Apple, Market Share, and Who Cares?

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Chuck Toporek
Aug. 22, 2001 05:59 AM
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There was an interesting roundtable discussion last week on SiliconValley.com, which posed the question: Does Apple Matter?. Sure, Apple might only have a small fraction of the operating systems' market, but on a grander scale, the concensus seemed to be "Yes, Apple does matter."

Apple has continued to take jabs on the chin, in the side, and the occasional rabbit punch to the back of the head. Granted, sometimes its deserved, but not all the time. A recent discussion on SiliconValley.com posed the question to a group of industry pundits and some Apple luminaries, including Gil Amelio, Jeff Raskin, and Jean-Louis Gassée.

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What I did read mostly made me believe that people are looking at Apple as the "innovator" in the hardware industry. For example, they're the ones who pushed USB and FireWire, they're responsible for dropping floppy drives from boxes, they're creating software that the average Joe can use to edit and create digital movies, edit sound/audio, etc.

There was also a great discussion on market share and whether it really matters how much of a share of the market Apple holds. John Welch of MacTech had this comparison that I thought was beautiful:

"This only applies to one industry, the computer business, and it is an artificially-created rule. Mercedes has been making cars for over a hundred years; when have they ever had the leading market share? Porsche is the same way. Even Honda. Still, when you think of outstanding automotive engineering, those are the companies that first come to mind. So when are they due to go out of business? Mercedes -- not anything soon I think, they just bought Chrysler.

"Also, comparing Microsoft's R&D to Apple's is just silly. Microsoft is first and foremost a software company. Yes, the X-Box is hardware, but face it, it's a PC in a cool box running custom w/Windows for games. This is R&D? Keyboards, mice? All good products, but 99% of their R&D is software, which is inherently high margin, (I've heard reliable estimates that MS gets 80% margins on each copy of Windows.) So now who's charging the premium?

"So you are comparing a Systems and Applications software company to one of the five companies doing real computer R&D (Apple, IBM, Compaq, HP and Sun. Compaq looks like it's going to turn into Dell or Gateway soon, and drop this list to 4.). And Sun is an excellent example. They don't have a majority market share, yet they certainly matter, and they will continue to matter for a long time to come.

"Any company that creates, and markets their creations and services to its customer base well, regardless of industry, pundits, and stock analysts will succeed, thrive, and matter. BMW, Carver Audio, all of the premium, "niche" companies know this.

"Again, I ask, except for computers, what major purchase do you make solely based on market share?"

I was surprised to see the following (snippet) from Gil Amelio's (only) response about whether Apple mattered and about its market share:

"Just as Steve Jobs went to Xerox to discover the GUI, I went to NeXT to find the new territory on which to build our castle. This meant buying NeXT and bringing Steve Jobs back to Apple...generally over the objections of my staff. I had no illusions...I knew it was a bold and dangerous move...and I was right. I may have lost my job for all the wrong reasons but I believe those decions were correct and enabled us to have a forum on Apple this week!

"A final comment on market share...market share is important but it is also important how you define the market you are measuring your company or product against. Mercedes is only a small part of the auto industry but it is a giant in the luxury automobile market. The trick is defining your space correctly."

The discussion goes on, but the general feeling that I got from the discussion was that yes, Apple does matter, regardless of its market share. As a Mac fan, I've always thought of Apple as the Mercedes of the personal computing market, so to me, their market share is less of a concern. With personal computers, you get what you pay for.

Chuck

Chuck Toporek is a Mac technology geek and a senior acquisitions editor with Addison-Wesley, a division of Pearson Education. He is the author of three Mac books and one medical book, and he has written for MacAddict and Macworld magazines.