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Apple Cannot Handle More Than 5-Percent

By - Source: Tom's Hardware US | B 90 comments

I am wondering if Apple may have been just a bit too cocky and simply ignored what storm has been brewing on its horizon.

Google’s Android platform has just become the most popular smartphone platform in the U.S. and is apparently outgrowing the iPhone by a ridiculous margin. Now we hear that Android is likely to prevail in the battle against the iPhone. Is Google Apple’s second Microsoft? Will Apple, once again, drop below 5% market share in its core business?

When the iMac was released more than 10 years ago and when there was the general feeling in the industry that Apple had its mojo back, no one really took Apple serious back then.

In the 1990s, Apple had spent most of its time with its Mac slightly above and mostly below the 5% market share mark. I can remember, when I started my career at a print magazine, that the only reason why we knew there were Macs out there was because the layout of the publication was done with QuarkXPress and that particular software was a pain-in-the-you-know-what on the PC. Dedicated Mac users were about as religious about the Mac back then as they are today, but you just did not take them that serious. As far as arrogance of a PC user goes (I grew up with the PC and I still believe it is a matter of exposure whether you like the PC or the Mac more than the other), we accepted that there was a Mac, but did not talk that much about iot and we did not diss it.

Back then, it was clear that Apple’s walled garden hardware-software business model had failed and Microsoft’s approach to conquer the world with countless hardware vendors that would use its software was the way to go, with all its advantages and disadvantages. Microsoft had found a way to limit Apple’s ability to grow and as long as Microsoft gave customers what they wanted, Apple’s market share was contained somewhere around 5%. It was a time where you just knew that Microsoft would only fail if there was a radical change in consumer needs, market development or if Microsoft sabotaged itself. 

Flash forward, Apple has gone through a phenomenal phase of recovery, growth and conquest. The iPod+iTunes business model hit the nerve with consumers and created a foundation for amazing growth that seemed, until recently, virtually indestructible. To be fair, Apple had some help as well. The markets it was targeting were relatively immature (iPod) with inexperienced companies and, thankfully, Microsoft ended up shooting itself in the foot with Vista. However, Microsoft is somewhat recovering with Windows 7 (but still messes up in the smartphone and cloud space) and we are seeing Google’s Android operating system grow at a stellar pace. It has surpassed the iPhone in sales and popularity in the U.S. already and a global effect appears to be just a matter of time. Canalys recently said that Android grew globally 886% annually, while the iPhone hit just 62% (albeit from a stronger base and both outgrew the industry, which hit 41%.). Nielsen said that Android now captures more new smartphone buyers in the U.S. than the iPhone (27% vs. 23%). NPD noted that Android is now the most popular smartphone platform in the U.S., which is significant, since we know just how much the U.S. is in love with Apple. And then we hear that iSuppli believes that Android will topple the iPhone worldwide by 2012. iSuppli believes that iOS share will rise to 15.9% in 2012, but Android will have 19.4% by then. In 2014, Apple’s iOS market share will begin to decline, the market research firm said.

“Android is taking the smart phone market by storm,” said Tina Teng, senior analyst, wireless communications, for iSuppli. “The OS started with entry level models in 2008, but the flexibility Android offers for hardware designs and its appealing business model in terms of revenue sharing have attracted vigorous support from all nodes in the value chain, including makers of high-end smart phone models. Cell phone OEMs representing all tiers of the industry have committed to support Android, including Motorola, Samsung, Sony Ericsson, LG, Huawei, AsusTek and ZTE. This broad industry support will allow the Android OS’s usage and market share to exceed that of its chief rival – iOS - in 2012, just five years after its introduction.”
Could it be that Apple has messed up its opportunity and will be pushed back below 5% market share in its core markets?

Historic market shares

Reliable market share numbers about Macs are not as available as I would like them to be. The most detailed document I found was Ars Technica’s (5-year old) 30 years of PC market shares. If we believe those numbers as well as spotty numbers from Gartner and IDC, then it appears that Apple’s Mac U.S. share was somewhere around 15% in the late 1980s, about 11% in the early 1990s and just 8% by 1995. The lowest figure I dug up was 2.7% in 2000, which improved to 4% in 2005 and has since doubled to more than 8%. Gartner most recently estimated Apple’s U.S. Mac share at 9.8%. Global numbers are scarce, given the fact that Macs are more popular in the U.S. than they are elsewhere and market researchers usually do not publicly track anything below the five largest players.

