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There is a possibility that Apple could reshape itself as a consumer entertainment company, according to Gordon Haff, an analyst with Illuminata. In fact, he said doing so would be a smart move.

By most accounts, Mac OS X has a slicker and friendlier GUI than Windows, Apple’s hardware is much sexier, and the company has been pushing hard with its Switch campaign.

But Apple still is not gaining significant ground against Microsoft — a benchmark that some see as the only one that counts. What will it take to put the company at the top of the tech heap? Is that even a possibility at this point and, more importantly, does it matter?

The Muddle of Market Share

Many think that measuring market share is the wrong way to look at Apple’s performance. For one thing, the bar keeps getting higher every year. While Apple adds new users to its customer base, the overall PC market is growing at the same time. Adam Engst, publisher of the TidBITS Mac community newsletter, noted, “Apple’s market share could be dropping while their user base could be doubling…. Market share has become an increasingly uninteresting way of looking at the place of these companies in the world.”

It is also difficult to put a finger on exactly how many users Apple has. In January, the company released figures showing there were approximately 5 million active users of OS X — a drop in the bucket compared with the number of Windows users, but hardly a number to sneeze at. Also, there is no telling how many people are still using old Macs with an older version of Mac OS, especially since Engst said users may hold on to Apple machines for a relatively long time.

“What ends up being weird for the Mac [is that] older machines hold their value much longer … five to seven years, [which is] highly unlikely with a PC,” he told NewsFactor.

The iTunes Strategy

Regardless of exact numbers, Apple has enough users to cause a stir in the music world. The company’s recent launch of its iTunes Music Store generated enormous interest — enough to sell more than 1 million songs in its first week. Whether Apple can translate this initial swell of interest into a long-term lure for users to switch is another story.

“It’s conceivable that the iTunes Music Store could increase Apple’s overall computer market share,” Engst said. “They are creating a Windows version, so it won’t be as simple as all that. But if they become the dominant player in the online music market, and the Mac is a better experience for doing that than Windows, I can see it having some extremely positive effects.”

There is also a possibility that Apple could reshape itself as a consumer entertainment company, according to Gordon Haff, an analyst with Illuminata. In fact, he told NewsFactor that doing so would be a smart move for the company, which could avoid locking itself into a future in which Microsoft remains its main competitor. “When you have a bigger competitor barreling down at you, move out of the way rather than attacking them head on.”

Haff said Apple is already well positioned to sell entertainment products. “Apple’s strength has always been a sense of style, an understanding of how consumers interact with computers and other devices…. That’s much more a recipe these days for computer electronics than for staid, boring computer success.”

The Server Market

Speaking of staid and boring, Apple also has turned its attention to the server market with its Xserve offering. And even before the Xserve launch, the company had a robust server business, according to Brian Croll, Apple’s senior director of OS product marketing. “People were taking a tower and adding OS X to it to make a server,” he told NewsFactor. “[The server business] had been evolving quite nicely.”

However, Apple faces some challenges in an increasingly competitive market — particularly when facing off with Linux on Intel or AMD-based machines. Holger Dyroff, head of SuSE’s U.S. operations, told NewsFactor that Apple should consider “opening” its platform. “Right now, with the proprietary system and very proprietary hardware, [they are] running into the same problem that Sun does,” he said. “People don’t want a proprietary solution…. The recommendation would be, they need to settle on more open platforms and give choice to the user.”

Haff agreed that Apple will have a tough time being competitive in the server market as is. “Both servers and desktops are increasingly commodity

and about price. Apple can’t go that way.”

He said he sees the Xserve as “primarily a play for environments where Apple already has a certain mindshare.” According to Haff, the company is not gunning hard for the server market. “It would seem an ambitious and probably ultimately unrealistic goal for Apple to transform themselves into the next big server company. I view servers [as] essential as a tactical move to gain some additional revenue and presence in accounts where Apple is already popular…. There seems to be very little evidence that Apple … really has great prospects for servers being a breakout growth area for them.”

Does It Matter?

For those who wonder whether Apple will be able to regain the top-dog spot in the computing market, it might be worthwhile to ask: Does it really matter?

“When it comes down to it, who cares, [as long as] they can remain healthy and can do interesting stuff?” Engst said. Unlike in the computing world, he noted, “most markets are not monopolies…. There are big players and small players, but you don’t think worse of a car company for having a small market [share].”

Engst raises a good point — no one thinks worse of Porsche because it does not dominate the car market, and there is little pressure or expectation for Porsche to even try to appeal to the mass market. The same holds true in almost every other market. The high-tech industry is an aberration in creating a single dominant player that holds sway over the majority of the market.

In the end, said Engst, it does not really matter whether or not Apple retakes the market lead position. “As long as Apple is doing good stuff, everyone benefits,” he noted. “Apple is the company that actually makes things happen.”

was created by Joe “Zonker” Brockmeier May 13, 2003 4:00AM

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