Asia forms the core of Apple Computer Inc's new plans
FOR the beleaguered US-based Apple Computer Inc, does salvation lie in the eastern hemisphere? Apple recorded a loss of $69 million (Rs 250 crore) in the quarter October-December 1995, sparking off rumours that the company that had more or less invented the desktop computer business was up for sale, and culminating in the exit of CEO Michael Spindler. But, Asia tells a very different story.
Apple's sales in Asia grew three times faster in 1995 than its worldwide growth rate of 20 per cent. Apple has an impressive 450,000 machines installed in the continent. In Japan, it has a 17 per cent market share, double of what it has in the US. The company's next target is India.
Although Apple set up operations in India about two years ago, it is only now that it plans to go into overdrive. Says Robin Abrams, Apple Asia's Hong Kong-based managing director: "India and China are the fastest growing markets for Apple in Asia." In the fiscal year that ended in September 30, 1995, Apple's sales in India shot up by 121 per cent, more than double the Indian infotech industry's growth of 54 per cent. And its base of installed machines isn't too small any more. At last count, Apple had a 4.5 per cent share of the country's computer sales. An indicator of both Apple's growth and seriousness of purpose: while 14 months ago there were 70 Apple sales outlets, one distributor and five software developers, the corresponding figures are now 160, 3 and 40, respectively.
While Apple will be pushing deeper into its traditional constituencies of desktop publishing and graphics, a central part of the company's new strategy will be to strike a balance between high-end and entry level computers, discloses Abrams. In 1994-95, Apple's high-end computers, (used mostly in the publishing and advertising businesses) accounted for 72 per cent of sales, with the entry level machines (in schools, small offices and homes) taking up the rest of the company's shipments. In 1995-96, says Abrams, Apple sales will be divided 50:50 between the two segments. The new buzzphrase, clearly, is volume sales.
And with the home computer segment set to swell in Asia, it may provide just the right spark for Apple's growth. The synergy between education and home computers can then be put to best use, says Abrams. Moreover, Apple's strength in interactive multimedia could provide a natural fit for the home computer segment, she observes.
Take Taiwan. In 1994, the share of the home computer segment in the total personal computer market in Taiwan was 18 per cent. The very next year, the figure shot up to an incredible 38 per cent. The factors spurring growth: lower price points, a growing middle class and the government's initiatives in funding computer-aided teaching in the classroom. But in India, agrees Abrams, the total duty burden of over 60 per cent on computer systems, including 40 per cent customs duty, could act as a hurdle to growth. In comparsion, duty on computers in Taiwan is a mere seven per cent.
There are ways out of the high duty barrier, though, says Abrams. A global computer company like Apple could licence its operating system to a local Indian company. Alternatively, Indian companies could build their own motherboards, or buy Apple's and deliver the systems. Thus, by reducing the import component of computer systems, the high duty structure then can become less of a hurdle to sales than it is now.
In India, Apple has a natural ally in the country's technically qualified manpower. "It's the high technical literacy in India that accelerates the growth of the computer industry in your country," says Abrams. Last month, the company set up a software development centre in Bangalore, Apple Development India (ADI), to provide off-shore software engineering services for Apple Computer and Apple customers worldwide. ADI is hiring Indian software engineers to work in the areas of graphics and multimedia, networking, Macintosh operating systems and Windows programming.
Apple's Asian sales, which account for between 7 and 8 per cent of the computer giant's worldwide business, may not help in turning around the company's fortunes, at least not in the near future. But this bit of good news may boost sagging company morale. Newly-appointed CEO Gilbert Amelio has quelled takeover rumours. Says Abrams: "Apple's board of directors has given Amelio the charter to re-examine the company's business model and transform it into one that can sustain profitability."
The company expects computer sales in India to take off with a big bang, a la Taiwan, in the next 18 months, at least in the home PC segment. And, says Abrams: "As we have to compete in India with Compaq, Acer and a host of others, we undertake weekly price and market reviews." Considering its recent debacle, it's not surprising that the once proud computer maker is taking no chances.