Why Apple Scares the Wintel Vendors
You might think that this is a trick question. On the surface, the answer should be the iPad and its eco system. But the iPad is a new category and while it is true they fear Apple’s potential of owning this market and making it hard to create products that are competitive, this is not the product that they fear the most.
The product they fear the most is Apple’s MacBook Air. When Apple first introduced the MacBook Air, a lot of the PC vendors thought it was a gimmick. While it was very thin and light it was very underpowered. And well over $1000. PC Vendor’s thin and lights (their definition, not mine) had broken $1000 and PC”s under $700 were dominating the overall market for laptops. And this first generation MacBook Air had no impact on their laptop market at all.
The only company to kind of take this Apple move serious was Dell, who created the Adamo XPS, supposedly their version of the MacBook Air. But while it was relatively thin compared to all of the other “thin and light” laptops on the market, it was also so high priced that people stayed away from it in droves. At least for the short term, Apple’s MacBook Air was considered the thinnest and lightest laptop albeit slightly underpowered and with Apple’s upper end pricing scheme behind it.
In the mean time, the demand for cheap PC’s started to take off. In fact, a new category of thin and lights called netbooks was all the rage for about two years. And while Steve Jobs considered netbooks toys, he watched its growth with interest. While he publicly said Apple would never make a netbook, it was pretty clear that Jobs and company had decided to make the next MacBook air lighter and thinner than a netbook yet as powerful as most mid to high end laptops. And, while their starting model is $999, their proprietary unibody casing and integrated graphics chips still make these the most powerful ultralights on the market today.
But when Apple also decided to kill their MacBooks, or their entry level laptops and only bring to market MacBook airs at prices close to their older entry level models, the PC vendors sat up and took note of this quickly. To them it signaled that Apple is getting ready to start a full out assault on what has been sacred territory for them. Sure, they can still create laptops under $500 and sell them all day long. But they also realized that Apple is now setting the bar for laptops at a new level by using the MacBook Air to help define the next generation of laptops and, they know that with Apple’s buying power and International reach Apple could price them even more aggressively in the very near future.
The PC industry itself had somewhat anticipated this and is working on creating what they call Ultrabooks, Windows based systems that are much like the MacBook Air. But the one that is on the market today that is the closest to the MacBook Air is the Samsung 900 3X which is priced about $1600 Euro’s in Europe and well over $1800 in the US. Apple’s comparative model is $1599. Although the Samsung 900 3X is a solid product, Apple’s lead in these types of “ultrabooks” along with their stores will help them sell even more of these in the future. In fact, in the last earnings call, Apple said they sold about 4 million computers in the last quarter and that 73% where laptops. And we believe that 75% of those where MacBook Airs.
Given the MacBook Air’s pricing and Apple’s apparent commitment to be even more competitive with the mainstream PC vendors with this model, signals to me that they really want more of the hallowed ground that traditional PC vendors tread today. And it looks like Apple is about to crank up their laptop supply chain prowess, industrial design skills and marketing and retail emphasis and will go right at the heart of these PC vendors most profitable laptop segment.
Oh yeah, and they will soon have their iCloud offering that will bring their eco-system in sync to their laptops and desktops as well, another value added piece of technology that I am sure will strike a chord with users. And given the possible halo effect of the new iPhone 5 when it comes out as well as the iPad and the iCloud, I am certain that Apple will drive even more people into their stores and will put an even greater effort on selling MacBook Airs and MacBook Pro’s in the future.
Yes, the iPad is a real concern for the PC vendors as Apple has a huge lead in tablets and strong demand. But if Apple starts eating into their laptop market share, this will have the greatest impact on these PC vendors in the future and make it even harder for them to make strong profits on this part of their laptop business.