However, Apple’s current global share could be just about at 5%, if we believe Net Applications, which uses online usage data to estimate operating system market share. The company indicates that Mac OS is adding share every month. Not much, but it is growing. How much further can it go? And the numbers of today and those of the 1980s and 1990s show similarity. If Apple does not learn from its mistakes in the past, Apple could be insignificant in 2020 again, even if it is touching almost 10% at this time in the U.S. Especially if we think about the fact how much the company relies on Steve Jobs as a leader today.

It is widely believed that the Mac has benefitted from a snowball effect that has its origins in the popularity of the iPod and iTunes. Clever marketing has positioned the Mac not so much as a computer, but as a beautiful consumer electronics device that happens to be a computer. That strategy played very well into a time that commoditized the computer. Apple was able to take huge advantage of Microsoft’s Vista weakness. But that advantage is gone. The iPod is winding down and the iPhone has capable rivals. Apple’s competitive landscape is changing. With Android, Apple has suddenly become the underdog and we are still busy realizing that.      

The present

Apple delivered a stunning quarter result with dazzling sales. But that was before Apple’s antennagate, before Apple deceived its customers and before Android climbed past the iPhone. Apple is still selling every device it can make and the iPhone and iPad are clearly buzzing. But we are also seeing the limits of Apple’s walled garden. In its current environment, it cannot live with the carriers it currently has. Apple can’t make enough products. There isn’t enough variety. Apple can’t reach enough consumers to keep the lead.

We also notice a growing anger against Apple in the industry. Apple’s partners are not happy how they are treated and they are beginning to raise their heads, carefully, so they aren’t facing the wrath of the Jobs and getting sued out of business. Even if Intel just loves to be seen in bed with Apple in public, the company has long complained about Apple’s tendency to ignore existing non-disclosure agreements. The release of the A4 processor was an embarrassment for Intel as Apple openly ditched Intel’s mobile chips. Carriers I cannot name complain how they are treated by Apple and are getting tired of Apple’s arrogance and the way how their employees are treated by Apple’s staff.

Conceivably, Apple is in this game alone. It has no friends and if Apple thinks it can count on the support of others, the company is in denial. Sure, Apple is popular. But popularity is about perception and Apple has created a magnificent cloud of perception. That cloud has no substance and it may weaken at some point. In the end, Apple may not have enough friends to be able to get back up if it is beaten to the ground.

Apple has been told so many times that it is not a great idea to kick your partners whenever you feel like it. If Apple stumbles, it will get kicked back. There are plenty of companies out there that just can’t wait to jump ship as soon as it makes business sense.       

The future: A different Apple

Apple is still riding a tall wave of success. But I can’t quite remember a time in the past five years in which Apple was so vulnerable as it is today. Its damaged public image is just part of the story, even if Apple still seems to be struggling to avoid embarrassments these days. Microsoft has recovered from the Vista disaster. Google has become a serious threat Apple can’t ignore anymore. Qualcomm and Intel are feverishly developing new hardware that is likely to be more powerful than Apple’s own A4 processor – in the future, Apple may not be able to match the development resources of Intel and the A4 processor could become an expensive burden if technology requirements change.

Apple’s success with the iPhone may turn into a greater problem for the company the more successful Android becomes. The iPhone now represents about a third of Apple’s revenue and is in a close relationship with iTunes, the App Store, and - if we believe rumors – with the Mac soon as well. A threat to the iPhone could quickly turn into a threat for Apple’s walled garden. Germany’s Madvertise advertising company recently said that it expects the closed apps such as App Store apps will lose their popularity within 5 to 10 years as developers do not really like to develop applications for multiple platforms and may prefer open technologies such as HTML5. I would have to agree, especially since Apple has lost its legal cover to protect its iPhone from jailbreaking.

Today, it appears that Apple still lives in denial about potential future threats. As much as the company has grown over the past years, it almost appears that more than 5% market share isn’t exactly healthy for Apple’s management and reveals an uncomfortable cockiness that seems to work in Apple’s favor in times of high popularity, but is changing into a threat to the company when it struggles. 

If Google plays its cards well, then it will be Android that turns into Apple’s second Windows. This time, the threat will arrive on phones, mobile devices and desktop computers. Google is executing incredibly well these days and competing with Google will require Apple to start taking rivals seriously, tone down its arrogance, realize that consumers have a brain, shift its business strategy, and build strong and lasting relationships that can weather a storm’, Google will require the company to rethink the iPhone platform and open it up to more carriers with more than just one or two models.

