Monday, July 28, 2008

Apple Market Share: You Can Take It Seriously!

"Whoever says Apple is going out of business is going to go out of business themselves."

I said that to an Apple executive in 2000. Apple has had ONE losing quarter since I made that statement - but only because of a failed product launch (The G4 Cube) and because of a dramatic economy slowdown after Sept 11 2001.

Sam Jaffe, reporting for BusinessWeek on December 11, 2000:

Investors may be asking themselves what Apple can do to revive its fortunes. The likely answer, unfortunately, is that Steve Jobs has no white rabbits left in his hat. Apple appears to be facing a dead end in its business growth, the victim of mismanagement and unmitigated hubris. Apple lovers are a loyal bunch, and they'll probably stick with the company. But Jobs's dream of becoming the world's biggest computer-maker will likely remain just that -- a dream.

* Apple was 8th in marketshare when Jaffe wrote the piece above.

Jobs isn't pulling rabbits out his little hat - he's pulling new species of large exotic albino animals out of his hat in every show!

Example: The iPhone.

Need more examples from the last 10 years?

The iMac, The iBook, First to adopt Wifi, Only manufacturer to offer an affordable wireless 56k modem access, Removing the floppy, the iPod, the Mac Mini, iMovie, the switch to Intel from PowerPC, allowing Macs to boot Windows ...

NONE of these did any analyst predict nor did ANY Apple user think would happen.


Here is a pair of 2008 quarterly research reports released revealing that Apple is continuing to experience growing U.S. market share among PC shipments.

A Gartner report places Apple's share of U.S. PC shipments for the 2nd quarter of 2008 at 8.5%, up from 6.4% in the 2nd quarter of 2007. Apple's U.S. shipments increased 38.1% year-over-year, outpacing the total industry shipment growth of 4.2% - allowing Apple to pass Acer for the 3rd position in the U.S. rankings.

* Acer is now Gateway, eMachines, Acer - three companies that were previously EACH ahead of Apple in marketshare. Also take into account when Apple had 4% - 4.5% US Marketshare in 2001 - PC shipments were SIGNIFICANTLY lower as a total. Making a gain when the total market has grown is an even bigger accomplishment than it appears to be by just analyzing the recent numbers.

An IDC report places Apple as being tied with Acer for 3rd place in U.S. market share at 7.8% in the 2nd quarter of 2008, up from 6.2% in the 2nd quarter of 2007. IDC's estimates show shipment growth for Apple of 31.7% year-over-year in an overall market growing at only 3.6%.

* These are not conflicting reports, but complimentary and based on different data.

Who would you say is bigger: Motorola, Sony, or Apple?

Answer: Apple is bigger than both Motorola & Sony combined!

Motorola's 2nd quarter 2008 results were $7.45 billion in revenue... but a $194 million loss.

John Gruber of Daring Fireball posits: What matters is profit; market share and revenue only matter insofar as they lead to making money. Motorola sold 16 times more phones than Apple for at least 8 times more revenue — but is there a person on the planet who would trade Apple’s phone business for Motorola’s?

Sony CEO Howard Stringer:

"Apple is a marvellous company, but it is a boutique. We are a giant conglomerate."

How giant? Sony’s current market cap is about $44 billion. The boutique’s market cap is about three times larger, at $149 billion. In terms of net income for the most recently reported financial year, Sony’s was $3.7 billion; Apple’s was $3.5 billion.

Who would you say is bigger: DELL, HP, or Apple?

Answer: Apple is bigger than both HP & DELL combined!

Michael Dell at the Gartner Symposium and ITxpo in 1997 (speaking about Apple):

"What would I do? I'd shut it down and give the money back to the shareholders."

Dell's comments followed Steve Jobs' keynote address at the Seybold trade show the week prior in San Francisco, where he gave his explanation of why he had made certain key decisions such as killing the clone market and making an alliance with Microsoft over Office for Mac.

As of today's close: Apple's stock indicates Apple has a $149 Billion market capitalization; DELL market capitalization is $47 Billion.

DELL may be #1 in computer sales, but Apple, for the last ten years has averaged a profit margin of 33% of all products sold while Dell has averaged 4% - 6%.

