So who won the PC wars, exactly?

Posted by: Peter Burrows on August 27

Throughout my first few years of covering Apple in the late 1990s, the focus of the business press coverage (including ours) was about Apple’s disastrous fall in market share—all tied to Steve Jobs’ original sin of not licensing the MacOS. That decision, as my peers and I argued ad nauseum, left the door wide open for Microsoft to set the standard with Windows. That put Apple at the mercy of an indomitable crew of PC makers who outsourced most of the innovation, and seemed destined to snuff Apple and its higher-cost approach to building PCs out of existence.

Well, today another one of those once-indomitable foes has bitten the dust. Gateway has been sold to Acer for a paltry $710 million (that's how low Gateway had sunk; that price was actually seen as a huge premium by shareholders, who raised the stock 50% today. Apple, by the way, has a market cap of $115 billion). Despite throwing every strategy he could think of to fix Gateway's problems--including selling the company to eMachines--PC industry pioneer Ted Waitt couldn't figure out the conundrum of selling a highly-complex product that carries the margins of a banana.

To me, it's a powerful reminder of the wisdom of Jobs' approach to business--which values profits over growth, and which values market share mostly as a trailing indicator of success rather than a primary peg of a strategy. I remember Jobs pointing this out to me in the late 1990s. He'd only recently returned as CEO of the company, and had cut costs to bring Apple back into the black, but Wall Street was still carping about growth. He said he wasn't concerned, and imparted some advice Ross Perot had given him during Jobs' dark days at NeXT Computer: maintain your profitability, and you'll be able to live another day. For an innovative executive like Jobs at an innovative company like Apple, that means another day to come out with breakthrough products capable of quickly eradicating those growth concerns. Can you spell iPod?

Gateway is far from the only proof point that Jobs was right. Back in the day, Apple's main tormentors also included IBM, Dell, Packard-Bell, HP and Compaq. Now look. IBM is out of the business. Dell is struggling mightily. Gateway announced, in conjunction with the Acer deal, that it would buy Packard-Bell. Compaq was bought by HP. Indeed, only HP, Lenovo and Acer are putting up numbers an investor could love, or even much like.

But none are doing as well as Apple. The company continues to grow at three times the overall PC market in unit sales, and profits are soaring even more than revenues. Still, while it's hard to argue with Apple's success, that old obsession with market share dies hard. While Lenovo clearly has the most to lose from Acer's move, many articles mentioned that the Gateway acquisition would vault Acer well ahead of Apple, as well. Who knows, maybe that contributed to the 2.25% drop in Apple shares today. If so, it's a buying opportunity.

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Reader Comments

Tom B

August 27, 2007 11:10 PM

Apple has faced long odds over the years. The Windows monopoly infects our society top to bottom. Apple survives because they make great products, products way beyond anything out of Redmond. They always have, and this has meant their core following has been people like me: professionals--scientists, and artists, and videographers who need to do more with their computers than simple word processing and E-mail. With the advent of UNIX-based OSX, I think the quality gap between Mac and Windows has greatly widened and has become increasingly evident. And the iPod, the new ads, and Apple Stores have served to attract eyeballs. I'm glad I bought at $18.

jbelkin

August 28, 2007 12:41 AM

Not sure why people are still obsessed with the market share thing when it means NOTHING.

Intel inside (or x86 family?)

Internet apps?

Does Google run slowly on a Mac? Yahoo? email? Flickr? YouTube? FaceBook?

Nope.

It is exactly like the auto industry. As long as your growth is greater than the average and you're profitable, it doesn't matter what segement you sell in - as long as you are on four tires or in Appe's case, can get on the Internet ...


Paul

August 28, 2007 12:37 PM

Good article.

Apple's profitable diversification into non-core products and the resurrection of the company from the brink of collapse into, once again, a world class brand has gotta be one of the great corporate success stories of the past two decades.

But with emerging companies, especially from the likes of China, Korea and India, who sooner or later WILL move into Apple’s territory, Jobs and co can't afford to rest on their laurels.

Oh and btw, you can add Digital (gobbled up by Compaq in late 1990s) to the grave yard of the once mighty PC behemoths.

Roberto

August 28, 2007 01:57 PM

"Steve Jobs' original sin of not licensing the MacOS."

Mr. Jobs was stripped of all power at Apple in May 1985. Bill Gates didn't even write to Sculley about licensing until July 1985.

