Vista to bite into Apple's Mac market share
The launch of Microsoft Corp.'s Windows Vista operating system will have a negative effect on Apple's share of the personal computer market over the next several months, according to checks performed by research and investment firm PiperJaffray.
In a research note released to clients on Wednesday, Sr. Analyst Gene Munster said that while a survey of 50 Best Buy retail stores around the country found that Vista sales have not met expectations, PC sales have still risen as a result of the software roll-out.
"Of the 50 stores we surveyed, 80 percent of Best Buy stores indicated that they have sold less copies of Vista than they had expected," the analyst wrote. But at the same time, he said, 72 percent of the stores saw an increase in Windows PC sales since the software launched.
Munster, who attributes the surge to pent-up demand for PCs with Vista pre-installed, is forecasting for a spike in Windows PC sales during the March calendar quarter, which "could put downward pressure on Mac market share." More specifically, the analyst expects Mac market share to decline from 2.5 percent in December to 2.3 percent in March.
"Historically, from December '04 to March '05, Mac units increased by 2.3 percent and the market share increased by 0.3 percent," he wrote. "During the Intel transition, from December '05 to March '06 Mac units fell by 11.3 percent and market share was flat."
Still, Munster said he remains confident that Apple in 2007 will gain share overall, helped from the industrywide shift toward portables where it currently excels. The analyst also sees potential for Apple to seize the opportunity presented by the launch of Vista to gain mind share with consumers.
"The company views this season of Vista-related computer purchases as an opportunity to sell more Macs," he wrote. "Around the time of the consumer Vista launch, Apple initiated several strategies to attract Vista customers toward the Mac."
For instance, in an email to registered iPod owners with PCs, Apple asked customers: "Upgrading to Vista? Think Mac." The Cupertino-based firm also launched national TV ad campaigns in the US, UK, and Japan criticizing Vista's difficult installation process and frustrating security features. Furthermore, recent reports suggest that Apple's retail stores will also be used in an effort to monetize the Vista opportunity with employees are emphasizing the fact that Macs run both Mac OS X and Windows.
"Although many features of Vista are already available on Apple's current operating system, 10.4 Tiger, Apple is preparing 10.5 Leopard for a Spring release," Munster told clients. "With the release of Leopard, Mac market share will benefit from upward pressure from slight pent-up demand."
The analyst said the release of Leopard will also mark a turning point for investors, who will shift their focus back on the Mac chapter of the Apple story. The launch of Tiger in April 2005 added $100m in revenue to the company's June quarter, he said, with 2 million copies shipping in the first month of availability.
Since Tiger's release, which went on to sell 7 million copies in its first year on the market, the Mac OS X installed base has grown 25 percent from 16 million users to about 20 million users, Munster said. Similarly, he expects that 40 percent of Mac users to upgrade to Leopard in the first year of availability.
"Assuming a late April launch, this would lead to Leopard sales adding $130 million to the June '07 quarter, shipping 2.6 million copies in the first month of availability and adding $456m to [fiscal 2007], shipping about 9 million copies in the first year," he wrote.
In a research note released to clients on Wednesday, Sr. Analyst Gene Munster said that while a survey of 50 Best Buy retail stores around the country found that Vista sales have not met expectations, PC sales have still risen as a result of the software roll-out.
"Of the 50 stores we surveyed, 80 percent of Best Buy stores indicated that they have sold less copies of Vista than they had expected," the analyst wrote. But at the same time, he said, 72 percent of the stores saw an increase in Windows PC sales since the software launched.
Munster, who attributes the surge to pent-up demand for PCs with Vista pre-installed, is forecasting for a spike in Windows PC sales during the March calendar quarter, which "could put downward pressure on Mac market share." More specifically, the analyst expects Mac market share to decline from 2.5 percent in December to 2.3 percent in March.
"Historically, from December '04 to March '05, Mac units increased by 2.3 percent and the market share increased by 0.3 percent," he wrote. "During the Intel transition, from December '05 to March '06 Mac units fell by 11.3 percent and market share was flat."
Still, Munster said he remains confident that Apple in 2007 will gain share overall, helped from the industrywide shift toward portables where it currently excels. The analyst also sees potential for Apple to seize the opportunity presented by the launch of Vista to gain mind share with consumers.
"The company views this season of Vista-related computer purchases as an opportunity to sell more Macs," he wrote. "Around the time of the consumer Vista launch, Apple initiated several strategies to attract Vista customers toward the Mac."
