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| Q3-97 State of the Mac Report: |
Q3-97: State of the Mac Report -- Apple loses much less than analysts expected (even pseudo analysts like myself). I figured that Apple would pile on the debt. because they had just dropped Amelio, but they did not -- that is obviously a positive thing. It may show that things are not as bad at Apple as people thought.
The $56 million that Apple lost is far less than last quarter. There are some decreases in volume, and revenue, over last year at this time, but some increases as well. But Apple didn't have as many clones last year, and they had some problems with supply on their 8600/9600's. So it is not too surprising, nor that big a deal.
I see the quarterly report as quite positive.
It has been pointed out to me of late, that it is easy to criticize others, especially when you take no chances yourself. I have done some forecasting, but will take a few more chances. Here is summing up the past, present, and future of Apple Computers and the Mac.
Apple -- the Upside!
Some say I paint too rosy of a picture by failing to "buy in" to all the stories of Apple's immediate doom. I say to them that we should learn from the past. Apple has been "doomed" since '81 (according to the press and analysts). Apple has had inept management since before then (and some outstanding talent as well) -- that is the way with most companies. Apple has seen tough times before and tough times again. The realities are that $8 billion companies do not just disappear, especially when there are many other large companies that have strong interest in them and depend on their products. Apple still has the strongest customer loyalty, a great installed base, strongest customer satisfaction, and best products in the industry. That means something!
This doom scare was predicted almost two years ago because Apple took a loss on restructuring charges (in reality they had made a profit, but those charges out-weighted it). December 95's $20 million profit became a loss of $68 million, and reporters started jumping on the "Bash-Apple" bandwagon. Silly, but it can't win out over the truth in the long run. Yes "the Press" has hurt consumer confidence, and yes that has hurt Apple. But it WILL grow old. Already the trend is changing -- last year I would see 10 bad articles to 1 good one... now it is more like 3 or 4 to 1... give it time, the tide is changing.
Almost everything (strategic) about Apple is looking better than a few years ago.
- Apple's products are better than ever.
- Apple is struggling a little, but this makes them open to new ideas and listening much more than in the past.
- The advantages of RISC are showing up, and PowerPC's are being noticed. This performance lead for Macs is INCREASING.
- The PC Emulators are getting so good that there is little need for a PC anymore -- seriously. Think about that! For those who don't want a PC, they can emulate it and comply with IS depts., and still have the advantages of a Mac. Home users will be able to have the ease of Mac AND play games written for the PC's. As the Hardware performance increases, this only makes these options MORE viable.
- Clone makers are becoming common and they are expanding choices, and it looks like they will continue to do so. The press bashes Apple for loss of their Marketshare, but the reality is that the clones have picked that up (and then some) and the Mac market is looking better (long term).
- Rhapsody looks like it will be far more powerful than any other OS's out there, and will be a better MacOS platform than the Mac. But Mac OS 8 is out now, and is very nice. 8.1, and 8.x are on schedule to be released soon as well!
- Everything else that was supposed to be scheduled for Copland will be out by next year (but Apple is being smart for once and not preannouncing everything).
So where is the cause for all the doom and gloom? (Other than the press).
The most positive signs are that Apple FINALLY has well defined goals! For years Apple has been this unfocused group of engineering fiefdoms, all headed willy-nilly with their own objectives. Now Apple is focusing on Rhapsody and Mac OS, and defined what they will do, and when. They have actually been meeting schedules! Yes, Apple has lost some good people, but they have also gained new ones, and the ones that are left are at least all rowing in the same direction (for once in Apple's history). These are good things and far more important to me that what is going on quarterly with their stock.
So there are lots of positives in Apple, and lots of reasons to ignore the garbage.
Apple -- the Downside!
Apple is in change. They are changing from an old Apple to a new one, and many are resisting. Most of will stay, and be converted to the NEW Mac way (Rhapsody). Some are going to convert to the dark side (Wintel) out of their own stubbornness, and learn some harsh life lessons about that market -- I expect 3 out of 4 converts to be gone in a year or three. That is how change works. That is how it will work in the future. Sure there are people vocal to the change -- but they can not stop it. Screaming against a hurricane will do no good. Maybe, just maybe, if you are very selective in what you complain about, then you can get some of the force of the gail diverted. Maybe you can seek shelter -- but change is coming either way.
