Daniel Eran Dilger
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The iPod Power Behind Apple’s Big Mac Push

Daniel Eran Dilger
Combining the iPhone and the MacBook will create a peanut butter and chocolate combination for a company that’s already well regarded in both areas separately. Apple’s stellar MacBook sales combined with the worldwide phenomenon of the iPhone will drive a new kind of differentiation on multiple levels that rivals will be unable to match. Here’s why.

Articles in this Series:
What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0
Two Decades of Portable Macs: 1989 – 2009
The iPod Power Behind Apple’s Big Mac Push
A Product Transition: Giving MacBooks the iPhone Touch
The Power of the Market versus Market Power.

Apple is selling iPhones by the millions, giving it the buying power to drive down its component costs in the same way blockbuster sales of the iPod gave Apple access to cheap Flash RAM. Rather than using its iPod market power to extort high prices, Apple aggressively dropped iPod prices so rapidly that competitors couldn’t keep up. That in turn sold more iPods and granted Apple even more favorable RAM pricing.

Steve Jobs had originally intended to pursue a similar strategy with the mid 80’s Macintosh, but Apple’s conservative leadership wanted to stay the course with high prices and a protracted legal war that ran the company out of resources, prevented it from staying competitive as the environment began to heat up, and failed to care for the health of the Mac platform.

After resuming control of Apple, Jobs was tasked with rebuilding the damage done over the previous eight years of tragic leadership, ending its ineffectual ideological wars with rivals, reducing Apple’s dependence on foreign software resources, investing in critically needed infrastructure, and restoring the company’s reputation internationally and at home.

Since being returned to its former position, Apple under Jobs has been able to do with the iPod and the iPhone what John Sculley’s obstructionism didn’t allow Jobs do with the Mac during his previous term: put his planned policies in place and sell it.

Steve Jobs and 20 Years of Apple Servers

Leveraging CE against the PC.

While Apple has ratcheted up sales to drive down its iPod and iPhone component pricing, the larger volumes of PC sales from rivals such as HP and Dell no doubt prevent Apple from obtaining PC components at the same kinds of prices.

Between 1991 and 1995, Dell, HP, and Compaq together only sold about 60% more computers than Apple. By the second half of the 90s, they were selling nearly eight times as many, and between 2001 and 2005, they were selling 15.3 times as many computers as Apple. Gartner estimated that factor would drop to around 13 times for the second half of the current decade. Still, that’s a big difference in sales volumes.


In comparison, Apple sold sixty million iPods and iPhones over the last year, a number that dwarfs the entire PDA, MP3, and smartphone business of every other US manufacturer and equals roughly a sixth of the entire world’s production of similar devices, four times Apple’s market share in the PC world.


Just Getting Started.

While pundits insisted that Apple would be distracted by its massive new market power in consumer electronics and simply let go of the Mac, Apple has instead used its retail and marketing power to drive Mac sales. Computers now account for more than half of its revenues, and Mac sales are on an impressive climb.

Apple has applied its design and integration expertise into reinvigorating the dying PC industry now limping along at relatively flat overall growth, selling users on style with differentiated hardware and software. Apple’s Mac business is growing at 34 to 40% year over year. Rivals are just now discovering that Apple’s status among PC makers is about where the company was with the iPod among music players in 2004. The real growth hasn’t even happened yet.

This year’s MacBook Air was essentiality the iPod Nano of laptops, both from a design perspective and a marketing angle. What’s next will be the iPhone of laptops, which will likely enable Apple to double its market share and installed base and triple its revenues, as the following article will present.

Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas.

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  • kalm

    Long time reader, first time poster.
    First off, like the new site design, especially the random scenic photos at the top off the page.
    Second why are the articles getting shorter?
    And third, I hope you’ll come back soon to the other series that you have started recently, like the iPhone/DOS and road to 64 bit snow leopard series.

  • nat

    Man, these shorter articles are such a tease! Can’t wait for the next one.

