HEAD-TO-HEAD
Mac Death Match, Round Six: Chaffin vs. Enderle

Strangely, Enderle actually appears to agree with Chaffin on some points Chaffin raised in Round Five -- most specifically, that Apple needs to overhaul its marketing roadmap. Does this mean Chaffin wins by technical KO? Or is Enderle faking him out before his own knockout punch?

ENDERLE HITS CHAFFIN WITH A RIGHT CROSS

It looks as if Mr. Chaffin and I agree that Apple is on the right path. Where we disagree is what that path is. What is also interesting is we disagree on the effectiveness of Apple marketing -- but I'm coming around to the view, based on a lot of e-mail on this subject, that Chaffin is right. Apple's marketing organization needs a dramatic overhaul.

However, before offering our opinions of whether Apple is going in the right direction, maybe we should have first defined that direction. To make this easy on our readers, I'll position initially as if I agree with Chaffin on the company's direction.

A Market Defined by Cost

Right now cost is defining the PC market, with the most active segment being the sub-US$1,000 segment. This is a segment Dell resisted entering until last year. Then, largely because it had no choice, Dell entered it with a vengeance. Apple doesn't play in this segment much at all, and isn't even close to the $600-$800 sweet spot.

With worse economies of scale than HP (NYSE: HPQ) or Dell and others, it may not even make sense for Apple to play here -- yet this is where buyers are increasingly entering the market. Migrations from Windows machines to Apple machines just aren't happening.

When Apple does win a new customer, it holds a much higher loyalty than any of the other vendors. But if the company can't capture these new customers, it is on a going-out-of-business path.

Apple is being purged from education for similar reasons. The company's hardware simply is not cost-competitive at time when the education market is, due to budget shortfalls, counting every penny.

Moving to Where the Customers Want You

You have to be able to move where the customers want you to effectively compete in the retail PC market, as Chaffin points out. Apple simply seems unable to do that. HP does fund R&D and does compete with Dell. HP has also recently partnered with Apple. That may bear fruit, but it likely won't help Apple PC sales very much.

On marketing, the entire PC industry is in a world of hurt here. We have very little true demand generation, and Apple has shown that, when you do this right, as it has with the iPod, you can do amazing things. But just spending money, as Intel (Nasdaq: INTC) did with their Blue Man Group campaign, does nothing but bad things to the bottom line.

I actually think Apple does better than most here -- but better than most in a market that does this horribly is clearly not good enough. Once again, if it no longer has this advantage except with the iPod, then it is on track to get out of the PC business. Customers will buy the well-marketed product, not the poorly-marketed one.

The Need for Better Execution

That we are even comparing Dell -- which has never been known for marketing -- to Apple and favoring Dell, should wake up Apple to a serious problem. Apple's iPod significantly outsells Dell's similar offering (which may actually be a better value), which I think showcases what Apple can do. That Apple doesn't is just as big a mystery to me as it is to Chaffin. Of course, Dell doesn't really market their iPod clone and doesn't have a retail presence to speak of. If we concluded that this was more the reason why Apple eats Dell alive in this market, it really wouldn't bode well for Apple marketing.

So Chaffin and I agree that, to become more successful with PCs, Apple needs to get back to marketing its platform. My view is that this is something Apple doesn't want to do. In other words, the company is getting out of the PC business by choice.

Chaffin thinks Apple is on the traditional track and simply can't execute. Strangely enough, this may mean Chaffin and I agree that the company doesn't execute well. The fact he and I can't agree on what path it is on exemplifies this.

In the end, I believe you are either in a market all the way and competing with everything you have, or you are exiting that market. Intentionally or not, I still believe that Apple is exiting this market.

CHAFFIN HITS ENDERLE STRAIGHT ON

Mr. Enderle's argument [in Round Five] is so full of nonsense and stretches of the imagination it simply befuddles me to determine where he is coming from. According to him, Apple porting one piece of software, iTunes, is evidence that the company is becoming less platform-centric.

In the meanwhile, Apple has introduced GarageBand, Motion, Final Cut Express, Final Cut Pro HD, Xgrid -- all Mac-only products. The company also continues its practice of charging non-Mac Shake (IRIX and Linux) customers more money to upgrade and maintain those versions of Shake, and has not reversed its decision to stop shipping a Windows version of the software. Apple hasn't introduced any other products for the Windows "standard," and continues to promote, albeit poorly, the superior Mac experience. Again, nothing whatsoever supports the notion that Apple is moving away from the Mac platform.

Longhorn, Linux, Whatever

As for Longhorn and the YAUVL (Yet Another Ultimate Version of Linux), it defies reason to say that Apple is going to be crushed by either product when neither is on the market yet. Apple will have two major releases of Mac OS X before Longhorn ships -- and that's assuming that Longhorn doesn't slip yet again.

It also remains to be seen if Longhorn will be all that in the first place. Certainly Microsoft (Nasdaq: MSFT) is headed in an interesting direction with Longhorn, but it will have to prove that it can actually execute the transition to the OS, a transition that will take many years after Longhorn is (finally) released.

Until then, it's yet another bugaboo that will supposedly destroy Apple, while Apple continues to ship ever-improved versions of OS X.

Cue the Death-Knell Counter

Analysts have been proclaiming the preeminence of Linux almost as long as they have been proclaiming the death of Apple, something that Enderle has done yet again. In fact, this will mark his fifth entry into The Mac Observer's "Apple Death Knell Counter." I'll believe in a version of Linux that is truly as easy to use as Mac OS X, or even Windows, when I see it.

Keep in mind that I am a huge Linux fan, but I am also a realist. It's not ready for mainstream consumption.

Apple clearly has areas where it must improve in order to grow. I have laid out a couple of those areas, while Enderle has instead woven a fantasy where Apple needs to somehow sell hardware that runs either Windows or Linux, yet somehow still maintains its vaunted user experience; where the company is in imminent danger of being destroyed by a threat at least two years away; and where one Windows port of an Apple application (i.e., iTunes) is obvious evidence that Apple is busily reinventing itself as multiplatform software-and-services company.

It's all utter nonsense.