Over the past four years (1999 to 2002), Apple's share of the global PC market has shrunk from 9.4% to 2.6%. In the past six years, against a backdrop of unparalleled profitability in information technology, Apple was profitable in only three of those six years, despite a slew of provocative product introductions. It may be that the business model at Apple is somewhat flawed. Apple's Steve Jobs, who returned to the company in 1996, did some brutal housekeeping. Job's predecessor, Gil Amelio, had already done most of the dirty work. But Jobs made some harsh decisions too, rescinding the licenses of competitors who have been cloning Apple's Macintosh computers. Apple has been suffering losses on price because machines based on Microsoft's Windows are much cheaper. Apple also is a big loser compared with Windows based on the availability and breadth of applications.
During this period, Apple's competitors in the PC industry IBM, Hewlett-Packard (HP) and Compaq are all experiencing significantly slow sales growth, mainly due to lagging economic conditions. The only company that appeared to do showing increases in sales was Dell Computers. Industry analysts were predicting significant declines in sales growth for the next year as the PC market matured. Apple remains profitable because of the sheer size of the computer industry that has grown up around them. Since business is primarily about relationships, and Apple has chosen to value the relationship with the end-user higher than their relationship with the distribution channel, this approach puts Apple at a competitive disadvantage. Apple has two problems. Not only is its sales and marketing structure less effective than it could be, but as it increases its success, it increases the burden on the support infrastructur ...