Is it fate? No. Ignorance? Absolutely. Apple had every opportunity to rule the world, but ended up shooting itself in the foot on multiple levels. Just by itself, I doubt that Apple can survive Google and countless other companies that are emerging as challengers, including Amazon that is testing the waters -- unless it changes some of its hardened ways.

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Top Comments
  • 33 Hide
    FATAL STR1K3 , August 5, 2010 10:33 PM
    Only a matter of time until Apple is just another company trying to compete with the big fishes. I have to say, I am glad that the iPhone is not on top..
  • 32 Hide
    cabose369 , August 5, 2010 10:41 PM
    Apple's downfall will be Apple itself!!

    They try to cater too much to their niche cult market while letting the rest of the market go to something else.

    Ultimately brand loyalty (Apple Propaganda) can only go so far with their members before their members realize there are far better alternatives to Apple products that are wayyy cheaper and less restrictive.
  • 26 Hide
    dassox , August 5, 2010 10:36 PM
    Something tells me this time though, Google won't have to bail out Apple so that they still have someone to compete against like Microsoft had to.
Other Comments
  • 33 Hide
    FATAL STR1K3 , August 5, 2010 10:33 PM
    Only a matter of time until Apple is just another company trying to compete with the big fishes. I have to say, I am glad that the iPhone is not on top..
  • 26 Hide
    dassox , August 5, 2010 10:36 PM
    Something tells me this time though, Google won't have to bail out Apple so that they still have someone to compete against like Microsoft had to.
  • 32 Hide
    cabose369 , August 5, 2010 10:41 PM
    Apple's downfall will be Apple itself!!

    They try to cater too much to their niche cult market while letting the rest of the market go to something else.

    Ultimately brand loyalty (Apple Propaganda) can only go so far with their members before their members realize there are far better alternatives to Apple products that are wayyy cheaper and less restrictive.
  • 10 Hide
    nevertell , August 5, 2010 10:43 PM
    But why do we need iTunes? I mean, if someone ported libimobiledevice from linux to other OS's, we could use that. It already supports most of the features I used to use with iTunes, and now I don't need windows at all.
  • 20 Hide
    exodite , August 5, 2010 10:44 PM
    I feel that the main issues that keep me off the Apple platform is neither the much discussed 'Apple tax' nor the distinct style of both the hardware and Apple community but rather their inability to keep up with the times.

    I don't mind paying a premium for either design or functionality but the days when Apple offered innovative and cutting edge hardware along with their prices are long gone. Add that their refusal to adopt widely accepted standards while trying to push things like Firewire, mini-Displayport and the iPhone's propriety connector on us is doing them no favors.

    I don't vehemently dislike either Apple's style in design or pricing but it's way overdue to bring some substance along for the ride.

    Cue my recent notebook dilemma, the new 13" MacBook Pro is a decent enough machine for the price but the inability to connect to our projectors without buying, and lugging around, a propriety dongle turned out too much of a chore. Add to that I can't connect it to my home TV without a second dongle, or to my computer without a third and things get way beyond annoying.

    TL;DR: Apple is trying to be a premium brand with premium pricing while offering less than even mainstream consumers demand from their machines and gadgets. This prevents them from ever achieving mass-market appeal.
  • 9 Hide
    Abrahm , August 5, 2010 10:45 PM
    A really nice article. I agree with, and predicted a lot of what you described when the Droid first came out, and Android was taking off. I have to say I disagree with one point though...

    "Germany’s Madvertise advertising company recently said that it expects the closed apps such as App Store apps will lose their popularity within 5 to 10 years as developers do not really like to develop applications for multiple platforms and may prefer open technologies such as HTML5. I would have to agree, especially since Apple has lost its legal cover to protect its iPhone from jailbreaking."

    I personally completely disagree with this. Web programming is a huge pain, and HTML 5 cannot come close to doing what a real programming language can do on a platform. Developers may not like closed App stores like Apples, but Google's App store isn't a problem. An App store gives developers a channel for people to stumble upon and use their apps that they wouldn't normally find otherwise.

