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A Midsummer's Mac Death Match, Round One: Enderle vs. Chaffin

By Staff Writer MacNewsWorld ECT News Network
Jul 12, 2004 4:07 AM PT

Ground Rules

A Midsummer's Mac Death Match, Round One: Enderle vs. Chaffin

Each combatant is asked to opine on one Mac-related issue. After receiving both polemics, MacNewsWorld collates and provides each with the others' responses. Then these bitter rivals rip apart each other's assertions -- once, and then once more -- to the death.

Our Contestants

Rob Enderle, a TechNewsWorld columnist, is the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.

Bryan Chaffin is editor-in-chief of The Mac Observer, a leading online source for Mac news and information.

MacNewsWorld: Where will Apple be in five years?

Bryan Chaffin:

Looking back at The Mac Observer's Apple Death Knell Counter, and indeed throughout Apple's history, it's interesting to see how often people have been flat out wrong about Apple's future. With this newest round of the Mac Death Match, it seems that I am destined for the same ignoble fate, but I will tread without fear nonetheless.


In five years, Apple will be pretty much where it is today, but with some new products that further expand the company's reach into what it calls the "Digital Hub."

Apple will also have a much bigger portion of the digital video market, and a solid presence in the Enterprise and IT markets.

Lastly, Apple's market share in the consumer space will continue the upward trend it has taken in recent years, helped in part with what I am calling PC: The NeXT Generation.

Shocking predictions, I know, but traditionally, prognosticators tend to radically underestimate the far future, to radically overestimate the medium-term future, and to completely miss the boat for the near future. I hope I can forego that tradition in my look at the near future.

Extending the Digital Hub

The Digital Hub -- more specifically, the music and movie portion of the Digital Hub -- offers Apple's greatest opportunity for near-term growth. This is obvious looking at Apple's recent success with the iPod and the iTunes Music Store (iTMS). With Steve Jobs recently saying he wants Apple to have 5 percent of all legitimate music sales, it should also be obvious that in his mind, those successes are just the beginning.

Steve Jobs also has said he wants Apple to be the Sony of the computing industry, and so far he has made his company just that. iTunes, iPod, iTMS and AirPort Express are all extensions of the Digital Hub, and are all part and parcel of extending the computer into our digital lives. They are also very much the kinds of products one might have once expected of Sony.

Apple is likely to continue to release innovative products aimed at this market, and has as much as promised so when talking about all the fantabulous products still in the pipeline.

I shall not pretend to predict what kinds of products Apple will release -- for instance, AirPort Express took me by surprise -- but I am sure we will see many new iterations of the iPod.

Mac at the Center

OK, how about one prediction? I think that we'll eventually see networkable iPods that can wirelessly stream music from our main computers.

I also expect at least one entirely new class of digital product in the next five years, though I have no idea what it may be.

Of course, we can expect some other innovations and evolutionary changes to existing products along the way, too.

Whether or not that is the case, I see Apple's image subtly evolving into being perceived as a "Digital-Hub company," as opposed to being strictly a computer company, even if many aren't aware of that perceptual shift.

Where Enderle and others have gone wrong in the past is in thinking that the Mac won't be a part of that future. Far from it -- the Mac will be at its center.

Apple's Passion for Digital Video

One simply has to look at the fact that Apple has bought DV editing software (Final Cut Pro, which it bought from Macromedia before its initial release), as well as entire DV software companies (Nothing Real) and digital sound-editing companies (Emagic) to understand that Steve Jobs is passionate about the DV market.

Apple has also released a stream of its own products aimed at this market, which is perhaps why, according to research firm Weinstock Media Analysis, Apple had three of the top ten most popular new products at NAB 2004, the National Association of Broadcasters' annual electronic media show. These included Motion, which came in first, and Xsan, which came in second.

If you need more evidence, Jobs' other company, Pixar, and his comments about how important making movies is to him also illustrates his passion. Then there are the meetings with Hollywood executives, in which he has asked them what they needed in their computers.

My point is that Steve Jobs is passionate, very passionate, about making movies and having his computer company play a big, big part in this process. As a growing segment in this multibillion-dollar industry, DV production and editing offers Apple an enormous niche to be a part of, and perhaps, even to control.

So far, Apple's every move in this market has been a raging success.

So much so, in fact, that if Death Knellers like Enderle still need a way to understand that Apple is not exiting the PC business, they simply need to look at the company's commitment of resources to this market to understand that Apple will continue to make Macs for a long time to come.

My prediction: In five year's time, Apple (and the Mac) will be either the biggest player in the DV market, or one of the top two.

Enterprise and IT Gains

Believe it or not, Apple is selling more computers (Macs, Xserve, Xserve RAID) in the Enterprise and IT markets. When I say "more," it's a matter of perspective, because the company wasn't selling squat in these markets two and a half years ago.

Apple's battle has been a multifront war of sales infrastructure, providing the right products and overcoming the very anti-Mac attitudes prevalent amongst IT pros.