Hewlett-Packard in contrast, has a market capitalization of $107 Billion. HP is #2 in computer marketshare.

Apple is as big as both HP & DELL if looking at market cap & profit margins. Apple has fewer employees; doing work more efficiently, with the added burden of producing an operating system & the hardware. Microsoft (with Windows) produces the operating system for the majority of Dell and HP PCs.

Both HP and DELL have recently downsized (cutting thousands of jobs) - Apple is constantly hiring.

Employees as of July 28 2008:

DELL: 58,000
HP: 150,000
Apple: 22,000 (including those in retail stores)

Apple has no debts and $20 billion (that's billion with a "B") in cash - as in MONEY IN THE BANK for blank check writing, acquisitions, research and development, expansion, venture capital, and most importantly consolidation of every aspect of its core businesses. It also means that unlike HP, Apple is focused AND funded.

* Not even Walmart or Exxon (USA's two largest companies) can claim $20 billion in cash reserves and no debt.

Why is $20 billion important to market share? Apple could withstand 5-7 years of straight quarterly losses (20-28 quarters) and not go out of business - a notion that has plagued Apple for the past two decades. To put it simply; Apple cannot fail at this point - while a similar loss for 2 years straight would put every other computer manufacturer either up for sale or out of business. This is a hard point for many to comprehend and seems insignificant - but it does solidify Apple's staying power.

Many analysts say if Apple didn't have it's iPod business - it would fail. Apple's cash portfolio simply won't allow that. Their constant yearning to introduce new technologies will only serve to grow other areas if one area of business fails.

Here are Apple vs DELL vs HP 4th quarter 2007 revenue reports:

Dell increased revenue by 10 per cent to $16 billion, but net profit fell by 6 per cent to $679 million.

Apple posted revenue of $6.22 billion & net quarterly profit of $904 million.

HP 4th quarter 2007 profit was up 27% to $2.8 billion, but HP also cut jobs & sold off arms of business

Dell is at the top of computers sold marketshare, but at the expense of both quality and profit margins.

HP has a much greater revenue due to its dominance in the printer, medical equipment, and server markets.

As computers become more powerful, consumers are seeking out design and functionality over price and "sameness". HP seems to want to compete against Apple with products like the Touchsmart PC - capitalizing on both the iPhone and iMac popularity.

In the age of the iPod, which has now been out 7 years and has begun to see the initial target age group 16-24, capable of making their first computer purchase decisions - they are choosing Macs. It goes beyond a "halo effect". That term is only an analyst cliche. The term "halo effect" implies that current buyers are buying Macs because they already have an iPod. Many adults are now buying Macs, who have never owned a PC or are Windows Box converts. These young adults, who control the USA (and for that matter the world) fashion trends - are buying Macs; not PCs. They are buying iPods, they are buying music from Apple, they are using Safari (Apple's internet browser) to navigate the web, they are using Quicktime subtly in other hardware like cameras and to watch movie trailers, they are using Apple hardware and software to create media and to do academic and medical research ... the list can go on and on where Apple products are not just more popular, they are preferred.

iPod sales:

iTunes song sales:

Sales graphs from Wikipedia

A favorite quote of Steve Jobs is by famous painter Pablo Picasso:

"Good artists copy, great artists steal"

The best that HP and DELL can do at this point is try to copy Apple. They don't have the momentum that Apple has as the cool guys. Many an article has talked about the PC manufacturers just not getting it. I don't think that makes sense. Toshiba, HP, and Sony have ALL released technologies like touchpad laptops, built in webcams, and media PCs - long before Apple. Sony has even had the design down. From a pure design point of view - Sony's PictureBook line of laptops is beautiful. Sony introduced the PictureBook line in 1998 with an integrated webcam. Apple released its first subnotebook with an integrated webcam called The MacBook Air in 2008 - a full 10 years later. Apple introduced its first laptop with a built in webcam in 2006 - but Apple got all the press. Sure, at the time, Sony got a lot of buzz and positive reviews for the PictureBook - but there are very few Sony blogs, there are few (if any) widely published Sony ONLY magazines, and there's no SonyWorld Expo as there is a MacWorld Expo. Sony does have Metreon - its retail experience in San Francisco. But, as I pointed out - EVEN THEY SELL iPods.