  • limey

    “After resuming control of Apple, Jobs was tasked with rebuilding the damage done over the previous eight years of tragic leadership, ending its ineffectual ideological wars with rivals, reducing Apple’s dependence on foreign software resources, investing in critically needed infrastructure, and restoring the company’s reputation internationally and at home.”

    Very, very clever Daniel.

  • nat

    Hah, limey, I caught that too. :D “Innovation We Can Believe In”

  • Urian

    Can I ask something to you dan?

    I am interested in the sales numbers of Apple in all its history and the total marketshare of the computer industry that they had since the release of the Macintosh until today.

    At least where I can find the data.

  • Realtosh

    “At the end of May 1985 – following an internal power struggle and an announcement of significant layoffs – Sculley relieved Jobs of his duties as head of the Macintosh division.”

    “In 1996, Apple announced that it would buy NeXT for US$429 million. The deal was finalized in late 1996, bringing Jobs back to the company he founded. He soon became Apple’s interim CEO after the directors lost confidence in and ousted then-CEO Gil Amelio in a boardroom coup.”

    danieleran –“After resuming control of Apple, Jobs was tasked with rebuilding the damage done over the previous ***eight years*** of tragic leadership, ending its ineffectual ideological wars with rivals, reducing Apple’s dependence on foreign software resources, investing in critically needed infrastructure, and restoring the company’s reputation internationally and at home.”

    I don’t know what everything else feels about Apple’s direction, during the entire absence of Jobs presence at Apple. Jobs was gone from Apple close to or just over eleven years, not the eight years of tragic leadership that you mention.

    Daniel, which three to fours years during Jobs absence do you consider less than tragic? It seems to me that Apple was going in the wrong direction right at the moment that Sculley won the boardroom fight over Jobs, and didn’t get back on the right track until Jobs won another boardroom fight at which Amelio was ousted, more than eleven years later.

    We then endured several more years of interim iCEO Jobs, who was finally getting Apple back on its’ original trajectory of greatness. Not until January 2000, did Jobs announce that he was becoming the permanent CEO of Apple. By that point Apple was solidly back on track and heading up again, even though it wasn’t until the following year, in October 2001, that the iPod was introduced. The Mac lineup had been cleaned up and the iMac was the darling of the computer world.

  • Dorotea

    Yes, indeed. Daniel was exceedingly astute with his analogy. Great Work!

  • PerGrenerfors

    “Leveraging CE against the PC.”

    This one had me laughing!

  • snafu

    Judging from NeXT performance as a hardware company, I don’t think the Steve Jobs of that era would have been that fantastic at Apple those days. It took all these years for him to mature and be ready to lead Apple in a far more effective way.

  • Brau

    “In 1996, Apple announced that it would buy NeXT for US$429 million”

    I’ve heard Ross Perot was a major investor in Next, lost a bundle during that time, and I’ve always wondered if he finally benefitted from the sale to Apple (or if he sold out his interest prior).

    Looking forward, the acquisition of PA Semi continues to pique my interest. While many observers simply claim Apple will just design custom chipsets, the crew at Apple has frequently shown they like to think outside the box and change the way manufacturing is done; the way they did with the MBA custom Intel chips, plus the custom plastic molding techniques they developed for the iMac. With that in mind, I’ve seen reports of a number of breakthroughs lately revolving around printed circuit design whereby circuits could be theoretically embedded in the outer case of a device, and I know beyond a shadow of doubt such a capability would be a product designer’s dream. Just imagine how much more battery space an iPhone could have if the plastic body itself contained some or all of the circuitry. How much smaller and thinner could laptops be? Now, I’m sure that buying PA Semi was born out of much more practical needs, but this new frontier is a manufacturers “Holy Grail” to reach for and if anyone would actively chase that futuristic dream and attempt to incorporate some of those ideas into a practical product, you can bet it would be Steve Jobs and his cohort Jonathan “iVes.”

