So that’s where all those Mac laptops were hiding!
I have long suspected that Macs had made more headway in capturing market share than the periodic research reports have indicated. Finally, we have a report that explains why.
A Bernstein Research report by Toni Sacconaghi, Jr., which I discovered via Philip Elmer-DeWitt’s Apple 2.0 blog at Fortune, provides some fresh numbers on the Mac, particularly its laptops.
The Bernstein report differs from other market share reports I’ve seen in that it breaks the data into five price “quintiles.” Mac laptops have a whopping 29.4 percent of the top quintile (machines over $1,300) and 9.3 percent of the second. When you drop the two quintiles in which Apple does not compete (the bottom two fall under $1,100), Mac laptops still net a 13.8 percent market share in the U.S. While still a long way off from parity with the Windows competition, these numbers jibe better with real-world observations than the 5 to 6 percent numbers that reflect sales of mountains of cheap PCs to businesses.
One of the charts included in the Bernstein report includes a line that breaks out Apple’s U.S. market share in the highest price category in the education and consumer markets, excluding the corporate market that the company historically has ignored. Mac laptops comprise 45.8 percent of that market. Wow.
While anecdotal proof for the Mac’s increasing popularity has been building for several years, the market share numbers have not reflected what seemed obvious. True, the Mac’s overall market share has doubled since 2004 (from 3.2 percent in the U.S. to 6.7 percent and from 1.8 percent worldwide to 2.9 percent, according to Gartner data), but all those glowing Apple logos on laptops on college campuses, at technical conferences and in public Wi-Fi areas argued for higher numbers.
Apple’s laptop share worldwide has shown a similar pattern. Mac laptops do best in the highest price quintile with 11.2 percent, and have 8.1 percent of the second most expensive one. Mac desktops have 8.1 percent of the top quintile of the global market (but almost nothing in the other four). While these figures are far from dominating, compared to Apple’s scrawny worldwide share overall, they’re startling.
Another surprise in the Bernstein report is that Apple’s surge in the high-priced categories is a relatively recent phenomenon. In 2000, Mac laptops held 3.6 percent of the top quintile in the U.S. and 4 percent of the second. The highest percentage, 6.1 percent, was in the lowest-priced quintile. By 2004, the Mac laptops had risen to 7.6 percent of the top quintile and 7.2 percent of the second. That year Apple had the highest share in the third quintile at 9.7 percent.
Despite what appears to be great news for Apple laptop sales – rapidly increasing market share in the highest-priced, most profitable quintiles -- Sacconaghi’s report points to dark consequences. It views Apple’s rapidly increasing share of the pricey end of the laptop market as a limiting factor to growth in the years ahead, particularly in light of the Mac’s increasing average price versus that of a typical PC laptop.
I had almost forgotten this, but the iBook a few years ago started at $999. The increase in price of the entry-level MacBook to $1,099 combined with the perpetual fall of Windows-based laptops has had the net effect of making Macs more and more expensive relative to their PC counterparts. Sacconaghi theorizes this will narrow the potential market for Mac laptops and pressure Apple to drop the entry-level price back to $999 or lower to perpetuate the rate of growth it has enjoyed over the past two years. Combined with Apple’s determination not to go after the corporate market, further limiting its overall market share growth, I have to concede that Mac laptop sales could hit a wall at some point.
Sacconaghi does not note in his report that Mac laptops, while costlier on average when compared to the entire Windows PC market, are priced about the same as PCs of comparable abilities (Charles Gaba’s System Shootouts site has many examples of this). Apple refuses to make cheap Macs because it wants to maintain its image as a maker of quality computers and because it disdains low-margin hardware. But in doing so, Apple has written off a significant chunk of the PC market.
This could present a problem as Apple’s market share grows, but one of the notable aspects of the company’s recent increases in market share is that they have come despite the higher average selling prices of Macs. Consumers are voting for the Mac with their pocketbooks, and there are no signs yet the trend is slowing.
Even if Sacconaghi’s scenario materializes (he projects sales into 2011), Apple’s generous margins always give it the option of prudent price cuts to goose market share. Case in point: the controversial $200 iPhone price cut resulted in a sustained 56 percent increase in sales, according to Piper Jaffray’s Gene Munster.
But for the near future, I see Apple standing pat. Wall Street should be more than satisfied with the boatload of good news Apple will deliver in its fourth quarter earnings report Oct. 22.
Comments
A friend in university took a term in Mexico with six other randomly chosen students. All seven toted MacBooks.
Posted by: Neil Anderson | October 13, 2007 4:14 PM
I tend to support Job's view of Apple's high-margin product line and fractional sales figures when compared to Windows box makers: Does BMW expect to compete with Chrysler or Ford? No, and they don't have to. Their market target is the more discriminating consumer, and they are quite content to "merely" grow their market share within that group. 'Nuff said.