For instance, in an email to registered iPod owners with PCs, Apple asked customers: "Upgrading to Vista? Think Mac." The Cupertino-based firm also launched national TV ad campaigns in the US, UK, and Japan criticizing Vista's difficult installation process and frustrating security features. Furthermore, recent reports suggest that Apple's retail stores will also be used in an effort to monetize the Vista opportunity with employees are emphasizing the fact that Macs run both Mac OS X and Windows.
"Although many features of Vista are already available on Apple's current operating system, 10.4 Tiger, Apple is preparing 10.5 Leopard for a Spring release," Munster told clients. "With the release of Leopard, Mac market share will benefit from upward pressure from slight pent-up demand."
The analyst said the release of Leopard will also mark a turning point for investors, who will shift their focus back on the Mac chapter of the Apple story. The launch of Tiger in April 2005 added $100m in revenue to the company's June quarter, he said, with 2 million copies shipping in the first month of availability.
Since Tiger's release, which went on to sell 7 million copies in its first year on the market, the Mac OS X installed base has grown 25 percent from 16 million users to about 20 million users, Munster said. Similarly, he expects that 40 percent of Mac users to upgrade to Leopard in the first year of availability.
"Assuming a late April launch, this would lead to Leopard sales adding $130 million to the June '07 quarter, shipping 2.6 million copies in the first month of availability and adding $456m to [fiscal 2007], shipping about 9 million copies in the first year," he wrote.
Comments
D
Bit of a non-story really. If there's an artificial short term bump in windows pc sales as people satisfy that pent up demand, then of course apple's market share will go down, even if it ships more units itself, unless the proportion of apple's increase is greater than the proportion of pc sales increase. Say there are 100m PCs normally sold Feb-Apr, and they sell 115m; and there were 10m macs sold Feb-Apr last year but this year they sell 11m, then apple's share for the quarter will go down, despite shifting 10% more units. The rest of the report implies this. All it really shows is the importance of long term trends, but I'm sure the stock market will see any drop in market share for a single quarter as a Bad Thing and sell off. Fine, could be a good time to buy
D
Bingo.
Microsoft hasn't launched a new OS in five years, prospective PC buyers knew for months that Vista was coming in January, and the bump in market share reflects nothing more than a temporary surge (as George Bush would call it) in PC sales.
No one is saying, "Wow, Vista looks nice. I think I'll get that instead of a Mac."
That said, I though Apple would have had more measurable success in improving its market share since the launch of Tiger, and I'm a little disappointed that more people haven't come over to Mac.
Multimedia features will continue to drive the home users to Mac, but I think Apple is missing a lot of business customers by not offering tighter Outlook/Exchange compatibility and the ability to run Windows apps natively on OS X.
But it is Mac with 10.4. How will a switcher feel paying $129 in 2-3 months for 10.5?
An aggressive counter-Vista move would be for Apple to say "if you buy a new Mac NOW, you get a free upgrade when Leopard is released." Or their typical $19.95 "handling" fee for free upgrades
An aggressive counter-Vista move would be for Apple to say "if you buy a new Mac NOW, you get a free upgrade when Leopard is released." Or their typical $19.95 "handling" fee for free upgrades
That is EXACTLY what Apple should be doing, I agree. People won't consider Mac OSX when they can have something that looks like Vista. Vista sucks, but they don't know that. Alot of home users are gullable
-tj
Vista sucks, but they don't know that. Alot of home users are gullable
I upgraded to Vista Ultimate and have been using it continuously for a number of days. It doesn't suck, at least no more than XP. It is pretty much the same old Windows with a new coat of paint. So anyone who is already familiar with XP will feel right at home with Vista. That is once they replace their Linksys wireless router ( if it is more than a year or so old it is incompatible), update the firmware in their cable modem, get new drivers for second hard drive, and patch dozens of software applications, then they'll be ready to go. Windows is Windows...Whatever, get a Mac if you like Macs. It's not like Macs don't have a few issues as well. Nothing is perfect.
M
Yeah, Vista is a mess. I bet you the "analyast" from PiperJaffray hasn't even used it.
Why do people say stuff like this? Getting hold of a copy of Vista isn't some difficult, it's-more-likely-he's-just-saying-he-did-it, kind of thing. It's out there, available for purchase.
But really, what has that got to do with anything, anyway, whether he's used Vista or not? He isn't talking about whether Mac is better than Windows. He's just telling his investors "Don't lose your water if you see Mac market share nudge downward in the next couple of months. It's not necessarily a sign people prefer Vista. It's just people satisfying pent up curiosity."
