Apple's iPhone 'halo effect' lifts Mac to 16.4% sales growth
Global Mac sales have significantly outpaced the rest of the PC market, which expanded just 2.3 percent year over year -- just more evidence of the iPhone halo effect, according to one analyst.
In his latest installment of the "Wolf Bytes" investor note, Needham & Co. analyst Charlie Wolf said that the significant increase in Mac sales in September came in spite of the fact that Apple has refused to enter the inexpensive netbook market that only months ago was booming. Apple made the right decision to stick with its high-end, premium segment, he said.
Calling the netbook craze "the implosion of PC prices," Wolf noted that Mac sales did slide in March of 2009 by 0.7 percent, but Apple's share continued to grow as overall PC sales fell 6.7 percent. As both PC and Mac sales turned for the positive through September, Apple has continued to widen the gap, which now sits at 14.1 percentage points.
"We have consistently argued that Mac price cuts were a misguided strategy," Wolf said. "Such cuts would not have stimulated much demand because the price elasticity of demand for the Mac -- the one differentiated product in a sea of commodities -- was simply too low. They would end up decimating Apple's gross margin with little to show for it."
That "pricing discipline," as he called it, has led Apple to a worldwide revenue share of about 10 percent, while its market share hovers just north of 4 percent. In the U.S., the revenue share of PC sales for Macs rests above 20 percent, while the unit share is just above 10 percent.
Wolf credits continuing Mac expansion to the popularity of the iPhone, which, much like the iPod before it, has created a "halo effect" that encourages consumers to switch to the Mac. Only this time, he said, it seems as though the iPhone is even better at pulling in new users.
"We believe that the halo effect emanating from the iPhone should be even stronger than that surrounding the iPod," he said. "After all, the iPod is a relatively simple device while the iPhone is arguably a mini-computer wrapped in a phone's form factor."
Wolf has been a proponent of the iPhone halo effect theory for some time. As the iPhone cannibalizes iPod sales, the handset is expected to fill the role once carried by the media player.
Interestingly, the 16.4 percent growth in Mac sales in September was led overseas. While Mac sales increased 9.8 percent in the U.S., they spiked 38.7 percent in Europe and 27.1 percent in Asia.
Most of the success of the Mac of late has been thanks to the home market. Apple's home sales grew 28.8 percent worldwide in September, versus only 18.1 percent for the rest of the market. Education sales, too, were strong, growing 15.6 percent, while overall PC sales sagged 2.5 percent in schools. Apple, though, lost 12.4 percent in the business market, and 76.8 percent in government sales.
Last quarter, Apple sold a record 3 million Macs along with 7.4 million iPhones, increasing the company's profit more than 46 percent to $1.67 billion. The Mac maker is expected to sell an additional 2.9 million machines this quarter.
In his latest installment of the "Wolf Bytes" investor note, Needham & Co. analyst Charlie Wolf said that the significant increase in Mac sales in September came in spite of the fact that Apple has refused to enter the inexpensive netbook market that only months ago was booming. Apple made the right decision to stick with its high-end, premium segment, he said.
Calling the netbook craze "the implosion of PC prices," Wolf noted that Mac sales did slide in March of 2009 by 0.7 percent, but Apple's share continued to grow as overall PC sales fell 6.7 percent. As both PC and Mac sales turned for the positive through September, Apple has continued to widen the gap, which now sits at 14.1 percentage points.
"We have consistently argued that Mac price cuts were a misguided strategy," Wolf said. "Such cuts would not have stimulated much demand because the price elasticity of demand for the Mac -- the one differentiated product in a sea of commodities -- was simply too low. They would end up decimating Apple's gross margin with little to show for it."
That "pricing discipline," as he called it, has led Apple to a worldwide revenue share of about 10 percent, while its market share hovers just north of 4 percent. In the U.S., the revenue share of PC sales for Macs rests above 20 percent, while the unit share is just above 10 percent.
Wolf credits continuing Mac expansion to the popularity of the iPhone, which, much like the iPod before it, has created a "halo effect" that encourages consumers to switch to the Mac. Only this time, he said, it seems as though the iPhone is even better at pulling in new users.
"We believe that the halo effect emanating from the iPhone should be even stronger than that surrounding the iPod," he said. "After all, the iPod is a relatively simple device while the iPhone is arguably a mini-computer wrapped in a phone's form factor."
