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Where lies Apple’s future?

Consumers, yes; business, maybe; schools, no. Apple is the John Travolta of the computer world. Depending on which analyst/tech prophet you listen to, the Mac maker is either on its way out or making another comeback. And so it’s gone for almost 20 years. To this columnist and long-time Mac watcher, Apple’s future looks rosy in one area (the consumer market), sorta promising in a second (business/enterprise), and gloomy in a third (education). Let’s look at each area in turn.

The consumer market

As the maker of the most stylish consumer desktop around (the flat-panel iMac) and a host of user-friendly “i-applications” (iMovie, iTunes, iDVD, iPhoto, iCal, etc.), Apple could continue to lure home and small office-home office (SOHO) users to the Mac platform.

Apple’s “Switch” advertising campaign (in which ex-Windows users talk about how much better life is after going Mac) and growing number of retail stores (which should number about 50 by year’s end) should have a strong impact on consumer sales. The campaign and stores don’t have to convert a majority of Windows users (an impossibility at any rate) in order to be successful. If Apple could lure even a small percentage of Windows users to the Mac, the effect on its bottom line would be phenomenal.

The company may be making some progress in this area. Market research firm International Data Corp. (IDC) released research numbers in July that indicated a small increase in Apple’s market share in the United States. For the fourth quarter of 2002, Apple was the sixth-rated computer maker with a 3.48 percent market share. This is an increase of 0.4 points over Q4 2001 and a 0.25 point increase year over year. Worldwide, Apple is in ninth place with a 2.4 percent market share. (In comparison, computer maker Dell is in first place in U.S. market share with 26 percent and worldwide with 14.3 percent.)

IDC analyst Roger Kay attributed Apple’s increased market share to “the strength of the iMac introduced in January.” And Apple claims that surveys conducted in its retail stores show that approximately 40 percent of the people visiting Apple’s retail locations are Windows users.

Charles Haddad, who writes the “Byte of the Apple” column for BusinessWeek Online, thinks that Apple’s foray into digital technology could keep the company prospering and growing, and even taking the lead in certain areas. Digital technology keeps opening up new fronts, including handheld computers, camcorders, cameras, MP3 players and TV set-top boxes. None of these areas are dominated by Microsoft, Haddad says.

In the realm of consumer electronics, of which PCs are but one small part, Apple could well play a major role “given the worldwide recognition of its brand” in wiring all these devices through one platform, he says. Haddad thinks the key to this strategy are tools like QuickTime, iMovie, iTunes, iDVD, and iPhoto, which are turning the Mac into a digital warehouse and routing station.

“These programs exemplify what Apple is really selling: ease of use,” he explains. “No computer company is better at hiding the inherent complexity of electronic devices under a fun and easy-to-understand interface. And without such an interface, no consumer electronics device will succeed in the mass market.”

Even if Apple doesn’t attract many switchers, it could still make a tidy profit in the consumer market thanks to the summer introduction of a Windows compatible model of the company’s iPod digital device. Needham & Co. analyst Charles Wolf thinks that, with the iPod for Windows, Apple could capture about 10 percent of the portable music player market.

Business/enterprise

The world of enterprise and business is much more iffy as a potentially lucrative area for Apple. Microsoft and Windows are thoroughly entrenched. However, dissatisfaction with both the Big M and its flagship product seems to be at an all-time high.

There’s much griping about the high cost of Microsoft’s software, especially in two 2002 initiatives. Windows Product Activation requires users to register Office with Microsoft before they can use it. And the Open License 6.0 program rewards companies and organizations that upgrade within Microsoft’s schedule. Both moves have ruffled a lot of feathers among end-users and in the corporate world.

If enough have been ruffled, it could open some business and enterprise doors for Apple’s Mac OS X, which appeals to a lot of folks due to its Unix roots. The latest incarnation of Mac OS X, 10.2 (better known as Jaguar) makes it easier than ever to integrate Macs into a cross-platform environment.

Also, Apple’s Xserve rackmount server offers a nice price/performance package for the business world. Of course, those unhappy with Windows could turn to Linux rather than the Mac operating system, though, again, Apple’s name recognition will certainly help.

