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SEPTEMBER 4, 2002 BYTE OF THE APPLE By Charles Haddad Redmond's Prices May Cost Gates Dear Microsoft's costly software has seen PC makers turning to alternatives. The trend fosters innovation, which is a synonym for Mac
It looks like Mac users aren't the only ones rebelling against the high price of Microsoft software (see BW Online, 8/21/02, "What Mac Fans Want from Microsoft"). Indeed, HP said price was the reason it was swapping Office for WordPerfect. And it won't be hard to implement, given Microsoft's recent antitrust concessions. HP can now actually replace Office with WordPerfect on the Windows start-menu bar on its Pavilion PCs. OUT OF STEP. HP's switcheroo speaks volumes about Microsoft's growing struggle to maintain its dominance. The company is increasingly out of step with the market, where PC makers are slashing costs to maintain profits in the worst climate in a decade. High-priced Microsoft software is considered part of the problem -- not the solution. What does that have to do with Apple? Plenty. No computer maker is an island -- although Apple likes to pretend it is. The company is part of the PC community, struggling like everyone else to cut costs and maintain profit margins. Like HP, Apple has a harder time selling computers when the leading software maker keeps its prices high in a soft market. Why buy a newer, more powerful machine if you're not willing to pay $400-plus for the latest version of Office? Apple has a special relationship with Microsoft. The two form the opposite ends of the life force -- the qi, as the Chinese would put it -- of personal computing. Apple is the yin to Microsoft's yang. Everything one does affects the other. If users and PC manufacturers are growing disenchanted with Microsoft, then Redmond's power is waning, which gives Apple greater room to maneuver. DRIVING INNOVATION. The disenchanted are more willing to consider alternatives to the status quo. It becomes less important that there's a Mac version of Office. And that creates more opportunity for smaller developers, such as Mariner, Nisus, OmniGroup, and Mesa. These small fry have long driven innovation in PCs. And innovation is the lifeblood of the Mac platform. The more that users are willing to consider innovations, the stronger Apple's hand in the market. So is Microsoft toast? Hardly. Office still has 300 million users worldwide. You won't find it in the discount bins of CompUSA anytime soon. But it does appear the giant's qi is weakening. While surviving the government's attempted breakup, Microsoft appears increasing like a wounded giant. The antitrust trial has emboldened allies and competitors alike to challenge the company. Few PC manufacturers would have dared to yank Office from their machines two or three years ago. But HP -- which is is now considering whether to install WordPerfect on its newly acquired Compaq brand of home computers -- is only the latest PC maker to dump Office. Sony, the fastest growing manufacturer, includes WordPerfect on a number of its PCs. Leading notebook maker Toshiba uses IBM's Lotus SmartSuite. All cite price as the reason for the switch. IT'S ACADEMIC. Microsoft has been its own worst enemy, continuing to price Office as if we were still in the boom market of the late 1990s. But that may be changing. In a stealth campaign, Microsoft has been selling an academic-branded version of Office at discount retailers such as Target and Wal-Mart. That version, priced $330 less than the one sold in computer stores, used to be available only at campus bookstores and other school outlets. While you can't upgrade the academic version, it does includes all the features. As Mac enthusiasts, let us hope that some Microsoft honcho squashes this stealth program. The longer Microsoft remains blinded by its own brilliance, the better it will be for Apple.  Haddad, Atlanta-based correspondent for BusinessWeek, is a long-time Apple Computer buff. Follow his weekly Byte of the Apple column, only on BusinessWeek Online Edited by B. Kite Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | SEPTEMBER |
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