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Wednesday, September 02, 2009, 07:55 am

Microsoft's fight against Apple ads seen as waste of money

By Neil Hughes

With Apple's Mac home market share tripling in the past five years, Microsoft has fought back with its own advertising campaigns attacking Apple for the first time, a move one analyst sees as a mistake.

In Sunday's New York Times, Devin Leonard took a look at the advertising battle between Apple's "Get a Mac" campaign and Microsoft's "Laptop Hunters" and "I'm a PC" TV spots. He said that the ad war between the two companies is "destined to go down in history," with the likes of the Pepsi-Coca Cola rivalry of the '80s and '90s. But in a new note to investors, Charlie Wolf of Needham & Company said the Mac's recent market share gains are a result of much more than advertising. In addition, he said the Windows maker would be better suited using its money to combat overseas piracy in emerging countries.

"One has to admit that Apple’s 'Get a Mac' campaign was humorous if nothing else," Wolf said. "But why Microsoft responded with an ad campaign of its own is a mystery. The company erroneously attributed the Mac’s share gains to the 'Get a Mac' campaign... However, the damage done to Windows' worldwide market share was miniscule. While it’s true that the Mac’s market share has more than doubled in the past five years, Windows’ market share loss was just 2-plus percentage points."

He said that Windows' share of the worldwide PC market is only 70 percent, and that's mostly due to piracy of Microsoft's operating system. Chasing those pirates, Wolf said, would be a better value for shareholders of Apple's rival to the north.

Apple's own market gains with the Mac platform are attributed by Wolf to the iPod "halo effect," in which users become more familiar with Apple products and migrate to the Mac. In addition, he said constant updates to OS X as well as the company's consumer-friendly Apple retail stores have all given the Mac more market and mind share.

"Those share gains began long before Apple introduced its 'Get a Mac' campaign," Wolf said. Apple's share of the U.S. home market, which is the focus of its ad campaign, has already increased from a low 2.9 percent in the second quarter of 200r to 7.8 percent by the time the 'Get a Mac' campaign began, and it eventually rose as high as 12.1 percent in the second quarter of 2008."

Needham report



In a separate report last week, Wolf went in-depth into the breakdown of recent PC and Mac sales, as Apple saw a 5.5 percent year-over-year increase in sales. He believes those gains were achieved through price cuts in the MacBook Pro lineup enacted on June 8, and that the Cupertino, Calif., company was able to make those cuts without affecting its bottom line due to high profit margins on the iPhone.

In the second quarter of 2009, Apple commanded 8.7 percent of the U.S. PC market, growing from 7.4 percent in the first frame of the year. That as the rest of the PC market slid 1.2 percent year over year.

Contrasting the styles of Apple and its rival, Wolf calls Microsoft's ads "a variation of cash for clunkers," focusing on price and emphasizing that more things are important than just brand.

"What's implied, at least from Microsoft's perspective, is that the only reason the Mac gained share was its ad campaign that derided the Windows PC," he said.
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