Microsoft, as foretold by its “here’s some money, buy a computer” TV ads.

Even though this quarter has historically not been a strong one for any computer manufacturer—the holiday and corporate purchasing seasons are usually prime time—Apple showed year-over-year growth in revenues, iPod sales and iPhone sales. Mac unit sales took a slight hit year-over-year, but were still the second-highest ever. And despite decent under-the-hood boosts to the line-up over the last year, there’s been nothing to really break ground since the MacBook Air debuted in January 2008, though the recent Mac Pros are a promising tech platform.

But hasn’t Apple heard there’s a Great Recession going on, and people are socking away their spare nickels under mattresses across the country? Pundits and analysts were dusting off the old “beleaguered” appellation last seen in the early years of current CEO Steve Jobs’ second coming to Cupertino.

Tight budgets, uneasy credit and layoffs, everywhere layoffs, were supposed to mean that “boutique” PC makers would be hit first and hardest. And that assumption was based on the “common knowledge” that Macs cost oh-so-much more than honest, hot-dog-without-yellow-mustard PCs. It’s been disproved six ways to Sunday, yet you keep hearing analysts talk this up as they fight traffic in their BMWs. (BMW seems to be holding it’s own, too, by the way.)

So, sorry CNet, Marketwatch and Rob Enderle. You are apparently going to have Apple to kick around some more. Enderle seems to be the Wrong-Way Corrigan of analysts. I think his most recent miss was the ex cathedra statement that iPod and iTunes will decline unless they act like Ruckus. And Ruckus is what now? Well, that’s part of my point. (Feel free to track Enderle and other sages at Wrong Tomorrow.)

Compare and contrast Apple’s financials to the latest earnings reports coming from Microsoft.

Officially ruled a monopoly not so many years ago, the company has consciously made itself into a commodity, complete with levels of pricing ranging from bulk to unbelievable, while making money for each corporate-partner PC maker. The management in Redmond saw revenue and income drop year-over-year in the latest quarter reported—6 percent and 3 percent, respectively. Over the same period, Apple saw almost a 9 percent rise in revenues.

Even the division in charge of Windows saw a slowdown—though one “bright spot” is Microsoft’s annuity business. That’s good news for them, but not for consumers: I’m referring to the part of the company that generates money from subscription fees.

In total, this has led to measures such as the layoff of approximately 4,400 Microsoft employees since January. Weirdly, Microsoft’s stock rose on the poor earnings news last month, from $19 to $21, showing perhaps how little faith the market has in the company, though the stock is back to hovering around $20 a share.

Maybe this sense of belt-tightening has really hit home with the Microsoft managers, though we haven’t seen any company jets on eBay or silly things like, you know, changes in product pricing or policies. But we are getting the well-noted, and well-mocked, series of TV ads in which “real people” are followed while shopping for a laptop. Each conspicuously poked into an Apple store, only to declaim how spend-thrifty it is.

Let’s put aside that these are not fair comparos (what TV ad is?), and that the myth of the Apple “tax” is a by-product—not of head-to-head product price gaps, but of the fact that Apple doesn’t compete in the low-end market. BMW, to which Apple has in the past been compared, doesn’t compete in the sub-$15,000 market. So what’s the larger message?

To me, it seems that Microsoft still isn’t in the game of producing the best damn product out there. I do know engineers and designers within Microsoft who are brilliant and dedicated. But the corporate result has always been, and sorry to say seems still to be, “just good enough.” And marketing is somehow supposed to make up the difference.

How’s that working out for them?

So Apple didn’t die, not yet. It’s pushing ahead with Mac OS X 10.6 Snow Leopard as Microsoft chugs away with the next version of Windows Vista, better known as Windows 7. Apple’s iPod is still strong and to most, aside from the do-it-yourself crowd who can cobble together an Ogg Vorbis player from two hairpins and a Tic Tac box, a good value proposition; it gives you a clean, easy experience from ripping your own CDs to buying digital music to playing those tunes and videos. Take that, Zune.

The iPhone—there’s still nothing quite like it (Android included) and iPhone 3.0 is on the horizon. And as for Macs? Like iPods, they’re a value proposition for those who want not to futz but to get the hell up and running.

And that’s not a luxury, folks. That’s good design. And good design sells, even in a recession.

[Dan Turner has been writing about science and technology for over a decade at publications such as Salon, eWeek, MacWeek and The New York Times.]

This story, "Apple to Great Recession: 'What, me worry?'" was originally published by Computerworld.

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