During the last two and a half years or so, Apple slowly has been tackling all of these fronts. The company has a dedicated team to sell to IT departments and the government; made OS X into a legitimate OS that can meet the needs of serious IT folks, and has introduced Xsan and Xgrid as members of its IT product line; and is trying to use both of these tools -- as well as supercompetitive pricing for Xserve and Xserve RAID -- to change the way IT people look at the company.

So far, Apple has had some success doing just that, although the company is still barely even a blip on most IT radar screens. Of course, being barely a blip is far better than being persona non grata, and that kind of change is key to Apple's future in these markets.

In other words, Apple has grown its presence, just not enough to be a real player. Yet.

My prediction: In five years, I think that Apple will have some tangible results for all this quiet effort, and be considered a real option for many IT departments. Even a 1-percent market share in the IT world would be a huge increase for Apple.

Digital Hub Done Right

Apple has been growing its share of the consumer space in recent years, helped in part by its growing fleet of Apple-owned retail stores, as well as the Switcher campaign, the iPod, iTMS and, surprisingly, iLife.

These factors have brought new people to the Mac platform. When measured as a whole, Apple's market share has declined to less than 3 percent of new computers sold, but within niche markets such as DV editing and the consumer space, Apple has grown share.

I think that Apple will continue this trend going forward, and here, the Digital Hub comes back into the picture. While Microsoft focuses on trying to put Windows in place of a TV, Apple has been choosing instead to release Digital-Hub software and hardware products that complement the Mac. iPod, iLife, the iTMS, .Mac and now AirPort Express are all examples of this.

This can best be summed up in this way: Apple's creative team tries to develop products that they themselves want to use, while Microsoft's team tries to develop products they want you to have.

This makes the Mac, as well as Apple-branded Windows products like iTunes, iPod and AirPort Express, a more logical center (in the case of the Mac), or extension (in the case of the peripheral devices), of people's digital lives. It's the Digital Hub done right. This is resonating with an increasing number of people, which itself is why Apple's retail stores have been a success.

My prediction: In five years, this success will have continued, and Apple will be a substantially bigger force in the consumer space.

PC: The NeXT Generation

Another direction that I expect Apple to be able to head down is another example of the fundamental difference between Microsoft and Apple.

Steve Jobs once said in an interview that he liked being able to go to any NeXT computer, log in and pull up his desktop. In other words, he logs into a network as "Steve," and he gets the same desktop he would get if he were logged into his own physical computer.

While this is really an extension of the Unix way of computing, Apple should be able to take it further than any other company.

Indeed, this capability exists in Mac OS X today, although it requires enormous bandwidth and other technological infrastructure that simply isn't in place, except in a few corporate and academic environments.

It also requires a paradigm shift away from the "My Computer" mentality of today to a de facto server-centric "My Digital Life" mentality that could soon be possible.

Given its traditional path, Apple will pursue this in such a way that allows you to keep your information on your computer, while being able to access it anywhere, any time. That's your data, on your Mac, at your home or office, under your control.

In contrast, Microsoft is busily trying to build a world where you keep your data on Microsoft's computers. You can access it any time, anywhere, so long as you are paying Big Redmond for the privilege to do so. That is at the heart of .NET, in my opinion, as well as Microsoft's attempt to move towards a rental-licensing scheme for Office and Windows.

In short, Microsoft is all about recurring revenue, while Apple is more or less about making technology work for us (as long as we do it Steve's way, but that's a topic for another time). Apple's approach and Microsoft's approach are two sides of the same coin, but I'll take Apple's approach, thank you.

Your Digital Life

I've written about this before, but the logical conclusion of this idea is to be able to have a portable device that logs into your home Mac from anywhere, wirelessly, pulling up your desktop in the process. This device isn't a PDA -- it's a small, wireless Mac.

Throw in roll-up LEP screens -- Light Emitting Polymer display technology that effectively allows displays to be printed on paper, which I believe will be on the market within the next five years -- and you have Your Digital Life with you anywhere, any time in an easy-to-use form factor.

We could get fanciful and throw in some software agents and voice controls, but that's missing the point; look for Apple to provide the tools that allow you to take your digital life with you.

The barriers to this kind of computing paradigm are mainly ones of bandwidth and wireless infrastructure. The rest, Apple could, more or less, do today. It's a simple idea, of course, but the best ideas are often simple ones.

My prediction: This could well be the part I have the most wrong, but I hope we see this sort of technology out of Apple in five years' time.

All the Way Home

I'll wrap this up by pointing out that the Apple of tomorrow isn't very different from the Apple of today. Apple will still be a PC company making cool products that augment our digital lives. Of course, in five years, a cadre of Death Knellers will still be prophesy the imminent demise of Apple, but that's because the more things change, the more they stay the same -- Apple included.

Rob Enderle:

Apple in 5 Years: Changed, Renewed, and out of the PC Platform Business

Predicting where a company will be in 5 years isn't particularly easy. In 1990, who could have predicted that Digital would become part of Compaq, and in 1997 that Compaq would be part of HP? In 1985 IBM was at the top of its game, yet by 1990 it was viewed as the most hated company in tech and a failure. Then five years later, IBM was once again renewed and expanding.