  • lmasanti

    “Jobs was gone from Apple close to or just over eleven years, not the eight years of tragic leadership that you mention.”

    There is something called “inertia”: Apple keep flowing the right path while the head (a.k.a. Sculley et al.) got rotten.
    From memory:
    1985 showed the Macintosh Plus
    1986 the LaserWriter and AppleTalk
    …also QuickTime, Color management… etc., etc.

  • stefn

    A huge external threat is required punish grandiosity and instill humility, flexibility, and an acceptance of change. Nice for Jobs that he could pick up the reins and slough off any blame for the slough (don’t you love English spelling conventions) of failure when Apple hit bottom.

  • stefn

    Well that’s weird. Here’s the first paragraph of my comment:

    Like snafu, above, I wonder about the alternative Apple history, the one in which Job remained at the helm. As an old manager I know that change is almost impossible in an organization that sees itself as successful. Apple arrogance in its first period was monumental and legendary.

  • Brau

    Couldn’t agree more with stefn and snafu.

    Jobs was at the helm (correct me if I’m wrong) and largely seen as responsible for the ill-fated Lisa project. Sculley simply could not have ousted a founding father if the sentiment wasn’t already firmly established within the ranks already. Most leaders tend to organize their ranks according to the direction they are already going. Blazing trails based one person’s vision is something very difficult to do because few will follow if they don’t share that vision and investors/stockholders will judge that vision solely on past success or failure. Steve Jobs noted in an interview that his prior failures with Apple and with Next taught him a lot about how to aim for greatness yet constrain it within reality. He learned that a great product (Next OS) can easily fail without the direct support of an established manufacture/distribution network and price constraints, therefore the failure of the Lisa could not be blamed on Apple. Having to come to terms with these realities eventually led him back into discussions with Apple and the rest is history. Since coming back to Apple he has aimed at low attainable/marketable goals rather than lofty aspirations toward highly expensive unmarketable products (MicroSoft’s big-ass table is a good example), but suffered a lot of criticism and almost sunk himself by pushing the Mac Cube out at a price much too high (personally I see the Cube as a halo product that broke the mold of what a PC had to be, paved the way for the MacMini, and ultimately led to the plausible creation of the all-in one crt-less G4/5 iMacs). Since then, all the latest products start out with some bare-bones advancements and grow over time instead of trying to be a utopian device right out of the gate. Each model improvement becomes another opportunity to convince people to upgrade and generate more revenue. He moved OSX development into a rapid cycle where it can be resold every one or two years, and calls it “a license to print money”.

  • DeadParrot

    To the best of my knowledge, the best historical information on market share of nearly every type of PC on the web (1975-2004) is at http://arstechnica.com/articles/culture/total-share.ars

    The source data (spread sheet + 2005 data) is at http://www.jeremyreimer.com/total_share.html

    As far as I can tell from IDC numbers, the more current numbers are

    2006 229700 – PC 5655 – Mac
    2007 261300 – PC 7764 – Mac
    1Q+2Q/2008 132982 – PC 4785 – Mac

  • beanie

    I would say the iPod and iPhone will have to survive the upcoming flood of mobile internet devices using new mobile chips such as:

    1. Intel Atom-based devices
    2. NVidia Tegra-based devices
    3. Qualcomm Snapdragon-based devices
    4. ARM Cortex-based devices
    5. Texas Instruments OMAP-based devices
    5. ATI mini-Xenon graphics chips

    My guess is iPod will lose lots of marketshare. I will be very surprised if it can hold.

    If Apple wants lots of PC Marketshare, all they have to do is become a Windows OEM and pre-load Windows with their computers.

  • http://johnsessays.blogspot.com John Muir


    Nice one. I’m sure the main thing making keeping people back when they look in the window at an Apple Store is the whole Vista Wow thing. Just as much as I’m convinced that Atom doesn’t stink right now, and that music players are sold entirely based on what processor they have. It’s an inexplicable miracle that iPods ever sold all right. ;)

  • http://johnsessays.blogspot.com John Muir


    Here’s a nice chart:

    The short story: steady growth from 1985 to 1991, then a tumble as Windows replaced DOS, until 1998’s iMac and 1999’s iBook, then another tumble with the internet crash of 2000, lingering around until 2005 when sales skyrocketed which they continue to do today.

