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Apple Considering a Break-Up?
rlthomps-1 writes "Despite Apple's recent sucesses with the iTunes music store and the latest round of PowerBooks, TheDeal.com has an analysis of the options that Apple investors might force the company to take, including a breakup into separate hardware and software companies, a merger with both Universal and Pixar, or a leveraged buyout by private investors. Their analysis points to Palm as a case study for a successful breakup of a company that made both operating systems and hardware in a competitive market. Could separate Apple hardware and software companies revitalize the brand and challenge Microsoft's monopoly?" He forgot to call Apple "beleaguered;" however, he did say their decades-old position is "untenable."
It's obviously a slow news day and they needed to re-cycle something to fill in the blank space.
Whether that blank space was on the page or between their ears is of course a completely separate question...
Bad analogies are like waxing a monkey with a rainbow.
IBM was all ready to break up into little pieces when they weren't doing well in the 90s.
Then Gerstner came in a leveraged IBMs size as a strength, not a weakness.
Although appples software is really quite beautiful I don't think they're going to break up.
Firstly apple tried this (Claris ?) and it didn't work.
Steve jobs seems to be leveraging the HW/SW integration as a strength to make mac systems work as well as they do. I don't think he wants to give this up.
While Palms are still being bought and sold, I wouldn't exactly consider them the best case model for driving business profit.
And that's really besides the point--Apple isn't considering anything. Jobs likes "integration", and it's particularly integration that makes the iTunes Music Store work--if it was a standalone app, not nearly as many people would have bothered. But the fact that it is pre-installed, and works with Apple hardware for playback, is a large part of what's driving the TMS success.
This is just foaming at the mouth by analysts, who must feel more and more like they need to justify their salaries by spouting opinion.
--
$tar -xvf
So Apple Software sells Mac OS. Apart from a few slashdot moderators (and authors), no one else is interested in intel version. Microsoft FUD: Buy XP it has been tuned over Intel for 20+ years.
And then there is hardware. The people who like Mac OS wonder that Apple is changing strategy and might dump PowerPC soon. So why not wait and see how this goes.
And then there is Steve Jobs. Do I remain the CEO of the hardware side or the software side. Actually given the changes I have brought in hardware (original iMac, new iMac, iBook, PowerMacs, Powerbooks, and iPod) and in software (OS X, OS X, OS X, and Keynote, and Safari, and iChat, and iCal (oops)), I think splitting the company will ensure that the other side does not have my (Steve's) leadership. Should I do this?
Maybe the solution will be "Apple Group of Companies" - Hardware+Software, Movies, Music and more. And that is probably already there (although Pixar does not truly fall under the Apple Umbrella).
Just some idle musings...
s a stand-alone company, Apple's hardware unit could offer its users computers equipped with a Microsoft Windows operating system. That move alone, Kastner estimates, would double the company's market share.
And slice their profit margin by 90%, no doubt.
but not someone who can run a multibillion dollar company.
Analysts are notoriously conservative, and they like what's been proven to work. So by saying
> A separate Apple software unit would be far better able
> to challenge Microsoft Corp.'s Windows operating system
> for market share.
they're forgetting that Microsoft got to their dominant position by illegally abusing their monopoly. And no software company can compete on that level.
He seems to think that shareholders reacted poorly to the rumored purchase of Universal music because they don't want an integrated company. Not necessarily -- shareholders always react negatively to any activity that results in a large outlay of cash, with that deal certainly would have done.
Banking on Palm's success in splitting their company is a silly idea. Palm is quickly on their way to becoming the "Iomega" of PDAs -- fast start, no forward momentum, and eventually moribund.
Apple's success stems from their understanding that a large number of people want to buy a fully-integrated product -- that is, the hardware and software from the same vendor. As Apple's financials show, this business can be very profitable. On the other hand, if they only did software, it's unlikely that they would have as elegant of computer systems. So it doesn't seem like a sure thing for Apple to grow by splitting their business. Instead, they need to aggressively expand their market. They're trying to do this with their Switcher campaign, and according to the figures they released to analysts, they doubled their market share in the consumer space. Perhaps this means their strategy is working.
