The Apple II Report # ------------------- # # The Apple II: Revitalized # And Ready To Compete For Apple # # By Ron Lewin # Marketing Director, Micol Systems # Publisher of Micol Advanced BASIC # # Regular Mail: 46 Parklawn Crescent # Thornhill, ON # Canada L3T 6W7 # # Electronic Mail: GEnie ID: MICOL.SYSTEM # America Online: MICOL SYS # Compuserve: 71601,3306 # Pro-Line: RonL@Pro-Generic # # # ** Edited for general release # # Copyright 1990, Ron Lewin, Toronto, Canada # This document may be reproduced in whole or in part, provided it # is not altered. # Commercial publications must seek the author's permission before # publishing this document or any part thereof. # # # [-----------------------------------------------------] # # Reference Tables: These tables are referred to in the body of the # report. # # Table 1: CPU Market Share in Units (Retail) # source: Computer Reseller's News # # 4th Quarter Rate Of Year End Rate of # CPU 88 89 Change 88 89 Change # --- ----------- ------- -------- ------- # Mac II 5.0 0.2 -96.0% 3.7 1.5 -59.4% # Mac IIcx 3.3 2.8 # Mac SE 7.4 3.6 -51.4% 6.9 4.6 -33.3% # Mac SE/30 2.2 1.7 # Mac Plus 5.0 3.8 -24.0% 3.8 3.8 0.0% # # All Macs 24.4 16.8 -31.1% 18.7 17.2 -8.0% # Apple IIGS 7.0 3.7 -47.1% 4.3 2.8 -34.8% # # # Table 2: Overall Market Share: Personal Computers # Change from 1988 to 1989 # source: New York Times (2/11/90) # # Market Rate of # Manufacturer Share Change Change # ------------ ------ ------ ------- # IBM 34.7 + 3.3 points + 10.5% # Compaq 16.7 + 1.4 points + 9.1% # Apple 18.4 - 5.3 points - 22.4% # Apple II 3.3 - 5.2 points - 61.1% # # # Table 3: Educational Plans to purchase by Brand Name (K-12) # source: Technical Horizons In Education Journal # market survey # # Brand 88 89 Rate of Change # ----- -- -- -------------- # Apple II 50% 30% -40% # Mac 6% 16% +166.6% # -- -- # Overall- # Apple 56% 46% -17.8% # IBM 23% 38% +65.2% # # # [----------------------------------------------------------] # # # Introduction # # The Apple II has survived a long time. It can be said that # the Apple II is the longest living computer line which still # enjoys significant sales. Market Data Retrieval Inc., reports # that 60% of the computers currently installed in primary and # secondary schools are Apple IIs. In 1988, the Apple II alone # accounted for $1 billion worth of Apple's revenue, and if spun # off into its own company, would have occupied a position better # than 400 in the Fortune 500. Last year, the Apple IIGS outsold # the Mac Plus. The Apple II has outlived even Apple's # predictions, who never expected the computer to last as long as # it has. And Apple seems not quite sure what to do with it. # It has survived so long because there continues to be a # market for the Apple II. The Apple II continues to sell, despite # strong rumors of an impending death and a lack of attention and # promotion by Apple. The Apple II community has been hearing # these rumors since the introduction of the Lisa, and yet the # Apple II still survives. But it is getting weaker, and it seems # Apple is doing nothing to strengthen the line or develop the # market. The Apple II Developer's Association was formed by a # group of developers who were growing increasingly concerned about # Apple's marketing of their low end Apple II line. Apple has # recently come under increasing criticism from computer industry # analysts for ignoring the low end of its product line, and Apple # II users are becoming increasingly angry at not being taken # seriously by Apple. Apple II demand has fallen only because this # excellent low-cost, low-end platform has been inadequately # marketed. By focusing on the Apple II and developing its market, # Apple can reverse its decline. Apple has a machine which is # built for combat in the low end market but Apple's marketing # goals for the Apple II are not consistent with the low end # marketplace. # # This may sound negative, but it must be stressed that this # is not the report's intention. Granted, many parts will be # highly critical of Apple, but not without due justification, and # certainly not maliciously. The only reason this report exists is # because the Apple II Developer's Association truly believes that # Apple genuinely cares. This report is designed to highlight # problem areas and especially to present opportunities which are # going unrealized. # # The data given within this report is as accurate as possible # given the author's limited resources. With access to the amount # of information which Apple possesses, this report would, no # doubt, be more accurate. The author does feel, though, that the # data used in this report is generally accurate and reflects # reality. Most data has come from respected unbiased trade # magazines and journals as a result of their own research, and all # sources are noted. # # * The Apple II Market Is In Crisis # # The sales and market share of the Apple II line has fallen over # the past two years at an alarming rate. Overall, this has had a # negative effect on Apple. In a period of growth for the Mac, the # destabilization of the Apple II line has dragged down Apple's # corporate performance. Apple has not kept the home fires burning # on the low end, and as the low end of Apple's product line # suffers, so does Apple. # # Market Data # ----------- # # Poor low end performance # ------------------------ # # Apple's low end Apple II line accounted for 25% of Apple's # revenue in 1989. The proof is overwhelming that it is in # trouble, and Apple is not taking action to correct this. The Mac # Plus has failed to win the low end market, with dropping sales # that are worse than the Apple IIGS's sales. Apple need to solve # its low end crisis by creating a low end machine which fulfills # consumer expectations. Audits and Surveys, Inc. was quoted in # the New York Times (2/11/90) as saying, "failure to move quickly # on a low priced machine has pushed down Apple's overall unit # share of the PC market to 18.4% from 23.7%". In fact, an # internal document (dated February 8th) from Morgan Stanley, Wall # Street's most profitable and prestigious investment banking firm, # recommends a hold on the purchase of all Apple stock, stating # "...there have been numerous criticisms of a gap in the product # line, particularly at the low end... We are expecting it to take # all year for the company to stabilize marketing... we would not # rush in to buy stock but wait for increased clarity." Apple has # been criticized strongly for ignoring the low end, something that # Apple II developers have been warning them of for quite some # time. Only now that the problem may have reached critical mass # is Apple paying attention. # # Apple must take this issue very seriously. The rumored low # end color Mac is rumored to be not due for 12 to 18 months. # Without this Mac, Apple's low end depends on the Apple II. Apple # cannot sell low-end Macs that do not exist, Apple must sell what # it has today, the Apple II. However, Apple II sales have sunken # to dangerous level. There is a great amount of uncertainty # surrounding the Apple II's fate. Apple needs to resolve the # uncertainty surrounding the Apple II. If Apple wants to retain # any clout in the low end consumer market, it had better # concentrate on the Apple II, at least for the short term. # Otherwise, by the time the low end Mac arrives, Apple could find # itself in a very disadvantaged position as a minor player in the # low end consumer market. # # Sales # ----- # # Audits & Surveys Inc. announced last week that Apple II # sales fell 51.8% in 1989. During the same period, Macintosh # sales increased by 20.4%, while PS/2 sales rocketed up 39.5%. # # Market Share # ------------ # # Table 1 shows the performance of Apple II and Mac in the # retail environment as determined by tracking sales at retail # stores. Retail sales of the Apple IIGS has fallen 34.8% over the # past year. What is surprising is that sales of the Apple IIGS # fell by 47.1% during the fourth quarter, which is usually a very # strong period for the Apple II line. This indicates that sales # of the Apple IIGS were falling faster towards the end of the year # than at the start. # # Personal computer sales rose by 22% during 1989, indicating # that this is still a rapidly growing area, however Apple's market # share has dropped. It is interesting to note from Table 2 that # Apple's total loss in market share (5.2 points) is almost # identical to the Apple II's loss in market share (5.3 points). # This proves that while the Macintosh line is remaining stable, # the Apple II line's decrease in sales is almost totally # responsible for Apple's 22.4% overall loss in market share. # During the same period, IBM and Compaq's market shares have # risen. Jimmy Treybig, the CEO of Tandem computers, comments, # "The economics of our business are frightening. We can deliver a # lot more power for a lot less each year, but the industry isn't # growing as fast as it once did. The bottom of the line is, if # your company doesn't have big growth, you have a horrible # problem." Meanwhile, Apple's market share is shrinking. # # The educational market share of Apple has also fallen, and # is expected to continue to slide, as indicated by Table 3. Plans # to purchase Apple II in the K-12 market have fallen by 40%. # Plans to purchase Mac have not increased nearly enough to fill # the void, as total plans to purchase Apple computers have fallen # by 35.7% in an area that is traditionally dominated by Apple. # Plans to purchase IBM have risen by 65.2%, spurred by Apple's # weakness in the K-12 market. It is estimated that school # districts and schools (K-12) will spend $388.8 million on # microcomputers during 1990. Colleges and Universities are # expected to spend $1.4 billion on microcomputers during the same # period (Technical Horizons in Education, Winter 1990 market # report). # # Alienation of Apple II Community # -------------------------------- # # Apple II users are becoming increasingly unhappy. A visit # to a user group meeting, Apple dealer, or Apple II BBS will # verify this. Letter writing campaigns to Apple USA and computer # magazines have been initiated by Apple II users who feel that # they, and the Apple II are not being taken seriously by Apple. # The Apple II community sees that sales of their Apple II are # falling, and they hear the rumors that the Apple II is on the # verge of being discontinued, and they worry about the value of # their investment. The Apple II community's complaints include: # # * Apple is allowing their computer to drift in obscurity. # Providing new system software is no replacement for # competitive hardware. # # * Apple II users have a very legitimate complaint that the # Apple IIGS's speed is inadequate and uncompetitive. # # * Apple II users feel ignored by Apple. In the past, Sales # promotions have often featured only the Mac line and have # ignore the Apple II line. Apple II users feel like second # class citizens. # # * Apple II users feel that they do not get the support they # deserve from Apple and that there is a pervasive attitude at # Apple that only the Mac line matters. # # This may sound severe, and you may not believe it, but it is # true. If you doubt it, ask yourself when was the last time you # went to an Apple II user's group meeting unannounced? If still # in doubt, visit an Apple II BBS to read the messages and # concerns. No doubt, you are aware of the current letter writing # campaign (called "II Infinitum") organized by the Apple II # community, and this alone should tell you how Apple users feel. # Apple users are loyal and proud, but where there was once # confident belief, now there is doubt. # # Apple II users want to be satisfied that their computer has # a future and that it was a worthwhile investment. Apple II users # want to be taken seriously by the computer industry, and are # frustrated to find that even Apple Computer doesn't take them # seriously. Apple must not make the mistake of thinking that # because this computer is old, and is no longer Apple's premier # product, that its owners do not matter. There is no doubt that # everybody at Apple would protest strongly that Apple does not # think this at all. Then the problem is, why aren't the Apple II # users getting this message? The evidence supporting their # dissatisfaction is strong, why are they unhappy? # # Clearly, this is an important matter. There are 4.5 million # Apple II's out there in the hands of educators and private # owners. A company's existing customer base is often considered # its best market for new products. The people in the Apple II # user base were early Apple customers, and confident believers in # Apple. Apple should be exploiting this, but instead there is # rift growing between Apple II users and Apple Computer. Many # Apple II users have been involved with computers for a long time # and were early adopters. As such, they are Opinion Leaders seen # by family, friends, and co-workers as knowledgeable about # computers, and are used as a source of information. Any # animosity between this group and Apple would be reflected in the # advice they give to those seeking information. If