In one of the mailing lists (CyLUG) that I am a member, I got this mail that was send from George Iordanou.
Î’Ï?Î®ÎºÎ± Î¼Î¹Î± ÎµÎ½Î´Î¹Î±Ï†ÎÏ?Î¿Î½ Î±Î½Î¬Î»Ï…ÏƒÎ· Î±Ï€ÏŒ Ï„Î¿Î½ Alain Anderton Î³Î¹Î±Ï„Î¯ Î· MS ÎÏ‡ÎµÎ¹ Ï„Î¿ Ï€Î¬Î½Ï‰ Ï‡ÎÏ?Î¹ ÏƒÏ„Î·Î½ Î±Î³Î¿Ï?Î¬ Î¼Îµ ÎÎ½Î± Ï…Ï€Î¿Î´Î¹ÎÏƒÏ„ÎµÏ?Î¿ Î±Ï€ÏŒ Ï„Î·Î½ Apple [Mac] operating system.
Apple has had a chequered history. Founded in 1976 by two students, Steve Jobs and Steve Wozniak, it produced the world’s first real personal computer (PC). In 1984 it launched a revolutionary operating system named Macintosh for its PCs. Apple introduced the “desktop” screen with the now familiar icons. These could be accessed through another first, the mouse.
In contrast, Bill Gates at Microsoft was struggling with an operating system, MS Dos, which had been bought second hand from another company.
It was complicated to use and prone to crashing. However, the operating system had one key advantage. Bill Gates had developed it for use on IBM machines. IBM in the 1970s was the world’s dominant computer business, often accused by competitors of being and acting as a monopolist.
However, IBM was worried that the traditional computer market, based around large mainframe computers, was changing irrevocably with the advent of the PC. In game theory terms, if it did nothing, it could see the new PC upstarts take all the computer market. If it produced its own PCs, it might at best gain a dominant position in this market as it had in the mainframe market. At worst, it could survive as one of many competing firms in the PC market with hopefully some mainframe business remaining. So it decided to manufacture a PC but needed an operating system immediately. That was what Bill Gates provided.
IBM was such a powerful company that other computer manufacturers decided to produce clones – similar machines – to the PCs of IBM This meant using the same operating system, which would allow their PCs to run the same software packages as IBM machines. IBM’s agreement with Microsoft did not prevent Microsoft from licensing MS Dos to other computer manufacturers. Bill Gates was only too willing to allow MS Dos to be used on non-IBM machines. In contrast, Apple decided that its Macintosh operating system would only be used on Apple manufactured machines. In game theory terms, it judged that the profits it could make by selling both the machine and the operating system were greater than if it licensed the operating system to other PC manufacturers, but as a consequence sold fewer machines because of the increased competition.
That judgment was, with hindsight, flawed. What Apple failed to realize at the time was that PC consumers wanted a universal operating system on which all software would work and which would allow machines to talk to each other. MS Dos came to provide that, even if technically it was a poorer system than Apple’s Macintosh system. In the 1990s, Microsoft went on to develop MS Dos into Windows and incorporated many of the revolutionary features of the Macintosh system, such as the use of the mouse and icons. By 2000, Windows had 90 per cent of the world’s market for operating systems. But dedicated to Macintosh users claim that, even in 2000, it is still technically inferior to Apple’s system.
Financially, Microsoft won its game convincingly even if there were doubts about the technology.
SOURCE: Economics 3rd Edition by Alain Anderton (ISBN: 1-902796-10-1), page 371 [Applied Economics – Apple Vs Microsoft]