What’s Next, An HP G5?

by Hadley Stern Jan 12, 2004

imageThe recent HP-Apple announcement makes the significance of the iPod mini announcement at Macworld well, look minute. Finally it looks like Steve Jobs has not let his ego get the best of him, and done something that is right for Apple as a public company. Let�s look at what could have been; Apple could have decided to keep the iPod and iTunes an Apple-only product greatly limiting the sales of both. Instead, any PC user can now buy and listen to digital music using Apple products. Brilliant.

But the HP-Apple announcement takes things to the next level. It is an agreement that only Steve Jobs could agree to. After all, we aren�t talking about ugly clones here; we are talking about the rebranding of Apple hardware with another color and logo. Manufacturers like HP have been doing this for eons for companies, among others, like Apple�private labeling their printers for other companies.

As significant as the hardware agreement is the real kicker is the software HP has agreed to install on all its Windows boxes. By agreeing to install iTunes HP is also agreeing to install QuickTime with its AAC codec. For the first time the AAC codec (which isn�t Apple�s proprietary technology, it�s just MP4) will come preinstalled on a PC. This is a brilliant salvo and trojan horse by Apple against Microsoft�s monopololistic desires to spread the Windows Media format.

So kudos to Apple for the brilliant move. With OS X and the G5 many have commented that now is the greatest time to be a Mac user. However, for those of us who enjoy the history of Apple, blunders and all, from a business standpoint this is a fascinating time to be an Apple watcher. I have a feeling that the HP-Apple deal is just one of many interesting things that is going to happen in 2004 but it could well end up being the most interesting in the long term. Apple licensing its hardware to a major PC maker? Who would�ve thunk?! What�s next, an HP G5?

Comments

  • I think the battle lines of DRM have just been drawn.  With Apple, HP, and Real using AAC and with the others using Windows Media, this is reminiscent of the browser wars.  The winner will be who becomes more adaptable and the Apple/HP deal is the step in the right direction.  The only question is, how much will this affect the bottom line of Apple?  We shall see, I guess.

    Tuju Crue had this to say on Jan 12, 2004 Posts: 15
  • I think it is fantastic that Real and HP are going to support M4P, and DRM’ed AAC.

    I think all business people will agree that marketshare follows mindshare. And if Apple can make blockbuster deals with Pepsi and HP while maintaining hardware and software control - it is indeed a good time to be Apple.

    Nathan had this to say on Jan 12, 2004 Posts: 219
  • I think this is the moment that people will back on, five years from now, as the day WMA died. grin

    The move is brilliant. It was funny seeing Microsoft railing that the move “hurts consumer choice,” which is just basically Microftese for “Oh my God, consumers will have access to non-Microsoft software!”

    Still, I find the prospect of an HP PowerMac G5 to be slim to none. If anything, the iPod deal will help Apple sell MORE Macs. Once Apple gets consumers hooked onto the “Apple Way” in the guise of the “HP Way,” it’s only a short step for consumers to make the switch to the Mac. You have your iPod, you have your iTunes, you have your QuickTime - when that HP clunker needs replacing 3-4 years from now, I suspect a lot of people will find it significantly easier - psychologically and in terms of their hardware investment - to make the jump to the Mac. After all, the deal insures that you WILL be able to take your music and iPod with you….

    Paul had this to say on Jan 12, 2004 Posts: 31
  • Naw, don’t make an HP G5. Give ‘em an HP G3 with System 7 on it, and they’ll think it’s Windows! ; )

    Macca had this to say on Jan 12, 2004 Posts: 5
  • History suggests strong and justified reluctance again to licence hardware manufacture. But this deal raises intriguing possibilities: think it through. No-one (least of all Apple marketing strategists) can escape the conclusion if it goes well: judicious agreements with reputable, trustworthy manufacturers may be possible without cannibalising hardware revenues (indeed probably growing them through royalties).
    Everyone is predicting Linux growth at Windows’ expense. Why should Apple not put OS X on that train, positioning itself as ‘Linux - only better’ - perhaps even to the extent of Mac OS on specified Intel hardware?
    Imagine the market share impact of IBM, Sony and HP all offering match-priced Mac OS / Windows-capable computers. Vast increase in visibility, credibility, availability, software variety, support options. Suddenly corporates lose their fear of proprietory vendor lock-in.
    Risky, yes, but for such an outcome? Throw the dice, Steve!

    BrianMcTavish had this to say on Jan 13, 2004 Posts: 5
  • It will be interesting to see the development of mobile phones capabilities with regards to music…ie, what standard they will go for.

    No doubt Windows in there (o2 XDA, Orange SPV) so will push for WMA. Real is there as well with a mobile phone player.

    How much the mobile industry through 3gpp can influence the market…I don’t know but that is a space to watch as well.

    This is more relevant in Europe & Asia than in US as mobile phone adoption & mobile internet is higher than in US.

    With regards to devices…I am dreaming of a iPhone.

    Vincent had this to say on Jan 13, 2004 Posts: 6
  • In response to BrianMcTavish:

    Licensing the software may increase market share but would steal away Apple’s bread and butter, hardware.  Looking at the companies 1st quarter results, Apple made a killing on the hardware.  Even though Apple is still making hardware in your scenario, the company has to compete with the other three hardware manufactures using the OS.  Out of the 829,000 macs sold last quarter, only a few would’ve be Apple.  The revenue would not have been as strong and the companies margins would have fallen considerably due to a price war.

    That said, co-branding is different.  Co-branding allows apple to control the hardware and margins.  They can control their own destiny by selling their own product with out their name on it.  It is not a license to HP to use the technology, it is a license to HP to put their name on the plastic and chrome case.  Big difference when it comes down to it.

    Tuju Crue had this to say on Jan 15, 2004 Posts: 15
  • My point is that a step-change in market share is simply not going to happen while only Apple makes the hardware, for reasons I mentioned. Yet at this point 10% and more seems mouthwatering - and achievable. Open hardware licensing failed, because it attracted only those who were content to cannibalise Apple’s sales.
    Controlled licensing to selected others, with acceptable royalty rates (I seem to recall
    it was rumoured to be about $25 per machine last time round) and perhaps market-share linked safety clauses (‘you can’t go more than 10% below our prices until market share reaches 10%’, or ‘we must approve new hardware designs, unless market share reaches 10%’) including guaranteed marketing spend from the likes of HP, IBM and Sony would grow the whole Mac cake. Can you imagine any move that would terrify Microsoft more?
    If Apple couldn’t make more money than they do now out of a 10% share I’d wonder if the management was competent.

    BrianMcTavish had this to say on Jan 15, 2004 Posts: 5
  • A big thumbs up to an HP G5, then we could buy it for $1300! Sure, Apple’s margins would be a lot lower, but the mac would quickly grab 30% of the computer market (albeit through a reseller) and the momentum would be hard to stop. They are not that daring though, its a shame.

    cambac4 had this to say on Jan 15, 2004 Posts: 2
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