From FixYourThinking January 2006:

One other quick note about Metreon that I thought was worth mentioning ... part of the store was an iPod accessory store and another part was a Macally peripherals area ... including Mac keyboards and mice. I just found this odd ... being in a Sony Store that had ALL OF THESE items Sony branded or had Sony counterparts. I think this is extremely telling of the market the iPod has ... even your competition has to sell your product!

Apple has over 200 successful retail stores worldwide - adding a half dozen each year or so in more locations.

Sony has also become known to the younger adult crowd as buddybuddy with the RIAA and MPAA - known for their outlandish lawsuits and fearmongering to protect a dying model of distribution. Apple, while maintaining a fine balance of contracts has become known as the company that's your friend, that's looking out for you, and has the products that can make your life happier, more creative, and more productive.

The subliminal Quicktime & iPod.

I have a hard time quantifying which is a better subliminal message; Quicktime or iPod. I think everyone realizes that an iPod is made by Apple. However, the lack of association with Quicktime and its creator as Apple; is just as subliminal to me. I hardly know of a digital camera or camcorder that doesn't feature Quicktime as a standard used with the device. Consumers see the Quicktime licensing message at the bottom of their boxes, on product stickers, and pages of their instruction manuals:

Quicktime® is licensed from Apple Computer©

They see it and don't think about it ... but just like seeing someone in a magazine advertisement drink a nice cool glass of lemonade on a hot day ... it makes you thirsty. The seed of the word "Apple" has been planted in your mind. Sony on the other hand is no longer subtle, Sony is everywhere and makes every thing you can imagine. People look at Sony nowadays as if they were a pine tree amongst a forest. A subtle reference to the word Apple and older adults remember them and tend to be more curious about what they're up to these days.

Journalists don't ask stars what music they listen to, they ask, "What's on your iPod?"

The most hit article on this website is the recording phone calls laws section. It has subtle references to Apple products, and every page on this website contains archive links galore referencing Apple and Apple products <-- those archive links (and article tags) also make it into search term results. Very subliminally - it's advertising for Apple. College campus after campus is turning to Macs. It's no secret that Apple used to be the dominant PC or at worst; used on 50% of college campuses. During the 90's, Gil Amelio, Apple's then CEO, didn't see the education market as important. The penetration of Macs dwindled on college and K12 campuses to below 25%. This market share loss can also be blamed on a bloated lackluster product line and the introduction of clones. Steve Jobs has taken a new direction for education market share; mindshare. The iPod is every where - its the device to have if you're in college. Not only do you see students walking to class and running with them, but also recording lectures and listening to books. The Apple logo on the back of every iPod has caused an interest in Apple computers and has gotten professors to notice as well.

Apple is regaining its market share in education as more and more school districts and campuses become Mac friendly.

If your school district has signed an exclusive contract with Dell or HP know that you may be able to get an exception to purchase some Macs for your school. Dell is required by my state contract to provide creative departments with Macs - a lot of Art teachers and media classes have them.

* Apple holds a 28% market share in Europe's educational market.


In 2005, Creative Inc CEO Sim Wong Hoo had this to say about the release of the iPod Shuffle:

We're expecting a good fight, but they're coming out with something that's five generation older. It's our first generation MuVo One product feature, without display, just have a shuffle feature. We had that — that four year ago product. So I think the whole industry just laugh at it, because the flash people — it worse than cheapest Chinese player. Even the cheap, cheap Chinese brand today has display and FM. They don't have this kind of thing, and they expect to come out with a fight; I think it non-starter to begin with.

This parody shows how Creative has had to make gains on iPod market share:

Kidding aside, my best friend and I have been discussing the misconceptions that "corporations" hold about Apple. What they don't realize is that they are being fed by Apple's competition. Furthermore, shills like John C. Dvorak, Rob Enderle and Paul Thurott who get quoted a lot in print media are able to quickly disseminate misrepresentations about Apple that spook financial analysts. Most likely if you're reading this you've read one of the following:

"Apple computer virus out in the wild and very serious"

"Steve Jobs health could prevent his company from moving forward."

