KEY POINTS:
What should Apple do with its spare billions? Maybe setting up some soup kitchens could be in order.
Despite what analysts and money people venture as intellectual capitol these days, nobody really knows what will happen with this recession. For years earning more money has been interpreted simply as more leverage to borrow still more money to have still more stuff. When the crash really impacts, you won't have a job. Now will your neighbour. What use will a computer be?
Many thought Apple would release a really cheap 'netbook'. Not me, though, as I wrote at the time. Since then (22nd October) Apple CEO Steve Jobs has stated: "We choose to be in certain segments of the market and we choose not to be in certain segments of the market."
The segments Apple chooses are demonstrably the higher end, not the budget end. The end with high profit margins. This has always worked for Apple; that's why Apple has all those billions in the bank.
Actually, setting up a bank might be a good idea for Apple - who else has substantial cash reserves these days? Even governments are in the shade - especially as they dole out what reserves they currently do hold to bail out the money lenders.
Jobs doesn't think the current economic situation will change Apple's stance on it product line. "Well, again this particular downturn is not creating a market of cheaper computers. That market has existed for some time and there are parts of that market that we choose not to play in."
Will the downturn drive some of Apple's customers to lower segments of the marketplace, meaning they will have to buy lesser products? In some instances, of course - especially if requirements are low to start with.
To be honest, if you are only going to do some writing, download some photos, surf the net and do some emailing, you can achieve those things with the cheapest possible hardware you can find. It won't have an Apple logo on it and you may curse more. But the bare fact remains that while many people are buying Macs, many of them don't touch more than 8-10 per cent of the capabilities of them.
Many have never even looked through their Applications folders and booted everything they find in there - not to mention the Utilities folder. Who would know a studio-quality audio program sits in there, allowing you to create soundtracks, podcasts and music? That you can fix your images as well as just keep track of them?
Of course, if you're new to computing, and you grow as a user, these capabilities are sitting there waiting for you to explore. That's great.
Meanwhile, Apple did very well in the last quarter despite doom and gloom and retrenchments all over the place, but the impacts have yet to be felt on Apple's growth. Profit has also been boosted by the sensational iPhone 3G, despite what other-brand smart phone acolytes might think of it.
Apple sold 6.8 million iPhones worldwide during the last quarter - that's more units than in all the other financial quarters combined. That means Apple sold 10 million units two full months before it expected to reach that self-imposed goal, according to sources like Macworld Australia.
The fact Apple is in a good position to weather a recession - or even a full-on depression - is all good. In some ways, belt tightening may help Apple - those who formerly needed both a Mac and a PC may now just get a Mac and install Vista on it. This was already happening anyway, as people got used to the idea. But in other ways, it's clear people will be scaling down their investments across the board, which will include Apple purchases.
It depends how far ahead people look, of course - if you do your homework you will realise that the still-current lack of malware affecting Macs and the quality of the software installed saves you money in the long run.
The low rate of Apple warranty returns compared to some brands and Apple's purported "ease of use" also go towards better returns on increasingly precious investment. Those in industry will be jealously guarding their competitive edges with the best hardware they can buy - and keep running.
So, you'd imagine that Microsoft is still creaming it (as they say) with its massive market share? Not really. Fortune magazine points out that there are all sorts of sea changes afoot. Bare with the mixed metaphor - but Apple actually has a bit more cash on hand than the Redmond giant, with $24.5 billion versus Microsoft's $20.7 billion. But Microsoft's operating system still dominates by a huge margin compared to Apple's OS X. Redmond's revenue and net income still dwarf Cupertino's.
But Apple has been hiding most of its iPhone revenue behind so-called subscription-based accounting. That means that, using the non-GAAP deferred revenue numbers that Apple released last week, the company now earns more than half of Microsoft's profits on more than three-fourths of its revenue. Money people are calling this the 'iPhone revenue bomb'.
In fact, according to Fortune, Microsoft's revenue grew 9 per cent year over year last quarter, while Apple's grew 75 per cent.
- Mark Webster mac.nz
