Apple Blew It

Like everyone else, I knew that Apple's (Nasdaq: AAPL  ) final appearance at the Macworld trade show would leave the iFaithful wanting. How could it not? CEO Steve Jobs, the undisputed ringmaster of this January circus, had been sidelined by an illness.

What I didn't expect was a carnival freakshow.

What happened
Let's review yesterday's announcements.

  • New editions of iLife and iWork. Apple has upgraded iLife and iWork and will bundle these suites together with Mac OS Leopard into a "box set" for users who want the latest software. Goodies include a new version of GarageBand that embeds music lessons taught by John Fogerty and Sting, among others. The new iPhoto gets geotagging, face recognition, and support for photo sharing via Flickr and Facebook. Cool stuff.

  • A new MacBook Pro you can't afford. Next, Apple veep Phil Schiller showed off a new 17-inch MacBook Pro with a glossy display, a massive 320-gigabyte hard drive, and up to 8 gigs of memory. It's a processing monster weighing in at just 6.6 pounds.

    There's just one problem -- the price tag: $2,799. To be fair, that's the same price Apple charged for earlier versions of its 17-inch PowerBook and this Mac has a chip-controlled battery that Schiller hailed for its ability to support up to eight hours of use.

    Impressive, yes? I'll say. But the new Pro has the same problem as the iPod and iPhone -- its battery can't be removed. You'll need an Apple Store and $179 if you want to reup after the five years the battery is expected to last. Mix in a recession-ignorant price tag in a market that's increasingly taking to Dell's (Nasdaq: DELL  ) netbooks and this Mac looks like a sure loser.

  • ITunes goes DRM-free. Finally, the big news: Apple has wised up and stripped digital rights management software from 8 million songs in its iTunes catalog, going to 10 million by April. This isn't a freebie, though. Rather, Apple is extending its iTunes Plus program. Listeners will have to pay to upgrade -- $0.30 per song, News.com reports.

Still, I call this a win for shareholders. Amazon (Nasdaq: AMZN  ) , Microsoft (Nasdaq: MSFT  ) , and others have used the iTunes-music-won't-work-anywhere-but-your-iPod stick to beat up the iEmpire for years. The agreement should also deepen Apple's long-term partnerships with labels like Warner Music (Nasdaq: WMG  ) and Sony (NYSE: SNE  ) BMG, which now gets to avoid what looked to be a DRM death sentence.

Let's give Apple style points for climbing aboard the DRM train. And how about a polite golf clap for the battery breakthrough and a needed consumer software upgrade? No doubt Apple's hardware and software engineers worked hard to create these innovations.

Too bad they didn't spend more time on products that will make serious money.

Why it matters
Or maybe they did and we have yet to see the fruits of their labor. All I know is:

  • Apple didn't show off Snow Leopard, its newest version of the Mac OS.
  • Microsoft is about to roll out Windows 7 to business users who stiff-armed Vista.

EWEEK's Joe Wilcox says it best in a blog post from yesterday. "With Windows 7, Microsoft has got a new operating system rushing to release. Apple's Snow Leopard is a cat in hiding. I would feel more confident about Apple's position had something, anything, been said about Snow Leopard today," Wilcox writes.

Exactly. Snow Leopard could be the Trojan Horse Apple needs to further penetrate the enterprise. But only if it beats Windows 7 to market and creates the buzz that Apple is famous for. If not, if Mr. Mac gives mighty Mr. Softy a chance to get up off the mat, Snow Leopard will be just another pretty kitty for Mac users like me.

But the opportunity for another knockdown punch is there. Apple says that Snow Leopard is designed to support Exchange 2007 and Exchange Web Services, which, if true, would make it a lot easier to plug a Mac into a Windows-centric network of Office users.

Snow Leopard is also designed to work with Intel's (Nasdaq: INTC  ) multi-core processors. General users aren't likely to care much about that, but IT managers usually prize interoperability and headroom. If Snow Leopard gives Macs more network staying power, tech buyers won't be as quick to dismiss them.

