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The licensing question returns to haunt Apple

Apple's refusal to license its technology contributed to its demise in

the personal computer market.
Apple is running into the same challenge as it experienced with the
Mac of selling a proprietary solution that is, music on the iPod cannot
play on non-Apple devices.
This time around, however, Apple is allowing HP to resell iPod and it's
their first small step into trying to get into the mass market.
The risk is that they will continually get downward pressure on price
by competitors like Dell, and greater availability of options by
customers using Microsoft software leading to a repeat of the Mac
One can still detect an Apple orientated approach to growth rather than
one driven by absolute growth. For example, iTunes, was initially
available only on the Mac. This was meant to drive Macintosh sales, and
then six or nine months later Apple would bring out a Windows version.
The problem is that it gave competitors six to nine months to bring out
Window's products, which creates a more competitive environment.
Sony drove the Walkman into a mass audience by drastically bringing
down the price. Apple may be able to do this successfully with the iPod,
but it has never been very good at very high volume manufacturing at
very low costs.
But, it maybe that the iPod is becoming the dominant platform in MP3
players just like Microsoft did with its Windows Operating System.
Cell-phones: the new threat

In 2005 Vodaphone and Orange introduced their own downloading

services. Sony-Ericsson has also launched its first Walkman Cell-phone,
and Nokia and others are producing their own music phones.
Consumers can already download music to their cell-phone, but the cost is
almost twice that compared to Apples itunes
the inexorable shift from separate devices to a single hand-held device
appears to be gathering momentum.
In particular 3G cell-phones will also offer the capability to download
high-speed data over the airwaves including television pictures. The 3G
handsets may be destined to become mini-TVs allowing consumers to
watch sporting highlights and other entertainment, including games.
Apples Action to Combat Threat

To combat the threat from cell-phones Apple has established a strategic

alliance with its long-time partner Motorola, which will enable Motorola
cell-phones to incorporate itunes technology. Late in 2005 Motorola put
its ROKR E1 in the shops announcing it as the first cell-phone compatible
with itunes.

The success of Apple iPod has surprised its competitors, market analyst and investors
who had largely believed Apple was a niche player in the computer world. To be
successful in the mainstream mass market is unusual for Apple. Many people recognise
the Apple brand, but far fewer buy its products. Take the imac; this iconic stylish PC
was universally praised for making the desktop PC an attractive product rather than a
dull grey box. The imac is clearly different from other PCs and customers have to pay a
price premium for this, but few are willing to pay twice as much for a machine that
ends up doing much the same as any other PC.
Because of small scale of sale,profit margins are extremely small for
PCs; this is why it is difficult for Apple to produce any revenue from the
imac despite its success. Indeed, it is the iPod, which has delivered the
cash for Apple. Apple, perhaps best known for its Macintosh computers,
has relied on the iPod and sales of music from its iTune online music
store to make up for its lack of market gains in the highly competitive
PC market. The core business of PCs continues to shrink, with iPod and
iTunes driving its current revenue growth.