Insert simplistic political, ideological, or personal proselytization here.
Short and sweet here:
Computer prices are so low because there is no other differentiation besides price. What is the difference between HP, Dell, and Gateway? Price and a logo on a case. Perhaps some 3rd rate software package pre-installed. That's it.
Apple doesn't compete on price because it competes on the experience. It is the ONLY integrated solution out there and the only niche computer player in the world (easy Amiga and Atari fans).
This reporter reminds me of the Iraqi Information Minister.
I only came here to do two things; kick some ass, and drink some beer...looks like we're almost out of beer.
The biggest point the author appears to be trying to make is that Apple would do better if it was broken into a Apple Software and Apple Hardware. To me, that just seems crazy.
Apple Software would have to compete on x86 hardware for marketshare against Microsoft. I don't think Apple makes any real money on their software: the software gets people to buy their hardware. I think they'd be hard-pressed to compete against MS in this area. Most likely, Apple Software would go the way of Be, Inc.
Apple Hardware would have to go into the x86 PC business and would be competing against Dell and HP/Compaq. Instead of the higher end computers Apple specializes in currently, they'd be forced to compete on that lower end where profits only come through huge sales volumes. Dell would smash them in the hardware market.
No, Apple is a successful niche player because they own the hardware and the software. The seamless integration of the hardware and OS allows the company's products to become "luxury computers". They are a joy to use. Dell makes commodity computers. Apple may have a small marketshare, but so does Jaguar in the car business. Small is fine if your making a profit, something which the current Apple has a good history of doing. Break the company up and I don't see what either piece could do to stay afloat.
Life is short: void the warranty.
There is no sign that Apple shareholders are particularly discontented.
Quite to the contrary, there is ample evidence that Apple shareholders are positively thrilled. I've made a tidy sum in the past month with my modest number of shares, and there are lots of folks out there who hold way more shares than I have.
It's obvious, as least to me. Regardless of whether you love Apple or hate Apple (I'm a fan), Apple survives because of their integrated platform. The reason Apple waited to introduce iPod for Windows wasn't because of an inability to produce - it was because Apple wanted to initially use iPod as a value proposition to sell more Macs:
"See this iPod? Isn't it cool? Don't you want one? Well, you can, but only if you have a Mac..."
It's the same with the iLife apps, and initially with the music store. If you want get the benefits, then you have to buy a Mac. Not coincidentally, Macs have gross margins far higher than comparable commoditized PC's. Duh.
What analysts in general just seem to Not Get At All is that Apple plays a different game from the other PC makers. All other PC makers let Microsoft tell them what to make and sell. They add Intel's latest tech, package, and market. There's virtually no engineering difference between a white box, a Dell, and an IBM. were Apple to split off a hardware company to market Wintel boxes, they'd be generic boxes with nice industrial design, but nothing to differentiate them from Dell. Given that Dell is cheaper, Apple'd be roadkill in a hurry.
And the newly split-off Apple software company? Yeah, they'd get loads of OEM software contracts. I'm sure they'd ship on every Dell within months. Just like it worked out for Be.
In other words, it'd go over like a fart in church. A complete disaster. Short-term, it might bump up the share prices, but within a couple of years you're looking at the death of Apple. They can't go head-to-head with Microsoft, because Microsoft could crush them in a heartbeat. Apple has 4.5 billion in cash? Microsoft generates that kind of profit every quarter. It's no contest.
The only way Apple can thrive is to continue selling computers that are different, and therefore not commoditized. Sure, they could have gone into licensing 18 years ago. They blew it. Get over it, analysts - that dog don't hunt nowadays. If Apple converts to Intel/AMD, they now compete more directly with Wintel - even if they keep the Mac itself proprietary. That's because the frame of reference is now common. Af Apple sells Wintel boxes, they get crushed by Dell. If Apple sells software for generic Intel, they get crushed by Microsoft. it's not pretty either way.