So, on this issue, Wilcox is right. Apple demonstrated a bad case of clueless by failing to show Snow Leopard at Macworld. Unless, that is, plans are under way for a release party on Jan. 24 -- otherwise known as the 25th anniversary of the debut of the Mac OS.

Stay tuned.

Get your clicks with related Foolishness:

Apple and Amazon are Stock Advisor selections. Dell, Intel, and Microsoft are Inside Value picks. The Fool owns shares and covered calls of Intel. Try either of these Foolish services free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team and had stock and options positions in Apple at the time of publication.

Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy has to put you on hold for a moment. Be right back.


Read/Post Comments (25) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 07, 2009, at 5:05 PM, ericAZ2CA wrote:

    Tim,

    Why are we so short-sighted when it comes to Apple. You title your article "Apple Blew It" yet you call their actions a "win for shareholders" inside the article.

    Where was Snow Leopard? Did Apple say MacWorld 09 was the unveiling of Snow Leopard? No, they didn't. Have we already known FOR YEARS that Apple and IDG have been on the outs? Yes, we did. Has Apple used OTHER times of the year and events to unveil great products. YES. WWDC, for example.

    I believe one of two things about this article: 1) It's completely unresearched and therefore shouldn't have been written and posted, or 2) The headline was a cheap attempt at getting clicks (clicks=$$$). After all, I clicked on it to read how "Apple Blew It" yet after reading the whole thing, I still don't see.

    Regardless, I hope you get a lot of mileage from your title. I love Fool.com, and want to see you guys continue to rock the world with your content. However, for this one article, I see no difference between this kind of journalism and "Hillary Clinton has alien baby" journalism.

    Even the most intelligent of us look at the cover of that one...if only to see the shoddy Photoshop work. Advertisers score!

  • Report this Comment On January 07, 2009, at 5:39 PM, clevebob1 wrote:

    I'd have to concur with eric's assessment, Tim. Aside from the dumb upgrade for "newer" iTunes, I'm unclear as where exactly Apple "blew it".

    I'm a new (this summer) Mac user with the exact 17" MacBook Pro you speak of in the article. I'm overwhelmed by the machine and it's ease after a couple of decades of Windows based hassles. Love my Mac.

    That said, I've picked Apple to under perform in my CAPS, so I'm not confident their going to strike quickly enough either with the new OS. They're never going to eat up big chunks of MS's install base and Apple is still a great stock to own.

  • Report this Comment On January 07, 2009, at 5:39 PM, brijar wrote:

    Tim Beyers, you need to re write this entire article, number 1 people that buy the 17" Macbook Pro will continue to buy the 17" Macbook Pro, not a loser at all. Apple Macbook and Macbook Air will do fine against the garbage Dell produces.

    iWork, iLife? Eh who cares really

    DRM is not the fault of Apple, never has been, it's the recording industry that set those limits based on the price Apple wanted to sell the music for.

    Mac OSX Leopard will still be far superior to anything Windows can dump out over the next several years

  • Report this Comment On January 07, 2009, at 5:47 PM, jonnykmart wrote:

    Well, on one hand, the new 17" Macbook is not priced to reflect a recession, and so you criticize it. Was the OLD 17" priced so low? I think Apple knows what they're doing with pricing. This is a powerful machine. I just looked at Dell.com, who you say everyone is moving to, and they have Dell Precision Laptops that go well over $3,500 !

    As far as Snow Leopard. Who cares? Let it be demo'd closer to release.

    If you can't buy it, what's the use of salivating over it? And WHY would you want to give hints to Microsoft for things they can copy? It's a long way away, so why should Apple put pressure on themselves? Remember how the first iPhone was delayed a month?? Do we need more of these self imposed timelines??

    BUT, what really struck me was these two issues together...what happened to the RECESSION, that was so bad for the 17" macbook??? In a recession, will businesses that balked at Vista, and do fine with XP, REALLY going to be flocking to ANOTHER new Microsoft OS?? After the LAST one, that so many get along well WITHOUT?

