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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."
... FreeBSD is dead, and MS are going to open the Windows source.
There is nothing new in this article that hasn't been said before and argued to death. This will never happen under Jobs' reign, as this is exactly what he reversed after he returned to Apple.
Some points:
There is still no sign that non-tech people using PCs will switch to an Apple-built OS, especially not in the numbers that would justify the port.* (Note that PC users currently aren't switching to other OSes in big numbers. Remember how Sun was considering cancelling Solaris for Intel?)
The jury is still out on Palm Source. It is far too early to consider it a success.
There is no sign that Apple shareholders are particularly discontented.
*Yes, we all know that the port exists. The problem is the cost of maintaing the port as a consumer product (esp. all those drivers).
Oh yes, very realistic. An Apple with i386 hardware running windows. Yes, I can definitely see how beneficial and appealing that would be.
Sheesh...
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.
It's usually just speculation until one of the billionares gets involved. What prompts these stories are when companies trade at or near cash value, but have business segments that others believe would be worth more separate. Think of what people would have paid for a piece of the internet explorer company in 1999, given the same advantages that it has, but it had a stock all to itself.
What has prompted this is that Apple has been trading at cash value for almost a year (about $12/share), meaning investors put nearly zero value on the hardware business (between $1 and $2 for most of 2002 and 2003). If a large investor could buy enough stock, they could replace the board take their proportional share of most of the cash as a distribution to shareholders and sell off the businesses to the public or the heighest bidder. While the company was in a good position for this a month ago, assuming an investor could look out into the future and estimate how profitable the company would be selling Macs with IBM's 970 chips, an investor today would have to believe that the music sales business really is worth what investors have bid the rest of the stock up to (about $4 per share).
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
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."
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?