    Maybe it is just my severe dislike of web development, but I would rather develop a cross platform game than develop a web game.
  • 9 Hide
    togenshi , August 5, 2010 10:47 PM
    Amen.
  • 19 Hide
    caustin582 , August 5, 2010 10:48 PM
    This is actually what I've been saying for a long time. Apple's entire business model is based around being the "little guy." They wouldn't be able to function otherwise, unless they were to fundamentally change almost every aspect of how they work. This is why there will never be an Apple revolution. If Microsoft ever falls from its throne, Apple will not be the one to take its place.
  • 0 Hide
    elkein , August 5, 2010 10:51 PM
    There is no way to trim around the fact that they are not the most competetively priced always making them vulnerable. Secondly beating their suppliers and even third party developers with bad deals may even make a developer -eager- to jump ship when other oppurtunities arise. The general ebay seller revolt comes to mind.
  • 4 Hide
    yellowblue , August 5, 2010 10:53 PM
    Apple should create a new sister company to cater the masses like what Asus did with Asrock. This way they will retain the brand prestige and at the same time create more market on the new brand.
  • 20 Hide
    milktea , August 5, 2010 10:54 PM
    From the article -
    Quote:
    since we know just how much the U.S. is in love with Apple

    Please don't generalize the U.S. consumer. Not all are in love with Apple.
  • 3 Hide
    togenshi , August 5, 2010 10:55 PM
    Apple's product **looks** great but when you start digging around you realise that the software is incomplete yet marketed as a functionality. *stares at Address Book server/Push notifications + lack of tape drive/backup support*.
  • 0 Hide
    acadia11 , August 5, 2010 10:56 PM
    It's a catch 22, the simplicity and relative stability of apple OS is because it's closed and apple has a lot of control, but it loses, that if it opened up it's platform more. I'll say this Windows 7 is amazing. And I just checked out Samsung Galaxy S, and it looks every bit is powerful if not more so than that iphone 4g, at the end of the day you can't beat numbers, because droid is open, someone is bound to come up with a product that can compete or beat out the iphone. I wonder how Apple will respond will they make the same mistake.
  • 5 Hide
    milktea , August 5, 2010 10:58 PM
    Apple is too stuck-up to realize that a one-man army never prevails in the long run. You need support from the rest of the industry.
  • 8 Hide
    iam2thecrowe , August 5, 2010 10:58 PM
    The main thing that p**ses me off about Apple is that they basically use the same components as a windows PC, but refuse to sell the OS separately or allow it to be installed on generic PC hardware. If they did this i'm sure more people would give their OS a shot.
  • 7 Hide
    waffle911 , August 5, 2010 10:59 PM
    One of the ways Apple is REALLY shooting itself in the foot currently is by ignoring it's former core market: creative professionals. It's current software offerings are either decaying or becoming dumbed-down and consumer-oriented, while its hardware is losing it's performance edge. Not to mention, after leaving their formerly great 30" display un-updated for nigh on 6 years, they finally discontinued it–and promptly replaced it with a glossy-only, LED-backlit 27" display with a 16:9 aspect ratio instead of 16:10, and losing vertical resolution as a result. And it only has mini-displayport. They've ceded the pro market to other companies such as LaCie, NEC, even LG and HP.
  • 6 Hide
    moeswow , August 5, 2010 11:06 PM
    I completely agree with you exodite. I currently work at best buy and I have the ability to play on both platforms all day. The Macbook Pro's are decent but their priced double what they should be. Considering that Apple no longer uses their own cpu or other hardware components and rely on the same companies that supply pc computers with hardware, I cant seem to see how this justifies their price. I can buy an i7 4gb 500gb toshiba for under a $1000 and barely get half the performance from their macbook which is priced at $1,199....
  • -1 Hide
    mlopinto2k1 , August 5, 2010 11:07 PM
    Speaking of QuarkXpress.. ugh, I hated that program. When I worked in Manhattan doing digital retouching, I was taught on a Mac using PS 4.0. It sounds just like my department was, for you. TrueType fonts and PC's... what a joke. That is another reason for Mac's. Their fonts. But, for photoshop, there was ALWAYS the wars about which was faster. I remember when they got their first G4 500Mhz Mac... Oooooooh. LOL.
  • -1 Hide
    moeswow , August 5, 2010 11:11 PM
    caustin582Side note: Tom's Hardware really should add an option for deleting one's own comments. My computer here at work choked all of a sudden and somehow posted my comment twice. Go ahead and rate down/hide the copy. Meh.


    I completely agree, if we were sooo in love with apple as the author stated then why is its market share less than 10%.
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