Sellers Research Firm: Apple shouldn’t license the Mac OS again

Posted by Dennis Sellers Oct 24, 2006 at 12:30am

Since I don’t think any special qualifications are required, I hereby declare myself an analyst, so I can make pronunciations on the state of the tech industry, whether they make sense or not. From this time forth, feel free to quote me, Dennis Sellers, as an analyst for the Sellers Research Group. My first analysis: Apple shouldn’t dump its hardware business and license the Mac OS X to Dell.

Last week the analyst firm Gartner issued a report, “Apple Should License the Mac to Dell,” that said Apple should get out of the hardware business, saying that increasing component costs and pressure to cut its prices meant Apple’s best bet for long-term success is to quit the hardware business and license the Mac operating system to Dell. Gartner said Apple should concentrate on what it does best—“create software”—and make use of Dell’s production and distribution infrastructure. The firm claimed that with the right partners, distribution channels and a more affordable price, computers running the Mac OS could eventually account for 20 percent of the total computer market.

“Apple should leverage its close relationship with Intel and team up with Intel’s closest ally, Dell,” the report stated. “We recognize that this move would surprise and even shock many. We are aware that Steve Jobs cancelled previous Mac licenses when he took over at Apple and that he guards the Apple brand zealously.”

According to Apple’s third-quarter results, released in July this year, Mac sales were up 12 percent compared with last year, during what was considered a poor quarter for the personal computer market. However, Gartner warns that Apple won’t be able to substantially increase this growth on its own because of increasing pricing pressure. Apple’s margins for its Mac business, currently around 40 percent, are only sustainable because component makers such as Intel choose to prop up the business, the firm claims.

The Sellers Research Firm begs to differ. Looking at figures from IDC and Gartner itself, Apple’s market share is already on the rise (though far from 20 percent). According to IDC, Apple’s market share of the personal computer industry in North America in the third quarter grew to 5.8 percent from 4.3 percent from the same period in 2005. Quarterly unit sales were up from 664,000 to 975,000. According to Gartner’s figures, in the third quarter of 2006, Apple’s market share of the personal computer industry in the U.S. grew to 6.1 percent from 4.6 percent from the same period in 2005, with quarterly unit sales up from 744,000 to 975,000.

And last week (just after news of Gartner’s report broke), Apple reported the best shipment of Macs ever in the company’s history during the fiscal 2006 fourth quarter that ended Sept. 30. Apple shipped 1,610,000 Macs, which was up 30 percent from the year-ago quarter. The previous quarterly record was 1.3.8 million Mac in the first quarter of 2000. Fifty-eight percent of the company’s revenue for the quarter came from Macs. The growth was almost three times what the IDC research projected for personal computer growth during the period.

If Macs accounted for 58 percent of the company’s revenue for the recent quarter, it would take a lot of Mac OS X-equipped Dells to make up the income with software licensing. Speaking of the clones that Gartner’s “Apple Should License the Mac to Dell” report mentions, Apple’s approved cloning of the Mac several years ago proved disastrous. As my colleague Gene Steinberg points out in a Mac Night Owl editorial: “Gartner also wants us to believe that farming out manufacturing of Macs to Dell will provide better products, lower prices, and greater market penetration. At the same time, Gartner seems to forget that Apple tried something of this sort a decade ago, by licensing several manufacturers to build Mac OS computers from reference logic board designs. The biggest of these cloners, Power Computing, was actually headed by a former Dell executive and used something akin to Dell’s online marketing expertise to actually steal sales from Apple. Indeed, cloning nearly killed Apple, yet Gartner wants us to believe that doing it again, with the company that comes closest to Power Computing in the PC world, will somehow deliver huge gains.”

So the Sellers Research Firm urges Apple to stay in the hardware business. Keep making those Macs, keep innovating and, hopefully, the company’s market share of the personal computer biz will continue to rise.

Thoughts? Write me at daseller@earthlink.net

Advanced Search

Article Information

Comment on this Article Print this Article Email this Article Digg This

Contributor

Recent Articles