Wolf has been a proponent of the iPhone halo effect theory for some time. As the iPhone cannibalizes iPod sales, the handset is expected to fill the role once carried by the media player.
Interestingly, the 16.4 percent growth in Mac sales in September was led overseas. While Mac sales increased 9.8 percent in the U.S., they spiked 38.7 percent in Europe and 27.1 percent in Asia.
Most of the success of the Mac of late has been thanks to the home market. Apple's home sales grew 28.8 percent worldwide in September, versus only 18.1 percent for the rest of the market. Education sales, too, were strong, growing 15.6 percent, while overall PC sales sagged 2.5 percent in schools. Apple, though, lost 12.4 percent in the business market, and 76.8 percent in government sales.
Last quarter, Apple sold a record 3 million Macs along with 7.4 million iPhones, increasing the company's profit more than 46 percent to $1.67 billion. The Mac maker is expected to sell an additional 2.9 million machines this quarter.
Comments
The generic box makers, much to their misfortune, have absolutely no way of differentiating themselves - Sony is HP is Lenovo is Acer. And MS has no problem with whoring out their back-asswards copy of OS X to even the lousiest box-maker. Abusive codependent relationship indeed.
This result can't completely be attributed to the "halo effect". I think the quality of Apple's computers and word of mouth also had something to do with it. People aren't simply buying Macs because they think their iPhones are cool. People are gradually figuring out that Macs don't "suck" as some Winboys liked to froth, and that they are, in fact, really really nice computers. Some people were also likely to have been hugely attracted by the new unibody design of the MacBooks and especially the aluminum MacBook Pros.
I agree and my 2 cents .... There isn't a day goes by I don't meet someone saying they are getting a Mac next or have just got one. Many say a friend or a relative has recently go one and love it so they are going to get one now. This is based on the Mac experience and subsequent enthusiastic recommendations not the iPhone Halo effect although I agree that is probably what started the ball rolling in the first place. The constant refrain I hear is "Oh why did I wait so long?" from recent switchers.
Most of the success of the Mac of late has been thanks to the home market. Apple's home sales grew 28.8 percent worldwide in September, versus only 18.1 percent for the rest of the market. Education sales, too, were strong, growing 15.6 percent, while overall PC sales sagged 2.5 percent in schools. Apple, though, lost 12.4 percent in the business market, and 76.8 percent in government sales.
Apple's stratagem of only targeting the rich niche consumer is seriously flawed.
Sure they are making a profit, I can make a profit selling lemonade in front of my house, but it's not going to "change the world" for the better and vulnerable to changes in the larger market.
For instance any crap change on the PC side is reflected on the Mac side, because Apple can't compete unless it uses commodity PC parts.
The economy is going to deal Apple a serious blow in the consumer market for the next several years and with virtually no footprint in other markets to compensate, we are looking a implosion here if Steve passes away.
Apple is going to wish it hedged itself and paid more attention to business and government sales, which can sign off on hundreds of thousands of computers with a single pen stroke.
Do you really think these businesses and governments want the headaches and billions of dollars of data loss using Windows?
Call it whatever you like - "halo effect" is nice, why not, one thing is for certain: Apple knows the market far better than any other player. They know how to create desire and excitement and make money at the same time. A rare feat in these times. Even more interesting, is that they now dominate the most profitable and most coveted segment of the market. Apple does indeed care about market share, but only in the most profitable segment.
The generic box makers, much to their misfortune, have absolutely no way of differentiating themselves - Sony is HP is Lenovo is Acer. And MS has no problem with whoring out their back-asswards copy of OS X to even the lousiest box-maker. Abusive codependent relationship indeed.
'Halo effect' is a nice way of saying 'blood-bath.' This is how some of Apple's competitors view it!
I have always thought the halo effect of the iPhone was a two edged sword unlike the iPod for precisely the reason the analyst states "the iPod is such a simple device and iPhone is a minicomputer". You need a iMac or Macbook to do much more with an iPod. The iPhone can almost stand alone. I had already switched to a mac before buying an iPhone and recently purchased a nice Macbook Pro, but unless the trip absolutely requires it, I find myself leaving the laptop at home and at times wondering if I really should have purchased it. It will certainly slow my need for a new notebook as long as I keep getting a new iPhone every 2 years or so.
I'm in the same boat, Mark. I gave my MB to my daughter to go to school with the idea that I would be replacing it with an MBA.