Apple cannot # restore the fierce loyalty Apple II users once had for Apple, # Apple will have lost a very valuable resource. # # Third Party And Dealer Support: Going... going... # ------------------------------------------------- # # Third party support for the Apple II is dwindling. Software # publishers and hardware developers, too, hear the rumors of the # Apple II's demise, and see their falling sales. Software # Publishers Association reports that during the 1st quarter of # 1989, Apple II software sales declined 35.6% to $29 million, # compared with the same quarter of the previous year (MacWeek, # June 27, 1989). As Apple II sales fall, and Apple II users feel # more discontent, the Apple II third party is suffering. With # fewer new Apple II's being sold, potential growth is limited. # And because the future of the Apple II is uncertain, Apple II # users are not investing more money in their Apple II's by buying # new software and hardware. As well, the poor image the Apple II # has in the computer industry makes it difficult for Apple II # developers to find the financing necessary for proper business # operations and growth. # # Many Apple II developers have chosen to discontinue Apple II # support and development, including: # # Company Name: (Comments from company representatives, or from # sources near the company, hearsay in some cases) # # Mediagenic/Activision # Infocom: "GS? We're not developing for those any more." # Sierra Online: "The GS is too slow for our SCI game # authoring system. No further Apple IIGS development is planned." # Software Publishing Corp # Pinpoint # Microsoft # Electronic Arts: Apple IIGS development has been cancelled # because Apple has dropped support of the GS. I read it in the # paper last week." # AST Research # Broderbund: "We had two science fiction games scheduled for # release. Both were cancelled last month" # Peachtree Software # MDIdeas # Wordperfect Corp # MicroProse # Spectrum Holobyte: "We don't have anything planned for the # Apple II for the next year." # Springboard: Left message asking about future development of # Apple II products. Development director never returned call. # Epyx: Currently in Chapter 11, but announced previously that # it would no longer be developing for Apple II # PBI: Currently in Chapter 11, but announced previously that # it would no longer be developing for Apple II # Three-sixty: Publisher of Dark Castle GS and Warlock GS is # said to be "not thrilled" with Apple II marketplace and is # "seriously considering" not developing any new products # Sublogic: "What's a IIGS?" # Access: "IIGS?" # Absoft # Softview # Zedcor: Sees no future in Apple II # # The third party Apple II magazines have been far stronger in # the past. Gone are Call-Apple, A+, Softtalk, and others. The # Apple II community has noticed that the numbers of magazines and # their sizes have been shrinking, and the table of advertisers # grows shorter each year. Magazines like Byte and Computer # Shopper have seen their Apple II sections shrink to nothingness, # while sections for Amiga, Mac and MS-DOS have all expanded. # # This is not to say that the Apple II magazine industry is # unhealthy. InCider/A+ has grown in the past year since merging # with A+, and a few new, small magazines have entered the scene. # However, the Amiga, with a far smaller installed base, is able to # support three times as many magazines as the Apple II does. # # And Apple II users are becoming increasingly dismayed when # they walk into their favorite software store and find a pitiful # selection of Apple II software and hardware, next to a wide # selection of MS-DOS and Amiga titles. What is more worrisome # than this is the attitude of many Apple dealers that if you're # not there to talk to them about Mac, they don't want to speak # with you. This, too, may sound untrue, but it has even happened # to the author. A true story: the author once saw a salesman at # an Apple dealer tell a young college student "If you want an # Apple with open architecture and color, you'll have to get a Mac # II." The very same college student was observed two hours later # at another store down the street buying an Amiga 2000. Many # Apple dealers totally ignore the Apple II line, or are grossly # ignorant of it. # # # Analysis # -------- # # Apple has two requirements: # # # # * To stimulate the Apple II market to extend the Apple II's # life cycle. This is required to boost sales and recover # lost market share; # # * To mend the rift growing between itself and the Apple II # users, and keep them happy for the long term. # # Addressing these two problems will effectively solve the # problems of the Apple II third party. Apple II users will be # happy as long as new software and hardware is available for their # Apple II. And the third party depends on the Apple II community # to buy new software and hardware. If the Apple II third party # dies, then all Apple II users, including educational # institutions, will feel effectively orphaned. And if the Apple # II community loses all faith in the Apple II, the third party # will die. Therefore, both the Apple II community and the Apple # II third party must be kept alive. # # * There exists an important cycle in the Apple II market: # # as long as the Apple II community has faith in the Apple # II, and continues to see new products, the Apple II # community will remain strong and buy new products... # # and as long as the Apple II community remains strong and # buys new products, the Apple II third part will continue to # develop new products. And the cycle continues. # # All that is needed are a few inexpensive boosts by Apple to # keep this cycle flowing, or at least keep it from slowing down # too much. These boosts are important to the Apple II community # and the Apple II third party. They are signs that Apple still # cares about the Apple II, and that their investments are safe. # In fact, this is part of the key to satisfying Apple II users. # As long as the Apple II remains a viable market with a steady # supply of new developments, Apple II users will remain relatively # content and happy about owning their Apple II. # # Apple II users also need to be taken seriously by Apple. # That means Apple needs to take the Apple II more seriously. In # doing so, Apple would also be extending the product's life cycle # by addressing the Apple II's image problem. And as long as the # image problem is addressed, the third party is happy because some # of its problems are solved. # # So it is obvious that in addressing a few needs, Apple can # solve many