Posted by: John Date | October 13, 2007 6:52 PM
One thing to remember is that Apple is digging its way out of some disastrous leadership in the early 1990's. The Mac was better than the Windows PC's but cost about twice as much. Apple was resting on the laurels that it earned in the late 1980's. The Mac OS was more user friendly than Microsoft Windows, but it had serious problems with its antiquated foundations. Then all those IBM PC compatible manufacturers (Compaq, HP, IBM, Packard Bell, etc) chose Microsoft DOS, and then Windows 95, to standardize on.
Since then Apple has rectified its problems. The price a Mac is comparable to a name brand PC with the same features. Apple learned that, when it attacked Wintel head on, it lost, so Apple does not market in the low end, Enterprise, government and gamer markets.
A Mac can compete on price, but Apple will not sell a stripped computer. Apple has specialized in the consumer, education, Small to Medium Business and creative markets where craftsmanship, excellent design, ease of use and panache trump a low price. These markets are the best place for Apple because they are growing when the world wide Enterprise Market is flat.
Macintosh Users value quality. Very often, when two models of a Mac are offered (except for processor speed, disk and screen size) the higher priced one is more popular. That totally breaks the pattern on the Wintel side where the cheapest price is king.
Mac OSX is superior to Windows Vista. One of the Mac's greatest features is that its foundations are build on Open Source, BSD Unix foundations. The Mac's Application Programming Interfaces and its Xcode development tools are mature; Apple does not need to reinvent the Mac like Microsoft needs to do with Vista.
Microsoft wasted five years trying to get the Longhorn operating system to work before abandoning it. Microsoft retreated to Windows Server 2003 to build a Graphics User Interface on top. Thus, Microsoft is eight to ten years behind Apple in the modernity of its OS.
Since Apple's API's are mature, it can spend its R&D budget on improvements. Apple tends to update its OS every two years vs Microsoft taking twice as long.
Apple has had to overcome severe Fear, Uncertainty and Doubt promoted by its competitors. Apple was forever going out of business, they said. They also said that Mac's were incompatible with PC, cost more and didn't offer any software. These reasons have been trounced. Now that the Macintosh can run Microsoft Windows OS too, it now has more software than Wintel. Since Mac users are very picky about quality, the Mac software is better than Windows.
Microsoft's business plan is dying; it has become very boring This is why the Mac sales are growing at 30% a year. This rate is accelerating. Microsoft is being push back into its core markets of the low end markets, Enterprise, government and gaming markets. Meanwhile, Apple is nibbling around the edges.
Microsoft is beleaguered while Apple is at the top of its form. It is amazing what ten years can do.
Posted by: Louis Wheeler | October 14, 2007 1:54 AM
Apple definately had some serious issues in the mid 90's ... Apple had realized it was unable to build its next gen OS (Pink was one codename...) and so went shopping for its NeXT gen OS ... it looked at Be OS, Apple had dabbled with Mk (Mach, iirc) Linux and even IBM's AIX (again my memory is foggy here, but those boxes were the farthest thing from a Mac you could possibly get... so didnt so good, even though they had great capabilitty for the day).... and eventually they settled on NeXT Computer ... and purchased the company around '96/'97 .... and Jobs quickly took over as the iCEO.
On the otherside, Windows NT was not too shabby, esp compaired to Windows '95/'98 and the disasterous ME (at which point Windows 2000 was suppose to 'fuse' the "best" from '98 with the best from NT 4). This is similar to what Apple eventually did with Mac OS 8/9 and Rhapsody ... and delivering Mac OS X (beta 10.0). For some things OS 8/9 form Apple still had an edge but for MOST things, I would say 2000 was overall better, though I liked OS 9 better than 2000 (and still do), there were a lot of tasks (and multi tasking) where Windows 2000 was better.
Not so anymore.... Microsoft ability to work with 'anybody' and make 'anything work' .... seems to have done them in. Where there are hundreds of thousands of 'threat' programs, warez, viruses and trojans for the Windows platform, there are few to none for Mac OS X (I think Mac OS 9 had around 200 viruses in its day...).
Vista is a huge resource pig and at this point does not seem to do anything better than XP did ... I would even say its not really any more secure than a fully patched install of XP. Office '07 is also a disaster ... since its not compatible with any previous version (or more to the point the default file format it saves in (MS XML) is not compatible with anything else Microsoft has done).
Where I work, we have no plans to go to Vista. Infact we are specifically ordering Dells with XP installed as many of our apps wont run right (or at all) on Vista and even if they did, we'd need to get bigger/more expensive machines to run everything at speed... The systems do come with MS Office '07, however we upgrade them to Office '03 via our license....
Microsoft may always be king, but their empire is slowly eroding... and as people see others happy & using Macs and OS X .. and even running Windows occasionally on Apple hardware - MS will loose even more of their previously maximized market share.
Posted by: drx1 | October 14, 2007 6:13 PM