Seems like you guys would welcome somebody coming out and reminding people that this kind of thing happens. And he clearly needs to say something like this, because it does happen. Pent-up demand, pent-up curiosity, it's out there. With the enormous user-base of Windows, even a minor bump in sales will make a negative impact in Mac market share. Don't say it won't happen. Be glad if it doesn't, but be realistic.
<soapbox>
I see so many posts on Mac forums criticizing these financial analysts, because their analysis seems tepid or obvious. But why? We've gotten so acclimated to how the regular news services behave, and that's sad. It's backwards, I think. Hardly anybody does "news" any more. They do infotainment and edutainment. They want to hit you with something that catches your attention, stirs up controversy (read: makes you angry at someone other than them), so they can profit. The more they stir you up, the more you keep coming back. As a result, though, we seem to act as though every bit of news pertaining to us is a call to arms. And the only thing we try and do, glancing over it, is to answer the age old question "Are you with us, or against us?" It's in the face of neutral news like this that the inappropriateness of this reaction is best seen. Just remember the difference between being informed and being worked up. But more to the point, when you encounter someone who is just trying to analyze a situation objectively, to inform people without pushing a political agenda (whether it's yours or someone else's), put your weapons down. Check your anger at the door. And just read what the man said and consider it. No "oomph", no "pizzazz"? Sometimes those are artificial additives not always necessary. No controversy? Wonderful. Don't respond by trying to manufacture your own, every... single... time. It may be the knee-jerk response that "infortainment" taught you, but sometimes it's not necessary.
</soapbox>
Since Tiger's release, which went on to sell 7 million copies in its first year on the market, the Mac OS X installed base has grown 25 percent from 16 million users to about 20 million users, Munster said. Similarly, he expects that 40 percent of Mac users to upgrade to Leopard in the first year of availability.
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Interesting numbers. I remember (back in the Jaguar days) when it was often said more people were still on the classic Mac OS than OS X ... and we've all been hearing about the boom in Mac sales that going to Intel brought ... I kind of wonder what the chart looks like exactly. Especially as there are some really complex market conditions to look out for this year.
Vista released: some PC sales lost in 2006 are regained in 2007, indirectly reducing Mac share
Leopard released: some Mac sales are regained (as in those of us who read AI etc. and know about Leopard) but without a major late-Tiger slump before hand.
Nice idea that Apple should pony up Leopard vouchers for early 2007 Macs. But other than goodwill I don't think they'd win much. Leopard has the excitement factor Vista so sadly and obviously lacks.
Who in the world is actually stoked over Vista's release and doesn't work for MS or a PC making OEM?
Interesting that PiperJaffray used BestBuy stores to gauge reaction because I was just in one the other day and heard how they (at least one store) were pitching against the Mac. One of the computer salesmen was talking to a customer who expressed interest in looking at a Mac. The Best Buy rep went into full negative mode offering that Mac's are "cute" but finding the power button is hard and it only has one mouse button. Say what? I almost said something but figured it wasn't my place to stick my nose into how he sells their products.
No, you're letting your Mac side down!
Only kidding. It's a shame so many jackasses kick around in the world to ruin other people's days. That's precisely what the Apple ads and Apple stores are for.
Yeah, Vista is a mess. I bet you the "analyast" from PiperJaffray hasn't even used it.
Let's not be silly. Of course Munster has used Vista. And he's probably talked to more people who've used Vista than anyone on this list, with the possible exception of some admins. And he's probably read more about Vista than a lot of us as well.
That's all analysts do, after all (besides drinking heavily on their "working lunches.")
Critique someone's analysis by all means. But don't make foolish comments that are obviously untrue.
Even Dvorak, in his worst, most ill-informed, block-headed anti-Mac rants, couldn't be justly accused of never having used a Mac.
That said, without access to the same info Munster has, this analysis "feels" right. There has been a lot of pent-up "demand." "Demand" isn't actually people marching out in the streets "demanding" their Vista PCs, but simply people who have pushed off buying a PC for a few months because Windows Vista will then come pre-installed.
This is the same thing my wife and I are doing now. We are limping along with an ancient G4 tower, fixing problems, hoping complete failure doesn't occur before several things happen. Specifically, we're waiting for:
1)A Macbook (and hopefully a mini with a 3.5" HDD) with the X3000 integrated graphics.
2) Leopard
3) iLife '07
This is pent-up demand. If it were available today, I'd cancel soccer practice and go pick up 2 Macbooks, or a Macbook and a mini, and probably call in "sick" tomorrow. (If they only have the vanila 3000 IG chipset, we'll get a single MBP instead.)
The sheer volume of people doing this on the Windows side, particularly after so many delays, is bound to have a positive effect on PC sales. However, the reality of Vista's fizzle means that this will be far below MS's expectations. A perfect opportunity for Apple to score big with Leopard later in the year.
