Apple is trying to stick it to Microsoft again, this time releasing an expanded-memory iPad just days before the release of Microsoft's Surface with Windows 8 Pro. And, for the first time, Apple is being candid in saying this iPad version is tailored specifically for enterprise and business power users who need more storage and processing power.
The admission of enterprise targeting is important, as Apple hasn't been one to truly - or at least openly - engage the business marketplace. It's well aware that millions of its iPhones, iPads and Mac PCs are used by corporations and corporate users. However, Apple has coyly ridden the BYOD wave, preferring end users to bring their devices into their workplace and forcing IT shops to support their devices.
Releasing a device with enterprise ambitions could be a sign that Apple is truly running out of steam amid market saturation; rising competition from rivals such as Samsung, Google and Amazon; and general commoditisation. To maintain its growth, Apple will have to either invent a whole new product segment as it did with the iPhone, iPad and iPod; or it will have to expand its market reach and sales capacity.
In other words, Apple may find itself standing at the same crossroads as Dell was in 2006 when, after many years of resistance, it opened up and embraced the channel.
Let's look at the numbers. In the fourth quarter of 2012 (Apple's first fiscal quarter), Apple generated more than $54.5bn (£34.4bn) in gross revenue, mostly through the sales of nearly 48 million iPhones and 23 million iPads. While profits narrowed due to rising distribution and marketing costs, Apple's financial performance remains the envy of the rest of the technology landscape.
Here's the problem: Apple hasn't done anything new since the iPad. For much of the last 10 years, Apple has masterfully leapfrogged the market with new product types. The iPod and iTunes revolutionised music. As the iPod peaked, Apple released the iPhone, which disrupted conventional wireless communications. The iPhone was still going strong when Apple introduced the iPad, which obliterated the netbook market and disrupted the notebook segment.
In each case, Apple was ahead of the curve, launching new products with near-100 per cent market share. That's been the strategy floating Apple's rise to the top of the IT pyramid.
Apple's new lacklustre iPad for professionals is a sign of that strategy running its course. Apple PC sales are sliding in proportion to the rest of the market. Apple keeps telegraphing the release of a smart television line, but vendors such as LG, Samsung and Vizio are already two or three generations into their smart TVs. And, perhaps the worst news of all, Apple's tablet market share slipped from 52 per cent in the fourth quarter of 2011 to 44 per cent in the same period of 2012. Conversely, Samsung is seeing huge gains against Apple. The South Korea-based electronics giant saw its tablet market share balloon in the fourth quarter from 7 per cent in 2011 to 15 per cent in 2012.
Dell went through the same cycle. In the late 1990s and early 2000s, Dell and its direct model could do no wrong. The combination of low pricing and fast fulfillment made it the darling of PC users everywhere, and propelled it past rivals such as Hewlett-Packard, Compaq and IBM (pre-Lenovo sale). Dell used its PC muscle to unsuccessfully branch into other consumer electronics, including MP3 players and flat-screen televisions. Dell's success is probably one of the contributing factors of the 2002 merger of HP and Compaq, too.
The success of Dell's direct sales model couldn't be sustained. The consumer ventures failed miserably. HP, combined with Compaq, recaptured the top PC crown. And Dell's server business stalled as it couldn't compete in mid-market and enterprise devices. By 2006, Dell's declining fortunes were so dire that then-CEO Kevin Rollins was ousted, founder Michael Dell retook control, and Dell - at the behest of high-powered consulting firms - openly embraced the channel for the first time.
Now, Dell is still working on rebuilding its fortunes. It has spent billions of dollars on expanding its enterprise hardware, security, managed services, professional services and cloud computing offerings to make it more of a portfolio company supported by channel partners. Progress is slow and the notion of it becoming a private company is to allow it to make changes faster than Wall Street will allow. Yet, despite its challenges, Dell can point to the channel as a success: partners deliver more than one-third of Dell's revenue compared to nil just five years ago.
On the first anniversary of Dell's channel launch, my colleague Chris Gonsalves and I met with Michael Dell in his Round Rock, Texas office. Given the early success of Dell's channel efforts, we asked what advice he would give Apple about working with the channel. He coyly deflected the question by saying "we're not in the business of giving advice to other companies".
If Apple doesn't come up with a totally new hit product, it will have no choice but to embrace the channel and compete more forcefully in the field with partners to stave off competitive encroachment. The last time Apple fell back in on itself, it had to be rescued by bringing Steve Jobs back to run the company and a life-saving investment by Microsoft. Neither of those options is likely to happen again, and that makes the channel Apple's best hope for sustained success.
Larry Walsh (pictured) is president and chief executive officer of Channelnomics.
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