complex problems. With a little creativity (something # Apple's never been afraid of), Apple can address these needs # inexpensively. # # Sales have fallen and support is dwindling because of poor # marketing by Apple, and particularly poor marketing of the Apple # II line. # # * The low end market is not being understood, and because of # this, the marketing mix (product, price, promotion and # distribution) is not being manipulated to satisfy consumers. # There still exists an immense market for the Apple II, but # Apple seems unable or unwilling to recognize and serve it. # # * Apple is not being market oriented or adhering to the # marketing concept. Business Week editor Lew Young, once # said, "In too many companies the customer has become a # nuisance whose unpredictable behavior damages carefully made # strategic plans." Apple must be careful it is not falling # into this trap, especially with the Apple II. # # # Marketing of The Apple II # ------------------------- # # There is great confusion and uncertainty about the Apple # II's fate. There have been reports everywhere of the Apple II's # death. In MacWeek, MacUser, The Wall Street Journal, user group # meetings, and even from Apple dealers themselves, people are # being told that the Apple II is about to be discontinued, is # dying, or is already dead. # # * If this is totally false, then why have such rumors been # allowed to spread virtually unchallenged? # # After all, if Ford was marketing a car, and rumors # consistently appeared proclaiming that the car was on the verge # of dying, it would be seen as an utter failure of Ford's # marketing and promotional campaign. # It is unbelievable that a product that accounted for $1 # billion of Apple's revenue in 1988 is allowed to founder in # uncertainty due to inaction on Apple's part. This uncertainty is # a direct result of Apple's poor promotional campaign and support # for the Apple II. The Apple II, as it will be shown, is still a # highly viable product, and Apple must do everything in its power # to promote this computer as such. # # * Apple has ignored the Apple II for too long... it is time # for this to change. # # Pigeonholing the Apple II as an `educational machine' is self # defeating. Apple has much to gain by reconsidering its current # market segmentation and target market for the Apple II and Mac # lines. # # Apple's market segmentation and current target markets: # # Segments # -------- # (Low End) Education # Home Recreation/Education # Home Office # (Medium End) Small Business # Medium Business # (High End) Large Business and Fortune 500 # Workstation market # # CPU Target Markets # --- -------------- # Apple II Education # Mac Plus Education # Mac SE Home recreation/education # Home Office # Mac SE/30 Home Office # Small Business # Mac II Medium Business # Large Business and Fortune 500 # Workstation Market # # The largest problem with this segmentation is that is does # not reflect the needs of the low end market. Low end users want: # # * Color # * Value (at a low-end price) # * A `fun' and reasonably powerful computer # * A computer which they feel comfortable with # # The Mac does not offer color at a low-end price, and it is # unrealistic to think that it will in the near future. The Mac # has developed such a `corporate' image that low end users are # turning increasingly towards Amiga and the PS/2 Models 25 and 30. # Apple II is not even considered because it is hardly promoted as # anything other than an `educational machine,' and due to the # uncertainty of its future. # # In reality, as Apple searches for an answer to their # problems in the low end, the answer sits right in front of them. # The GS is a perfect low-end Mac... it provides everything the Mac # does, including a rich selection of general and specialized # applications. Both the Apple II and the Mac offer the GUI. In # fact, both the GS and the Mac offer the same DeskTop metaphor, # system file structure, disk drive, and DeskTop BUS. Virtually # everything from SCSI to IEEE specs are supported through # hardware. The GS's features are very similar to the Mac's. The # only difference is that the GS is (in general) slower, and does # not have the same amount of professional applications. # # There is no reason why both the Mac and Apple II line cannot # co-exist. The Apple II line serves the needs of the low end and # small business market, and the Mac serves the needs of the medium # and high end markets. There is no cross-over or threat to the # Mac. The Apple II threatens the Mac as much as the Amiga # threatens the Mac: Not much. However, a low cost Mac would # cannibalize current Mac sales as much as encourage new one. # That's because market perception of the machine says that the Mac # is a more powerful and professional computer. Introducing a low # end Mac would degrade this image and the higher end models would # suffer. By revitalizing the Apple II line as the low end line, # Apple brings further clarity to its product line. The Mac is no # longer seen as trying to be all things to all users, it assumes # its legitimate place as a higher market machine, while at the # same time Apple has a clear winner, with proven strengths, in the # low end market. # # * The Apple IIGS Is The Ideal Low End General Purpose Computer! # # Apple's continuous promotion of the Mac over the Apple II is # hurting itself. Bruce Luputkin of Hambrecht & Quist is entirely # correct when he comments on Apple's low end, stating, "Apple has # the tendency to cannibalize its old products for the sake of its # new ones... there were some errors committed in pricing and # positioning." Even MacUser commented that Apple should make a # cheaper Apple II and promote it widely, saying, "It's already # overdue. The company is crazy not to assert itself with such a # strategy" (MacUser, Dec 1989, p 308). Apple is abdicating the # low end, and IBM and Commodore are moving in to fill the void. # While Apple's share of this market continues to fall, IBM, # Commodore, and the IBM compatibles make huge gains. Computer # Reseller News, when explaining Commodore's gains commented, # "Apple's attempts to move its large base of Apple II users to the # Mac has created a huge void for Commodore to fill" (Aug 21 1989, # p 2). Amstrad has successfully used a strategy similar to # Apple's old Apple II strategy to become Europe's largest seller # of personal computers. Amstrad's low end line is inexpensive, # includes color and an Appleworks-like integrated package (called # Alphaworks). While it is not being suggested that Apple try to # emulate