Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

The Post-PC Era: Why Apple Is Losing Market Share


The tech giant is approaching a troublesome situation. Can it learn from its own history?

Three years ago, Steve Jobs told an industry conference that the "post-PC" era had arrived. We were seeing a migration of technology, he said, away from personal computers, and towards smaller, more intimate devices. The PC, like the pickup truck, was becoming a luxury that few people needed. Instead, we would be seeing more products like Apple's (NASDAQ:AAPL) new iPad, which at the time was one of the fastest selling electronic devices in history.

What Jobs didn't talk about -- and what the media largely overlooked -- was Apple's failure to grow its core PC business. Despite more than 10 years of his leadership, and countless "I'm a Mac" commercials, the company's share of the PC market had barely budged. In 2000, about 3.4% of all computers sold were Macintoshes. In 2010, that number stood at 3.9%. This was a disappointing improvement for a period in which the Apple brand had infiltrated every home, and the company had sold hundreds of millions of Mac-friendly iPods and iPhones.

In other words, Apple's success depended upon a post-PC world.

So far, Jobs' prediction has come true. Tablet sales have continued to grow over the last few years, while the PC industry has stagnated. Mobile devices are changing the landscape of personal computing, and the era of beige boxes has come to a crashing end. The problem for Apple is that this new world is beginning to look a lot like the old one, in which a faulty business model nearly put the company out of business.

To put it simply -- Apple has never learned how to share. Except for a few years in the mid-'90s, the company has refused to license its operating systems to other manufacturers. If you want to run Mac OS X, you have to buy a Mac. The same practice has been followed with iOS, which is limited to iPhones and iPads. This means that software developers are faced with a confined market to begin with, and then marginalized further by the prices that Apple charges for its products. The company sells more hardware this way, but limits itself to a minority share of the market.

That's a real problem when it's the software that drives the user experience. Cool, monochrome designs may add a certain cachet, but as Mac users will tell you -- including myself -- it's no fun having to wait two years for developers to port their software from Microsoft (NASDAQ:MSFT) Windows. When content creation is decentralized, there's an enormous value in having a common platform, a single marketplace. Apple's '1984' commercial was as misconceived 20 years ago as it is today. What limits freedom in the digital age is not the dominance of companies like Microsoft and Intel (NASDAQ:INTC), who sell their products indiscriminately; but the artificial roadblocks thrown up by corporations who want to monopolize their customer base.

Steve Jobs believed that post-PC devices would be different -- that they would require an "intertwining" of software and hardware. But has this been anyone's experience? The fact that a smartphone can make calls and take photos -- something they all do -- is becoming less important than the status of these phones as a mobile software (and really, entertainment) platform. To put it another way, as the differences in hardware become minimal, the discrepancy in software becomes relatively more important. With Google's (NASDAQ:GOOG) Android outselling IOS by a 5-1 margin in smartphones, and the mobile app market swinging in Google's favor, how long will it be before the same dynamics that muscled Apple out of the mainstream PC market, begin to cut into its iPhone sales?

The iPad, which still accounts for more than 50% of the tablet market, is no less threatened. Conventional wisdom has it maintaining this lead. However, analysts are ignoring the greatest danger, which isn't from Android devices undercutting the iPad on price, but PCs evolving into a similar form factor but with superior performance. The introduction of a touch-based Windows 8, and improvements in the miniaturization and power-efficiency of computing hardware, are pushing the PC into the mobile market, and into a space that Apple once had all to itself.

Also see:

Apple: It's Not About the Earnings!

Top 10 Tech Stocks for 2013: Are Facebook, Broadcom, EZchip, and RIM Set to Gain?

Should You Buy Apple or Exxon? The Answer Is in the Charts
< Previous
  • 1
Next >
No positions in stocks mentioned.
Featured Videos