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For six years, the Internet Nexus served as my technology blog, but I've since started blogging at the SuperSite Blog instead. If you're looking for the blog, please head there. --Paul

Friday, May 21, 2004

Divide and Conquer: Why Apple Has An iPod Division

I, Cringely: "The news was that Apple was creating a separate iPod division because the little music players are such a huge success. Conventional business school wisdom also says that starting a separate division is a way of isolating startup costs, making them more obvious to Wall Street and thus minimizing negative impacts because of course, even Apple has to spend money to make money. Or, like 3Com did with Palm Computing (and even Apple once did with Claris before changing its mind), you can structure a division to spin-off or have a separate IPO. This all makes sense on the surface, but then I recalled something I was told more than 20 years ago by a much younger Steve Jobs. Back then Apple had three divisions – Apple II, Lisa, and Macintosh. Why have separate divisions? 'Because it’s easier to shut one down,' said Steve ... I can imagine that Apple might stop Mac sales entirely and become a consumer electronics and software company. Think about it. The upgrade to G5 cycle isn’t going as well as Apple had hoped it would, but if the company did an Intel upgrade cycle EVERYONE would move up. That’s 20 million users instead of four to five million. Such a move would boost profits (the software’s already paid for, remember, so the margins can be HUGE) and make the company look even better, at least for awhile ... I think iPod really means 'not Macintosh.' It wouldn’t surprise me if the company did more types of consumer devices, but the point is not to sell a workstation you get paid for once, but to create a revenue stream that pays you every week. That’s what Steve is groping for, I’m sure of it."

Voila. Robert X. Cringely agrees with me about the implications of Apple's reorg moves.

[ Posted at 1:33 PM | Permalink ]