Education

If Apple’s future looks semipromising in the consumer and business areas, the market where it faces a very serious challenge is education, an area it dominated for years. Recently Dell has, as one educational representative told me, “eaten Apple’s lunch.”

And it’s taken a big bite indeed. In the first quarter of 2000, Apple and Dell were in a head-to-head battle for dominance in the U.S. education market when Dell had 22.6 percent of the market and Apple 20.2 percent. Since that time, Dell has seen its numbers jump to 34.9 percent while Apple’s has dropped to 12.4 in the fourth quarter of 2001, according to IDC. Those are the lowest numbers ever for a company that, for years, boasted one-third or more of the school market.

“I think [the decline in market share] happened to Apple in education for a similar reason it happened in the general market,” IDC analyst Roger Kay told MacCentral, an online Mac news site (full disclosure: I also write for the site). “Windows became established as the de facto standard; for a lot of reasons that meant that Windows costs were less. Apple’s products are premium priced to begin with, and although they have recently modified that, it’s too little, too late.” It’s not that Apple hasn’t made some serious efforts to continue to attract schools. In 2001 it bought PowerSchool, a completely Web-based student information system that enables districts and schools to record, access, report, and manage their student data and performance records in real-time. Parents, students, teachers, and administrators use the system to share information about grades, attendance records, and homework assignments. The PowerSchool student information system is used by 2,000 schools in the United States.

In April, Apple introduced the eMac for the educational market, then released to the general public in June “due to strong consumer demand.” It’s Apple’s lowest-priced desktop system, starting at $1,099–and less for educational customers. The iBook portable continues to be popular in schools, especially in conjunction with Apple’s AirPort wireless technology. The Xserve rackmount server also offers some advantages to schools.

Mac OS X 10.2 (“Jaguar”) is both a blessing and a curse for educators. It’s a blessing because of its ability to network with Windows-based PCs. But some will find it a curse because of its heavy hardware requirements, and schools tend to have lots of legacy systems, something that probably won’t change anytime soon, considering the current economy.

Why is Apple losing ground? Three reasons. One: The company, which makes its own hardware and software, simply can’t compete with Dell’s cutthroat pricing. Two: The “everyone else is doing it, so we should, too” mentality. Three: Apple has let its educational focus lapse.

When it comes to pricing, Apple will never be able to undercut Dell’s up-front pricing. That can’t be done unless Apple is willing to practically give away systems to schools. As long as schools are looking only at the immediate, short-term picture, Apple won’t regain lost ground. However, if educators start looking at the long-term picture (return on investment, if you will), they may find Apple an attractive option. For some good points on the Macs versus Wintel debate, check out Mac consultant John Droz’s Web site “Should Our Schools–or Anybody Else–Have Macs or PCs?”. Droz says the site offers “overwhelming” evidence that everyone associated with a school system will benefit significantly more from standardizing on Macs.

As for the second challenge, it’s as tough or tougher than Dell’s low prices. Parents and administrators are going PC because that’s what dominates the business world, though not everyone thinks that’s a logical reason.

“There’s a belief out there that students should be learning on computers that they will have to use when they reach the outside world, therefore [they go with] Windows,” Kay said in the MacCentral interview. “I don’t think this is particularly relevant. What I note about these interfaces is that you can spend your whole school life on a Mac and the day you get out of school you could go to work in a Windows shop and you would not be at a big disadvantage.”

Also, Apple’s inroads into the consumer and business markets could eventually impact its standing in the educational system. If those in charge of purchasing equipment see the Mac popping up more and more in homes and businesses, then the “do as they do” mindset will ease a bit. Meanwhile, Apple should manage to hold onto its distant second to Dell in the overall education market. Especially since its ease of use makes it extremely popular in elementary grades where children are first being introduced to computers.

But if Apple is going to make any serious return in the education market, it’s going to have to pump up its efforts. Several educators tell me that Apple’s recent efforts in schools is halfhearted compared to Dell’s meet-and-greet efforts.

Other companies (mainly Dell) send representatives out to the schools; too often, Apple sends flyers and faxes. Personal contact is badly needed, as is more hardware-software training for educators, especially with the changes that Mac OS X has brought about.

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