If you are a developer, and you believe in the Mac OS and the old API's exclusively. Then everything Apple is doing now is wrong. THOSE are the people that the Press talks to. But those are also the people that are least likely to produce something new and revolutionary and good -- they are too stuck in their old ways, their old API's and their old thinking! Rhapsody empowers smaller developers to do much more. This will stimulate the market, and enable many vertical markets that could never exist before. Most of these are going to be done on OpenStep, and that empowers the Mac.
We know that Rhapsody will slowly eat the Mac OS. The only question is Apple going to be smart (and do it over 10 years), or be dumb and force that transition in 2 or 3. I think that even Jobs has matured enough to let the former happen -- but he is the biggest risk right now. Will Jobs tolerate the Mac OS and its' competition with Rhapsody, or will he try to crush it (like the young spoilt little boy of the past). Even if he goes for the latter, there will be lots of resistance, and that may make him wise up. I've grown over 10 years, I will assume that Jobs has as well, until he proves otherwise.
Some developers are mad at life and the reality of this coming change. Yelling won't change it. Apple is setting their direction -- I think its good, others don't like change. Apple has millions of users in the Mac OS, and they will continue to support them because there is money in that. But the future is Rhapsody. Rhapsody is a brilliant plan, and many developers who are young and open to change will ride this train for all its worth. You can climb on board, or stand in the tracks yelling for the train to stop. Your choice. The Mac OS will still be there for years to come -- many years. So it is no more dead that Windows 95/98 (with 95% of the Windows market) is dead because of WinNT (with the remaining 5% of Windows market). They WILL co-exist, but eventually Mac OS will die out -- but it took 10 years for the Apple II market to die, with lots of incentives to kill it, it will take even longer for the MacOS (if Apple is smart).
Other negatives? Will Apple be bought out? Who cares? Seriously. Almost anyone that will buy Apple will be doing so FOR THE VALUE of the company. This includes its' products, Marketshare and MINDshare. So if they buy Apple, what are they going to do? Certainly not destroy the Mac! Most likely what would happen is that they would replace the board of directors with some people who had brains. Remember the press is good about spinning things, misreporting things, sensationalizing things, and creating news. I believe that even the reports about Ellisons intents are greatly exaggerated. So the worst that a buy-out company might do, is something "radical" like break up the hardware and Software divisions -- which has trade-offs, but may not be such a bad idea. Even Apple is looking at that without a buy-out. I don't see how any of that could make things worse for Apple (in the presses eyes), and it stands a good chance of shutting the press up, or converting a few more of them to "Apple may have something of value after all".
Motorola, IBM, UMAX, and even some companies like Sun, have a big stake in Apple. If Apple collapses, then it harms these other companies -- and those companies know it. IBM is heavily invested in the PowerPC, as is Motorola. The Mac is the only option in the commercial computer arena. Without that market, it stresses the rest of their chip business (embedded controllers, minicomputers, etc.). So they will not let Apple go down. If they do support Apple, then the press will have to shut up about "Apple's doom". It is not Apple's doom they are forecasting, but a whole industries, and with many allies. In fact, if the reporters were as sharp as bowling balls, they would have realized that already (a few years ago).
For those that wonder why I mentioned Sun, remember this. MS has basically made it "MS against the industry". If Apple collapses, then the whole industry will collapse into a single standard - Windows. Unix, and those platforms, are already collapsing under MS's marketing weight, even with Apple taking most of the load off them.
Apple is going in to Unix with Rhapsody, and is the last chance for any viability for Unix. If Apple falls, then almost all the others with Unix platforms will fall as well. Without Apple, Unix will end up as strictly an academic and freeware toy for engineers. The companies that make their money off Unix will have such a hard sell, than their niches will probably dry up. I think that some people in Sun, SGI and HP are smart enough to realize that. In fact, I think people in other companies realize that as well.,
The future?!