The best option at this point to end all this speculation is probably taking Apple private, and then just keep making the products they're making - just work towards closing the speed gap (the PPC970 can't come fast enough!) and price the high-end machines a little more competitively. Keep coming out with neat products. In this economy, just treading water is a victory of it's own right now.
-- Josh Turiel
"2. Do not eat iPod Shuffle."
I guess there are writers out there who still long for the day when Beleaguered Apple still existed. The article also seems to ignore the fact that Apple is not too interested in market dominance, but I guess they had to find some sort of "issue".
To paraphrase a certain musician, they like being the underdog. It's better than sucking.
------------ Ben Chroneos
Look at how well BE OS did in the consumer Wintel space. Im sure MS would love to see Apple have the same success.
This story is so old that all it takes is to retype commentary from an old book (in this case, "Infinite Loop" by Michael S. Malone).
Apple went ino that tunnel in December 1995 (...) After 20 years of intense competition, almost every market niche in personal computing was filled. In every direction a giant company, many of them as big as Apple, squatted directly in the company's path. Mass-market a Windows clone and Compaq will crush you. Custom-build budget machines and you ran into Dell and Gateway. Laptops? IBM, Toshiba, NEC, Compaq, Hitachi and Acer had every market segment sewn up. Peripherals? Network computers? Hello Hewlett-Packard.
As we all know, Apple went out of that tunnel ignoring all the advices like "adopt x86", "allow cloning", "reduce your obscene profit margins". Jobs saved Apple selling iMacs and iBooks, computers as applish as can be (way slower than competition, overpriced yet stylish and still best-selling), and by killing the whole Apple clone bussiness (remember StarMax?). I think anyone claiming that by adaptation of x86 Apple would double its profit margins, should immediately start his own PC bussiness. If it's that easy, why don't you do this? Because Dell, Gateway, Compaq etc. would eat you for breakfast? Exactly! So why do you think Apple would fare any better on that market?
> A separate Apple software unit would be far better able
> to challenge Microsoft Corp.'s Windows operating system
> for market share
Taken out of context, this sentence makes sense. In fact any other random sentence describing how one company can challenge the other's market share would make sense. A small number of these ideas would probably even work.
However, what these "market analysts" for some reason annoying persist in not seeing is that when the context is Microsoft, such ideas, no matter what they are, do not apply because MS is not your 'normal' company but is in fact a steam-roller and the only way of gaining market share from MS is to somehow become a bigger steam-roller.
It's not about innovation, elegant design, usability, bang-for-buck, marketing plans. It's about sheer brute force and huge unstoppable momentum.
It ain't an ideal world and I don't like it (in fact I hate it) but at least I'm aware of it and I get on with it. I just sometimes wonder if I should have become a 'market analyst' and lived in a world of pure bliss with a silly grin on my face...
A cynic is what an idealist calls a realist...
apple's success is based upon software/hardware integration..dividing these teams under two sets of leadership will dismantle the apple brand by hadicapping the user experience
Yeah, right, Apple investors forcing Steve Jobs to do something?
Perhaps you didn't hear about the recent vote to require Apple to expense our stock options?
Apple is a publicly-traded company. The shareholders ultimately can hire and fire the board.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Actually, Apple ships with a one button mouse so that it helps get the user set up as quickly as possible, no matter if they are left handed or right handed. It also explains why there are two USB hubs on the keyboard, why the pro mouse is symetrical, and why Apple has support for two button mice.
Etiquette is etiquette. He kills his mother but he can't wear grey trousers.
A PowerBook can get up to a million hours with all two hundred and fifty thousand batteries installed. What's your point?!
"Wise men talk because they have something to say; fools, because they have to say something" - Plato