Lars

August 29, 2007 12:27 PM

Apple didn't beat the Gateway people out of biz, the other windows folks did it....with better marketing and greater staying power.

O and by the way IBM will also fall in the next 10 years because they are not in the PC biz. The age of the large mainframe has died, but no one has told the old guys who still use them...They are getting older and will be replaced soon, this will be very interesting to watch over time.

Digital was way ahead of its time with ditributed processing. Way ahead of its time. It killed the company and about 17 other mini computer vendors.

Bruce

August 29, 2007 02:32 PM

Wake up! Apple's success has nothing to do with computers. The ipod and their on-line music has been extremely successful!

Johnny

August 29, 2007 02:34 PM

I'm not sure Apple would be so successful without the iPod (and soon, the iPhone). If they had stayed a computer company, I've no doubt they'd be in great shape but I don't think they'd be worth $115 billion. Of course, Steve Jobs is a great CEO and there's no denying that. All I'm saying is, Peter, is that your article would give the more complete picture if it considered Apple's computers only.

Bruce

August 29, 2007 02:48 PM

How much is Apple paying you to "imply" such crap! Apple only has about 4% of the computer market share and you make it sound like Apple dominates. They do not dominate the computer industry. And you think I.B.M. is going away in 10 years. I.B.M. perfected the "copper clad" process for CPU's, and several years ago, SAVED Apple's ASS and without I.B.M. we would not have what we have today. Oh yes, you ask, "Why didn't Steve Jobs patent his computer and operating system." Well, MANY of us know that it's because they stole it from ZEROX. And you can NOT patent "what" someone else owns.

AG

August 29, 2007 06:20 PM

^^ to the previous poster. I wouldn't be so sure of your assertions as you barely seem to know what you're talking about. IBM does a lot more that just build "mainframes," don't forget we are talking about one of the largest chip manufacturers in the world.

As for Apple.. I for one, never really lost hope.

Roberto

September 2, 2007 07:00 PM

Er, OK Bruce... ZEROX.
Maybe you were trying to tell us something about Xerox?
And "stole"? Maybe you are rambling about the technologies Apple BOUGHT from PARC: "Xerox granted Apple engineers three days of access to the PARC facilities in return for selling them US$1 million in pre-IPO Apple stock (approximately US$18 million net)."

ex2bot

September 3, 2007 05:21 AM

RE: Apple "stealing" from Xerox

Read folklore.org

* The Xerox Star didn't even have overlapping windows! * Apple did take some ideas, but implying they stole a modern windowing OS from Xerox is inaccurate.

Bot

Karl H.

September 3, 2007 11:35 AM

Um, Apple's success is more than just the ipod. Get your history straight Bruce -- Apple's turn around was mostly due to Job's coming back and the iMac line.

As for your comments about Jobs stealing from XEROX (not ZEROX) PARC, several people had seen the research done. It was Apple that help to perfect and mass market it -- as they seem to do for most things. It isn't like MP3 players were a new idea when the ipod came out.

IBM lives for many reasons and will continue to do so, although probably in a smaller capacity than we know today.

Chris

September 11, 2007 01:23 PM

Thanks everyone for setting Mr. Bruce straight; I was concerned no one would. This is public knowledge, Mr. Bruce. You need to read up before posting. Few have done the extensive research that I have on Apple (college does that...), and I can tell you are could not be more wrong. You just make yourself look down right childish posting outlandish comments like that. I actually had a similar experience with a classmate during my Apple presentation. His was on Microsoft. Whilst I stuck to the facts, and did not "bash" Microsoft, that was his entire presentation! Pointing fingers, making outlandish statements (and I quote "While Bill Gates is out saving the world, Steve Jobs is buying $1000 outfits for his keynote addresses"), mind you Jobs wears jeans and black t-shirts...my point is, go do your research, son.

mcse2020

September 24, 2007 01:38 PM

How is this writer defining "PC War?" Obviously, Apple lost the PC War by becoming a top MP3 player manufacturer, proudly carrying a large market share of its own, might I add. Losing the war doesn't have to mean losing money in the process. Apple found a back door out of the PC War and was clever enough to take it and survive with its I-Pod line. Apple's not stupid, but did certainly was the loser when I comes to the Personal Computer.