"iPod sales slump means weakening demand"

There have not been ANY viruses propagated on Macs or infecting Macs in the past 10 years that would be of any concern. There have been security issues, but these issues have been addressed by Apple within 3 days or less for the more serious cases.

Steve Jobs has been private about his health and pancreatic cancer remission, but he has also said that he is in near perfect health.

iPod sales have not slumped, they've grown consistently for the past 7 years. (see chart above) To say sales are weakening is a twisting of facts much like the government will say they are reducing spending. What they mean is they aren't raising the budget as much as they did in the previous year or money is being shifted to another program. iPod sales (which are in the millions) have increased single digits recently - rather than double digits as in previous quarters. The iPhone and is not counted as an iPod sale - it's counted as an iPhone sale - Apple has sold close to 9 million iPhones since launch - surely a good number of those buyers are using the iPhone with it's built in iPod functionality instead of buying an iPod separately - I know I did.

If you hear negative press about Apple and that information would make you lose confidence in the company and therefore not support or buy Apple - then make sure your source is correct and purely factual - not a shill.

While Apple's been doing a much better PR job lately and had more successful advertising campaigns - the consensus amongst CEOs and the above age 50 crowd is that Apple has insignificant market share. What they don't realize is that may be missing the opportunity to be ahead of the competition by starting to buy Apple products for use in their homes and businesses NOW and start providing support. If not, it could soon be a support nightmare for technology call centers. If 1 in 10 of your customers is an Apple Computer user, can you afford to lose them?

References for Apple in enterprise, research, and education:

Virginia Tech Super Computer Cluster Uses Mac Pros

School Districts around the country buy 10's of thousands of Apple laptops for use in K12 education

NASA uses Macs heavily for number crunching

Genetech, multibillion research firm uses Macs exclusively

Comprehensive FAQ Regarding Macs

Size Matters & Matters Not

Any Apple fanatic will brag about how long they've had their Mac and how many old Macs they still use or have in their collection. The truth is; this isn't just a hobby, it's a market share booster. Apple isn't just gaining quarter to quarter sales gains - they are placing more and more Macs into service every day while PCs are being replaced with Macs and simply thrown away. For nearly half the PCs sold - it is replacing an older or broken PC.

I've worked in the surplus property business for over a decade. I've been supporting Macs for almost two decades. I have customers that have uses for Macs from 1988. I have one customer whose whole business relies on a 1995 Macintosh Quadra. I have never been in a business - not even an auto mechanic - who had a 10 year old PC running Windows. The majority of my large customers have 6-8 year old Macs - side by side with new Intel models. Again, Macs aren't being replaced and taken out of commsion and use as much as PCs. PCs (Windows boxes) are being recycled for materials - Macs are recycled for use.

One other aspect of the re-use of Apple computers is the design - a plain PC box seems harsh but okay to toss into a dumpster - a Mac looks odd anywhere near a trash can - it's art! It's harder to throw away. The mac purchaser has also spent more money on their computer than the average commodity PC - it's harder to just go out and buy new - but why buy new when things are going well. Most new PCs now can't do what Macs have done well for the last 6 years.

You can't expand a Mac

While the MacPro is the only desktop model with industry-standard expansion slots, that doesn't mean the other models aren't expandable: their USB & FireWire ports allow them to attach a wide variety of devices. Furthermore, Macs come with most features built-in as standard.

In most cases, it's better to have an external solution attached via USB or firewire rather than an internal one - this makes for better portability and futureproofing.

Apple uses all proprietary connectors & hardware

Apple uses industry-standard USB, FireWire, DVI, audio (both digital & analog), standard PCI Express, ExpressCard expansion slots, wireless 802.11b/g/n, and standard memory & hard drives.

There's no software for Macs. They're for artists & creative people.