    Note that the present Mac boom started back in the last year of PowerPC. It seems to have had as much to do with the similarly timed boom in iPods (2005 saw the video iPod and nano introduced) as it did with Intel.

    Of course: I doubt it would have gone nearly as high as it has if we were still stuck on G4’s either!

  • lmasanti


    “My guess is iPod will lose lots of marketshare. I will be very surprised if it can hold.”

    As usual, you are comparing the “actual iPod” with “future products”, as when Microsoft tell us that the late-2009/2010 release of Windows Mobile will surpass the “actual iPhone”.

    Did you take in consideration that, for the time any one of those products are available, there would be different iPods, possible better that the coming products?

    Hey, wait a minute, maybe the Sept. 9th “rumored” event could introduce them!

  • designguy

    Nice teaser Daniel…
    I was not expecting you to pull off some Apple style theatrics.
    Perhaps you should finish your stories with, “one more thing.”
    Seriously though, thank you for the article.


    In the context of Ultra-portables, I do not want to tackle laptops that potentially could use these devices.

    I am glad that you brought these “alternative” hardware platforms, into the limelight. I would be interested to see Daniel’s comparison on them. In a few hardware generations, we might even some of these used by Apple, although I doubt it given the “PA Semi” acquisition.

    The primary reason that these alternative hardware components would not be successful, is that they require a well matched software platform. Being that they are just “components,” an entity would need to slap together the remaining hardware.
    That leaves some problems, big problems for non-vertically integrated companies. Said entity would require an operating system, and being a “slapped together” jigsaw of components could potentially imply that the OS must support a plethora of component manufacturers.

    Said operating system must support true multi-touch (*cough*, Google). While many cell phone companies and their networks may be able to force keyboards on users as a feature, for a “slate” there is just no substitute to screen interaction. (Apple already has a bluetooth keyboard if this is a necessity anyway)
    From this point, one can also argue that an OS’s multi-touch and gesture capability needs to be well rounded. An excellent example would be the inability of certain emerging smart-phones (Dare and Instinct mainly) to register multiple points of contact. How well would a competing product to the Apple slate be able to do all the “cool stuff?” Keep in mind the seemingly infinite amount of patents Apple holds on these “cool features.”

    I am going to need help on this one John, as I will be leaving OS gaps. By the way, I enjoyed your sarcasm above. :)

    OS Options excluding Apple:

    Windows CE…. LOL
    Windows Mobile 6-7 (Possibly)
    Android variation (we can all safety assume that Google will want their searches on every device…)
    Linux (alternative flavor…)

    For the consumer success of a slate device, price will be a major factor. This being said any windows device will already be at a disadvantage. So an Android variation seems to be the component manufacturer’s salvation, yet again. Following OS price, one must look at the FLASH memory and congruent components. I wonder who gets those favorable??? LOL
    A successful “app store” will also be a foundation block to the success of such a “slate.” Now if we could just think of a company that has an existing, thriving, profitable and secure marketplace……

    I know, maybe Microsoft can create a “Surfaces” mobile, charge $3000 and create an “EnjoyForSure,” or “UseForSure” application file system that depends on overpricing developers for the right to create on their “innovative” OS. :) Hope you enjoyed that John.


    I am glad to see you bringing up these new concepts on integrated design components. I agree with your statement on there being more to the “PA Semi” acquisition.
    I will go a step further and mention Apple’s patent on solar-panel LCD screens or other promising concepts I have seen from them such as touch detection casings.
    For Apple having access to such design talent now, the sky is the limit.