    The other negative of showing a new OS would be that people will put off CPU purchases so their machine "comes with the new one"

  • Report this Comment On January 07, 2009, at 5:58 PM, ztirffritz wrote:

    I think that you're mistaken on DRM in iTunes. Apple never wanted it. It was a restriction that was placed on them by the labels. Steve stated as much in an open letter about 1 or 2 years ago. The labels continually held Apple to this restriction while letting Amazon and others get away with ditching DRM so that they could level the playing field. While Apple controlled 75% or more of the legally downloaded music, they could call the shots. The labels used DRM to help boost Amazon and others while effectively crippling iTunes. My guess is that Steve called their bluff and said we'll just quit selling your music and become like eMusic selling smaller label's music.

  • Report this Comment On January 07, 2009, at 6:11 PM, dolphid wrote:

    Anyone who uses the PRO notebook know why they spend $2800 for it. They can go on sight with their camera's - still or movie - and graphically manipulate what has to be shipped out to wherever in the psyber world and they can do it with their new 8 hour wonder - under a palm tree at Napili Bay in Maui if they so desire. They know because it is a Mac - it works. No Windows craziness ever. Just works. Day after day. That's why the call it the Probook ... it's for Pro's who like to get the maximum amount of work done with the minimum amount of hassle. Folks who don't think this way are called Windoze losers...er Windows Users.

  • Report this Comment On January 07, 2009, at 6:58 PM, jamesreidy wrote:

    The article clearly stated where Apple blew it and why. It is now up to the market to judge whether Tim's conclusion plays out. On one hand the sealed battery case is a huge downside but on the other hand, as the above posts demonstrate, the Apple faithful will buy it in droves because 1) they are locked into Apple for the same reason people get locked into a brand of camera and 2) Apple has managed what almost no other company has: blind and unflagging consumer loyalty.

    I've been using Windows exclusively on two laptops, one gaming rig and a collection servers. They are all stable, smooth and supported by a massive user community. I'm not sure what Windows "hassles" you all are going on about because my machines just work day in and day out.

    There is no doubt that Apple makes some fine PC's (an Apple is not a PC in the same way a BMW is not a car. The guts are all the same; Intel chips, nVidia graphics, runs Windows XP, etc) but they don't walk on water. They fall victim to all the same issues other PC's do. Hardware breaks, software gets corrupted, etc.

    Would you buy a DSLR camera that didn't have a removable battery? Really?

    J.

  • Report this Comment On January 07, 2009, at 7:37 PM, mattack2 wrote:

    You get higher quality songs after the upgrade, not just removal of DRM.

  • Report this Comment On January 07, 2009, at 7:58 PM, bruceb4 wrote:

    The Battery last eight hours! Besides, who really carries multiple batteries with them any how? I know there is some business types that will claim they take multiple batteries with them but this lap top isn’t for them. I have never bought an extra battery or replaced one; nor do I know a person who has. I’m sure some people do, but their the exception rather than the rule.

  • Report this Comment On January 07, 2009, at 10:25 PM, Maraith wrote:

    Mr. Beyers clearly did not do his research. Waste of my time. So I clearly will not bother reading his articles again.

  • Report this Comment On January 07, 2009, at 11:53 PM, SuperToppy wrote:

    I love reading negative articles about Apple. The cult followers come out with guns blazing!

  • Report this Comment On January 08, 2009, at 12:40 AM, Babble100 wrote:

    Tim is right. Apple's resurgence has been tied to the ineptness of Vista. With Windows 7 coming, the party may be over. In this economic environment, Mac will need to slash prices to within 10% of Dell if it wants to keep growing. The $2700 price tag for the new laptop is dead on arrival.

    Once Windows 7 arrives, the only compelling advantage left for Mac for businesses will be its freedom from viruses. But how long can that last?

  • Report this Comment On January 08, 2009, at 1:43 AM, windozeluser wrote:

    Wow. Anybody can say anything in an online article. It doesn't have to be researched, or even remotely well thought out.

