In 10 years Apple has re-defined music players, smart phones, tablet computers and, with the MacBook Air, the notebook computer. In the first 3 they've also gobbled up the lion's share of the profits.
Are they about to do it again with Ultrabooks?
The market share delusion Despite not having the largest unit shares in PCs and smartphones, Apple is the world's most valuable company. Why? Because its unit shares are very profitable.
Apple dominates over-$1,000 PC revenue with a 90% share. Tablets likewise. And they've re-invented the tough/SSD/lightweight/long battery life notebook - 1993's HP Omnibook 300 was first - with the MBA.
Their all-in-one iMac is the #1 AIO with a 32.9% unit share and, no doubt, most of the profits. So what does this tell us about the Ultrabook's chances?
Winning on price? Now, aided by an Intel war chest estimated at $300-$500 million, the PC vendors are striking back with the same tired "cheaper, not better" strategy that lost them the profitable markets segments in high-end PCs. Apple's economies of scale meant they had a tough time matching Apple's price.
But they'll get there soon, with prices starting as low as $599. So it's over, right?
No so fast Apple's strategy is to win the profitable sales, not volume. So the question is: can Apple retain significant differentiation that appeals to consumers affluent enough to support their higher entry-level prices?
Looking at Apple's key advantages:
- Machined aluminum cases. Apple bought all the production capacity so competitors can't build them too.
- SSDs. Besides buying half the world's output of flash, Apple has been a leader in embedding SSDs into products. Plus their recent acquisition of Anobit is another competitive edge.
- Battery technology. Apple appears to have the lead here too, with batteries that support 1,000 recharge cycles - 5 years for most people - as well as furious research into fuel cells.
- Thunderbolt. If ever a technology appealed to power users, Thunderbolt is it. PCs will start having it this year, but Apple's all-in support means it will probably have the largest total dollar market for Thunderbolt add-ons for the next 2 years or more, key for developers who have to adapt drivers.
- Owning the high-end market. Apple claims over 90% of the over $1,000 PC revenue, so they already own the high-end customers who are the most likely buyers of Ultrabooks.
Against these advantages, the traditional PC vendor price advantage looks to be no more successful than it has in tablets.
Touch screen notebooks are stupid The MacBook Air already has a touch screen: the trackpad. It is easy to reach, supports a wide-range of user-selectable gestures - many compatible with the iPhone and iPad - and won't smear up the HD display. Touch screen Ultrabooks are a dumb idea.
The Storage Bits take Wintel will win the aggregate volume race - make an Ultrabook cheap enough, no matter how compromised, and someone will buy it - but 3 years from now an expanded MBA product line will have the revenue share lead and the lion's share of the profits.
Is there any hope for PC vendors? Yes, but it will take hard work and investment.
If Apple is the BMW of computers, there's an opening for a Toyota of computers: not the fastest or flashiest, but comfortable, reliable and practical. This machine needs lifetime virus protection built-in, easily upgradeable memory and storage (unlike the MBA) and a full-size keyboard.
But that's the kind of careful industrial design that PC vendors rarely bother with. So it looks like clear sailing for Apple in the Ultrabook wars.
Comments welcome, of course. I owned the Omnibook 300 and despite its anemic processor, reflective monochrome screen and high price, it was my all-time favorite Wintel PC.