Amstrad, it is interesting to note that Amstrad has been # very successful at satisfying the low end market which Apple # seems far more capable of satisfying. # # Why is it that everybody sees the low end as a valuable # market but Apple? Sculley was recently quoted as saying, "We see # ourselves as providers of workstations." That's fine, but Apple # should be able to support to the Personal Computer market as # well. The personal computer market accounted for the largest # share of industry dollar sales in the 1980's at 39%, and will # grow during the early 90's at a rate of 13% (Fortune, Feb 12 # 1989, p 64). People who work on workstations still must come # home to a personal computer. The Apple II line is the only truly # `Personal' low end computer that Apple makes which satisfies # customer's needs. The Mac II's are too expensive, and the Mac # Plus and SE lack color. The Apple IIGS is the ideal solution. # # Sculley was asked to attend the Apple II Summit at which # this report was presented. He replied with a polite `Thanks, but # no thanks,' and within his reply were some very interesting # comments. Sculley said, "I appreciate your concerns about the # Apple II product line. I assure you we are working to address # many of these same concerns while at the same time planning for a # strong future for Apple Computer, Inc." This implies that # addressing the developer association's concerns about the Apple # II product line could in some way compromise Apple's future. He # adds, "We will continue to sell, service and support the Apple # II. We are committed to supporting our large installed base of # Apple II users." When he talks about the Mac, we see phrases # like "aggressive product development," but he only promises to # "...sell, service and support the Apple II." He indicates Apple # commitment to the "large installed base", but says nothing about # growth. It is clear that perhaps Sculley does not believe in the # Apple II or perhaps it does not fit into his vision of Apple # Computer. Sculley is quoted as saying "We have no reason to # focus our attention beyond individual business users. If # anything, we'll be narrowing our focus." (Fortune, Feb 12, 1990). # Apple must be market oriented, and should not suffer because of a # contradiction between corporate philosophy and market reality. # As Fortune magazine comments in the same issue, "Apple's strength # for the 1990s is the clarity of Sculley's vision; its weakness is # that the vision may be wrong." # # Ignoring the Apple II is a problem throughout Apple # computer. Apple employees are so used to working with their # Macs, that they begin to lose sight of the average person's need # for technology. The sentiment that the Apple II is a toy # pervades Apple. And yet the IIGS, and particularly it's System # Software, are in some ways more technologically advanced than the # Mac. Developer University hardly offers any courses for the # Apple II. The Apple sales force is almost entirely Mac oriented. # Many people report going to special exhibitions at which The # Apple sales force was present with a plethora of Macs, and # perhaps one Apple II running `Reader Rabbit'. Lately, Apple has # been holding "Educational Seminars" at which the only computer # featured is the Macintosh, despite the fact that over 50% of the # computers installed in schools nationwide are Apple II's. The # 1989 Apple Annual Report was 40 pages long, and only mentioned # the Apple II in three short sentences. There were many pictures # of Macs, but no pictures of an Apple II, even though during this # year, the Apple IIGS outsold the Mac Plus. Ed Warnshuis, the # publisher of Technical Horizons in Education, told the author of # this report that he wanted to publish a special Apple II issue. # However, he received no support from Apple other than for his # special Mac issue. University dealers claim that Apple does not # give them any discounts on the Apple II. Apple employees are # `blinded by the Macintosh Light'... they are so awed by its # technology that they could not understand how anybody could want # anything else. The difference is, however, that they do not have # to pay for this technology. For the average person, an Apple # IIGS running Appleworks solves all their computing needs. # Fortune magazine comments, "At the dawn of the next century, who # will emerge as the victors? They will not necessarily be the # companies with the best technology. Instead, the winners will be # the companies with the smartest marketing and distribution... and # the best understanding of what customers, both in the United # States and abroad, want." (Feb 12, 1990). # # The Apple II is a truly general purpose platform that can # satisfy home office and small business segments. Consumers in # these segments want an inexpensive computer, one that they can # share with their family. These consumers seldom buy Macs, # because Macs are too expensive for a color system. Often these # consumers end up buying IBM compatibles. The Apple IIGS provides # networking, access to laser printers (many Apple dealers are # ignorant of this fact), easy expandability, and a wide range of # applications, as well as color. And Appleworks on the Apple II # has outsold every Mac integrated software package at a rate of 2 # to 1. In fact, the only resistance to the Apple II as a general # purpose home and business machine is due to Apple's marketing... # the machine itself is perfectly capable. Even if the Apple II is # never used for business, consumers feel the need to think that # they can, if they want to, use it for business. The Apple II # does not need to be promoted as a strong business computer, but # Apple must not hide the fact that it can be used for business. # The IIGS, with the name Apple behind it, could become far more # than the educational orphan Apple has relegated it to. Sales # that are going to the Amiga and low end IBM (and compatibles) # could be Apple IIGS sales, if Apple recognized the potential of # this machine. # # The Apple II's strong position in education is quickly # weakening. As seen in Table 3, school plans to purchase Apple II # have fallen by 40%, while plans to purchase IBMs have risen by # 65%. Effectively, Apple is losing the educational market. There # are three fundamental reasons for this: # # 1. The uncertainty of the Apple II line is scaring away # many schools. It cannot be said that the Mac has successfully # penetrated the school market because, in terms of market share, # less schools plan to purchase an Apple computer now than ever # before. # The educators