  • Brau

    @ designguy

    I also recall an Apple-filed patent way back regarding the placing of multiple image sensing (camera?) lenses between pixels of a display. The implications of this idea are tantalizing and clearly would require advanced circuit design akin to PA Semi.

    One other thing that rings in my ears is something Steve Jobs said at the end of his last keynote; that the foundation has been laid and the next few years are going to see products that are “through the roof”. If you look at Jobs’ history, despite some lack of success (Lisa, Newton, Next), all the products he has championed have been way before their time. Apple is going to be very interesting to watch.

  • larsonst

    Jobs was tasked with rebuilding the damage done over the previous eight years of tragic leadership, ending its ineffectual ideological wars , reducing dependence on foreign resources, investing in critically needed infrastructure, and restoring the reputation internationally and at home.

    With minor edits it sounds like he should be our next president

  • sebastianlewis


    Right now manufacturers are throwing ideas out into the market to see what sticks, ultimately the market will be reduced to Mobile Computers as standalone DAPs and PMPs go away, internet tablet devices probably aren’t going to stick either since they don’t create new platforms, just flood the market with devices that do basically the same thing.


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  • http://homepage.mac.com/lunaticsx/ LunaticSX


    “Jobs was at the helm (correct me if I’m wrong) and largely seen as responsible for the ill-fated Lisa project.”

    Jobs was ousted from the Lisa project, which is why he took over the Macintosh project. Remember how the Mac project building had a pirate flag flying over it?

    (N.B. The Macintosh was originally conceived of by Jef Raskin. His idea was of a much simpler machine that was more of an appliance, especially targeting word processing and basic productivity work. Jobs came in and pushed Raskin out, turning the Mac into more of a “mini-Lisa” general purpose computer. The Mac’s OS was never intended for multi-tasking or other “advanced OS” features, which is why it got so bogged down after System 7 and Apple became desperate to replace its foundations and have a true “modern” OS.)

    “almost sunk himself by pushing the Mac Cube out at a price much too high (personally I see the Cube as a halo product that broke the mold of what a PC had to be, paved the way for the MacMini, and ultimately led to the plausible creation of the all-in one crt-less G4/5 iMacs).”

    The G4 Cube should have been a headless iMac with a G3 processor. Even though a huge percentage of people who bought G4 towers never really used their expansion capabilities, part of what they were buying into was the OPTION of expandibility. The G4 Cube was supposed to appeal to these people, since it WAS cheaper than the equivalent tower, but it missed that fundamental desired possible expansion feature. On the other hand, as a “headless,” cheaper iMac, it probably would have sold very well. The Mac mini shows that it could have been at the very least a moderate success.


    “My guess is iPod will lose lots of marketshare. I will be very surprised if it can hold.”

    Keep guessing. :)


    “If you look at Jobs’ history, despite some lack of success (Lisa, Newton, Next)”

    As I noted above, Jobs was ousted from the Lisa project. Also, he had nothing to do with the Newton, it was seen as Scully’s pet project (which is rumored to be part of why Jobs killed it after he came back).

    Part of the Apple ///’s failure can be attributed to Jobs, as he insisted on it not having a fan. It also only had three slots, vs. the eight in the Apple II+ (then seven in the later Apple //e and IIgs), though that never got a chance to become a problem.

    Similarly, while Jobs was still at Apple there were no Macs with fans or slots. The first Macs with slots and/or fans, the Mac II and Mac SE, were designed the year after Jobs left, in 1986.

    Once Jobs came back to Apple they again released a machine with no fan and minimal expansion, the iMac. Luckily, this time the market was ready for such a machine and it was a success. Then the one bump on the road since then was the G4 Cube, with its similar philosophy (see above).

  • Brau

    @ LunaticSX

    Thanks for the clarifications, and the history too. Despite my errors, I still have a lot of faith that whatever comes from Apple will be something that reaches into the future a bit, unlike the rest of the catch-up makers.

