It must be unimaginably frustrating to be an Apple executive these days. The world is a buzz with Windows 95, whose flashiest features were first conceived more than a decade ago by Apple hackers. When Apple packaged its first Macintosh, offering a level of ease of use and integration that Microsoft still hasn’t matched, corporate users dismissed it as a toy. Now those same people are drooling at the prospect of Mac’s innovations appearing in the new Microsoft system. Apple says 80 percent of those who consider buying a Macintosh will make the purchase. But Apple gets fewer than one in 10 computer buys. That means almost no neutral party even thinks about buying a Mac.
What went wrong? Rewind to the late 1980s. Macintosh had overcome initial glitches and was well perched to take on the competing user-hostile IBM ma-chines–PCs that relied on the ungainly and confusing DOS operating system. Yet the then chairman John Sculley, happy with Mac’s steep profit margins, resisted taking the steps to build up Apple’s market share. He kept prices high and refused to license the Mac operating systems to other manufacturers (which would have spawned low-cost alternatives). Then came Microsoft Windows, running on bar-gain-priced IBM clones. And before Apple knew it, Gates and company had gotten a death grip on the PC marketplace.
In the last 18 months, Apple was offered a chance to recover. Windows had a soft underbelly: though it was a graphical system like the Mac, its file system was a sinkhole and adding peripherals was a chore reserved for wireheads. Meanwhile, Apple had masterfully pulled off a difficult transition to a more powerful microprocessor based on the exotic RISC chip technology, which provided high power at a reasonable cost. In 1994 it vowed that these new “PowerMacs” would always be aggressively priced–about 10 percent more than most IBM clones. Apple also announced that it was going full blast into the licensing business, letting others join it in selling computers with the Mac operating system.
The PowerMacs were great. But Apple’s market share actually fell. What happened? Though Apple sold a ton of PowerMacs, the PC business in genera was exploding–and Apple’s competitors sold even more. Apple claims that it was hamstrung by parts shortages, and indeed its most popular models were back-ordered for months, But greed was a factor, too. Once it realized that it couldn’t meet demand. Apple kept its prices high, even when its competitors sliced theirs. This kept profits up but sternly discouraged Windows users from switching. Meanwhile, Apple failed to produce the innovations that had made it special in the first place. The Internet has been the hottest thing in computing. But instead of using its software-design skills to produce the ultimate software for the Net, Apple focused its cyberspace energy on eWorld, an ill-conceived online service. And its flashy new operating system called Cop-land–the one designed to make people forget about Windows 95–is late, still a year away.
Is Apple, the former PC leader, destined to play a supporting role in the continuing drama of high tech? During the Expo last week, I asked two of its top executives, Dave Nagel and Daniel Eilers, about the impact of Microsoft’s much-improved and cosmically hyped operating system. They called it a “great opportunity,” explaining that as long as users were thinking about change, they might consider ditching their Windows rigs for PowerMacs.
Are they kidding? Windows 95 is not an Apple opportunity; it’s a nuclear-tipped Scud lofted toward Cupertino. Apple’s brand-new PowerMacs look hot and are priced to sell. But as far as market dominance is concerned, the game is over. (Especially since Apple admits that shortages may plague the company through the crucial back-to-school and Christmas buying period.) When Nagel and Eilers talk market share now, they don’t compare themselves to their vanquisher Microsoft but break out percentages in the categories where Apple remains strong: multimedia, education and publishing. They cite computer-industry success story Silicon Graphics, which does excellent business filling an important niche, making workstations that churn out dazzling graphics.
If that’s Apple’s goal, the company might one day be known as the most successful niche player of all. But it could have been much, much more.
