Morgan Stanley: 40% of college students plan to buy Macs
Apple's rapidly rising mindshare amongst current generation college students is setting the company up for an "aging phenomenon" that will spur further market share and revenue growth as those students enter the work force, investment bank Morgan Stanley said Wednesday.
A recent higher-education survey cited by analyst Katy Huberty reveals that roughly 40 percent of college students say their next computer purchase will be a Mac, well ahead of Apple's current 15 percent market share in the demographic.
In the near term, this sets the Cupertino-based Mac maker up for a strong September quarter -- a three-month period that embodies the heart of the back-to-school buying season, where incoming freshmen, existing undergraduates, and universities all plunk down considerable sums of cash in order to invest in computer hardware for the coming school year.
"Longer term," Huberty said, "we see an 'aging phenomenon' that will put Apple in a more mainstream market share position as students enter the work force, much like Linux adoption in the 1998-2003 time frame."
She noted that as the Linux platform matured and developers entered the workforce, enterprise-level Linux adoption accelerated eightfold, with 16 percent of servers shipped in 2003 running flavors of the linux operating systems compared to just 2 percent five years earlier.
For Apple, which holds just shy of 3 percent worldwide share of the personal computer market, each incremental percentage point of share gain means billions, Huberty said; approximately 6 billion in yearly revenues, and a full dollar in per share earnings for investors.
The analyst maintained her Overweight rating on shares of Apple, with a $185 per-share Base Case scenario that assumes Mac unit share rises to 3.5 percent from 2.9 percent in the next 12 months, and that consumers continue to buy up into the Mac product family, providing the company with some gross margin leverage.
Huberty also outline a $225 per-share Bull Case scenario which assumes twice the operating margin expansion of her Base Case scenario for the 2008 calendar year, driven by 40 percent revenue growth from broader demand for mobile products and greater success in the international and enterprise markets.
"Consumer demand presents largest downside risk to estimates," she said. "[The] rate of new product innovation must be sustained to justify strong double-digit revenue growth expectations."
A recent higher-education survey cited by analyst Katy Huberty reveals that roughly 40 percent of college students say their next computer purchase will be a Mac, well ahead of Apple's current 15 percent market share in the demographic.
In the near term, this sets the Cupertino-based Mac maker up for a strong September quarter -- a three-month period that embodies the heart of the back-to-school buying season, where incoming freshmen, existing undergraduates, and universities all plunk down considerable sums of cash in order to invest in computer hardware for the coming school year.
"Longer term," Huberty said, "we see an 'aging phenomenon' that will put Apple in a more mainstream market share position as students enter the work force, much like Linux adoption in the 1998-2003 time frame."
She noted that as the Linux platform matured and developers entered the workforce, enterprise-level Linux adoption accelerated eightfold, with 16 percent of servers shipped in 2003 running flavors of the linux operating systems compared to just 2 percent five years earlier.
For Apple, which holds just shy of 3 percent worldwide share of the personal computer market, each incremental percentage point of share gain means billions, Huberty said; approximately 6 billion in yearly revenues, and a full dollar in per share earnings for investors.
The analyst maintained her Overweight rating on shares of Apple, with a $185 per-share Base Case scenario that assumes Mac unit share rises to 3.5 percent from 2.9 percent in the next 12 months, and that consumers continue to buy up into the Mac product family, providing the company with some gross margin leverage.
Huberty also outline a $225 per-share Bull Case scenario which assumes twice the operating margin expansion of her Base Case scenario for the 2008 calendar year, driven by 40 percent revenue growth from broader demand for mobile products and greater success in the international and enterprise markets.
"Consumer demand presents largest downside risk to estimates," she said. "[The] rate of new product innovation must be sustained to justify strong double-digit revenue growth expectations."
Comments
For what it's worth, I find this to ring extremely true amongst many of my higher education counterparts.
I knew this was coming! I knew it back in 1997! Apple's stock is the closest thing to bankable there is in this economy. It has been the best performer for both the 5 year and the 10 year stats!
Yeah!
Every time I turn on my PC I start yelling. I'm no wimp, I'm a general software enthusiast on both PC and Mac, but the PC has just got on my lasssst nerve.
I'm telling family, no more computer help unless it's a Mac!
Which makes Apple's f***ing up of X11 in Leopard all the more annoying.
when these folks hit the corporate world, a significant proportion will succumb to reality (in the form of "comfort factor" and "switching costs").
You mean like they'll realize after using macs for 4 years how uncomfortable PCs are, and lobby their boss to switch to macs? and those who start their own businesses will set things up with their favorite trusty mac? yes, I agree..it will be great.
And I think in the 1990s everyone wanted a PC. I remember I graduated in 1995 and the thought of buying a mac was bizarre. We all wanted Dells, HPs, gateways, etc. There were no such thing as MP3s, youtube, or iTunes, and windows95 promised us all a better future.
If I was 18 years old again today..seeing how macs run unix and yet also holding an iPhone in my hand with unlimited developer/creative potential.. wow..I can't imagine buying a PC. Times have really changed.
