Monday, July 11, 2005

Is the future Mac - who will survive the next business cycle?

I think everyone who has a blog in the world of IT or finance has thrown in their two cents on the Mac moving over to the Intel x86 architecture. One of the most recent articles I’ve seen was over at Arstechnica, titled “Inside the big switch: the iPod and the future of Apple Computer” by Jon “Hannibal” Stokes.

At first glance, what Jon is saying is that Apple seems to have this tendency to ruin their supplier relationships by throwing their perceived weight around. They did it to Motorola, and they’re doing it to IBM.

So, okay… fine. This happens every day all over the world in every customer-supplier relationship. Great, but what’s new about that?

Okay, so moving beyond the gossip, the other more important thing that Jon is saying is that the future of Apple is bet on the success of post-PC products. Things like the iPod, video iPod, and even the Mac mini. Or in other words, the things that are driving Apple’s stock price. And you know what; this is exactly what “I Cringely” was saying in his “Mac Mini” article earlier this year. Not only has that, but Jim Cramer of and related fame alluded to similar points earlier this year when Apple couldn’t keep iPods on the shelves.

Which begs the question, Is Apple the new Sony?

Cringley certainly seems to think so. He thinks that these Mac mini’s are going to be a great way to pump Pixar movies into the home on-demand (or at least psudo-on-demand). And he’s probably right. But let’s not forget Microsoft. They want a piece of the action too… which is why the new Xbox is going to have a Media Center extender built right in. So you can buy a Media Center PC to pump Tivo-esque content to the TV that your Xbox is on. Very cool too. And the Sony PSP of course is being hacked into some PDA-web-browser hybrid that almost does the same thing (well, that and play some completely non-universal UMD disc format). And then there’s the new Microsoft Windows Mobile 2005 Smart Phones which let you play video content, run pocket-Excel, view and take pictures… and sometimes even answer cell phone calls.

So I guess Apple, Microsoft, and Sony are all the new Sony.

Which is all really just to say that the big money knows there’s a future in distributing content onto post-PC gadgets. It’s just that none of them are sure exactly how they’re going to make this happen. And all of them know that squeezing profits out of a sub-$300 computer makes almost as much sense as trying to squeeze blood from a turnip. Unless they can somehow convert that PC revenue stream into a razor-blade business model, the market is never going to bid-up the stock of any of these companies.

We need growth.

So if the business model for these companies is going to change, then the landscape of the industry will have to change with it. Sony has a good content library, and some neat gadgets… but they are struggling with bridging legacy-gadgets with post-PC gadgets (how many different MP3 players does Sony need to make?). Microsoft can build the software infrastructure to make this happen (and will have most of what it needs by the end of 2005), but they don’t own enough content. Microsoft needs a Disney-caliber content library. And Apple? Well, they have a slick software infrastructure in the form of iTunes, which they can build out. But Apple too lacks the content library.

And what does this have to do with Apple moving to Intel CPU’s?

From my perspective… very little. In my opinion, it’s just a natural way for Apple to protect it’s “legacy” computer business. Ultimately, Intel chips will reduce the cost of Apple computers – and other post-PC gadgets, allowing Apple to protect or grow that legacy business without incurring much in the way of cost. OS X will be the standard Mac operating system, much like the way that Windows NT kernel is still relevant today in Longhorn.

So will we ever see Mac clones, or Macs used in corporate IT shops?

Maybe. But who cares? While I don’t think Apple would mind getting tied more closely to those corporate IT budgets, it really doesn’t look like that’s where they’re making their bets.

So the question really isn’t so much “is the future Mac”? Rather, it’s “who’s going to survive, and where is the industry consolidation going to happen?”

That’s what interests me the most. Microsoft has too much momentum to totally loose this battle. Sony… well, Sony has enough gadgets and a large enough media library to at the very least survive. And Apple? Well, I think Apple has the most to loose. They have the least market share in their cash-cow (or declining) business (e.g. computers), and so much bet on the future of the post-PC gadgets (iPod-like products) that they really need a content library to survive.

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