Trying to Read the Tea Leaves at Apple
Amid all the advice Apple gets these days, the idea of remaking Apple as a software company always seems to crop up. Given Apple’s uphill battle selling computers of late, it’s not hard to understand why. But try as I might, I haven’t been able to imagine Apple as a software company. What would it sell?
When it rolls out Mac OS 8 later this year, it should peddle a few million upgrades at $50 to $75 a pop. That’s real money, if you ignore the monumental OS development costs. But it’s hardly a solid basis for a software business until clones help the Mac OS rise to at least 20% market share--a long way off.
Apple has various software gadgets and development tools, such as the QuickTime family--its system for creating and viewing animations, video and multimedia. These are great for drawing developers (and ultimately buyers) to the Mac, but not for direct revenue.
Then there’s Claris, Apple’s successful application-software subsidiary. It’s Emailer, Home Page, Works and FileMaker Pro products have all been top sellers on the Mac and have made an impact on the Windows market as well. Those easy, powerful applications seem refreshingly resistant to the feature-bloat suffered by many top-selling programs.
Claris is a great asset that should be expanded. Still, it’s a tiny slice of the Apple pie and could hardly replace billions in hardware revenue any time soon.
Apple decided not to become a software company in the late 1980s. At that time, Windows was a joke. Unlike today, the Mac OS wasn’t just better, it was the unchallenged king of the graphical user interface. Instead of openly licensing the Mac OS then, Apple chose to stay a hardware company, suing Microsoft for copying the Mac OS. (It lost the suit, of course, and the rest is history.)
Over the years, Apple executives have sometimes indicated that they expected software sales--presumably applications and operating system sales to a burgeoning clone market--to become a huge part of the company in the future. But they haven’t really spelled out how or when.
To judge the current thinking on this issue, I posed the question to the one of Apple’s few senior managers with a demonstrated ability to make money from software: Guerrino DeLuca, executive vice president of marketing and, until February, the head of Claris. He currently manages OS licensing. I figured if anybody could make a compelling argument for Apple as a software company, DeLuca could.
I expected another round of vague lip service to the gradual ascendance of Apple’s software business. But rather than making the case for software, DeLuca stated rather categorically that Apple “will be a system company that makes its money from selling systems.”
Why not a software company? “It’s a long, long shot, because our strengths are the integration of hardware and software, and you must play to your strengths,” DeLuca said. To become primarily a software company, Apple would need an entirely new business model, he added.
As much as I’d like to have heard dramatic new plans for the future, straightforward common sense has sometimes been in short supply in the executive suites. So I considered it an auspicious sign.
Then I asked Apple’s top merchandiser how he plans to sell more Macs.
“In spite of the fact that these are the most dire straits that we’ve been in, our product portfolio is the strongest in years,” DeLuca said.
He’s refreshingly right on both counts. Given the attrition in Apple’s R&D; corps, the layoffs and the general turmoil, it’s amazing that the company has just released several innovative, cost-competitive new Power Macintoshs, including a 300 megahertz machines announced last week. The PowerBook 3400 is a top-notch notebook, as I’ve written previously. Apple has the raw material.
But how will DeLuca sell more boxes? Apple’s recent ads look pretty tame and defensive--”We’re back” was the biggest campaign’s theme.
DeLuca explained the logic of the approach: “As you talk to the masses, you also wink to the happy few” so they feel validated in their original decision and stay the course.
Few people buy a new computer before talking with someone they know first, DeLuca reasons.
He wants to make sure that the tens of millions of Mac owners feel good, so they can act as Apple’s primary sales force.
His logic is consistent--Apple’s devoted true believers have always been its strength. So if you love the Mac, you’d better get to proselytizing.
*
Charles Piller can be reached via e-mail at cpiller@aol.com
