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Top Tech Company of 2010: Apple

If you're looking for evidence that the former Apple Computer has a hold on the American public, consider this: Many of the company's biggest products this year were lackluster at best, and yet all were stunning success stories. The company's iPhone 4 suffers from an amazing rash of hardware problems that the company refuses to even acknowledge, but it's the best-selling smartphone of the year. The iPad is simply an iPod touch stretched out to four times the original size, and Apple has managed to turn it into a new tech product category. The Apple TV, once considered a hobby by the company's executives, was replaced by a far less capable version and went on to sell 1 million units in a matter of months. And only Apple could release a $1,000 netbook computer, the MacBook Air, and create a smash sensation.

There's more, but you get the idea: In a year in which Apple arguably should have had much tighter control over its product quality, the company instead is roaring ahead. It surpassed Microsoft, at least from a (somewhat dubious) market-cap perspective, to become the biggest tech company on Earth. But you don't need any fuzzy math to understand Apple's influence in this industry and with the buying public. Apple has long commanded a level of influence that far outstripped its actual market penetration. But now the company dominates so many product categories, it's not possible to add any caveats. This is the biggest tech company on the planet, no matter how you slice it.

In fact, Apple's dominance is roughly analogous to that of Microsoft a decade or so ago. The company has frozen out the competition successfully in markets for MP3 players, digital music and content, and the nascent market for tablets—which is to say, the market for iPads. It's dominance of the smartphone market was broken only in part by the success of Google's fragmented Android platform, but even that minor hiccup required Google to give away the software to dozens of companies that make hundreds of devices; no single Android device sells nearly as many units as does the iPhone 4. It's not even close.

For MP3 players, there's iPod and then there's everything else, though most people would be hard pressed to even name a similar competitor. (Microsoft's most recent entry is a 15-month-old Zune HD entry that was stillborn the moment it arrived.) And Apple's iTunes service commands 27 percent of the overall music market, which includes both digital and retail music sales. Its nearest competitor, Amazon MP3, owns just 1.3 percent of that market. It's an also-ran.

And then there's the iPad, which actually sells at a rate of about 4 percent of the PC market. This thing is nonetheless so feared that PC companies are tripping over each other to offer up some alternative, and we can expect dozens of lackluster Windows 7- and Android-based tablets to pop up this coming year. Most will be taken off the market by 2012, I bet, by which time Apple will be launching its third-generation iPad. I'm guessing 2012 iPad sales will be far better than this year's expected ~12 million units.

Everything Apple touches turns to gold, it seems. The company launched a smaller new Mac mini, yet another generation of iPods, and other products in 2010, and promises a new version of Mac OS X, code-named Lion, in 2011. That product takes some interesting design cues from the iPad, giving Apple the kind of technological and user experience cross-pollination that Microsoft used to enjoy. It's a never-ending positive-feedback cycle.

Best of all for Apple, its products are all aspirational. While few consumers in the United States can actually afford a Mac—with an average starting price of $1,265, almost three times the cost of an average PC—many can afford iPods, and many are buying expensive iPhones and iPads whether they can afford them or not. The good experiences these people have with Apple's gateway products will lead many to consider a Mac the next time their PC needs to be replaced. And that, too, will happen whether they can afford it or not. (Apple offers "special financing options for up to 12 months when you buy a Mac, iPad, or any other Apple product" ... at an ungodly 22.99 percent variable APR if you're ever late.)

The success of this upsell model can't be understated, and it's a model Microsoft can't replicate because it doesn't sell most of its own products to consumers. And when it does, there's little in the way of upsell. Sure, you can move up from Windows 7 Starter edition to Windows 7 something else. But there's no real luxury brand on the Microsoft side, nor is there an incentive for Microsoft to promote a high-end PC from, say, Dell, over a low-end PC from HP. To most consumers, PCs are commodity products that get a job done. A Mac is something they desire, simply because it's made by Apple.

In the mid-1990s, I was involved in a debate at a higher-educational institution about the future of Apple and whether the school should continue investing in Macs. I argued that Apple would soon dissolve into bankruptcy and that the school would be crazy to buy more Macs. Today, Macs make up a sizable presence at educational institutions across the country, and in some other developed countries. Now, my advice was solid, for the day. But that's what makes Apple's resurgence over the past 15 years all the more impressive: The company was circling the toilet in 1996. No one can realistically claim they saw Apple's resurgence coming, because even the executives at Apple didn't see it coming, Steve Jobs included.

But come it did. And today, when I survey the companies that stand atop the tech industry, one stands out. It's not Microsoft. And it's not Google. It's Apple.

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