Personal computers still at Apple's business core

Jack Minsky built a successful business by writing software for Apple 's Macintosh computers. So when Apple last week dropped the word "computer" from its name, and dedicated its annual Macworld trade show to noncomputer gadgets, Minsky might have felt concern for his company's future.

Not so. Minsky, president of SoftwareMacKiev Co. of Boston, thinks Apple Inc.'s new strategy is right on target. "We're excited as we can be about the way Apple is going," Minsky said. In his view, Apple chief Steve Jobs's decision to downplay Mac computers is part of a strategy that will make the machines more important than ever.

Despite the hoopla surrounding Apple's iPod music players, and the hype over upcoming Apple home entertainment servers and cellphones, the company still makes a lot of money on computers. During the fiscal year ended Sept. 30, Apple sold more than 39 million iPods, compared to just 5.3 million Macs. But the Macs brought in nearly as much revenue, $7.4 billion, as the $7.7 billion in iPod sales, and have a better profit margin. Besides, since the rise of iPod, Apple's computer business has been better than ever, with unit sales up 61 percent over the past two fiscal years.

Arnold Reinhold, an analyst at Hurwitz & Associates, a Waltham technology analysis firm, said that like automaker BMW, Apple has succeeded in "carving out a luxury niche in a commodity market."

Yet under their elegantly sculpted hoods, Macs are little different from their cheaper cousins running Microsoft Corp.'s Windows operating system. In 2005, Apple decided to abandon IBM Corp. processors and use the same Intel Corp. chips found inside Windows machines. Mac hardware performance used to lag behind Windows machine; now they're stride for stride. The switch lowered Apple's manufacturing costs, further shoring up margins.

It also enabled Mac computers to run Windows software.

"It was really the evolution of the Mac to the Intel architecture that opened new opportunities for our products," said Bill Portin, sales director for Parallels Inc. of Renton, Wash. Parallels' software lets Windows and Mac programs run side by side, removing the stigma of using Mac computers in corporate environments addicted to Windows.

But it's in the consumer space where the Mac is most likely to gain strength.

"Microsoft has this very strong position in personal computing," said Reinhold, "but it's very vulnerable."

Home users focus on Internet activities, digital music, movies, and photos -- areas where maintaining Windows compatibility doesn't much matter. What users want is the best set of tools for managing their digital lives.

Jobs aims to establish Apple's OS X operating system at the heart of a computing ecosystem that will make personal computing easier and more elegant than anything its rivals can offer. That means staying well ahead of Microsoft, which rolls out its latest Windows upgrade, Vista, this month.

"Vista is really going to give Mac a run for its money once it gets going," said Roger Kay, president of Endpoint Technologies Associates in Wayland. "It's a much better operating environment than XP was."

But Apple will respond this spring with Leopard, its newest OS X upgrade. Reinhold said that Jobs refrained from touting Leopard last week because he's "saving his bullets" until the software is ready. "They clearly are waiting to answer Vista," Reinhold said, "and they're going to make sure they can put some distance between themselves and Vista."

Keeping the right amount of distance is a delicate balancing act. The iPod was only moderately successful when it could only be used on Mac computers; it became a global hit when a version of iTunes for Windows machines hit the market. In the same way, the new Apple TV entertainment server and iPhone cellular phone unveiled last week will only be hits if they're available in Windows versions.

So the goal for Apple is to provide Windows-compatible interfaces with its electronic gadgets, while ensuring that the devices still work better with Macs running OS X.

Minsky said he thinks Apple's getting it exactly right, with help from iLife, a digital content management suite from Apple that works only on Macs. SoftwareMacKiev offers educational software that integrates with iLife. For example, the company's KidPix Deluxe drawing program can easily import images stored in iLife's iPhoto program. Finished artwork can be loaded into the iMovie digital moviemaking program. Finished work can be uploaded into a video iPod through iTunes.

"It's better on a Mac," Minsky said. "It's a more elegant, beautiful experience."

If Apple can keep it that way, Minsky said he believes the company will sell plenty of Macs, along with all of those iPods.

Hiawatha Bray can be reached at bray@globe.com.