Wednesday, February 14, 2007, 09:00 am
Vista to bite into Apple's Mac market shareThe 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.
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