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For six years, the Internet Nexus served as my technology blog, but I've since started blogging at the SuperSite Blog instead. If you're looking for the blog, please head there. --Paul

Monday, March 05, 2007

No, wait, it's the Year of Desktop Mac!

I've been cautioning the Mac community not to get too excited over supposed Mac market share gains for a while now. I do this not to put down anyone but to inject a bit of realism into unrealistic expectations that never materialize into huge gains. On a related note, I've been poking fun at the "year of desktop Linux" stories for a while now. Sadly, these concepts have merged into what I think of as "year of desktop Mac." Here's a good example: Carl Howe from Blackfriars Communications see the "dawning of the Age of Apple":

We have all heard about the "iPod halo effect" where iPod owners increasingly are buying Apple computers. Well, it appears that the iPhone has kicked that effect into high gear. First, Pacific Crest Securities has used NPD data to claim that Apple computer unit sales are up 101% year over year, with revenue up 108%. That is a lot of Mac and MacBook business goodness...

Seriously, that's great. It's also anecdotal, since we won't know how many Macs were really sold in this time period until Apple releases its next quarterly earnings statement. But let's again look at why this data won't turn into massive market share gains for Apple. As I've written here frequently (here and here are two good examples), when you only control 2.4 percent of the market (as Apple does in reality), it's much easier to make big percentage-based sales gains because your sales are already so comparatively small.

So let's say Apple doubles its unit sales for the entire quarter. They started off 2007 with 2.5 percent of the market. If they double sales and PC sales are stagnant (which they aren't, as Vista just shipped), what will Apple's market share be at the close of the quarter? 6 percent? 5 percent?

No. Apple's market share will be 3.9 percent. Here's why: In the first quarter of 2006, PC makers overall shipped 57 million machines, according to Gartner. Apple says it sold 1.112 million Macs. Double that is 2.224 million Macs. So if the PC industry doesn't grow, and Apple doubles, it's still under 4 percent market share. That's as good as anyone should expect it to be, sort of pie-in-the-sky, gosh, you-never-know kind of thing.

But Apple almost certainly won't grow 100 percent for the entire quarter. And the PC industry isn't going to stagnate this quarter of course. In fact, there are reasons to believe that PC sales will grow dramatically in this very quarter because of Vista's release. So it's much more believable to think that Apple's market share will actually be closer to 3 percent, or even less. In fact, if PC sales grow just 15 percent, year over year, to 65.5 million units this quarter, then Apple's market share--in this best case 100 percent growth scenario--will be 3.4 percent. That's a massive improvement. And I think we can all agree it's never going to happen.

But let's let Mr. Howe keep dreaming.

Then, we have data from Net Applications showing that Apple computer market share has risen two points in the last six months to more than 6% world-wide. And then we have securities firms like Goldman Sachs predicting that iPod sales, despite their first quarter seasonal dip, are also rising year-over-year and could approach 11 to 12 million units in the first calendar quarter of 2007.

Two points here. Net Applications is not the source for market share data. We get PC sales figures from companies like Gartner and IDC, Mac unit sales from Apple, and do the math. This happens on a quarterly basis. Second, the vast majority of iPod sales go to Windows users, so it's unclear what that second point is meant to convey.

And finally, we have a survey done by Morgan Stanley noting that iPhone interest is actually larger than what the market currently anticipates, with 20% of the respondents who had heard about the iPhone and its features being "extremely interested in purchasing one".

I've read studies suggesting that iPhone demand is overblown, but neither case should markedly affect Mac sales. As with the iPod, most iPhone users will run Windows. In fact, one might make the argument that the iPhone is the second major Apple product, after the Apple TV, that was designed primarily with Windows users in mind.

Anyway, all of this is an overly-lengthy way of saying, don't count your chickens until they're hatched. If Apple actually does pick up major (or minor) amounts of market share this quarter, I'll be first in line, trumpeting it to one and all. But until we see hard data, all this information is anecdotal, a bit overly optimistic, and, in my mind, unrealistic. It's OK to dream. Just remember that the reality of this quarter will be known someday soon. It's best to wait for the real data and see what happens.

And for those who argue that market share doesn't matter, hey, that's great too. But I'm just responding to what seems to be an overly-exuberant trend lately. The numbers just speak for themselves.

Labels: Apple, Mac

[ Posted at 11:03 AM | Permalink ]