But having just replaced my original iPhone with a new 3Gs, I've sort of put off buying the MBA and rely on my 3Gs when I'm out and about and my iMac's big screen when I'm home. What I really would like now is the new 27" iMac. Decisions, decisions. Apple by making it easy, sure makes it hard sometimes!
A year ago I got my first apple product in the iPhone 3G, aside from some older iPods of course.
Today.
iPhone 3GS 32GB, Macbook Pro 15" late 2009 and an 21.5" iMac in shipment.
Never going back.
The economy is going to deal Apple a serious blow in the consumer market for the next several years and with virtually no footprint in other markets to compensate, we are looking a implosion here if Steve passes away.
Where have you been for the last year?
What nonsense! Apple is likely to be larger than Microsoft within the next 18 months. It doesn't, and never needed to do anything so ridiculous as this. It seeks controlled, sustainable and profitable growth, something your proposed strategy would annihilate in every conceivable way.
But having just replaced my original iPhone with a new 3Gs, I've sort of put off buying the MBA and rely on my 3Gs when I'm out and about and my iMac's big screen when I'm home. What I really would like now is the new 27" iMac. Decisions, decisions. Apple by making it easy, sure makes it hard sometimes!
Just imagine how many more people would opt not to buy a traditional notebook if they ever release a tablet computer. I think there would be major sales canabilization from the notebook line. They would still sell many notebooks, but I think it is why we have heard a lot of rumors about limited functionality on the tablets, not for any technical reason but to try and balance functionality vs notebook canabilization.
If a mac tablet could run powerpoint/keynote and hook up to external projectors....
I like the growth numbers. Admittedly, I'm an Apple supporter. To me personally, it means better Apple hardware and software in the near future because Apple has more money to develop their product line.
I was in a meeting yesterday, and this poor guy spent the entire hour trying to get a wifi connection on his HP laptop which had to be plugged into the wall because of low battery, using XP.
I sat there with my 3Gs on feeling, I have to say, a little smug!
Mac's just work and that is the halo generator.
Just imagine how many more people would opt not to buy a traditional notebook if they ever release a tablet computer. I think there would be major sales canabilization from the notebook line. They would still sell many notebooks, but I think it is why we have heard a lot of rumors about limited functionality on the tablets, not for any technical reason but to try and balance functionality vs notebook canabilization.
If a mac tablet could run powerpoint/keynote and hook up to external projectors....
Agreed, I don't think the tablet will be something like where you can sit and create a Pages document or spreadsheet like you can on a Laptop. I may be wrong about that, though.
But I do see it running keynote and connecting to projectors with may be some ability of say, rearranging slides but not really creating them.
There is overlap the only thing I miss really about my laptop is waking up in the morning and bashing out some quick emails, organizing my 'To Do' lists, checking the news all the while still in bed and drinking my coffee! I for one will wait for the tablet before buying my next laptop!
Apple's stratagem of only targeting the rich niche consumer is seriously flawed.
Sure they are making a profit, I can make a profit selling lemonade in front of my house, but it's not going to "change the world" for the better and vulnerable to changes in the larger market.
For instance any crap change on the PC side is reflected on the Mac side, because Apple can't compete unless it uses commodity PC parts.
The economy is going to deal Apple a serious blow in the consumer market for the next several years and with virtually no footprint in other markets to compensate, we are looking a implosion here if Steve passes away.
Apple is going to wish it hedged itself and paid more attention to business and government sales, which can sign off on hundreds of thousands of computers with a single pen stroke.
Do you really think these businesses and governments want the headaches and billions of dollars of data loss using Windows?
You're totally missing the point. And you're way too stuck on your fixed ideas about business and glossy screens.
Apple is doing "end runs" around all these silly entrenched ideas--Windoze huge installed base, the economy, business, IT, blah, blah, blah.
The iPhone/iPod are veritable Trojan Horses, and those coupled with its substantial investment in retail stores is providing the proverbial "open door" to masses of people to finally find out the truth for themselves about the whole Apple universe, a major part of which is still computers.
So many people HATE computers, which is the reason why Microsoft got big. Millions of lemming office drones got hoodwinked into using Windoze, because they didn't care, and because they didn't really have a choice. But that was OK, it wouldn't have made any difference. They somehow learned how to do the very minimum required on the computer so that they didn't get fired. It has been a really captive audience.
So in comes Apple with its iPod. Cool! And then they come out with iTunes for Windoze. Cool! And then they open retail stores--nice stores in nice places where rich people shop, and where not-so-rich people aspire to shop. Cool! And then they come out with the iPhone. Cool!