Phil Morettini

September 24, 2007 02:12 PM

You're missing your own point--Microsoft won the PC wars. They simply outsourced the low margin hardware portion to all the companies that you talk about. Apple still made a huge mistake; they could have been Microsoft. Apple has rebounded with other great non-PC products--but who's PC business would you rather have today--Microsoft's or Apple's?

Brian K Seitz

September 24, 2007 08:27 PM

Facts:
XEROX:PARC had the idea, but couldn't see the business case, nor marketing savvy. Apple came and saw a market. It was able to market to a small and growing hobbist community and later schools

IBM: It saw a potential market based upon Techtronix workstations and growing CPM market for small business. Due to internal infighting the PC development GM took a step to outsource most of the components, including the OS. At tht time S/W was consider a neccisary evil and not really a big deal. Bill Gates and company were smart enough to see an opporunity that IBM didn't. IBM has helped Apple many times; setting up automation lines, PowerPC, etc.. That does not mean they saved Apple's butt.

Microsoft: Small aggressive company, with savvy marketing that grew strategically by leveraging its business model and growing from programming tools to OS, to desktop apps to servers and business apps and now services.

These were all smart people that at one time hit the mark and may again at times hit the mark, however, they are human not gods.

Will Apple survive, Will IBM survive, Will Microsoft? They may but not neccesarily in their orginal form. Like US Steel, they may evolve into something comletely different. IBM may not be considered a computer company much longer and may ressemble Kelly girls as it is fast becoming the largest contingency labor force on the planet. Apple is becoming more Entertainment products, and Microsoft is starting down the road IBM had taken in the 90s of spliting into S/W, Hardware, and Services.

Aaron

September 25, 2007 09:45 AM

Well.....Apple has made a nice turn around from being down. However the current model of Apple is mostly on handheld devices, not PC or server. I know that they do make servers but the company does not compete in this market. Hndheld devices cannot be considered or compared to computer companies,otherwise we would be comparing Virgin to Dell. Yeah,that doesn't sound right.

Vernon

September 25, 2007 11:32 AM

Yes Apple is doing great today. But its computers of yesteryear sucked bad. There was a reson why high schools were the only ones to have an Apple. They did nothing. Only time made Apple a better computer, and the only that keeps Apple alive now is Ipod, Iphone, and other useless junk. If Apple wants to get back into the computer game, it needs to take that big ball of money they are making off of that junk, and put it into making the most kick azz computer the world has ever seen. It wont be long when anyone who wants all that iPod juke has one. Then what?

Apple needs to either make computers or Ipod junk, and the money for now, is iPod junk. I am a computer nut, and I know what Apple's are good for, and for the home user they suck till they added Windows. That says it all. But are they going to stick with it? Or go back to the iPod junk??? Make up your mind, Apple....

Old mainframer

September 25, 2007 01:18 PM

I think all you kids need to be spanked. Gates bought an OS from some guy for $25k when asked by IBM to develop a DOS for its new PC. Gates lied and said he had one. MS stole the whole concept of Windows from Apple who stole it from Xerox.

Saying a thing does not make it true. And believe me, mainframes and old guys are NOT going away very soon. Try running GM, Ford or the national govt on a PC LOL

Brian K Seitz

February 22, 2008 09:44 AM

Old Mainframer,
Ex-IBMer here at IBM during PC days. [Still have one of the first produced out of Boca] Gates may have stretched the truth, but technically didn't say he "had" an OS. He said he could deliver and OS in time to meet a very agressive schedule.

GM, Ford, and US Gov. take a look the precentage of computing power applied to application and "running" these organinzations is now on the PC/Server side; even SAP

The interesting thing about the GUI folklore is that elements of it are under pattent by IBM (GDDM, etc..)

What Microsoft has done and continues to do rather well is commercialize software. The entire eco-system around Microsoft is around the commercialization of S/W: Software, Hardware to run the software, books and training about the software, certification processes for professionals, certifications for well behaved programs and device drivers, etc..

The plain facts are not much of the IT h/w and s/w have disappeared off the map. I still see and occationally work on PDP-11 and Honeywell Level 66 stuff, Cobol is still alive and running, though slowly getting replaced with monster applications like SAP.

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A blog on the daily doings of Apple and the many companies in its orbit, with insight and analysis by two longtime Apple-watchers BusinessWeek Senior Writer Peter Burrows and BusinessWeek.com Senior Technology Writer Arik Hesseldahl.

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