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The personal computer market may be wheezing, but Apple (Nasdaq: AAPL) continues to rack up respectable growth numbers. Historically, growth has presented high-tech companies with some ticklish challenges, but the Macintosh maker may be poised to deal 
with the pitfalls associated with expanding market share.
One problem typically facing a rapidly growing company is expanding its infrastructure to continue to meet its customer's expectations. Tech support, for instance, may suffer.
Because of its market stature as a premium player, Apple can keep its operations in tune through pricing, according to Charles Smulders, an analyst with Gartner (NYSE: IT).
"Apple uses price as one instrument to manage its growth rate; in doing so it can build the appropriate infrastructure to support its customer base," he told MacNewsWorld.
Brand Dilution?
Another rub that can accompany market growth, especially when a company is trying to grow a premium product, is brand dilution. If everyone owns a Lexus, for instance, then the cachet of owning a Lexus diminishes.
Apple's been down that road before, according to Michael Gartenberg, vice president of strategy and analysis at
Interpret, a media and technology research firm.
"In the '90s, Apple went astray. It stopped producing innovative hardware design. It started producing beige boxes that looked like everyone else's PCs," Gartenberg told MacNewsWorld.
"They stopped OS development to the point where their OS wasn't that much different than Windows in terms of what it could do from a functionality perspective," he recalled.
Now, "as long as Apple does what it continues to do well -- that is, innovate on a blend of hardware and software and explain the advantages of that innovation to consumers -- then I don't think they will go wrong," Gartenberg said.
Brand dilution doesn't necessarily have to be a byproduct of growth, asserted Rob Enderle, president and principal analyst of the Enderle Group in San Jose, Calif.
"If Apple wants to move downmarket, they could come up with another brand," he told MacNewsWorld. "That way, they protect their boutique brand and have a volume brand. It's the Chevrolet-Cadillac model."
Minding the Margins
There isn't any rush, however, for Apple to start cultivating a downmarket share. There's still some headroom for the company in the premium market space, Enderle maintained. "After about three or four more points [of] growth, though, they're going to have to move downmarket."
If that's the case, Apple has a problem as serious as brand dilution. "Downmarket would put margin pressure on their products," Enderle observed.
"Apple's pulling from the premium segment of the market, which supports fairly high margins," he explained. "As you move to lower-priced products or other kinds of offerings, like services, your margins decline."
Given the current economic conditions, Apple's ability to milk its primary market may be impaired. "Given the fact that the overall market is flat," Enderle noted, "their ability to sustain growth in a flat market is pretty limited."
"If ever there was a year for them to consider a second brand, this would be the year to do it," he added.
Leaving the Low End Alone
Apple should be in no hurry to lock horns with other PC makers at the bottom of the market, suggested Interpret's Gartenberg.
"In tough economic times, people just don't buy based on cost," he argued. "They buy based on, 'Where do I get the most value for my dollar, even if it's not necessarily the cheapest item?'"
That's certainly something Apple wants to hear, given the perils of expanding market share based on price. "Building commodity hardware doesn't make you any money," Andrew Hargreaves, an analyst with Pacific Crest Securities, told MacNewsWorld.
"Building hardware that works well with your other software and services works extremely well in making money," he added.
"The economy aside, Apple is in a better position than any other PC OEM to profit from the direction that personal computing is going," observed Hargreaves.
"People now don't care about gigahertz and megahertz and gigabytes and storage capacity -- all that stuff," he said. "They care about what they can do and what their experience is. Apple has done those things better than Microsoft (Nasdaq: MSFT) has. People value that, and they're willing to pay more for it."
No Magic Bullet - Just Hard Work
What should Apple's goals be going forward? The answer to that question may be both easy and difficult.
"Produce the very best products at the very best prices," declared Gartenberg, "and capture the hearts and minds of the most end users."
"That's as simple as it gets," he added, "but it's the execution that's hard."
"It's like diet and exercise. When someone asks you how did you lose so much weight, and you tell them 'diet and exercise,' they're so disappointed when they hear that -- because they're looking for a magic bullet," elaborated Gartenberg.
"There's no secret to commanding the market," he asserted. "We know what the recipe is. The challenge is executing it."
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