Well the iPod and iPhone prove to be very nifty products in their own rights. So the Apple stores are crowded with people drooling over their next iPone/iPhone and happen to notice the computers, all of which are on and connected and "touchable."
"Wow. Nice computers. They don't look junky. OS X looks cool. Windoze looks junky. Hmmmmm. You get a lot of stuff included for the price. Hmmmm. Not so bad. Hmmmmm"
Too much attention on consumers? Bah! Just who do you think goes to work in all those offices to make up "business"? Consumers. That's right. Get it now? Duohhhhhhhh.
Never owned a windows machine, never will. I usually buy a Mac and trickle down the older unit for my wife and in turn hers to children and grandkids. I do the same with each unveiling of the iPhone. But Sunday I went and ordered 2 27" iMacs one a core duo and the other the i7 "Naehlem". We have been using dual G4 & G5's with 20" and 23" Cinema displays. The core duo should be delivered Friday and the i7 by the 14th. In all these years and for all these machines, I have never had a H/W failure or had to reinstall the OS (except for some self induced when on OS/6).
Mac's just work and that is the halo generator.
27" iMac Naehlem! I can't figure out if I'm jealous or envious or both!
You're totally missing the point. And you're way too stuck on your fixed ideas about business and glossy screens.
Apple is doing "end runs" around all these silly entrenched ideas--Windoze huge installed base, the economy, business, IT, blah, blah, blah.
The iPhone/iPod are veritable Trojan Horses, and those coupled with its substantial investment in retail stores is providing the proverbial "open door" to masses of people to finally find out the truth for themselves about the whole Apple universe, a major part of which is still computers.
So many people HATE computers, which is the reason why Microsoft got big. Millions of lemming office drones got hoodwinked into using Windoze, because they didn't care, and because they didn't really have a choice. But that was OK, it wouldn't have made any difference. They somehow learned how to do the very minimum required on the computer so that they didn't get fired. It has been a really captive audience.
So in comes Apple with its iPod. Cool! And then they come out with iTunes for Windoze. Cool! And then they open retail stores--nice stores in nice places where rich people shop, and where not-so-rich people aspire to shop. Cool! And then they come out with the iPhone. Cool!
Well the iPod and iPhone prove to be very nifty products in their own rights. So the Apple stores are crowded with people drooling over their next iPone/iPhone and happen to notice the computers, all of which are on and connected and "touchable."
"Wow. Nice computers. They don't look junky. OS X looks cool. Windoze looks junky. Hmmmmm. You get a lot of stuff included for the price. Hmmmm. Not so bad. Hmmmmm"
Too much attention on consumers? Bah! Just who do you think goes to work in all those offices to make up "business"? Consumers. That's right. Get it now? Duohhhhhhhh.
Well said. I especially like the 'end-run' and 'Trojan horse' comments. Spot on...while so many CEO's have been laying off people that they spent a lot of money on hiring and training in the first place, Apple is going full steam ahead!
Henry Ford raised his workers hourly wage to $5 which was unheard of for its day. He didn't do it because he was a good guy. He did it so his employees could afford to buy his cars. Just a quick example of a fwd thinking CEO like Jobs is as compared to much of the rest that seem to have more foreskin than foresight!
This result can't completely be attributed to the "halo effect". I think the quality of Apple's computers and word of mouth also had something to do with it. People aren't simply buying Macs because they think their iPhones are cool. People are gradually figuring out that Macs don't "suck" as some Winboys liked to froth, and that they are, in fact, really really nice computers. Some people were also likely to have been hugely attracted by the new unibody design of the MacBooks and especially the aluminum MacBook Pros.
Also notice how they cleverly omitted that fact that during this past year Windows Vista was the only alternative and that it did "suck", therefore OSX was a viable alternative. It will be a whole new ballgame this year with the advent of the universally critically acclaimed Windows 7.
This result can't completely be attributed to the "halo effect". I think the quality of Apple's computers and word of mouth also had something to do with it. People aren't simply buying Macs because they think their iPhones are cool. People are gradually figuring out that Macs don't "suck" as some Winboys liked to froth, and that they are, in fact, really really nice computers. Some people were also likely to have been hugely attracted by the new unibody design of the MacBooks and especially the aluminum MacBook Pros.
Nowhere in the report does it say it is.
It is only one of the reasons, significant mind you, but along with those you listed and a number of others as well.