Are the other 60% nuts?
ROFLMAO!
That's what I was thinking, too
The article headline sounded like something strait out of "The Onion."
Haha! The Onion would say something like, "40% of college students waiting for MacBook style refresh to ditch their PCs." Maybe thats the AI-Onion hybrid sitein my mind!
Anyone pause for thought this gone March 21st??
but when these folks hit the corporate world, a significant proportion will succumb to reality (in the form of "comfort factor" and "switching costs").
Seems to me that this should be a wake up call to the software designers/manufactures to get their apps written for OSX or they may lose out big time.
I have two daughters in college, one with a PC and one with a Mac, both grew up using Mac at home and PC's in high school. The one with the PC (university issued & supported) has begged me to let her trash the PC and get a Mac as soon as she graduates.
IMHO, kids coming out of colleges & universities are going to put a heck of a lot of pressure on the future workplace to convert to Macs.
Apple tried this in the 80's with the original Macintosh and it failed miserably. Remember Apple University? They had 100% coverage of some of America's biggest and best schools - Stanford, Michigan, Dartmouth, etc. And it got them NOWHERE. These students graduated and bought millions of cheaper PCs for their businesses.
We all do lots of things in college that we leave behind on graduation.
I love Apple the company and the products and I really really want them to succeed (I still own AAPL I bought in 1981) but...
Apple tried this in the 80's with the original Macintosh and it failed miserably. Remember Apple University? They had 100% coverage of some of America's biggest and best schools - Stanford, Michigan, Dartmouth, etc. And it got them NOWHERE. These students graduated and bought millions of cheaper PCs for their businesses.
We all do lots of things in college that we leave behind on graduation.
You are so going to eat your words it's not even funny, and yet... I still find it hilarious.
I love Apple the company and the products and I really really want them to succeed (I still own AAPL I bought in 1981) but...
Apple tried this in the 80's with the original Macintosh and it failed miserably. Remember Apple University? They had 100% coverage of some of America's biggest and best schools - Stanford, Michigan, Dartmouth, etc. And it got them NOWHERE. These students graduated and bought millions of cheaper PCs for their businesses.
We all do lots of things in college that we leave behind on graduation.
I do understand your point. I worked for an Apple Dealership here in N. Ireland during those times. We thought exactly the same thing.
However, there is one fundamental difference between then and now. Price.
The cost back then had an "Apple Tax". They really did cost a premium. Not so much these days. That is the real defining difference and why I believe the future to be much brighter now than it was back then.
Are the other 60% nuts?
No - just middle class and lower-middle class.
I love Apple the company and the products and I really really want them to succeed (I still own AAPL I bought in 1981) but...
Apple tried this in the 80's with the original Macintosh and it failed miserably. Remember Apple University? They had 100% coverage of some of America's biggest and best schools - Stanford, Michigan, Dartmouth, etc. And it got them NOWHERE. These students graduated and bought millions of cheaper PCs for their businesses.
We all do lots of things in college that we leave behind on graduation.
The difference is that today's Macs can run Windows. Plus there's that little consumer/business product known as "iPhone" out there today. Today is way different compared to 20 years ago.
I studied and later worked at Cornell University from 1989 through 1998, and saw the Mac fall from 90% across campus to below 50% (free grants from Intel made huge inroads while directionless OS 8 ). They are now making strong progress thanks to OS X, and also the iPod Halo via students.
BTW, one of the smart things I did take away after college was running my small business on Macs, now 10 years and running. Not one dime spent on tech support, very little tech repair or downtime, and never a problem dealing with clients on PC-based Wall Street thanks to Office compatibility.
Long live the Mac! All hail Steve Jobs and the people at Apple!! Oh, and thanks Microsoft for Office
Which makes Apple's f***ing up of X11 in Leopard all the more annoying.
I am using X11 under Leopard (10.5.2) and it looks fine to me. What is the issue(s) you are seeing?
No - just middle class and lower-middle class.
Funny, I know a couple of families that between them, over the years since the mid '80s, had 10 Apple computers/laptops. And they are middle class. So your point being?!
Apple's rapidly rising mindshare amongst current generation college students is setting the company up for an "aging phenomenon" that will spur further market share and revenue growth as those students enter the work force, investment bank Morgan Stanley said Wednesday.
A recent higher-education survey cited by analyst Katy Huberty reveals that roughly 40 percent of college students say their next computer purchase will be a Mac, well ahead of Apple's current 15 percent market share in the demographic.
In the near term, this sets the Cupertino-based Mac maker up for a strong September quarter -- a three-month period that embodies the heart of the back-to-school buying season, where incoming freshmen, existing undergraduates, and universities all plunk down considerable sums of cash in order to invest in computer hardware for the coming school year.
"Longer term," Huberty said, "we see an 'aging phenomenon' that will put Apple in a more mainstream market share position as students enter the work force, much like Linux adoption in the 1998-2003 time frame."
Funny thing about college students - they often don't know the value of a dollar