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January 24, 2007

Apple’s Golden Opportunity – Readers Respond

Gee, I haven’t had so much foul-mouthed abuse online since I was the CEO of a public company.  Then it was in the chat groups that follow every public company; now in comments on my very own blog. All I did was say that Apple is likely to miss a very big opportunity by not encouraging the now technically-possible use of Mac OS on commodity PCs.

But, as usual, there have been some very smart comments from readers which further an interesting discussion.

Reader Jim believes he knows why it makes good sense for Apple NOT to seize this opportunity:

“Making OS X available on generic PCs would be a direct frontal assault on Microsoft. Redmond will brook no serious competition on generic PC hardware. Going after Microsoft's bread and butter will result in a lot of direct and indirect action by Microsoft to sabotage OS X, including: crippling or discontinuing Office for Mac; killing all other Microsoft Mac software; and making it extremely difficult for Mac software to interact with programs, file formats and plug-ins that Microsoft controls...”

He’s saying that the market for desktop OS software has been effectively split and that Apple is avoiding stepping over a tacit line. It is true that the future of Microsoft applications on the Mac is always at risk. When I was at Microsoft (after it purchased most of the Mac software assets of my previous company), we put out Mac products somewhat begrudgingly but in response to very real demand from our customers.  Not sure how much that has changed.  Certainly Microsoft operates under an antitrust microscope both in the US and the EU which would tend to discourage anti-competitive behavior. But what about competitive behavior?

If Apple were to take my advice (which it won’t) and challenge Microsoft in the desktop OS market for commodity PCs, it would be a good idea to prepare for total war – I’ll grant Jim that. On the other hand, Microsoft has to be careful that it doesn’t lose the desktop application market because it is too focused on protecting Windows which could lose out to Linux.

Reader John M suggests a strategy for Apple which preserves hardware control:

“…Apple creates a whole new company division to sell the new "Spartan" line of computers. These machines are promoted as elegant Windows machines and will come with pre-loaded XP or Vista. They could be designed with a feature set that other makers do not have. They will look great and range from inexpensive office fare to hot game machines. But of course, they can also be ordered with a companion Mac OS and application suite. Apple knows how to make good computers; why not market a Windows brand?”

Good thought, John.  Since I’m no fan of vertical integration, I’d suggest that maybe Apple split into two companies, one which does hardware and one which does software. No question they have skills in both.  Interesting to see what hardware and software could do if unfettered by the need to support each other in the marketplace.  BTW, I DO understand that the original Mac could not have been done if it were not a unified hardware-software effort; I was there as a pre-release third party software developer. But that was then and this is now.

Reader Peter does some very interesting math to illustrate that OEMs would have to sell nearly 10 million PCs (16% of the PC market) with OEM copies of Mac OS to give Apple the same margin it gets by selling 1.6 million bundled Macs. Moreover, he thinks Microsoft would respond with a price war and Microsoft has more cash than Apple. “Tell me again why this is a good idea for Apple to do?” he asks.

Fair question.  But he is assuming that Apple loses all its hardware sales by making the software available separately. Most of Apple’s market today is relatively price-insensitive and highly quality and cache sensitive; they’d continue to buy both Apple hardware and software. The OEM sales of Mac OS would be largely additive; this is new income to Apple from the same code base.

Reader John Codrey thinks I’m brain dead, to put it politely.  Reader Ben Stanford thinks I should “shut the **** up”. Their mommies should suspend their Mac privileges until they learn that ad hominem arguments are not cool enough for Mac users.

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