Rhapsody.That's the future. Big time. I can't say that enough.
The computer industry is slow to accept things when (A) they are not compatible or (B) they have no infrastructure. When they have both, they get much faster acceptance. Rhapsody runs MacOS apps, uses MacOS hardware, and has all the infrastructure in place. I don't think acceptance will be as slow as people think.
Some people will start with some vertical solutions because of Rhapsody's RAD tools (Rapid Application Development), and then OpenStep will grow. More and more people will realize that this is the ULTIMATE way to create real solutions TODAY. Once that wave starts going, it will gain lots of momentum. MS will try to respond by preannouncing their own RAD tools and object oriented system (as they are starting to do), but MS has a large debt of animosity, fear and resentment -- and I think they are about to get paid back. This is not to say that MS will suddenly collapse -- it just means that people are learning not to follow MS blindly. Add that to the fact that Rhapsody is far better than anything MS could come up with in 4 years, and people with brains will go to Rhapsody. Sure the marketing and manager types in companies may be duped -- but the engineers will not. If the momentum builds, and people realize that the Mac is not dead, then there will be many that climb on board -- and the Mac will be revitalized. These are good things!
If Apple can start getting people on board, then the momentum will build. I believe that IBM, SUN, SGI and other Unix based vendors will all see the value in OpenStep and having those Apps run on their platforms. They will either pay Apple to port, or they will port themselves. Either way, the Mac platform wins! I expect some strategic announcements about OpenStep allies (like IBM and/or Sun) early in '98.
The internet is changing things. This is an understatement. The Mac is there. Some of the best quality tools are on the Mac. Some beta quality stuff is available on PC's first, but usually the best tools are Mac-first or Mac-only. Even some of the Java Journals are catching on to this. The Mac may not have the first Java 1.1 tools, but developers who use both platforms prefer the Mac 3:1 in taste tests. Apple and Sun have already said that they are not going to have the lag time between versions that they have in the past. So this is better. The Mac has a big presence on the internet, and that will grow. The Mac as an internet development tool is growing as well. OpenStep and WebObjects will enhance the Macs superiority in creating Web content.
The internet is also empowering people to do things like buy direct. Store fronts are become less necessary for some things like Computer or Software purchases -- mail-order and buying over the web are becoming more common. The Mac is there FIRST! This freedom will mean that consumers will have more choices, and more variety, like Macs and other alternatives to Windows and the pathetic variety available through store-fronts. (Remember store-fronts can only care a small percentage of Windows software as well as Mac software). This empowers Macs and Mac users -- and all choices more. This weakens the power of the biggest, who's strong arm tactics for shelf-space are far less effective.
Conclusion
People are sick and tired of MS and its' products, and looking for alternatives. People are growing tired of the "Mac is doomed" bullshit! Everything strategic for the Mac is looking better. The Mac platform is ready to go, and if the press lets up on their barrage of misinformation for one minute, then the Mac will take off. The press is already weakening on their resolve, and some analysts are already upgrading Apples stock. Once the FUD stops, the consumers will be free to chose the platform of their choice again, and many will open their minds and see that for many the Mac is the far superior platform.
The hardware side is looking far better than ever. The price performance curve is in the Mac's favor more than ever before. Since Apple has been held down so long, that pent up demand (once released) will make the numbers look much better... and once THAT momentum gets started, we will see a revitalization of the market (not that it is doing bad). Since the Mac technology is much better than the competitions, and does what the competitors promise they will do (in just a few more years, as they've been saying for the last decade), those Mac converts will stick. There are already many many people in businesses today that would LOVE to have Macs, but their companies will not let them. Imagine what happens when they can buy Macs that are fully compatible with Windows (via emulation). The tide in corporations will turn (again), and then Macs will thrive far more than they have in the past.
Short term, and tactically, there are still many hurdles. But none are insurmountable. This Chistmas is a telling time -- but if Apple can shore up some allies, then things will be just fine. Long term and strategically, things are looking great.
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