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Here we go again. Apple Computer swoons once more, and the Chicken Littles come out of the barn. They're having a field day with the company's projected loss of between $225 million and $250 million for the all important holiday season (see BW Online, 12/11/00, "Why Apple Is Losing Its Appeal Again"). Apple is doomed, the naysayers are crying, with the Mac headed into the dustbin of history just like the Commodore 64 before it.
Oh really? You mean like in 1997, when naysayers were confident Apple would either be sold -- to IBM, of all companies -- or go bankrupt. In a two-year period, sales collapsed from a high of $11 billion to about $6 billion. Meanwhile, worldwide market share slid from 10% to under 3%. Back then, the question became: Should Apple focus on software, licensing its crown jewel of an operating system to other manufacturers? Or should Apple remain unique in designing both computer and operating system so that they fit hand in glove.
In the end, Apple settled on the latter strategy, a move pushed by Steve Jobs as he regained control of his old company. Apple rallied under Jobs's direction to become a profitable and much-envied technology leader. And hear me now: There's no question in my mind that Apple will do it again -- and again. Let me explain why.
ROCK OF AGES. In my view, Apple is not just another company. It's more like The Doors, the '60s rock band that, though now defunct, still enjoys a mystical following. Not only do old Doors fans keep listening to the music of Jim Morrison but the band keeps attracting new followers -- even though its charismatic lead singer died more than 30 years ago. It will no more die than Light My Fire will suddenly disappear from the airwaves. This is the End? No, Apple's base of fans is simply too loyal -- and resilient.
Right now, Apple is caught in the same downdraft buffeting all computer makers. Don't forget that Dell, Gateway, and Compaq are all reporting that profits are falling with slowing sales. Computer makers are no different from any other consumer retailer. They ride a roller coaster that cycles through periods of boom and bust. It's a cycle as natural, and as inevitable, as the monsoon rains in Asia.
Computers, like movies, books, and music, are a hit-driven business. A popular new technology or piece of software powers sales. Consumers are bored with what computer makers are offering. There's no hot new game, such as last year's The Sims, to get them excited enough to buy new, more powerful computers.
Because of its special role as the computer world's stylish alternative, Apple is especially vulnerable to the industry's monsoons. It's truly a company that swells and sinks with great new ideas -- or the lack of them. Jobs's iMac propelled the company out of its doldrums. The G4 Cube has failed to sustain that momentum. But the Mac, ultimately, is a symbol -- even a cause -- to rally around. It engenders an almost fanatical following among the faithful. Those who dare question the Mac's future are tarred as infidels.
LOYAL TO A FAULT. The upside of this fanaticism is that Macheads don't switch brands to chase the lowest price -- something that's very common among PC users. No, Mac users stay loyal, feast or famine. And given Apple's rocky history, enthusiasts have become accustomed to adversity. For sure, Apple's installed base of 40 million Macs is small compared with the 1.4 billion PCs worldwide. But allegiance in the PC world is scattered among scores of companies, while Mac enthusiasts are committed to one brand, one company. Other consumer manufacturers would give their eyeteeth for that kind of backing for a product.
It's this intense loyalty that explains Apple's uncanny ability to bounce back time and again. It represents a bedrock from which to rebuild. Apple's ability to rebound this time hangs on its new and hugely ambitious operating system, OS X. The company plans to introduce it early next year -- just as the current slowdown in consumer spending may well be accelerating. That's gutsy. If OS X fails to wow Mac users, particularly if it fails to wow them immediately, hold on tight! Apple will be in for one of its white-knuckle plunges.
But if OS X proves popular, Apple's recent woes will be forgotten. Jobs once again will have relit the fire -- and it won't be a funeral pyre.
When he's not listening to old Doors albums, Haddad is Atlanta-based correspondent for Business Week and a Mac aficionado Follow his columns every week, only on BW Online. Edited by Thane Peterson
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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