    The iTunes changes aren't just DRM-free tracks, but also 256-bit encoded AAC files - double the quality of the previous DRM-protected tracks.

    I don't see the problem with having a high-end, 17" laptop. Dell and other vendors do. What is that bad for Apple? The kind of people who will buy that class of laptop will continue to do so for the screen real estate, CPU power, memory capacity, etc.

    I'm currently carrying an old 17" laptop, with extra batteries, as I travel almost every week. The sad thing is I rarely have time to charge the two extra batteries, since they have to be installed in the machine to charge. When I run low, I just find a place to plug in when I run my battery down. There are plenty of outlets in conference rooms, hotel rooms, airport gate areas, Starbucks, etc. It's just not that big a deal. I saw Apple's video explaining why they did the built-in battery, and it makes sense. Even if it only lasts 5 hours, that's still more than 2x what I'm getting now.

    Apple said last year that Snow Leopard would be available mid-2009. Why would anyone think it would be ready early? Has ANYONE ever delivered an OS early, or better yet, one that was both early and usable? MSFT was years late getting it out the door, and it's been a mess. Few companies have adopted it, and are installing XP over Vista on their new PCs.

    If MSFT rolls out Windows 7 too fast, it will be another train wreck. How would that be a good thing, other than to give Apple a bigger lead?

    The Mac's resurgence was happening before Vista showed up, but it certainly helped to have MSFT botch the OS release. If Windows 7 is somehow everything Vista was supposed to be, it will still likely be behind what Apple is doing.

  • Report this Comment On January 08, 2009, at 8:19 AM, ChandraC wrote:

    IF this is Apple blowing it, I will load up on even more shares. Apple manages the future of computing, portable media and telephony better than any other company. They manage their markets leaving the other players to react. No other player is able to take a leading role because they only have Windows and Linux to offer. This is a pitiful lack of market management by MS. Apple began to overhaul the PC market long before Vista appeared. Now with W7, it will overrun the Windows market with gusto. The poster is an ignorant hack.

  • Report this Comment On January 08, 2009, at 8:21 AM, TMFMileHigh wrote:

    'Morning all,

    Thanks to everyone for commenting. I'll respond as best I can, one at a time:

    ericAZ2CA -- "You title your article "Apple Blew It" yet you call their actions a "win for shareholders" inside the article."

    My apologies, Eric. The text, "Still, I call this a win for shareholders" relates *only* to the DRM-free catalog. I should have bracketed that text under the bullet above so as to avoid confusion.

    Also, please help me understand how this article was unresearched. Are my facts wrong somehow? Please understand that everything I write is news analysis and opinion. The guys at AP are journalists, I'm here writing as an investor, telling other investors what I honestly think about the news Apple announced. My editors expect nothing less.

    Did the co. promise Snow Leopard for Macworld? No, of course it didn't, I wouldn't claim otherwise. But given the circumstances, I think it was a strategic blunder to allow Microsoft to fill the airwaves with gooey goodness about Windows 7 without being challenged -- which is what we have right now.

    clevebob1 -- I love my Mac, too. It's the MacBook Pro I'm writing to you from. Love for the Mac isn't central to this article, though.

    Snow Leopard isn't a consumer upgrade it's a business upgrade. So is Windows 7. IT managers might switch to Mac if forced to by Microsoft blunders but only if Apple keeps the pressure on.

    brijar and ztirffritz -- the DRM problem is the labels' fault but a consequence of the strategy Apple chose -- low-priced tracks you can buy rather than a rent-all-you-like service. I think it was and still is the right strategy. Paranoid music labels may deserve more of the blame, but let's not say that Apple had *no* hand in the DRM disaster that resulted.

    dolphid -- I like my Mac, too. Been using one for decades. I own shares. But telling Windows users they're stupid doesn't buy us Apple shareholders (yes, I am one) anything.

    jamesreidy -- "They fall victim to all the same issues other PC's do. Hardware breaks, software gets corrupted, etc." Sort of. The Mac has proven to be far more secure than Windows because it has a smaller market footprint. Also, I know a *lot* of people who've switched recently and who say they'll never go back. Real or imagined, these stories help cement the claim that the Mac offers a better user experience.

    mattack2 -- Yep, I saw that. Don't think it much matters for your average user. It's a point Schiller made for PR purposes. I would have told him to tout the same in my former life as a PR consultant.

    bruceb4 -- Fair enough. So I assume you're happy to have no control over the battery in case something happens? (No sarcasm there -- I'm honestly asking.)