making these decisions are generally # conservative people, and know that they must be responsible to # the taxpayers. They hear that Apple may be discontinuing the # Apple II. Whether these rumors are true or not is irrelevant, # they still have the same effect: nobody wants to waste money # buying a computer which may soon be orphaned or discontinued. # Apple makes a half-hearted effort to promote the Apple II in # education, an effort that is not nearly as powerful as the effort # that is being made to push Macs into schools. What does the Mac # offer schools which cannot be had with the Apple IIGS? As well, # schools get a bit perturbed when Apple's sales people tell them # that they need to switch CPUs, along with software, peripherals, # support systems and more. Once schools are already pressured to # change all this, they begin to give serious consideration to the # offerings of other computer manufacturers. # After considering the costs of the Mac, and the lack of support # for and uncertainty of the Apple II, they recall the old saying, # "nobody ever got fired for buying IBM." # # 2. `The Real World': Schools, naturally, want to provide an # education based on what their students will face when finished # school. Right now, the "real-world" of business is predominantly # IBM. As long as the Apple II is considered solely an # `educational machine', educators realize that their students will # probably never use an Apple II outside of school. Therefore, # when considering new systems, educators look at what they expect # their students will use when they leave school... usually IBMs # and compatibles. # By presenting the Apple II as more than an educational # computer, Apple would be strengthening its educational position. # Educators would feel more secure with a computer that they know # is used outside of the schools, in homes as well as small # businesses, but still has a strong educational base. # # 3. The cost: The comparatively low prices of IBM systems # (and compatibles) makes many schools want to consider them over # any Apple. For the price of a single Mac plus, schools can often # get two or three IBM compatibles, or one IBM PS/2 with color. # Even the Apple IIGS is considered by many educators to be # overpriced compared to what is available from IBM and IBM # compatible producers. And with Microsoft Windows and similar # operating systems on other computers, the Mac loses one of its # main advantages. # # Certainly IBM has realized the value of the inroads it is # making into the educational market. It was recently leaked in # the January 11th, 1990 InfoWorld that IBM was soon going to be # bundling their PS/2 with the Trackstar 128e (an add-in card which # provides Apple II compatibility) for the educational market. The # fact that IBM would support a competitors environment in such a # way shows that IBM recognizes this environment as important to # educators. Why is it that it seems IBM realizes the value of the # Apple II in education even more than Apple itself does? # # Apple's emphasis on the Mac over the Apple II is far too # strong. The Mac is perfectly capable of standing on its own now, # and Apple must turn its attention to the Apple II market in order # to gain lost ground. In the past year, there have been 5 new # Macs, and only one upgraded Apple II CPU. For a small investment # in the Apple II, Apple can reap greatly increased cash flow and # market share. # # What is being called for is a revitalization of the Apple II # line. Apple has nothing to lose, and everything to gain. There # is still a strong market for a solid, low cost, easy to use # business and educational machine- a market which been Apple's and # is now up for grabs. Apple is sitting on a machine with # tremendous potential, and must seize this potential with # confidence and faith. # # Recommendations # --------------- # # These recommendations must be implemented immediately. # Apple has waited too long to show support for the Apple II, and # as a result, Apple II sales have fallen to dangerous levels. The # rumored low end Mac is not expected for at least one more year, # and until that time, Apple must sell the low end products it does # have: The Apple II line. Without either a strong Apple II market # or the low end Mac this Christmas, Apple will suffer. # # 1. Apple must assert its confidence in the Apple II. This # is necessary to keep the market share from shrinking even # further. Signs of support are very important. Consumers must be # assured that there is a future for the Apple II. # This will require a promotional campaign aimed at the # existing Apple II community as well as the target market. # This new promotional campaign should target the home user, home # office and small business. The medium should be primarily mass # media, appealing to those that do not own computers yet. # Advertisements should mention the word `business' at least once # # in the copy, and show adults working with the computers, not just # children. # Give the computer industry a sign that Apple still really # cares about the Apple II. And give Apple II users a sign that # Apple still really cares about them. # The Apple II market is plagued with uncertainty. Even Apple # dealers have been heard saying that the Apple II line has been # discontinued. It seems like Apple has not made any effort to # overcome these rumors. Apple had better make more of an effort # to combat these rumors, because Apple's message isn't what people # are hearing. # Introducing a product like the rumored Hypercard GS is only # part of the solution. Apple must assert itself more visibly # behind the Apple II, and this means more than a few token # developments. What is needed are a few well placed # advertisements in computer industry (not just Apple II) journals # and magazines saying "We Still Believe in The Apple II, and we're # going to prove it to you!" Then tell people about new products # like the new DMA SCSI card, and about Apple's dedication to # continue to sell and support the Apple II. This declaration does # not require a major commitment of resources, and will greatly # restore confidence in the Apple II. # # 2. Apple must re-evaluate the low end market and its # consumers, and re-orient strategic and operational marketing # plans to serve this market. For too long, Apple has taken this # market segment for granted. Apple must exist to serve the # market's tremendous potential. # # 3. Apple must make an internal effort to more firmly # implement the marketing concept. The fact that the Apple II # market's potential has been