Apple vs. Microsoft - But This Time in the Recession Ring

Microsoft recently cut 1,400 jobs of its planned 5,000 person layoff-and it's not alone. Other big tech companies like IBM, Sprint Nextel and Google are also laying off people by the thousands. So how is it that Apple is still sailing along? It has the consumer to thank.

According to Rob Enderle, principal analyst at The Enderle Group, Apple is still driving people to products despite the economic downturn. Apple is still a "consumer company" and its success isn't based on contracts, except really for iTunes, which is only a minor part of its revenue.

The holiday season also helped Apple this year. In a January 21, 2009 Apple press release, the company reported that it had net sales of US$10,167 million during the last three months of 2008, up from $9,608 million, which it reported to have had during the last three months of 2007.

According to Enderle, during its "gift quarter", Apple slipped on PCs, but sold more premium range computers than competitors. Additionally, the iPhone and iPod sold well.

Though many iPhones were bought as gifts during this past holiday season, Roger L. Kay, president of Endpoint Technologies Associates says, "Apple's best play in the enterprise is the iPhone." Does this mean that Apple will be more relevant in the enterprise going forward?

The 2009 Global IT and Technology Trends Forecast survey done by ITIC's principal, Laura DiDio, reported that "over two-thirds of the 700 survey respondents-68 percent-indicated they will allow their end users to deploy Macs as their corporate enterprise desktops in the next 12 months."

However, Microsoft's much anticipated Windows 7 might keep this from taking place.

Kay says that right now the choice is between Vista, OS X and Linux, but soon the enterprise will have a clearer choice.

People are very excited bout the upcoming Windows 7, and some enterprises that may have skipped Vista will switch from Windows XP to 7.

Vista's poor adoption definitely impacted Microsoft in a big way. "The very thing that should've carried Microsoft through, didn't," Enerle says, referring to Microsoft's Vista failure.

Yet Microsoft certainly wasn't the tech company hit hardest by the recession.

As Kay says, companies like Intel and Toshiba had bad fourth quarters, and their first quarters are in a sense "double whammies" because inventory has piled up. However, Apple is user based, so its inventory isn't piled as highly. According to Kay, there aren't any signs of cutbacks yet at Apple and a bad earnings report hasn't surfaced. And Apple is still putting money into its marketing, unlike many large companies that have cut their spending back in this area tenfold.

Many analysts are predicting that 2009 will be the year the economy will flatten out and by the second half of next year, around June 2010, things will turn around, Enderle says. "I expect technology to be the first out. A lot really depends on Obama's turnaround on the enterprise industry, especially on the consumer side."

Apple hasn't made any massive cutbacks or layoffs to date. However, Enderle isn't so sure layoffs aren't right around the corner. "I don't think anybody is immune to layoffs," he says.

Kay also speculates that Apple isn't out of the woods yet. "Apple's premium price possibly might hurt them long term if the recession continues long term."

Subscribe to the Today in Tech Newsletter

Comments