    Maraith -- Sorry to hear I'll be losing you as a reader. Before you go, may I ask what research you think I skipped? Everything in this article was sourced and the main points were taken directly from Mr. Schiller's presentation.

    SuperToppy -- I'm sorry to hear that the article comes across as negative. Rather, I intended it as brain food for us Apple investors. We now need to be very careful observers of what happens with Windows 7.

    Babble100 -- I don't think the situation is *that* extreme but I do see this as a lost opportunity. Apple needn't have released Leopard. To show it off would have been enough, give IT managers something to think about.

    windozeluser -- On research, please explain. On being well-thought out, you're entitled to your opinion and I respect that. But you'll pardon me if I disagree.

    And finally, "If MSFT rolls out Windows 7 too fast, it will be another train wreck. How would that be a good thing, other than to give Apple a bigger lead?"

    Respectfully, sir, this is -- at best -- pure optimism. Early reviews of Windows 7 are good. It's being called the upgrade to XP that Vista was supposed to be. If we agree that some business users decided to switch to the Mac because Vista failed to impress CIOs, and that 7 fills the void that Vista left, then couldn't this be a lost opportunity? Remember: We're buying and holding Apple for its growth potential -- not because of its dominant franchise in digital music.

    Snow Leopard is Apple's try for the enterprise. It should be as aggressive as it needs to be in order to give the OS a fighting chance.

    Thanks again, all. FWIW and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On January 08, 2009, at 9:28 AM, mstory123 wrote:

    Hey Tim,

    Your article is, as usual, concise, but I see it is in a couple of different ways. If the slumping economy causes people to not shell out $2,800 for a new Mac Book Pro (what I use at work actually and so wish I had one for personal use), they will get hit.

    But aren't a lot of Apple's revenues coming from the iPhone? With Wal Mart entering the fray and creating a mini price war for the 8 and 16 gig versions, this should keep Apple's revenue fairly strong (I am saying this without having seen their balance sheet).

    What might be an "ouch" in the pocketbook for consumers should be a win for shareholders, right? Apple is one of the last brands with a fanatical customer base and as long as they remain customer focused, I think that this bodes well for their sales and stock price.

    And it's strictly my opinion (as is all of this -- you know why I have to say this), but I don't think of people comparing Windows 7 and Leopard. It's Macs against PCs.

    All the best,

    Mark

  • Report this Comment On January 08, 2009, at 9:29 AM, TMFMileHigh wrote:

    One clarification. I wrote:

    I don't think the situation is *that* extreme but I do see this as a lost opportunity. Apple needn't have released Leopard. To show it off would have been enough, give IT managers something to think about.

    Obviously, I meant, "Apple needn't have released *Snow* Leopard." My apologies for the typo.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On January 08, 2009, at 9:36 AM, TMFMileHigh wrote:

    Thanks for commenting, Mark. Agreed; the iPhone is a major revenue driver. But the Mac is the business and always will be.

    It's not what consumers think that matters for this particular release. I'm certain that I will enjoy the features of Snow Leopard. CIOs are a different breed, however. They'll only switch if forced to by features or cost.

    Business is where the next battle is about to be waged and it's important for Apple to keep making gains. Snow Leopard could help if Windows 7 is a dud or late. Neither appears to be the case. (Not yet, anyway.)

