Apple Computers
Computers are still an important part of its mix, but these days music-related products are at the top of Apple's playlist. Apple Computer's desktop and laptop computers -- all of which feature its OS X operating system -- include its Mac mini, iMac, and MacBook for the consumer and education markets, and more powerful Power Mac and MacBook Pro for high-end consumers and professionals involved in design and publishing. The company scored a runaway hit with its digital music players (iPod) and online music store (iTunes). Other products include servers (Xserve), wireless networking equipment (Airport), and publishing and multimedia software. The company's FileMaker subsidiary makes database software.
Only co-founder, CEO, and Apple crusader Steve Jobs may have expected the level of success the company's music-related products have enjoyed. In 2003 Apple announced the launch of an online music service called the iTunes Music Store that lets computer users purchase and download songs for 99 cents each. Apple has since expanded the offerings to include music videos, audiobooks, television shows, and other content. The store's catalog, which has helped spur sales of Apple's popular iPod digital music and video players, includes songs from the five largest record labels, as well as television content from ABC, NBC, and a number of cable networks. The company has launched international versions of its iTunes Music Store that serve Canada and European Union countries. Early in 2006 it began offering select television content on a subscription basis with a service called Multi-Pass. Later that year the company launched an online movie service, and previewed a device called iTV for watching downloaded content on televisions.
Since debuting the iPod in 2001, Apple has provided regular updates to the line, including color displays and and flash memory-based models. Late in 2005 Apple, Motorola, and Cingular Wireless announced the debut of a mobile phone with iTunes functionality. Apple also unveiled the iPod nano, an updated (and even smaller) version of its miniature iPod model, as well as an iPod capable of playing video. In 2006 Apple reached a settlement in a dispute with Creative Technology over technology used in digital music players; Apple agreed to pay the company $100 million in exchange for a license to use Creative's patent related to navigation and organization.
Once the world's top PC maker, Apple Computer has been relegated to niche status in a market dominated by "Wintel" machines (computers using Microsoft Windows software and Intel processors). Macintosh computers run Apple's own UNIX-based operating system. The uniqueness of Apple's computers is a double-edged sword for the company. The graphical interface and form factor of Macintosh computers reflect the aesthetic of Jobs, who has long championed the importance of visually attractive, user-friendly design. The features that distinguish Macs have allowed the company to maintain a loyal following willing to pay premium prices and overlook any interoperability issues with Windows (a factor that Apple largely addressed with its OS X operating system). However, Apple's market share has dwindled as prices for commoditized Windows-based machines continue to fall.
In addition to its proprietary operating system, a traditional differentiator for Apple had been its use of IBM's PowerPC processors (manufactured by IBM and Freescale). However, in 2005 Apple announced it would begin incorporating Intel chips into its PC lines. At the time of the announcement Adobe Systems and Microsoft both pledged continued development of their Macintosh applications. Apple debuted its first Intel-based computers early in 2006, and it completed the transition across its entire line later that year. The company also released software that allows its Intel-based computers to run Microsoft's XP operating system.
Apple shares a long and thorny history with Microsoft. Although it provides an alternative to Microsoft's omnipresent operating system, Apple's relative size and market share restrict its threat to the software giant's stranglehold. The companies have long maintained a working relationship; the Mac-compatible version of Microsoft's popular office suite is a key software title for Apple, and Apple has scored crossover hits with Windows-friendly editions of iPod and iTunes. Soon after Apple released its Safari Web browser, however, Microsoft announced it would cease development of the Apple version of its ubiquitous Internet Explorer.
In an effort to boost its appeal among consumers, the company has opened more than 100 Apple retail stores across the US; it also has stores in Canada, Japan, and the UK. Apple generated 17% of its sales through its retail channel in fiscal 2005.
The company remains focused on product innovations that solidify its popularity in classrooms, Web design shops, and graphic arts studios. Although more than a quarter of its sales are to schools, Apple has felt increasing pressure in that market, particularly from Dell. While Apple continues to roll out unique hardware offerings, the company has also looked to software development to drive sales. Many of the company's multimedia applications -- including iTunes, iMovie, and iPhoto -- are available for free, but the company charges for bundled versions of its software.
Dell Computers
Whether you spend most of your time in a cubicle or on a couch, chances are good that there's a Dell in front of you. The world's #1 direct-sale computer vendor provides a broad range of computer and entertainment products for the consumer and enterprise markets. In addition to a full line of desktop and notebook PCs, Dell offers network servers, workstations, storage systems, printers, handheld computers, LCD and plasma televisions, projectors, and Ethernet switches. The company also markets third-party software and peripherals. Dell's growing services unit provides systems integration, support, and training.
Entrepreneurial wunderkind Michael Dell pioneered the direct-sales model for computers and took the company from his dorm room to the top of the PC heap by keeping it focused on a simple formula: Eliminate the middleman and sell for less. Dell's built-to-order boxes allow for lower inventories, lower costs, and higher profit margins -- elements that leave Dell well armed for the PC price wars and IT spending recessions. In 2006 the company announced plans to open retail locations in Dallas and New York. Dell -- which already operates numerous informational kiosks in malls and airports -- remains committed to its direct sale model, and the stores will only carry display models.
Dell has built its fortune with the industry-standard Wintel platform (Microsoft Windows operating system and Intel microprocessor) as its foundation. Intel has traditionally enjoyed an exclusive relationship with the company, but in 2006 Dell announced plans to use chips from AMD in some of its high-end servers. It also added search giant Google to its list of server customers.
Dell faces intense competition from Hewlett-Packard, whose market share increased dramatically following its acquisition of perennial PC leader Compaq. Dell generates about 80% of its sales from desktop and notebook PCs. The company diversified its PC offerings in 2005 with the launch of XPS, a line of high-end desktop and notebook PCs for gamers and others willing to pay premium prices for top performance. The following year Dell acquired high-performance PC specialist Alienware, which operates as a standalone subsidiary with independent branding and operations. Dell's PC profile took a hit in August 2006, when the company announced that it would recall more than 4 million notebook computer batteries with cells manufactured by Sony.
Far from limited to PCs, the company is also a leading provider of server computers and storage devices for enterprises. Dell augmented its storage line when it reached an agreement with market leader EMC to resell that company's enterprise systems. Furthering its push beyond PCs, Dell has introduced a handheld computer, a line of Ethernet switches, and consumer electronics such as LCD televisions. It originally partnered with Lexmark to develop a line of Dell-branded printers, and it has formed additional partnerships to quickly grow its printing line.
On the services front, Dell has mirrored its straightforward approach to hardware sales, embracing a fixed-price model for offerings such as data migration and storage systems implementation. The company is also looking to international revenue to supplant sales in the PC-saturated US market. Dell's operations in the Asia/Pacific region are based in Singapore, and include manufacturing units in China and Malaysia. Early in 2006 the company announced an aggressive growth plan for its Indian operations that will affect its existing call center and development units and possibly include the creation of a new manufacturing center.
Founder and chairman Dell owns about 9% of the company.
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