allowed to go unrealized shows that # Apple must be more responsive to the realities of the # marketplace. Apple must focus on a customer orientation as a # total company objective. This includes: # # * Re-education: People within Apple and people at Apple # dealers must be taught that the Apple II is a worthwhile # machine. Years of anti-Apple II sentiment must be erased, # and Apple employees must learn about the Apple II. The # amount of ignorance about the Apple II, especially within # Apple, is dismaying. Most dealer and Apple employees do not # know, for instance, that you can use a LaserWriter directly # with the Apple IIGS. The Apple sales force must learn to # recognize the strengths of the Apple II. # # * Appoint an Apple II Figurehead: Apple II users feel as # though nobody at Apple listens to or cares about them. As # well, Apple II users are not familiar with anybody at Apple. # Therefore, Apple II users see Apple as a large impersonal # corporation with no real face, which partly explains their # growing alienation. Creating a figurehead whose sole # responsibility is the Apple II market (not marketing) would # go a long way towards mending the rift between the Apple II # community and Apple Computer. This person would be Apple's # liaison to the entire Apple II community. Really, it would # be a public relations position. By having a person who is # responsive and accessible to them, the Apple II community # would feel more comfortable with Apple. They would know # somebody at Apple is listening and cares. Their perception # of Apple as a monolithic corporation would be replaced with # a more personal image of Apple, a face. This person would # be present at all major Apple II events, would travel to # user groups, and would support the Apple II community. The # best person for this type of job would be somebody # charismatic and enthusiastic who is a well known member of # the Apple II community. By giving Apple II users someone # who cares about them, Apple would show Apple II users that # it still cares. # # * Advocate the Apple II: Apple must take the position of # actively supporting, enhancing and developing the Apple II's # market and image. To revitalize the Apple II, Apple must # advocate it by: # # * Make an effort to encourage third-party Apple II # support and development. # Many companies have abandoned support and development for # the Apple II. Apple should make an effort to convince these # companies that the Apple II is still a viable market. The # Apple II market needs new software and hardware developments # to keep the market alive. And keeping the Apple II market # alive is Apple's only hope for the upcoming Christmas # season. # Do a mailing, which is inexpensive, to developers and # publishers (especially to the companies in the list supplied # in this report) explaining that the Apple II is still a # viable market, and that Apple feels there are still many # opportunities in this market. This is effective because it # tells developers that Apple still believes in the Apple II. # It should be pointed out that the Apple II market still has # a very large installed base, and that developing software # for the Apple II will require little time due to the cross # development tools available on the Mac. Mac developers can # easily and cheaply use these tools to bring their Mac # applications to the large Apple II market. As well, because # of the similarity between the Apple IIgs hardware and the # Mac hardware in terms of the DeskTop Bus, SCSI port, and # Serial ports, Mac hardware can also easily and inexpensively # be sold to the Apple II market. # These new products will be particularly meaningful by # restoring some market confidence in the II line, something # Apple II users are desperate for. # Apple has some very good tools, namely the developer # publications, with which to advocate Apple II development. # Apple should publish articles in AppleDirect and # AppleViewpoints which explain the Apple II market to the Mac # developers and point out that there may be unrealized # potential for them in the Apple II market. Apple should # publish articles Develop explaining how easy it is to port # Mac applications to the Apple II, and articles to promote # the tools which allow this. # This will keep new software and hardware flowing to the # Apple II market, an important component to keeping Apple II # users happy. # # # Based on this, Apple should modify its marketing mix to # better suit a the unrealized market: # # New Apple IIGS: Apple should begin work immediately on a new # Apple IIGS, if work is not already in progress. If Apple wants # to remain competitive in the low end, this machine is a must. # This machine should have the following features: # # * A faster processor. The Apple IIGS needs more horsepower, # at least a 6mhz processor. The claims that Apple is unable # to do this because faster processors are not available is # ludicrous. If Apple really wanted to solve this problem, it # would have been solved long ago. If Apple had the same # problem with a Mac, there is no doubt it would have been # solved long ago. ASIC Enterprises, two college students # with resources far smaller than Apple's, have managed to # solve this problem. Why can't Apple? It is also reported # that a Japanese company makes 65816 compatible chips for use # in the new 16-bit Nintendo system, but details on this # company are not available. This could, however, be another # source for faster chips for a more competitive Apple IIGS. # # * Better graphics. Standard resolution on most low end # computers today is 640x400. Apple is below standard. Apple # should integrate Video Overlay Card technology into the new # motherboard, but only what is essential for 640x400 # resolution. It should then provide a special interface so # that full Video Overlay Card functionality could be added at # a minimum cost with a minimum of hardware duplication. This # ability to add a Video Overlay Card at little cost would # create a true multimedia machine with awesome market # potential. # # * More sound RAM. With the new multimedia capabilities, the # new motherboard should include at least 128k of DOC RAM, # perhaps 256k, economics permitting. # # * Built in stereo. The fact that the current machine does # not have built in stereo capability is unbelievable # considering that with $10 worth of parts at Radio Shack, it # could be added. The new motherboard should have a stereo # headphone jack at the back, and stereo speakers should be # added to the monitor. This can be done at little cost, and # will greatly