My one concern with Leopard is that, with all the "secrecy" and speculation, people will build up Leopard to be more than it is. It's quite likely that Leopard ill be an upgrade in the same vein that Tiger was: more of a meow than a roar. Tiger was essentially Spotlight, plus some new or upgraded apps. Making Safari with RSS support a "feature" of Tiger was lame in the extreme. That's the main reason I'm still happily running Panther (which really had some solid kernel and great UI improvements over Jaguar). $129 for Dashboard? Please.
If Apple really wants to hit a homerun with Leopard, they need to deliver big and provide lots of real value to consumers. A lot of this can be done with .Mac and iLife, but Apple has got to stop being so chintsy.
A year of .Mac free with a purchase of Leopard and/or a Mac (and/or an iPhone) would be a good start.
Up the storage limit to 3+ GBs, and make upgrading storage cheap, like an extra $1 per year per GB (keeps the math simple and the good press would be easily worth it).
Integrate iMovie with YouTube (a no-brainer).
Build MySpace/FaceBook etc, (as well as .Mac) into iWeb.
Integrate iPhoto with Picasa and Flikr.
And I still like my family/friend/organization tree to build into Address Book idea from a while back. It seems to integrate nicely with the whole Web 2.0 thing. And if they play nice with MySpace and FaceBook, then no one will have to compare .Mac to those beheamoths.
And of course I want some better video management capablities in iTunes, where things can be tagged with director, actors, screenwriters, release date, genre, subgenre, etc.
Higher res movies (DVD quality) and commentary tracks and subtitles would also be important to me (but honestly unlikely).
Support for both Blu-Ray and HD-DVD should be built into a (rebranded) iDVD.
Burning your own movies to disk should also be a no-brainer. But they shouldn't tout this so much as a feature as fixing a bug (a legal bug concocted by greedy movie studios and an insane copyright system, not a technical one).
Do this Apple, plus other things that really make people's lives easier, and you've got some great things coming your way.
That is EXACTLY what Apple should be doing, I agree. People won't consider Mac OSX when they can have something that looks like Vista.
I don't understand what you mean. Is Leopard really going to change how the system looks? I really don't think OS X will look identical to Vista but both are fairly slick looking.
They want to hit you with something that catches your attention, stirs up controversy (read: makes you angry at someone other than them), so they can profit. The more they stir you up, the more you keep coming back.
A friend of mine refers to this as "irritainment".
The only thing more irritating than a rant, is the same rant twice
Interesting that PiperJaffray used BestBuy stores to gauge reaction because I was just in one the other day and heard how they (at least one store) were pitching against the Mac. One of the computer salesmen was talking to a customer who expressed interest in looking at a Mac. The Best Buy rep went into full negative mode offering that Mac's are "cute" but finding the power button is hard and it only has one mouse button. Say what? I almost said something but figured it wasn't my place to stick my nose into how he sells their products.
I would have said something. Maybe not a full-blown rant. But at least a "That's not true" with a knowing expression.
Then let's see with the rep knows. Dress 'em down, I say.
What he going to do anyway? Yell at you? You're the customer, dammit!
I'm all for exposing ignorance and stupidity whenever I see it.
If Apple really wants to hit a homerun with Leopard, they need to deliver big and provide lots of real value to consumers. A lot of this can be done with .Mac and iLife, but Apple has got to stop being so chintsy.
To paraphrase a popular quote, it looks to me like the mantra of Leopard is going to be "Developers! Developers! Developers! Developers!" There are going to be a lot of new APIs, a major revision to the primary Mac development language, and a host of other developer niceties. I suspect you'll see more 10.5-only software in the first half of this year than there's been 10.4-only software since its release, and in the end that's really what SHOULD drive the adoption of an operating system.
On the other hand, I'm one of those people who think the UI integration and per-record recovery features of Time Machine are going to be the most popular features of 10.5. Not all that sexy, and it's not like "backup" is anything new, but the "recovery" functionality of Time Machine is second-to-none.
This is a rough 2-3 month gap between Vista and Leopard. People are ready to upgrade their computers, and Apple are staying "OK, you're buying a computer, think about Mac."
But it is Mac with 10.4. How will a switcher feel paying $129 in 2-3 months for 10.5?
An aggressive counter-Vista move would be for Apple to say "if you buy a new Mac NOW, you get a free upgrade when Leopard is released." Or their typical $19.95 "handling" fee for free upgrades
Agree 100%. I think Apple usually have some such offer in general but not sure if it is 3 months ..