Apple has certainly had its ups and downs as well. The 1980s were good and marked a decade where the company was second to none in personal computers. The first half of the 1990s represented dramatic and seemingly positive change -- but in the second half of that decade, Apple suffered a catastrophic fall that most companies would have not survived.

Much of the positive -- and negative -- issues surrounding Apple have been tied to Steve Jobs, and his continued presence at Apple remains in question. He has another, potentially more powerful, company to run at Pixar, and Pixar, due to a fight with Disney, needs his full attention right now.

Meanwhile, Apple's PC market share continues to decline, while it owns, for now, the volatile and risky digital-music-player business. ITMS is best in class -- but it's not even in the same league with free services like Kazaa and Morpheus.

Several Critical Tests

Over the next 5 years Apple will face several critical tests. First will be the response to the company's success with iTunes and the iPod. Big hardware players like Sony, Thompson Electronics, LG Electronics, Matsushita and Dell are increasingly focused on this segment.

Moreover, the content owners are taking a more active roll, with Microsoft developing a cross-platform solution, codenamed "Janus," in conjunction with partners like Time Warner, that will offer a unique rental option. Jobs himself has said that he thinks that Microsoft's solution will take out all of the other players.

On the computer side Microsoft is rolling out a very Mac OS-like operating system codenamed Longhorn in 2006, which has even more effort and technology behind it than Windows 95 had over a decade ago -- and Windows 95 almost took Apple out of the PC business.

Meanwhile, both Novell and Red Hat are designing Linux user interfaces that use the Mac OS as a design template. By the end of 2009, at least one of these products should be mature and supported by the major hardware OEMs.

Finally, Apple processor partner IBM is trending to go independent, and were it to do this, it has the resources to give Intel a lot of grief. But IBM's "Power Everywhere" initiative can't compete with AMD's and VIA's "x86 Everywhere" initiatives, which Microsoft is quietly backing, unless IBM's microelectronics division can step out from underneath the IBM corporate umbrella.

This is what the IBM storage division did by joining Hitachi, which, interestingly enough, made the iPod Mini possible. But this is a long process and that means that if it does happen, it probably will happen too late to help protect Apple's PC market.

The Atari of 2009?

So the big question is, can Apple survive this onslaught or by the end of 2009, 5 years from now, will it be another Atari or Commodore? And if it does survive what will it look like?

I think Apple will survive, but I know it can't survive unchanged. During this period Jobs is going to have to choose which company to run. Both companies are going to be under heavy stress, but Apple will probably need him more. I'm going to bet that this is where Jobs will move.

Much of my prediction will be based on his staying with Apple. If he doesn't, I doubt Apple will be around at the end of this period, which would have made this a very short prediction and allowed me to maintain my lead on The Mac Observer's Apple Death Knell Counter -- something I live for.

The Linux Factor

Ultimately, Apple's ability to remain in the PC business will depend more on Linux than it will on either Apple or Microsoft.

We are approaching a period when intellectual property (IP) wars will likely make a number of governments rethink IP laws. Because much of this will be hashed out over these next five years, there is a good chance that Linux won't survive the period, and Apple currently is better protected.

However, if Linux isn't crippled during this time, it will probably turn most of the Mac OS business into a memory. It is hard for me to believe that governments won't intervene to save Linux, which would suggest that it will make a run at the desktop within three years and displace Apple in five.

Seeing this coming, Apple could attempt to license its user interface, which would be better than trying to sue Red Hat or Novell and being branded the next SCO. But for Jobs to agree to license the UI, he would need a brain transplant and that remains unlikely.

The Only Likely Outcome

Therefore, the only likely outcome is for Apple to exit the consumer PC platform business to focus instead on the growing markets for cross-platform accessories like the iPod and the Airport Express.

I do think Apple will hold a workstation business focused on multimedia content creation, but it will be both smaller and more profitable than its current broad consumer-heavy lines. Whether that workstation line will run on x86 chips or continue to run on PowerPC, Bryan and I have discussed previously and will most likely revisit later.

Within 3 years, Apple's PC division will wane as its multimedia division waxes. Apple will look a lot like a mix of Logitech and Creative Labs, with a touch of Sony, trading on the strength of the Apple user experience and industrial designs.

In other words, Apple will be a sort of uber-accessories company with point hardware and software solutions focused solidly on the entertainment space, from content creation to content use. In fact, it would make some sense for the company to merge with one of the firms I just mentioned if the logistics could be worked out -- although, when I look at the relationships and synergies, the most likely merger would be with HP.

Apple will retain software and compete more broadly against Adobe, generally focusing on entertainment, multi-media and photography hardware and software.

Decoupled From Its Origins

I also think that while Jobs will be around for most of this period, he will be gone by the end of it, leaving behind a hand-picked successor to helm a largely different company, rapidly growing and more closely coupled with -- and possibly merged with -- HP, which shares its future.

In other words, Apple in 2009 will have almost completely decoupled itself from the low-margin PC hardware that fueled its birth. It will be a company tied at the hip to the emerging multimedia market that drives its current successes and forms the foundation for its OS-agnostic future -- a future forecast by its cross-platform iPods, Airport Express, and iTunes offerings now blazing this trail.

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