Apple’s Turned the PC Market on its Head

The iPad’s devastation of PC market share (“Tablets To Grow 53.4% This Year, Says Gartner, As The Traditional PC declines 11.2%“) combined with Apple’s free release of Mavericks OS X struck me at how much the company’s flipped the dynamics of the industry.

I worked at Microsoft from 1991 to 1999 as a Group Program Manager. One of the sacrosanct truths of our industry and the company’s success at the time was that software was valuable and hardware was a commodity business. You could see it everywhere. I spent four years on a team developing Windows for office devices such as fax machines. Device manufacturers lined up to pay licensing fees for Windows and completely rebuild their $99 machines on hugely expensive Intel-based platforms.

With Apple’s release of  OS X Mavericks for free, it’s flipped these past dynamics on their head. Software is free. Its beautiful hardware is what’s valuable. Furthermore, the company’s innovative iPad has created a new class of hardware shrinking Microsoft’s market share .

When I wrote Microsoft’s Sacred Cash Cow for Seattle Weekly (see on Slashdot for correct date) in June 2004, I never imagined how dominant Apple would become. If I had, I would have bought its stock (then at $14.25). $1,000 invested then would be worth $516,000 today. One of the other ironies is that Microsoft abandoned its fledgling Pen Windows operating system in that same era.

I think it’s a combination of Apple’s still amazing hardware design, ecosystem (despite all its shortcomings) and its profitability that have allowed it to overturn the conventional dynamics of the market.

I’ve also been amazed at how long since my article Microsoft’s managed to continue to churn out massive profits even as the dynamics that have created its profitability are at a dangerous precipice. CEO Ballmer may be leaving at exactly the right time.

I’m also encouraged by the continued expansion of open source software and now inexpensive open source hardware such as Raspberry Pi. The future is bright and we can expect more change.