April 13, 2005
Not-so-big Apple
Lots of media gush today about Apple Computer. Swoon over those second-quarter financials—net profit up sixfold over the same quarter of last year, at $290 million, revenue up 70% at $3.2 billion. Gasp at those iPod sales—up 558%, with an 85% market share! Sigh longingly at the awesome power and beauty of Apple’s new Tiger operating system. Is this company unstoppable?
Er, probably not. What most commentators conveniently forget is how far Apple had fallen before the iPod—not all those shiny new Macs, but we’ll come to that in a minute—rode to the rescue. Between 2000 and 2004 the company’s revenue barely increased, edging up from $8.0 to $8.3 billion. (In the interim, in 2001, it fell as low as $5.4 billion.) And net income tumbled—from $786 million in 2000 to $276 million in 2004. Sure, Apple will do way better in 2005, but this is a company that is only now climbing back to where it once was.
The outlook for Apple’s core products is also mixed. The iPod is awash in competition, with new players unveiled daily. None yet beat the iPod on looks, but many run rings round it on value—and the designs are definitely getting cooler. Moreover, the iPod is far from perfect. The closed ecosystem that forces iPodders to use iTunes is a pain, which is why Napster is winning customers. iPods are slow to boot and painfully slow to recharge. The batteries aren’t user-replaceable. The “stainless” finish takes more fingerprints than the FBI. And some of the controls are waaaay less than intuitive (quick: how do you turn an iPod off?). Right now, the iPod chips in $1 billion to Apple’s quarterly sales. That number could soon peak.
Then there’s the Mac, complete with a new Tiger in its tank. There’s no doubt that the latest generation of Macs are terrific machines. But they still account for a woefully small 2% of personal computers sold—thanks again to that closed Apple ecosystem. Apple has tried pretty much everything over the years to supercharge market share, but to little avail. As some analysts point out, even a modest increase in share would boost the company’s bottom line—and many expect some progress on that front. But with Microsoft’s Longhorn closing in and Linux circling the desktop, any gains may be short-lived.
Posted by Stephen at 8:23 PM in Business | Permalink | TrackBack (0)
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