At the launch of Apple?s high-octane Only Apple campaign in May, UK managing director Jon Molyneux dropped a clanger which was a bit too close to the bone to be funny: ?The Worldwide Developers Conference had a great turnout ? two people attended.? The assembled company of press, PRs and resellers laughed nervously after they realised it was a gaffe.
Anyone who has relied on selling Apple for revenue could have been forgiven for thinking he was serious. After peaking at $11.5 billion in 1995, Apple?s sales slumped steadily, hitting an all-time low last quarter when the company turned in a loss of $708 million. Apple?s share of the desktop OS market declined to 4.2 per cent in Q1 1997, compared with Windows? 89 per cent. Nearly 3,000 jobs were slashed across the worldwide operation, with Apple UK shedding 12 per cent of its workforce, and the company has admitted it may not return to profitability in its fourth quarter as it previously anticipated.
A slick piece of PR in the ?yes it hurt ? yes it worked? tradition, the Only Apple campaign was designed to reassure everyone from major business partners to the general public that Apple had taken a long, hard look at itself, focused its marketing and was back in the driving seat.
?The fundamental message for dealers is, OK, we?ve had pro- duct issues, we?ve had results issues, we?ve had a restructure and lost jobs, which wasn?t exactly pleasant. But that was then. It?s behind us,? says Molyneux. ?But we need commitment and confidence from our channel to bring Apple?s new technologies to market.?
Molyneux knows where Apple went wrong and is determined to address each of these issues. ?Over the past year Gil Amelio [Apple CEO] has proved beyond reasonable doubt that he has strengthened the balance sheet immeasurably. It ain?t over yet, but most of the issues that dogged Apple in the darkest days, such as quality and over production, have been fixed. The OS road map had been unclear up until early this year and a lot of people have just been waiting for us to declare our intentions.
?When we announced Rhapsody, our partners and resellers sat up and said: ?OK. Now let?s get on with it?.?
His strategy for Apple is shaped by the build-up to the release of the Rhapsody operating system next summer. ?When Rhapsody comes to market, the rules of the Apple game will change,? he explains. ?Up until then we will have a clearly defined marketing strategy, which is to target our three core markets ? publishing (in all its guises), education and consumers ? very aggressively.
?Where we may have been wrong in the past is to have lots of very creative people with very different ideas. We now have a single, unified marketing team with clear objectives.?
To some extent, Molyneux?s ?new Apple? positivity is filtering through to the channel. Many resellers took courage from the Only Apple campaign, which reaffirmed the strength of the brand. Justin Anderson, marketing manager for Apple distributor Computers Unlimited, says: ?Apple is as strong a brand as Coca-Cola, and the campaign really brought home the quality of the brand.?
Steve Rush, marketing manager for Rapid Group, which owns a raft of direct and indirect Apple dealerships, felt the campaign had done a lot to improve customer confidence in the company. ?Apple is a high-calibre product. All that people needed was some kind of reassurance that the company was actually going to be around in 12 months,? he says.
Research suggests the Mac faithful are indeed as faithful as ever. Dataquest backs up Molyneux?s claim that Apple has 80 per cent of publishing market share. Ian Mills, managing director of Artworker Systems, and a member of reseller group the Apple Publishing Alliance, thinks publishing and creative customers still believe 100 per cent in the product. ?In my customer base, more than 95 per cent still want Apple hardware. We just think it?s time Apple stopped trying to buy its way into markets it doesn?t have.?
Hugo Kirby, MD of corporate Apple reseller Trams, agrees: ?There?s a lot of hype about publishing and creative industries moving over to PCs but I haven?t seen much evidence of it. More corporates may be running NT servers, but the workstations, in the vast majority of cases, will be Apple Macintosh.?
The fidelity of Apple?s direct customers hasn?t escaped Molyneux?s attention and he has promised to reward the loyal dealers with extra soft dollars for marketing. ?We?ll improve the business proposition for the most loyal dealers ? financially, making changes in their terms and conditions where necessary to reward loyalty.? He identifies several key ?staging posts? over the next 16 months, during which loyal resellers will have access to extra soft dollars, but will be expected to pull out the stops in return. The first such hurdle will be the launch of Mac OS 8, expected late summer.
In addition, Apple?s new product line is clearly designed with the core sectors in mind. The product strategy over the next 16 months focuses on the high end, featuring a new line of Power PC processors for desktops and servers, which will run at speeds of up to 400MHz. The Power PC AIM trio (Apple, IBM and Motorola) will develop a new set of multimedia extensions called VMX, designed for optimised digital video and 3D graphics processing, expected to ship late in 1998.
Apple has improved its networking portfolio, with 10/ 100Base-T networking, universal serial bus and enhanced Ethernet capabilities. Mac OS 8, currently in beta, will feature a native finder, speeding document access. All Apple desktop products are now branded as Power Macintosh, dropping the commercially unsuccessful Performa brand with its home PC overtones.
One key raft of Apple?s product roadmap is continued commitment to the Quicktime multimedia environment. This is a clear attempt to make the growing Web design and new media community feel as warm and fuzzy about Apple as the entrenched publishing market.
Research from IDC indicates that about 60 per cent of Web pages are created on Apple hardware. But, according to Tim Carrigan, managing director of creative Web studio Noho Digital, this may be changing. ?Apple has a fairly entrenched position in the online market, because creatives ? people creating multimedia graphics and sound ? still use Macs. But innovation in the internet area tends to come first on Windows. And most of the new media target audience runs Windows. So the people doing HTML, back-end server coding and Java also use Windows.? Carrigan estimates that the Mac OS has about half of the installed base of new media companies.