VersionTracker & MacUpdate list several dozen new programs every day in almost every category, totalling tens of thousands of applications. Home finance, CAD, recipe organization, 3-D modeling, accounting, engineering, DNA sequencing, data acquisition, electronic circuit design... just about anything you want to do has a program that can get the job done. Additionally, there are thousands of ports of Unix programs for scientists, and engineers. NASA and Genentech rely heavily on Macs for crunching numbers, from satellite sensors to gene sequencing to spreadsheets. MIT uses Macs for a project called KIZMIT - an artificial intelligence/emotion research program. If you haven't noticed lately, both Best Buy and Office Depot are offering a limited selection of popular Mac programs - Apple retail stores have a nearly complete collection. Fry's also carries an array of Mac software titles. Just about every online retailer sells Mac software including popular sites like AMAZON.COM and BUY.COM. You also have options like MacMall and MacWarehouse for mail order and online software and hardware purchases.

Macs can access flash media content on the web, interact with all banking websites, read PDFs, access java and javascipted web content.

Macs that have Intel processors can run Windows XP and Vista natively using the Mac OS Leopard feature BootCamp or simultaneously using programs like Parallels.

When having to tell friends, family, or business associates about Apple's market share - to entice them to buy, support, or provide training for Apple products; refer them to this article. I will update it regularly and place a link to it in the sidebar - just tell them to go to FIXYOURTHINKING.COM and look in the right hand column.

* Some references from MACTACTOE.COM

[UPDATE] On October 13, 2010 various news sources report that Apple's worldwide computer marketshare surpassed 10% in sales. It is estimated that Apple holds an 20-21% installed base.


I am a lover of children's literature said...

Wow, this was a long post, but a good one. Most blogs, as you know, basically only post tidbits of various things and rarely do they go into the depth that this post and others like Tom's excellent, The Small Wave, and those of John Grubber do.

Most blog posts are nothing more than a small rewrite of what somebody else had already posted. They rarely go into depth about what they are rewriting or even try to give their views or take on them. They simply rewrite a tiny portion and nothing more. This is ok for some posts, but certainly not for most if not all of them.

I found your post on Apple's market share well written and informative. Yes, these kinds of posts certainly take a lot more time, effort and work, but they are certainly worth the time and effort for people, like myself, who read and enjoy them.


Anonymous said...

Well done! Too bad our school district just bought a thousand Windows PCs to start a one-to-one laptop initiation. I learned it's impossible to change someone's mind with facts. :)

FYT said...

Thanks Don ...

I've been hearing for years that there was no where that one could get some straight facts and insightful speculation about Apple market share - good enough to convince IT staff, school districts, and business the absolute need to support or buy Apple products.

This is my first "making a go of this website as a part time job" post.

Please refer to it if you want to show anyone Apple's true market share.

Also, if you have anything to add - I plan to add to this post later. For instance, I want to discuss Apple's desire to be the best - not necessarily #1.

It's taken me almost all day correcting grammar mistakes - a problem of mine with my longer posts.

Anonymous said... really are a MacNut :)
On the comment of expanding Macs - how would you upgrade the video card on an iMac? Buying a new Mac doesn't count...
Are all your readers such dimwits?

FYT said...

first of all ... If you need an upgrade path for a video card you would buy a MacPro ... don't be a troll. Second, in case you didn't make your purchase wisely, bought an iMac, and need a video card upgrade ... you have several options - depending on what you need more video power for ... first, external video cards exist, second you can buy video decoders that will greatly assist in video production.

Anonymous said...

Surely you're joking...that's your solution??
Buy a 3 Grand desktop just to have the option to upgrade down the road?

Or buy an overpriced external card because my computer is not inherently upgradeable?

How do you expect a gamer (or any other user) know in advance what GPU specs are required by a game (or app) that may come out down the road?

Your comment only proved my point: you, and your Mac reader base are very easily swayed by such weak arguments.

FYT said...

Down the road?

So now we've changed arguments from not upgradeable to not 4+ years technology proof.

Apple has always held up very well.

Besides REAL gamers don't play games on their computers they should wisely use consoles that have dedicated use.

If you are a serious gamer - you have the big rig. If you are a part time gamer - a 256MB iMac is plenty. If you are a casual gamer like 90% + of the population you have an Xbox 360 or Playstation 3 or Wii.

May I point out that the Wii has a 3 year old graphics technology BUT is still outselling the PS3 and 360 combined and is generally still sold out across the country. This relates to the Mac in that it's not about quantity - its about quality and dedicated purpose.