Apple: A Product Plateau?

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In his keynote at the Worldwide Developers Conference in July, Jobs said there are "three parts to Apple now"—the Mac, the music business including the iPod and iTunes, and the iPhone. He used the image of a three-legged stool to make the point. I prefer to think of it as a tripod, and I think Apple can and will do very well to enhance and grow these three legs without the need for building a fourth.

Consumers Concerned With Credit

And would that be such a bad thing? With the economy heading into certain trouble, consumers around the world are paring discretionary spending. The marketplace for new products that might change the world may have hit a saturation point, and consumers are more concerned about lowering the balances on their credit cards than on maxing them out on new stuff.

Apple's in a very different place than it was seven years ago. On the eve of the iPod introduction, Apple had just emerged from debacle of the Mac G4 Cube and for most of 2001 had been reporting financial results that were unimpressive by today's standards. Less than a week before the introduction of the iPod, Apple reported a $25 million net loss on sales of $5.4 billion for the fiscal year. Sales for the quarter that ended September 2001 quarter were less than $1.5 billion.

Analysts expect that Apple will finish its September quarter this year with $8 billion in sales, and end the fiscal year with $32 billion in revenues.

Press the Offensive

Now, Apple and its customers would be well-served if the company concentrates on making everything better, faster, and cheaper. While the Mac is in the minds of many already a better personal computing platform than Microsoft's Windows, it's time to press the offensive. There is no reason that better Macs and better Mac operating system software can't push Apple's market share in the U.S. north of 10%, from 8.5% in the second quarter.

Continued software upgrades will add new and improved features and functionality to the Mac and iPhone, increasing the appeal to new customers and keeping existing users happier longer. It's also time to get things working right that haven't. Case in point: MobileMe, which illustrated that Apple overreached by trying to launch too many products at once.

And for all its relevance in North America, I think the iPhone gives Apple an important opportunity in international markets. As I've argued before (BusinessWeek.com, 9/20/07), the iPhone establishes a beachhead Apple can use to introduce itself and its other products, especially the Mac, in markets where it hasn't participated strongly. Markets like China and Russia come to mind.

No Time for A Breather

I'm not suggesting that Apple should slow down and take a breath on the innovation front. Not at all. The company now operates within substantially wider borders than it did when it unveiled the first iPod in 2001. Rather than widening those borders even further, there lies within them plenty of room for important, even if not world-changing innovations—not to mention scope for expanding Apple's business.

Hesseldahl is a reporter for BusinessWeek.com.