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Thursday, December 23, 2004

The Second Coming of Apple

Tim Hanrahan and Jason Fry write in the Wall Street Journal,Apple Computer has been reborn - and now it's on the verge of a renaissance. Apple’s share of the PC market around 2% in both the home and commercial sectors, with more than half the commercial numbers coming from educational sales. A confluence of events could substantially change some of those numbers, ushering in an Apple tidal wave that will remake the home PC landscape. Excerpts with edits and my comments added:

The file formats most people use in their daily computing lives are now standard and universal, and Apple and Windows machines co-exist happily in countless corporate and home networks. Steve Jobs's 1997 return to Apple restored the company's business focus and revived its reputation for making easy-to-use products with great style. That's the one-two punch that powers Apple's legendary brand, and without it none of what's followed would have happened. The first big wave hinting at what's coming wasn't the iMac or the G4 Cube - nice machines that signaled the company was here to stay, but weren't the stuff of revolutions. It was - and is - the iPod.For all intents and purposes, the iPod is digital music. Apple has more than 90% of the market share for hard-drive-based digital-music players, and both the iPod and iPod Mini are in short supply this holiday season. The iPod embodies everything Apple's always claimed to be: Its cool design makes it a must-have accessory for hipsters, and its ease of use makes it the default choice for newcomers intimidated by digital music. With the success of the iPod mini spinoff, other ideas are generating excitement: While Apple has rejected the idea of a video-player iPod, other rumors being batted around – with varying levels of credibility -- include an iPod that uses flash memory, a satellite-radio iPod and even an iPod/iTunes phone.
The iPod has drawn well-deserved raves, as has the multimedia suite of iTunes, iMovie, iPhoto and iDVD. Still, the company's share of the desktop PC market has remained stalled, leading some to wonder if Apple isn't morphing into a digital-entertainment company, with the computers that made it famous becoming an afterthought. After all, home computing itself is morphing into digital entertainment, with all the usual suspects trying to provide software and hardware for managing music, photos and movies and marrying the PC with various pieces of consumer electronics. While nobody's found the perfect formula just yet, so far Apple's done a better job than anyone else has. One of the more-interesting bits of recent speculation has been about the "halo effect," which holds that the runaway success of iPods could drive sales of Apple computers: In a Piper Jaffray survey conducted last month, 6% of iPod users said they'd moved from PCs to Macs after buying the digital-music players, and another 7% said they planned to do so in the next 12 months. The halo effect seems to be working: While there are always some people making the PC-to-Mac switch,the iPod is making many more people consider a move to the Mac world. Its success has meant Apple products in what were once Windows-only homes, paving the way for other products -- where iPods lead, wireless-networking products tend to follow.

Still, iPods and wireless networking are on the periphery of digital entertainment, whose center remains the Windows-dominated PC. Apple's operating system and machines are generally hailed as superior to their Windows counterparts, but much as it'll pain the Appletistas to hear it (again), that superiority isn't enough to cause enough people to switch camps. The biggest issue in tech today: the drumbeat of viruses, spyware and other maladies that plague Windows and are practically nonexistent in the Apple world. It's true that this perceived immunity is partially a reflection of Apple's small market share, but that won't matter to consumers tired of computing anxiety and pain. Sure, it's a lot to ask folks who've lived in the Windows world for years to switch -- Apple tried that campaign a couple of years ago, with little success. The difference between then and now is that the combination of Windows' security woes and greater familiarity with Apple products, a combination will be what Apple needs to unlock that market. It's happening slowly right now, but it's happening, and it'll gain momentum in the months to come. And while it won't alter the commercial-PC landscape at first, it'll put Apple in a position to consider whether it wants to try to make inroads into that market as well. We also need to see the effect Linux and Firefox has on windows, that could also influence Apple's position in the PC world.

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