How the world learned to love Apple and its Macs

* Jack Schofield
*
o Jack Schofield
o The Guardian
o Thursday October 25 2007

Apple produced a stunning set of financial results on Monday, with one big surprise. In a quarter that has been dominated by talk of the iPhone and new iPods, the Macintosh computers were the stars of the show. Apple sold 2.16m units, which is more than in any other quarter in its history.

Apple used to be number one in the US computer market, but was devastated by the success of PCs running Microsoft Windows 95. Apple's sales peaked at $11.1bn in 1995, and tumbled to $5.9bn in 1998. Both Dell and Compaq tripled their sales over the same period. Even in 2001 and 2002, Apple's sales were less than $6bn a year.

Now Apple has managed revenues of $6.2bn (£3bn) in the latest quarter compared to $4.8bn for the same period last year, and $24bn for the full year, so it has quadrupled its sales in five years. The news pushed its share price on the day to $186.21, putting it (in terms of market capitalisation) ahead of IBM, which used to have 70% of the whole computer market and was America's richest corporation.

There are reasons. In 2001, Apple introduced both the iPod and the long-awaited Mac OS X, finally giving Macs a stable operating system. It also started opening its own stores. All three turned out to be much more successful than anyone expected.

Apple has also benefited from the shift to digital music, the arrival of cheap LCD screen displays, a growing market preference for laptops over desktops and the massive growth in internet use. This has changed the very nature of the market.

When computers were bought mostly by businesses and games players, they cared a lot about the availability of software and the upgradeability of hardware. Windows had almost all the serious business programs and almost all the games. Businesses needed to be able to open up their PCs to add memory and bigger hard drives and to replace broken parts, while gamers wanted to add memory, fast graphics cards, specialised cooling systems and neon lights or whatever.

Today there's a large market among people who don't much care about software availability and really don't want to tinker with the hardware. They want to send email, do a bit of instant messaging and browse the web, and today almost any device can do those things, including many phones. Rather than choosing whatever system runs the applications they need (always the traditional advice to computer buyers), they just look online for applications that run in a browser.

A hardware geek can find plenty of faults with the latest iMacs, such as the limited performance of the built-in graphics cards, a general lack of expandability, inability to change the screen height, the awful keyboard and so on. The average consumer sees a beautifully styled system that doesn't look too complicated, doesn't seem to take up much space and could actually look good in a living room.

And while Apple still doesn't do cheap machines, the price difference is smaller than it used to be, in absolute terms. Buying a PC used to be much like buying a car - now it's more like buying a handbag.

Of course, selling 2m Macs is impressive because it's almost twice Apple's historic rate, but it's still only a fraction of the 67m PCs sold in the same quarter. On its own, HP sold 13m Windows machines, while Dell sold 10m.

The one thing you can't say about Apple is that it doesn't have room to grow.