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"I don't dispute that the PC was a better _value_ for years in terms of how most people chose to define "value". However, this utterly fails to explain why Apple didn't go out of business back then, nor does it explain why Apple is making big marketshare gains today."
You want an explanation? Try the fact that Microsoft (yes, THAT Microsoft) saved Apple in its darkest hour with a $150M+ bailout. No largesse, to be sure--the DOJ's Antitrust Division was bearing down on Redmond like a pack of lions on a three-legged antelope at the time, and there were similar movements by European regulators (which remain an ongoing issue for the company).
Apple survived pre-iPod because it provided a convenient way for MS to claim there was some sort of competition going on. There wasn't, and isn't. So don't pretend that your precious survived on inherent competitive merit.