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Boot Camp and Apple’s Strategy

There's a programmer named John Gruber who's got a Mac-related blog called Daring Fireball. He doesn't blog often but his analysis when he gets around to it is always worth reading.

He recently wrote at some length about Apple's release of its Boot Camp software, which allows the newest Macs to boot Windows XP and Vista. Not the tech stuff -- Gruber doesn't write about technology as such -- but the underlying strategy of letting Macs run Windows.

His points:

1. Apple makes money selling hardware, not software. The software is strictly the user experience surrounding the hardware.

2. Microsoft is primarily a software company. Therefore,

3. The popular "Apple vs Microsoft" meme is nonsense.

4. Apple does compete with Dell, Lenovo, Sony and Gateway, but at the high end of the market, where margins are comfortable. (Apple's margins have always run at about 20 to 30 percent.)

5. Apple will never unbundle its system software or allow it to run on non-Apple Intel boxes because the profit on each software box is far smaller than the margin on each computer.

Clear-headed thinking. But where he goes a little astray is here: the per-piece profit of a software license may be comparatively low, but the margin is near infinite. The N+1 price of building a computer is significant; the N+1 price of building one more software license is near zero. He's right, however, when he says that to maintain its current level of profitability while hurting its hardware sales by unbundling OS X, Apple would have to sell more system software than would probably reasonable to expect.

It *is* possible to build a significant business selling just software -- can you say "Microsoft?" -- but that's not Apple's business model.

The bottom line: Boot Camp, for all the nifty hack, is essentially a non-issue -- a Stupid Computer Trick. Nothing to see here.


This page contains a single entry from the blog posted on April 12, 2006 10:05 AM.

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