Commentary: Apple's color scheme goes only so far

Apple's announcements at Macworld Tokyo follow on the heels of its announcements at Macworld San Francisco, which included the Powerbook G4. The incremental performance improvements to high-end models, support for third-party CD-RW drives, and updates to iTunes are positive moves that address consumer market needs, but the computer maker still needs to add other features of key interest to consumers, such as larger monitors for the iMac.

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In addition, Apple needs to address the manageability (extensibility) issue and bring out a high-end machine that can match the price and performance of a high-end PC. More importantly, Apple needs to introduce a strong competitor in the under-$1,000 price range--at the low end of the market, Apple actually increased the entry-level point for the iMac by $100.

CEO Steve Jobs also brought a continued focus on design to Tokyo, announcing two new psychedelic color schemes for the iMac. Apple's focus on design in recent years has demonstrated an understanding of how the desktop computer market is changing to more of a consumer-driven commodity approach. As this occurs, design and branding become more important, just as they are in the car market. Certainly, when people buy a car, they consider performance, fuel economy and safety--but they also take brand, style and ergonomics into account in their final choice of which model to purchase.

The limits of design
Although Apple's persistent focus on style and ergonomics is a legitimate differentiator--and Apple should get credit for being well positioned to benefit from this market trend--good design can go only so far, and PC makers are catching up. A focus on improving ergonomics and style is now a central concern of all the major vendors. For example, Dell Computer, Compaq Computer and Hewlett-Packard are all currently marketing systems in a choice of colors and performance equivalent to what Apple offers, and at a lower price.

Apple's brand has historically been based on better ergonomics and an advantage in system software, but it has become increasingly hard to perpetuate that brand solely through their system software, so Apple is turning to other design features. We believe that this approach will eventually run out of gas as competitors emulate it.

Apple is basically a consumer-market and niche-market supplier that does not play in the larger corporate market except for selected graphics arts applications. Apple is also losing ground in the education market, where it was once a leading player. Part of the problem is that Apple is focusing on issues such as style, while enterprise and educational users are becoming more concerned with better manageability. PC vendors have an edge in this respect, and Windows-based systems, especially from Gateway and Dell, have gained significant ground in the education market.

Out of sync with the times
In effect, Apple is competing on the wrong ideas. It is still focused on the market of the late 1990s, when performance and industrial design became a differentiator for sales, and lacks a strategy that exploits changing consumer desires for the new decade.

In the emerging handheld and computer-appliance markets, Apple has also been noticeably absent. Its spectacular failure with the Newton has made it wary of re-entering the PDA (personal digital assistant) marketplace. Apple's ability to deliver innovative products in these markets that appeal to the Macintosh base and expand its appeal to the broader market are key to its long-term success.

Despite the challenges it faces--even in its core consumer marketplace--Apple has a loyal customer base and defensible niche. However, it must build on its recent announcements and address continuing encroachments by the Windows world into its share of the consumer market. Apple's recent announcements, including the Titanium laptop, are positive steps, but it must address price and additional functionality issues to bounce back and shore up its consumer market position.

Apple is still a multibillion-dollar company, and while sales may vary quarter to quarter, it is not showing any signs of going away. Microsoft Office does run on Apple, and even dedicated Windows shops often have Macs in the graphics arts production department.

In sum, Apple's emphasis on style and ergonomics may affect the expectations of some business users, who will wonder why their companies can't provide the same cool experiences that they are enjoying with their home PCs. However, we expect other PC manufacturers to continue emulating Apple's design-centric approach and remain close enough that this does not become a major issue for business PC buyers.

Meta Group analysts Dale Kutnick, Peter Burris, William Zachmann, Val Sribar, David Cearley, Steve Kleynhans and Mike Gotta contributed to this article.

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