Is Apple Giving Up the Computer Market to Focus on Consumer Electronics?

Today Leo Laporte speculated that Apple may be giving up on computers to focus on their big sellers, the iPhone, the iPad, and the iPod.

This development is evidenced by several factors:

1. Their computers are low profit compared to their appliance items.

2. Apple took the word "Computer" off their "Apple, Inc." log.

3. Apple is overdue for new laptops, but is in no rush to bring them out.

4. Apple has allowed Windows 7 to catch up with its current OSX.

5. It's easier for Apple to lie down and let Google and Microsoft take over the computer market.

Of course the biggest reason is that computers just don't bring them enough profit. Why should they bother?

Comments

[RL]

Interesting. This is the third mention of Apple dumping the Mac that I've seen in the past two weeks. Must be the tech rumor du jour.

I, too, believe it will happen eventually. I just don't buy-in to the stated rationale.

Re 1) Apple's Mac business is a gigantic share of revenue, and iirc, ~28% of bottom line. See a top-line breakdown graph here:

http://www.9to5mac.com/ipad-sales-cannibalization-494596

The figures are current through Dec. Qtr. of '09.

There's an even more important strategic reason to keep Mac, too. Consumer Electronics companies are a notoriously cut-throat lot. The long time king, Sony, lost its glitter long ago. Producing items that are essentially commodities (despite the advertising and high prices), they have to run a gigantic product line to achieve scale and protect against duds. Just think of the myriad models Sony produces in *just radios* every year.

Apple has but a handful of devices. Yes, they're the "Cadillacs" and they have tremendous market share now. But with that shallow a bench, they're always one injury or one bad trade away from a disaster. The analogy is to changing fads and a big-time product Fail. It happens to every company. It's happened to Apple before (albeit when devices were a much less important segment than now) and it will happen again.

The Mac business--strong, very profitable, and *dependable*--provides a cushion against the inevitable device disaster. It has also supplied the internally generated capital to develop these gadgets, a role doubly important should a product line cease profitability.

[RL]

Re 2) Business School Mumbo-Jumbo. Kentucky Fried Chicken rebranded themselves "KFC" for health fad reasons and to push their non-fried chicken menu. They didn't fool anyone, nor did they stop frying chicken. Plus, almost every company shortens its name as it matures, in a vain attempt to appear fresh and cool.

Re 3) And why would they be launching fancy, top-shelf/top-dollar hardware now? Despite the smoke and mirrors, we are indeed in rough economic times. Why launch a boat at low tide? Such inopportune timing may end up hurting the long, long awaited iPad, though that remains to be seen. Keep your powder dry!

Re 4) Debatable, and this is also tied-in with new hardware releases, covered above.

Re 5) I don't really understand this statement. Microsoft and Google aren't taking over the computer market. They both have more money than they know what to do with, and they spend it on pipedreams: In Google's case, whatever epiphany the latest batch of 'shrooms provided, be it flying to the moon or becoming a cell phone company. In Microsoft's, pretending they're a video game company, failing repeatedly to poach on Google's territory, and failing repeatedly to poach on Apple's. Real hardware companies (as opposed to MSFT), eg, HP and Dell, have both failed repeatedly trying to mimic Apple's gadget success. HP has diversified to compete with IBM and Cisco, while protecting their cash-cow printing business. Dell has had limited success escaping its '90s bubble epoch, cut-throat PC model, suffering as a result.

All that having been said, I think LaPorte, et al., are correct that Apple will cease Mac production eventually. I just think their rationale is "visionary myopic," which seems pretty common with pretend-insiders. (Maybe that's too harsh for LaPorte, I'm really thinking of others.)

Macs will cease production because the iPhone (or its descendents, Apple or otherwise) will provide the same functionality for users that the Mac does now (or at least the overlap will be significant enough to render Mac production superfluous from the company's viewpoint.)

This would affect all hardware makers, of course, not just Apple. The iPad is a first attempt to bridge this gap between computer and "smartphone." This attempt may fail, but bridged the gap will be.

And in so doing, I think the Mac (and PCs) will not so much die as be transformed, as cell phones are now. In essence, the iPhone will become a de facto Mac.

[Jeffrey McMahon]

RL, you make some good points. It's good to have an educated opinion other than Leo Laporte's.