    The only part I’ve ever disagreed with was the rumored assertion that Steve Jobs killed the Newton out of spite. It just doesn’t add up in my books. I recall the Newton as a PDA trying to exist in a world mostly running on paper, IBM PCs, and fax machines at that time. Even if I entered all my calendar data or Contacts into it, there was nothing I could do with all that data back then. Steve Jobs had to focus Apple on a few products they could do really well to stop Apple’s financial bleeding. The Newton was expensive, had fallen behind other PDAs (no color screen), and had a very limited fan-base/market. I believe any CEO worth his wage would have made the same decision, as unpopular as it was with the tech crowd.

  • http://homepage.mac.com/lunaticsx/ LunaticSX


    One of the three major successes Palm had with the Palm Pilot was the ease with which it could sync your calendar/contacts/etc. data with your PC. (The other two were its small size and its low price, with an additional feature being its long battery life.)

    With the iPod and later the iPhone, Apple took a lesson from this.

    I’m not surprised at all that Apple killed off the Newton after re-absorbing Newton, Inc., in order to focus on their core products. It’s unfortunate, though, that they gave misleading, or inappropriately hopeful messages for the reason, such as being able to provide more support for the platform by keeping it closer. Then when they killed it off they announced that there would be a replacement product in the near future (it took nine years after that for the iPhone to come to market). Apple could have, on the other hand, just let Newton, Inc. go.

    BTW, at the time Newton was killed, there were no mainstream color PDAs. Sharp had a Japanese-only color screen PDA, but it was limited to something like only four colors.

    Newton OS 2.0, on the other hand, had internal support for color. There was a PCMCIA external video card that worked with both Macs and the Newton, and the Newton could display color with it when hooked up to an external monitor. There was even 3rd party software that could play back Powerpoint presentations from a Newton with that card and a VGA display.

  • Brau

    @ LunaticSX

    Thanks again.

    It is interesting to consider the “what if Steve Jobs didn’t kill the Newton” thought. Personally I think the Newton would have progressed feature by feature as all the other PDAs did, without making much of a bite into the market, similar to how Blackberries for years failed to catch on in the consumer space. It was a cool gadget looking for a market that wasn’t quite ready and if it had been around, it would have lacked the sensational quantum leap the iPhone was able to achieve by hitting the market the way it did. As the adage goes, “you have to break a lot of eggs to make an omelet” and I feel it applies very well to Apple and the fate of the Newton. In reality the Newton never died; the dream just got bigger and came to fruition in one giant leap at a time when the market was seriously wanting it. A phoenix rising out of the ashes.

  • http://homepage.mac.com/lunaticsx/ LunaticSX


    Funny thing is, about six to nine months before the iPhone was announced I was sitting down with a bunch of Newton guys (SNUG, the first Newton user’s group; now morphed into SiPUG, but people still bring their Newtons) and I asked them what they thought the Newton would look like if Apple designed it at that time.

    Then: I had my MP2100 out on the table. I pulled out my iPod and placed it on top of the screen. “Pretty close in dimensions, huh?” I described a device that was the size of an iPod, but the entire front face (minus a bezel) would be its screen. It’d have an iPod docking connector and synch your address book, calendar, notes, music, etc. via iTunes. No PC Card/etc. slots, no removable battery (just like an iPod). 8 GB of Flash RAM would be reasonable.

    It just made sense, given the foundations in technology that Apple had been building.

    The next thing that makes sense: Apple now has experience with HSDPA 3G chipsets. They also now have deals with carriers worldwide. Both are thanks to the iPhone. Apple’s portables are all going to get build-to-order options for built-in HSDPA, just like built-in WiFi used to be an option. Unlike other companies who only have a small set of models that offer built-in 3G, though, Apple’s going to have it as an option across all of their laptops. (The MacBook Air is just begging for this, and there’s photos out there of people who have hacked it in.)

  • http://johnsessays.blogspot.com John Muir

    A little update to my DS MacBook idea:

    AppleInsider and their patent trawling … they know how to spoil us!