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“Apple’s Share Loss Results Not From its Strategy, but From its Constant Shifts in Strategy” – Nathan Brookwood, Insight 64

X-bit labs publishes a column provided by Nathan Brookwood, principal analyst at Insight 64, below.

Apple Design Win – Clean Sweep for Intel and Otellini

It’s been less than three weeks since Paul Otellini moved into the CEO’s cubicle at Intel, and already he’s put his mark on the company. Try as they might, neither Andy Grove nor Craig Barrett could ever claim that all major personal computer suppliers used Intel's chips. Apple’s announcement at yesterday’s Worldwide Developer Conference marks a clean sweep for Intel and Otellini. Apple’s audacious move may create some near term problems for the company, but there's little doubt that when the dust settles on this action, Apple will finally be driving down a processor roadmap with no dead ends in sight.

Nathan Brookwood

Today’s announcement signals the start of Apple’s third attempt to find a viable long term CPU strategy for its Macintosh line. During its first decade, Apple relied on the Motorola 68K. Just as the Mac’s market share peaked at twelve percent, Apple began its migration to the PowerPC, a move that triggered a long slide in market share to the current level of about two percent of PC units on a worldwide basis. I’m sure Apple and its faithful legions hope that today’s move will arrest that slide, and commence a new era of market growth for one of the industry’s favorite underdogs. Insight 64 has not yet bought into that vision.

Apple’s Market Share Will be 1-1.5%

From our perspective, Apple’s share loss results not from its strategy, but from its constant shifts in strategy. The Wintel world places great emphasis on backward compatibility; I can still run most of my old Windows 3.1 programs on my dual-core Windows XP system. Apple’s customers must deal with periodic tectonic shifts in system architecture. Each shift forces ISVs and users to acquire new software and to learn new ways of doing old things. This is expensive, time consuming, and unproductive.

Photo by PC Watch web-site

In the course of each transition, some disaffected users abandon the cause and move to the more placid Wintel world where users upgrade software on their own schedules, rather than those of their platform vendors. By the time the dust settled on the 68K to PowerPC transition, Apple’s market share had been halved to six percent. It finally stabilized in 2000, just in time to begin its next descent as Apple shifted from MacOS 9 to OS X. (The company can’t even decide whether to use Arabic or Roman numerals to label its major releases!).

Insight 64 believes this latest announcement will once again cause some Macolytes to scratch their heads and wonder if it’s worth it. Should they continue on their arduous trek, or is now the time, given that Apple has sanctioned at least half of the evil “Wintel” empire, to throw in the towel and sell their souls to the Win devil as well.

We anticipate that when the dust settles on the PowerPC to x86 transition, Apple’s market share will be lower than it is today, ending up somewhere between one and one and a half percent. At some point, even with Steve Jobs’ awesome ability to attract attention for the company, Apple’s declining market share will doom it to footnote status. At two percent, doesn't have too much further to go in this regard.

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