    FWIW and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On January 08, 2009, at 10:09 AM, jamesreidy wrote:

    Tim,

    As always your observations are on the money (pun intended). I agree that the next battle will be for the business market and your comments about CIOs are correct. Having worked with large IT departments (IBM and Thomson Reuters for example) the barriers to entry are much greater than running Office and Exchange support. There is a huge investment in tools (both physical and software utilities), training and applications (end user) that would all have to be retooled to support Apple's Mac line of PCs.

    So as you have already stated Apple would have to make a VERY compelling case for the CIO of a company with a large IT infrastructure to retool their shop. Smaller IT shops would have less of an issue and may convert to Apple if their users desire it (and many do).

    In my humble opinion the only way I see this happening in the next five to ten years would be if Apple deployed Macs with a Windows OS out of the box. I'm sure we all know this would never happen, and it shouldn't.

    The bottom line is that if Apple's hope for growth lies in the business market I am not very hopeful in the near future.

    Kind Regards,

    James.

  • Report this Comment On January 08, 2009, at 10:19 AM, l3iodeez wrote:

    I love how any article on Apple that does not sing its praises is followed by so many angry comments from the fanbase about how only stupid people would opt not to commit to purchasing all their technology from a single company. Seriously guys, its not really Mac vs. windows, its Mac vs. Non-apple x86 Hardware. On macs you can run leopard, but that just about the only upside. Everything else takes a hit, price and reliability of hardware in particular. I have seen more dead 2 year old MacBooks in my time than I can remember, yet I have 3 ThinkPads that is at least 6 and running strong. Anyone have a G3 that still works? I thought not. This is not stupidity, its dollars and cents. Perhaps the iFaithful should their collective iHead out of the iSand. This is a choice like chunky or smooth peanut butter. Everybody likes one better and no one can tell you you are wrong.

  • Report this Comment On January 08, 2009, at 10:40 AM, Coachbb94 wrote:

    The statement "This isn't a freebie, though. Rather, Apple is extending its iTunes Plus program. Listeners will have to pay to upgrade -- $0.30 per song" is only partially true. iTunes now has 3 tier pricing of $.69, $.99, and $1.29. The $1.29 does not apply to all songs so actually some songs will stay the same and others will actually be cheaper.

    I agree this was a hastily and poorly researched article.

  • Report this Comment On January 08, 2009, at 11:03 AM, TMFMileHigh wrote:

    Hello Coachbb94. Thanks for commenting but you're mistaking new pricing for upgrade pricing. Users that want to upgrade existing libraries to DRM-free *will* pay $0.30 per song. The article is correct.

    More here: http://www.macworld.com/article/138000/drm_faq.html

    And, again, anyone who wants to point me to where the research failed, happy to hear those criticisms.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On January 08, 2009, at 3:09 PM, viconquest wrote:

    Where will Apple's next big thing come from? I agree that Apple might've missed out on a great opportunity to publicize their new OS --- even though they had no obligation to do so. Taking the fight to the seat of power of Microsoft when they are most vulnerable would be a coup de grace. This means revving up the hype machine early with a sneak peak at their signature event. I realize that Apple's ad campaigns have been most effective with suggestive advertising right before launch time, but generating some buzz early could not have hurt.

    Maybe the title of this article was too much hyperbole, but I can't understand the depth of all this negative feedback.

  • Report this Comment On January 08, 2009, at 5:22 PM, dnmlhm wrote:

    Why would anyone pay 30 cents to remove the drm when all you have to due is burn to a cd the rip the cd. DRM free. Yes I know the cost of the cd & time. I doubt Apple will get many takers.

  • Report this Comment On January 09, 2009, at 8:37 AM, jamesreidy wrote:

    @dnmlhm

    In a word: Quality. The algorithm used to convert to MP3 or ACC is "lossy" in that data is lost to rounding errors during the conversion process. Much like photocopying a photocopy the quality starts to degrade quickly. Though loss less compression techniques don't have this issue that is not what people have in their purchased music library.

    Kind Regards,

    J.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 805603, ~/Articles/ArticleHandler.aspx, 12/21/2014 7:36:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement