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Harvard professor offers detailed insight into Apple

updated 08:00 am EST, Wed February 11, 2004

HBS proffesor talks Apple

Harvard Business School's has published a very in-depth and interesting interview with David Yoffie, the Max and Doris Starr Professor of International Business Administration at Harvard Business School, who has followed Apple closely for more than a decade. Yoffie offers many detailed insights into Apple's current position in the market, the company's strengths and weaknesses, and its prospects for the future. Yoffie notes that if one had invested $1.00 in Apple in 1992, it would be worth $0.72 today, versuses the $2.75 S&P 500 average, and suggests that Apple may have a difficult time competing Microsoft when it comes to developing the next generation of operating systems -- what replaces OS X and XP/Longhorn -- due to the sheer economics of the company.

by MacNN Staff

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02/11, 08:53am | report spam | close Reply |
RIPE

The stupid RIPE guy is just RIPE to commit suicide.

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02/11, 09:12am | report spam | close Reply |
OMG

I can't believe this! I think he's saying Apple is going under! But only mentioning that it will happen sometime in the future. At least he's left himself some wiggle-room.

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02/11, 09:47am | report spam | close Reply |
Intel Inside!!!

"David B. Yoffie, 48, has been a director of Intel since 1989. He is Lead Independent Director and Chairman of the Corporate Governance Committee of the Board."

http://www.intel.com/pressroom/kits/bios/bod_dbyoffie.htm

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02/11, 10:19am | report spam | close Reply |
Harvard...

Can anyone become a professor at Harvard these days ?
*lol*

What a load of c***...

-t

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02/11, 10:34am | report spam | close Reply |
next generation?

does apple really need a "next generation" of operating system? I don't see it in the near future

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02/11, 10:35am | report spam | close Reply |
hard time?

This edu-talk-idiot is definitely full of conflict of interest. Knocking the competition is his goal. XP is already light years ahead of Longhorn, so the next OS is merely another moving target for Microsoft.

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02/11, 10:38am | report spam | close Reply |
Re: based on stock price

A stock price is only the investors' opinion of the health of a company. Wall Street never understood Apple so always punished them for not being more mainstream (read: an MS-lackey) Whether Apple's share price is $20 or $200, it doesn't affect the profits they make and the amount of money they put into R&D.

How does one become a Harvard professor if they base a company's health solely on their share price?

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02/11, 10:55am | report spam | close Reply |
Yoffie is on Intel Board

One would question Yoffie's impartiality since he is on Intel's Board of Directors.

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02/11, 11:23am | report spam | close Reply |
jeez...

jeez... comment on the analysis, not on where he teaches and what board he sits on... he happens to make alot of sense. he's not saying that apple is going under anytime soon... but that it's got some interesting choices ahead of it.

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02/11, 11:24am | report spam | close Reply |
So...

I bet that I can pick an arbitrary point in Apple�s stock history and show a much higher return on investment. For instance lets say I bought a share of AAPL on� say� August 15th 1985. The stock closed at $14.50 that day but with adjustments for the two splits and the dividends paid over the years its adjusted close is $3.01. Fast forward to right now. We are trading at $23.61. That�s 784% return on investment. We�re rich!

Translation for the 1337: OMG WALLHAXOR!!!11

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02/11, 11:41am | report spam | close Reply |
Bogus investment quote

I am new to Apple, but one thing about the investment advice in this article caught my eye. In 1992 it looks like the average price on AAPL was around $50.00. They were chugging along very nicely and even expereinced one heck of a boom from 1999-2000 (just like every other tech stock). Comparing AAPL to the S&P 500 doesn't look great, but it doesn't look all that bad. His historical perspective is not great if you invested $1.00 in 1990 you would have made quite a bit more. Starting his arguement off with a poor stock comparison is just deceptive and is indicative of his bias.

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02/11, 12:33pm | report spam | close Reply |
Please

Would the zealots go back to their cave please? Apparently to them, journalists cannot really write, analysts are charlatans, Wall Street never understood Apple (but the zealots do!), and now a Harvard professor is a biased idiot who cannot teach or write!

I hate zealots.

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02/11, 12:38pm | report spam | close Reply |
Re: Please

what does this have to do with the Protoss?

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02/11, 01:09pm | report spam | close Reply |
Dell spends 1 percent

Dell spends 1 percent (of revenue) on R&D, Apple spends 4 to 5 percent on R&D. Apple has a lot more capacity built into its business model to play with industrial design and to get it right than a Dell or a Gateway.

I dont think this guy is stupid .. Apple does need to take the blinders off !!

They need to start coming out with more gadgets that work with everything and let it be a little expensive .. people will buy a 500 MP3 Player ..

How bout a digital camera apple ?

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02/11, 01:12pm | report spam | close Reply |
Re: Re: Please

I think he said Zergs. He hated Zergs.

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02/11, 01:17pm | report spam | close Reply |
The premise lacks logic

If we were looking forward even five years ago, who could have predicted that a company a fraction the size of Microsoft could totally rewrite its OS. And in my opinion, OS X far surpasses the quality, stability and user friendliness of XP?

Bear in mind that legacy software the size of Windows requires far more resources to recreate than anything Apple does. And I don't mean just money resource, but culture resource. Look at Longhorn. Who knows when it will come out? Even when it does in the next two or three years, will it really be anything different from XP? I doubt it.

So innovation and belief in what you are doing will often outperform the giants. It takes more than deep resources to succeed. Microsoft is almost beyond fundamental change. Their artificially bloated OS is designed for incompatability with 3rd party software and the OS is reeling under the waves of new virii.

I don't see a nimble Microsoft. The culture just won't allow it.

Even if Microssoft spends 1 to 2 billion to develop Longhorn versus a comparable cost for Apple to develop OS X, that does not mean much in terms of a better OS or something people love. The culture cost to Microsoft to create a breakthrough OS is just too high.

So I choose to look at Apple from a different perspective than what some may consider the "laws of business".

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02/11, 01:35pm | report spam | close Reply |
It's Academic

Wasn't it one of these high-falutin' Ivy League Business Schools that gave the founder of Federal Express a C+ on the paper that originally proposed Federal Express too?

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02/11, 01:56pm | report spam | close Reply |
his analysis

he uses 1992, if he had used 1996 or 1997 putting in $1 would have resulted in a several times increase, instead of a drop to 0.7whatever.

The current people in charge started in 1998 when the shares and company were essentially at an all time low, since then things have improved drastically. Instead he chooses a time 2 or 3 CEO's and other changes to the people in charge at Apple.

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02/11, 02:53pm | report spam | close Reply |
Re: Please

Funny how the "zealots" you make fun of actually provided reasons why the professor's logic is faulty. Such as, taking 1992 as an arbitrary point in time. (Why didn't he take it when the stock price was at $12, pre-split?), judging a company solely on it's stock price, not taking into account the unique situation Apple is in by selling complete OS&Hardware packages.

The best argument you can come up with is "I hate zealots." Hmmm... you seem to be an anti-Apple zealot, so how does that make you feel?

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02/11, 03:52pm | report spam | close Reply |
Re: Please

A Harvard professor is biased if he talks as a professor and doesn't disclosure his relationship with Intel.

What part of "conflict of interests" you don't understand?

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02/11, 04:17pm | report spam | close Reply |
Perhaps the Harvard idiot

can explain why Microsoft takes 10,000 man-years to write Internet Explorer 3 while a small company like Opera can write a better browser in 35.

If anything, it looks to me like Microsoft is the one that should be going out of business, if only due to the sheer administrative bloat required to push its products out the door while the rest of the world can make better products in less than 1% of the time, at less than 1% of the expense.

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02/11, 05:11pm | report spam | close Reply |
Hee hee

"If anything, it looks to me like Microsoft is the one that should be going out of business"

But it is not, is it? So you are wrong, aren't you? And I bet you have been saying/wishing that for years, haven't you?

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02/11, 05:21pm | report spam | close Reply |
Hee hee 2

Hey you dumbasses who think just because you used a Mac for a few years you are suddenly better at understanding the company better than journalist, professors, and analysts? Think again.

Case in point: some zealot wrote " he uses 1992, if he had used 1996 or 1997 putting in $1 would have resulted in a several times increase, instead of a drop to 0.7whatever."

Well, he did not arbitrarily use 1992. He used 1992 because that is when wrote his case i.e. when he began studying Apple. It makes perfect sense to start it then. In addition, his analysis is 100% factual i.e. Apple's "core business continues to shrink, with iPod and iTunes driving their current revenue growth.", unlike those emotional cries voiced by the zealots.

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02/11, 05:27pm | report spam | close Reply |
Hee hee 3

"If we were looking forward even five years ago, who could have predicted that a company a fraction the size of Microsoft could totally rewrite its OS."

Uh, you mean back 5 years. Are you forgetting Linux and its various distros? HOw about the advancement of Free/Open/NetBSD? And whether you like it or not, XP is also a rewrite of Windows as well, not as dramatic of a rewrite but still fundamentally different. In addition, tons of people write OSes from scatch. SkyOS, for one.

So, let's not go into extreme hyperbole and make all Mac users look like idiots, shall we?

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02/11, 05:36pm | report spam | close Reply |
Hee hee 4

" Wasn't it one of these high-falutin' Ivy League Business Schools that gave the founder of Federal Express a C+ on the paper that originally proposed Federal Express too?"

Sure. It is also Harvard whre Bill Gates dropped out of. It is possible to find gems that Ivy League failed to discover or that attended lesser known universities (or did not even attend universities). However, if you have to put money where your mouth is, i.e. give your *life savings* to grads of Havard to invest/seed/work with or those of your local community college, I bet you would shut your mouth pretty quickly.

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02/11, 05:38pm | report spam | close Reply |
re: Hee Hee

The point was that the guy's logic is faulty.

Effectively, he argues that MS is much bigger, therefore Apple can't compete. He did not address the point that MS uses way more effort to produce their stuff, and that these are often inferior and bloated. The IE 3 vs. Opera comment. He says Apple will need a major new OS to compete with Longhorn, yet Longhorn is years away, he makes no adequate explanation of what it will have that OS X doesn't. Nor does he address the fact that there are massive holes in XP, and not in X. Therefore, it appears that Longhorn is playing catch up with X.

He also ignores the fact that Apple, with far fewer resources, totally rebuilt their OS, on an open source foundation, when MS has been basically unsuccessful as reinventing their own wheel, over several major tries.

Apple also has much less of a problem to solve, because they do not have to work with millions of possible configurations of hardware. They control both.

Finally, he used 1992 as an arbitrary point in time (it was arbitrary whether that's when he started the study or not). Why did he pick 1992? At the very least he should have acknowleged that picking 1997 or 1987 would have produced very different results. Instead he implied this has been a consistent trend. He also completely dismissed the wad of cash, and the lean nature of apple as compared to MS.

No, MS is not going under. Neither is Apple.

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02/11, 07:20pm | report spam | close Reply |
Hee hee 5

Zealots turn everything that is not 100% positive about Apple into something personal. In addition, it is never about Apple the company, they have it to frame it as Apple vs. Dell, Apple vs. Intel, and Apple vs Microsoft and then defend it peripherally, well, Apple is not a pure HW manufacturer (in context of Dell), a chip-maker, or a softwarehouse.

Make up your mind, this is a criticism of Apple, not an Apple vs. rest-of-the-world.

For example, the previous poster is dying to frame this as Apple vs MS. I will address some of your points. Yes, MS stuff may be inferior or bloated comparatively. However, he is arguing that Microsoft can amortize that over 120 million users. Apple cannot. Therefore, this is not a trite discussion about security holes, worms, etc as everyone already knows about them or even about what Longhorn has or has not, which is what you are fixated on. It is about how Apple cannot afford to have its user base continually shrinking especially since its growth is with iPod and iTune, not OS X and G5, no matter how superior they are.

Second, stop it with 199x argument. He first studied Apple in 92 that is why he started in 92. This would be equivalent of one saying one's '92 investment in Apple did not pay off, which is factual. Sure, you could argue that in perfect hindsight, well, why did you not invest in 97 when AAPL is at its lowest? But that is not relevant since the fact one's '92 investment would still be under water is still 100% accurate and irrefutable.

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02/11, 07:54pm | report spam | close Reply |
Not quite

"... you mean back 5 years. " No, I meant what I said. If five years ago we had attempted to look forward five years, then no one could have anticipated Apples development and successful distribution of OS X.

I don't get your logic about XP, Linux and so forth. These are reiterations of software that have been around for years.

So OS X was a massive undertaking that I don't think Microsoft will ever be able to match. And they have many times the resources of Apple.

Others may disagree, but I think Apple demonstrates the power of real vision over raw money and people resources. Dreams have a way of overcoming obstacles that sink behemoths like Microsoft.

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02/11, 08:36pm | report spam | close Reply |
Apple's closed mindset

To many people here are missing the point. The professor is not criticizing Apple or its products, so there is no need to take it personally. He is simply stating objective facts, regardless of his board membership. Apple is a fascinating case study for business students.

Nowhere did he say that Apple's products are inferior, as some poor readers on this board wish to interpret from the professor's words. In fact, he said just the opposite.

The obvious facts that he stated are that Apple is losing market share and cannot sustain itself with continued loss, and that Steve Jobs very clearly is satisfied with Apple products being marketed as prestigious works of technology. Anyone who has listened to or read Steve's words can see that he is satisfied with Apple having a minority share and of the company taking large profit margins on every product�other than pre-installed software meant to promote hardware sales.

Having faithfully used the Macintosh and buying PowerBooks since the 170, I have been bothered by the obvious fact that advertising appears to all be aimed at the Apple faithful and any PC user who considers himself "different" or a rebel. That is no way to market these superior products. It appears as though the marketing department has the same closed mindset that Steve has, which only leaves lost opportunities and wasted advertising money.

I agree thoroughly that Steve Jobs needs to break out of his mindset and start seeking a larger market share, including by dropping prices and taking a lower profit margin for the company. Everyone rejects the idea of making Mac OS X for Intel computers, but the professor makes some other good points about possible options that Apple refuses to consider.

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02/11, 11:12pm | report spam | close Reply |
Bet Ivy?

"However, if you have to put money where your mouth is, i.e. give your *life savings* to grads of Havard to invest/seed/work with or those of your local community college, I bet you would shut your mouth pretty quickly."

I bet I would look at the plan and the people involved very carefully, not where they went to school.

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RE: Hee Hee 5

" It is about how Apple cannot afford to have its user base continually shrinking especially since its growth is with iPod and iTune, not OS X and G5, no matter how superior they are."

-Uh, I hate to burst your bubble but Apple's user base is expanding, not shrinking. Apple's percentage of market share is shrinking because the market size is expanding. Following your argument, Apple then has an ever growing user base to ammrtize its investments.

Additionally, a rising stock price means that people are betting that the company will make more profit in the next year in order to demand a higher price. If a business were making money hand-over-fist, but not makeing more money than inflation, its stock price would be completely flat.

Put in another way, if investors in MS want to continue to see the gains in the stock, MS must grow at the same rate. Now as yourself is it easier to grow by 15% if you are a small company or the biggest with almost total market saturation? The world is Microsoft's to loose.

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Harvard professor offers detailed insight into Apple

updated 08:00 am EST, Wed February 11, 2004

HBS proffesor talks Apple

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