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Weblog:   Apple As Innovator
Subject:   Question on licensing
Date:   2003-05-30 06:36:14
From:   anonymous2
I'm curious about one thing in regards to Apple. Why did they stop the licensing of their hardware and why won't they do it again? Imagine how great the market would be if Dell was able to build and sell Apples for both servers and desktops?
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  • Question on licensing
    2003-05-31 13:19:11  anonymous2 [View]

    The fundamental problem here is viewing Apple as a software company, and the inherent comparisons to Microsoft. While Apple produces software, their primary revenue stream is hardware.

    In fact, their business mode is pretty much exactly opposite of the Wintel market. While Microsoft uses cheap commodity hardware to sell overpriced software, Apple uses relatively inexpensive or free software to create desire for hardware that is in some, though by no means all or even most cases more expensive than its hardware competitors (HP, Dell, Gateway, etc.)

    The former model works for Microsoft they have, from day one, built the company around the idea of shedding the low-margin, high-volume hardware business onto other companies, and removed themsellves from that cut-throat market. They've merely been the third party that sees a war and sells weapons to both sides.

    Apple, on the other hand started out with Steve Wozniak, whose genius was as the designer of really good hardware, and this has remained Apple's primary business ever since. To transition away from this now would be a massive effort for the company, even if we assume the "clones" being made continue to use a limited range of components. But this business model works for them, as well as Microsoft's does for that company, if not to the same magnitude.

    Either company would be ruined by trying to use the other's business model. Microsoft as a PC maker wouldn't have a chance of competing with the likes of Dell, which has shown itself brilliant at optimizing inventory.

    Similarly Apple would likely not survive the transition to a pure software business model. They could simply not surive competing directly with Microsoft in x86 softare, and their developers would jump ship at such a dramatic hardware shift. Additionally, there would be no greater market for PPC Macs if Dell and HP sold them than there is now (something the company learned painfully during the original cloning escapade), and that's not a large enough established base to support a company the size of Apple if their only revenue stream were their own software offerings, which Mac users have come to expect at lower prices.
    • Tim O'Reilly photo Question on licensing
      2003-05-31 18:11:37  Tim O'Reilly | O'Reilly AuthorO'Reilly Blogger [View]

      I agree. There might have been a time, early in its existence, where Apple could have created that clone market, and tried to compete with Microsoft as a software company on top of a competing commodity platform. But that was a long shot. The commodity PC was already a reality.

      Apple is the last of the great *computer* companies (that is, companies that make both hardware and software). Interestingly, though, now that Microsoft has reached the limits of revenue extraction for software on commodity hardware, they are eyeing the idea once again of an integrated hardware/software bundle to improve the user experience. So it's not certain that the market isn't going to cycle around again in some interesting new ways.

      In any event, I agree with the previous poster that Apple's genius has been as a hardware company, with software that seamlessly integrates with that hardware.

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