The channel?s attitudes towards Apple split fairly cleanly between the Mac specialists, which the company keeps close to its bosom, and those who just happen to carry Mac product. Duncan Wilkes, sales and marketing director for off-the-page reseller Action Computers believes that if you don?t have the core customer base and the generous marketing funds provided by Apple, there?s little incentive in carrying product.
?Unless you?re one of the chosen few, you get almost no marketing help, terrible fulfilment and bad information about availability of product. Most indirects only stock Apple by default, and the demand for Apple product gets smaller and smaller with every quarter.?
Apple has always had a reputation for arrogance towards its resellers. To get Apple Centre status, the company still requires resellers to carry 100 per cent Apple product, and provide Apple-branded shopfronts.
The UK channel was badly knocked by the UK restructure. Many resellers felt the management reshuffle of the UK operation was handled badly. Apple laid off its distribution sales manager Ed Ewing, while promoting Terry Martin to channel director, only to have him defect to Samsung a few weeks later. This was followed by a U-turn from senior management as they invited Ewing back to fill Martin?s vacated shoes, amid (still persistent) rumours that he was going to head Frontline?s Macintosh division.
Despite Molyneux?s efforts to create a coherent marketing and channel strategy, many feel Apple lacks direction. ?Apple is a management pantomime,? said one indirect reseller. ?It?s about as confidence-inspiring as the Tory Party.?
Another force luring resellers away from Apple is the availability of ever cheaper and better Mac clones (computers produced by third parties using Apple hardware specifications and the Mac OS). Apple rejected the idea of licensing its operating system back in 1987 on the grounds that clones would eat into Apple?s market share. But in 1995, with sales plummeting, the company bit the bullet, agreeing that it was in its interest to let other manufacturers grow the market.
And it worked. According to US market research firm Computer Intelligence, the Mac OS platform market share grew from eight per cent in November 1996 to 11 per cent two months later. In 1996, Apple generated $6 million from licensing fees. But Mac clones ? now manufactured by Umax, Power Computing, Motorola and Daystar ? outnumber Apple-branded products bought in the US, according to Mark McGillivray, who cites research by his own company which says of the 11 per cent Macintosh slice, only about five per cent is Apple-branded product.
Perspectives on the clones tend to be split on predictable lines in the channel. Those carrying mainly Apple-branded product were disappointed when Apple failed to put clone licensing prices up in March as suggested. Those carrying a mix applauded, believing that to up the licensing fees would kill the market off. For many, the only true hope for Macintosh the platform is to rely less on Apple.
Apple is expected to raise licensing fees as the new technology associated with Mac OS 8 comes to market. For David Jesner, managing director of DAS Securities (which owns several Apple Centres), clones are little more than parasites, feeding off the R&D investment of Apple. ?Anything worth having isn?t going to come cheap,? he says. ?Our customers only want the machines with the Apple badge on the front.?
This view is by no means representative. Sue Reid, business development manager for the Mac division at Ingram Micro, said that although Ingram has no current plans to carry clones ?we certainly wouldn?t close our doors to them in the future. It?s one to watch.?
And then there?s the war of attrition with Windows. Even traditional Macintosh standard-bearers such as Computers Unlimited (CU) admit they are keeping their options open. CU relies on Apple for about 80 per cent of its revenue, and carries no clone computers (although it does provide non-Apple peripherals for the Mac).
But CU subsidiary Abacus, set up to distribute Mac clone manufacturer Radius, makes no secret that it wants to distribute more Windows-based products. Abacus general manager Simon Ellson freely admitted when Radius acquired PC Dos-card upgrade business Reply that he wanted to ?reduce reliance on the core Macintosh product set?.
However strong Apple may be in niche markets, its future depends primarily on the developers. The new operating system roadmap promises cross- platform functionality. At the Worldwide Developer?s Conference it was announced that Yellow Box, the application programming interface at the heart of Rhapsody, will support five platforms, ending the need for developers to write several times. Yellow Box is also designed to allow backwards compatibility with the current Mac OS, and will include capabilities to write in C, C++, Objective C and a range of Java- based languages.
Molyneux thinks the security of compatibility will guarantee the survival of Rhapsody and Mac OS. ?We believe this will stop people defecting. Developers can write once for one of five platforms. It just means two more bites of the cherry, in terms of revenue stream.?
Carrigan thinks the rot may have already set in, and the Mac?s days as a mainstream desktop OS are numbered. ?It would be difficult to win back the dominance which the Mac once had. Technological innovation these days happens for Windows first.
?There?s less and less reason to develop for the Mac. Developers find it hard to believe anything Apple says any more. We?ve had all these technological promises like Copland and Open Doc dangled before our eyes and then whipped away just as people start talking about them.?
The view from Silicon Valley is even more bleak. McGillivray, an Apple watcher at H&M Consulting in California, suggests that morale at Apple?s Cupertino headquarters is at rock bottom. ?Estimates from people I?ve spoken with inside the company range from ?They?ll be in bankruptcy court by the end of the year? to ?They might raise the stock price enough for someone to want to buy them?,? he says.?
He believes Apple the hardware manufacturer is now beyond salvation, and its only redemption could come through focusing on licensing. ?If Apple faces facts, and adapts into a pure licensing organisation it will be truly compelling.?
Carrigan broadly supports this view. ?The Mac still has an important role in publishing, but it will become ghettoised as a niche creative tools in that market, and in sound and design areas. As a mainstream desktop platform, it?s dead and buried.?
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