enhance the marketability of the Apple IIGS, # especially with the awesome sound capabilities of the # ensoniq. # # * Video RAM and all internal peripherals and I/O must run at # full speed. Technical sources have indicated that the MEGA # II chip is to blame for this and other faults, and that the # MEGA II should be scrapped in favour of a new, GS-specific, # chip set. The MEGA II has lots of circuitry which already # has to be duplicated in the FPI and VGC, and the Apple IIGS # has to go through all sorts of contortions since this chip # must run at 1mhz. # # * The new GS must include a SWIM, allowing the machine to # use the high capacity disk drives, and more importantly, # giving it the capability to read MS-DOS 3.5" disks. This # feature will be invaluable, especially for education. # # * Apple should incorporate a graphics co-processor blitter # chip. At the very least, a chip to handle block graphics # moves. Such chips are very cheap, and would enhance the # system's graphics capabilities immeasurably, especially # considering the new 640x400 graphics mode would use large # amounts of memory. Apple should also consider making this # chip a QuickDraw co-processor, handling many of the # QuickDraw II primitives. # # * The case should include a fan, as well as space for two # internal disk drives, either both 3.5" floppy drives or one # 3.5" floppy drive and one hard disk. Since Apple already # provides hard disks for its Mac line, providing them on the # Apple II would provide increased economies of scale. It # should also feature a strong power supply capable of # powering the hard drive. With Hypercard GS, many users are # going to purchasing the Apple IIGS with a hard drive. # # * A DMA controller is a must. And by perhaps combining on- # the-fly decompression, the machine's animation and # multimedia capabilities would be greatly enhanced. IBM is # rumored to be working on a multimedia machine with these # capabilities and more (Computer Reseller News, Nov 28, # 1989). # # * Slots should be able to optionally run at full system # speed for new cards which are designed to handle it. # # * Built-in DMA SCSI controller. More and more computer # buyers are purchasing hard drives with their computers, and # more and more software requires hard drive to function # efficiently. # # Apple IIGS System Software: Development should commence on # software which allows the new GS to be an AppleTalk file server. # With the DMA SCSI and DMA manager, it would make a more than # adequate file server, and there would be no need to tie up a Mac # to do this work for small business and school networks of limited # size. # # New IIc: Apple should consider the creation of a new IIc+ # with built in AppleTalk capability. This computer would be an # ideal workstation for a small business or school's low cost # network. This new machine should also include a built-in clock, # a low cost feature that is standard in even the most inexpensive # computers today. # # License Apple II Technology: License Apple II technology to # Apple II companies. If Apple is not going to develop the Apple # II market, they should allow responsible third parties to do so. # There are many advantages to this: # # i) It will be seen as a significant sacrifice by Apple on # behalf of supporting its Apple II customers. This will # increase the Apple II community's respect for Apple and # hopefully help to mend the rift that is growing between # Apple and the Apple II community; # ii) Apple can redirect more of its R&D resources into # programs it deems more crucial; # iii) Apple can make money doing nothing. Just by licensing # technology, Apple can generate revenue for little cost; # iv) There is no doubt that IBM has benefited by licensing # its technology. On one hand, IBM has given its competitors # the tools to compete against itself; but on the other hand, # IBM has gained a dominant position in the personal computer # market. After all, the computers are still IBM-compatible, # giving IBM further credibility as the real thing. # v) It may serve as an interesting test which Apple can study # with regards to possible implementation at a later date in # the Macintosh world. # # Pricing: Apple's pricing on it's low end computers should # reflect the realities of the low end market place with lower # margins. Note that is not "low margins", but rather "lower # margins" What this means is that Apple should not price itself # too cheaply, but must have lower margins in the low end than it # does it the medium (Mac) and upper (Mac II) markets if it wishes # to be competitive. University computer stores should offer the # Apple II at discount prices in order to compete with the # discounted IBM and compatibles. Those students who want Macs # will still purchase them. Those students who do not have Mac # budgets will not be forced to turn to IBM and IBM compatibles. # # Placing: Tell Apple dealers that they are expected to # continue supporting the Apple II. # # Explain to them that supporting the Apple II is good for # their business. Encourage them to do so. Most dealers should be # able to support the Apple II. Apple dealers have been justifying # the higher price of Apple equipment by saying that they provide # better support. For them to say this and then provide poor Apple # II support is bad business and degrades not only the dealer's # reputation, but also the reputation of the entire Apple dealer # network and Apple computer itself. # Apple might consider investigating alternative low end # outlets for the Apple II, but without compromising Apple's # support commitment. # # Conclusion # ---------- # # The low end remains a viable and profitable market and it is # a strategic marketing error to allow the competition to erode a # market segment which Apple has dominated for so long. It is an # even greater error to allow the stable, well known Apple II to # drift into obscurity when it still sells strongly despite Apple's # lack of promotion. # # A revitalized Apple II marketing program would be Apple's # salvation, giving Apple greater market visibility and financial # security. All Apple has to do is put greater effort into # marketing the Apple II in a satisfactory manor. Apple's # marketing of the Apple II should be re-oriented with a focus on # what consumers really want, not what Apple believes they should # have. # # The author has confidence and faith in the Apple II, and # vision for its future that sees it resume its rightful place as a # solid, low cost general purpose workhorse. # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # #