Apple is on a roll. Not just because it’s got some sexy products out there, but also because it’s turning one of the industry’s givens on its head.
It’s making money out of hardware, rather than software. This, from one of my favourite daily doses of marketing stuff, Reveries Magazine:
Apple is leading a trend into a “post-PC era in which silicon, not software, will be king.” If Apple gets its way, the traditional (i.e., Microsoft) model in which hardware is sold at a loss and profits are made on the software will be replaced by a new approach that is exactly the reverse. Apple’s iPod is the test case for this new approach — and a highly successful one, so far. In Apple’s fiscal quarter of 2004, it sold a quarter of a million iPods for about $400 each, in addition to some 30 million songs for about 99 cents each.
Apple ceo Steve Jobs has made it clear that profits are made on the hardware, not the software. So the old razors-and-razorblades notion that you lose money on the “razors” and make it up on the “razorblades” has effectively been scotched by Apple. Some observers see this new reality as “likely to bring wrenching changes to the technology world, largely dominated by Microsoft for the last decade. Richard Wallace of Electronic Engineering Times recently wrote about the implications of Apple’s new business model: “The irony is that while software gets the glory, it’s silicon that’s at the heart of the industry’s next darling…”
1/20/04 Apple’s Razorblades – Next Teletubbies – AT&T’s Cathy Constable
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