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Could Apple exit the hardware business? Part 1

Monday, 23 October 2006 — by

Of all of the rumours that surround Apple, only one has persisted until now and remained as strong as ever: could or should Apple get out of the hardware business?

an image of Steve Jobs presenting with the Apple logo in the backgroundYeah, we had the Intel rumour, but that’s now fact. What we have here is something much more fundamental than the mechanics, this is about whether there should be any mechanics at all!

In this first installment, I’ll look at what makes Apple money, the hardware they have in place right now and their current crop of multimedia offerings.

So how do we approach this question? Let’s start with a very quick look back at what Apple have done over the past 9 years since Steven P. Jobs came back to Apple.

Apart from pulling Apple from the very brink of the abyssal, Jobs and his remarkable staff created something of an icon of product design in the shape of the original Apple iMac. This one product re-shaped not just the fortunes of Apple, but asked some very serious questions about how close to an appliance a PC can be made to go, both in form and function.

While I don’t have any evidence to back this feeling up, I do believe that the iMac was a strategical stepping stone to something greater. Helping to lay the ground work, the preparatory foundations for a much grander plan for Apple, the Mac and the iMac.

That’s not to diminish the iMac in any way. After all, the iMac is still very much a current product and a vital part of Apple’s consumer strategy. But I think Jobs & Co. had the framework of their strategy in place before they stepped over the threshold of 1 Infinite Loop, Cupertino, California.

The thinking behind the iMac paved the way to allow Apple to commoditize their production methods and gradually move away from custom parts to more off-the-shelf fare to be found in regular PC’s.

Since then, Apple have progressively reduced their prices until the point where pound-for-pound (or dollar-for-dollar) they’re pretty competitive with comparative PC’s.

And the pinnacle of the broader strategy behind the iMac and the Mac in general was the adoption of the Intel hardware architecture [1] [2].

While some might argue – and quite rightly – that Apple may have had their hand forced a little, I think Apple was looking to make the leap eventually, regardless of the failings of Motorola and IBM combined.

Since that time, IBM has made some progress with the Power platform in terms of heat management, but Apple has made their move. However, there’s nothing to stop Apple going back to the Power platform if they wanted to for certain devices. After all, that’s the beauty of OS X, it’s very portable.

So why after all of this hard work at hand-picking the best of the hardware to build such high quality computers – like the iMac, the iBook and the MacBook – would Apple suddenly decide to jack the whole hardware thing in?

What’s in it for Apple? I’m not sure

Quite simply, Apple are after market share. And to get at this market share, Apple must take from Microsoft.

But then, this is to simplify things a little too much. For example, Apple has signaled their intention to move into quite new territory. Since Apple’s runaway success with the iPod, Apple is now looking to move out of the top pocket and into the living-room with the iTV.

So which market share would we be talking about, exactly? It seems to me that Apple is at their strongest and are happiest when they’re stretching themselves within the confines of a nascent market.

What I find odd is what some of the pundits out there who I’ve heard say: “Apple are now moving into Microsoft territory!” How is the living-room Microsoft territory? Microsoft has had a shot at the living-room with their Windows Media Center Edition PC and thus far, it’s had a luke-warm reception:

“In truth, the jury is still out on the XP Media Center Edition; it has hardly taken off, although some analysts seem to be wavering and thinking that maybe it will do much better…”

Why? Because it’s hard to use, it’s not very reliable and it’s a PC, not a little box you can shove under the TV.

Convergence is a wonderful thing, but it’s temperamental at the best of times. One of the key elements of merging one device, or one way of doing things with another, is preserving the original functionality without losing any of the simplicity.

This isn’t easy, by any stretch of the imagination, and it’s not an area Microsoft has shown much of a presence in, either. While the Xbox is good, there are signs of Microsoft trying to shoe-horn more functionality in to compete with arch-enemy Sony, which will sort of defeat the original appeal of the Xbox: it played games and that’s all.

This is where Apple is nimble enough to make headway where Microsoft will struggle because of their size. In a world where Microsoft need to make almost everything they hang their hat on a Windows franchise, Apple can forgo such license encumbrances and act like a true hardware player and produce a truly utilitarian device, free of the machinations of software EULA’s.

Apple has been canny enough to enter into the living-room both through the door and through the ceiling!

By that, what I mean is that the Mac Mini combined with Front Row offer one way of bringing the tele-visual experience that much closer to the computer and the computer that much closer to the television by being small enough to fit under the TV.

Right now, Front Row doesn’t exactly stand shoulder-to-shoulder with the broad functionality of a fully-charged Windows Media Center Edition PC, but in terms of simplicity, the Mac Mini and Front Row stand their ground.

Then there’s the iTV device which functions as either a wired or wireless device which would (presumably) be controlled remotely via a Mac of some kind, or maybe even a Windows PC?

While details are scarce, I’d hazard a guess and say that maybe iTunes or some version of Front Row would be the likely candidate media controller for the iTV. And given that Apple is very much keen on allowing Windows users a seat at this plentiful table of media-rich goodness, it’s not exactly a stretch of the imagination to see this functionality being available for the Windows PC user, too.

So if Apple has got home entertainment in their sights, and clearly hardware is an integral part of that agenda, where else might pressure come from to force or at the very least nudge Apple towards abandoning their hardware? Find out in part 2…

Part 1, 2, 3

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