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Fri, Feb 20, 2009 16:08 EST

Mac Sales Drops Help Microsoft, But It Ain't No Cure

Topic: Infrastructure

Blog: Eye on Microsoft

Current Rating: 5 Comments: 4

You knew it would happen eventually. The faltering economy finally caught up to Apple, as Mac retail sales dropped 6 percent in January compared to January 2008, according to research firm The NPD Group.

Apple, welcome to earth in 2009, where premium pricing doesn't cut it anymore.

The 6 percent drop is only one month of data (and a January in a bad economy no less) so it's not as if the sky is falling on Apple. Yet it was Apple's first year-over-year decline in three years, says NPD, and is a sign that consumers are valuing price over lifestyle.

This can only be good news for makers of PCs and lightweight, low-cost netbooks. Windows-based PCs are cheap, most in the $650-$850 range. Netbooks are really cheap ($350 or so), and exploding in popularity. Research firm IDC predicts that netbook unit sales will grow by 50 percent over the next two years. We live in a time where cheap is trumping cool, and probably will until this economy turns around. That's bad news for Apple, which has no netbook (that we know of).

Nevertheless, Apple's losses are not necessarily Microsoft's gain. Not in this economy.

The past four months say a lot about consumer spending and the economy.

According to NPD, retail PC sales have had steady year-over-year growth each month since October, peaking at 16.6 percent growth in January. Mac unit sales plummeted from 27 percent growth in October (after it unveiled a new line of MacBooks) to -0.3 percent in November to 0.4 percent in December to -5.5 percent in January.

"It has much more to do with pricing than with just netbooks," said NPD analyst Stephen Baker. "There's been some switching even among Apple buyers to the $999 [MacBook]. That's taken some sales away from the next tier up."

There seems to be no reason, other than an economic turnaround or reduction in Mac prices, for consumers to start buying Macs in droves again — there is no new line of MacBooks or iMacs coming, and there is no holiday or back-to-school season on the horizon.

So if price is going to trump value for the foreseeable future, what does it mean for PCs and netbooks? It's not a free pass, that's for sure. The entire computer industry, Windows-based or not, is likely to suffer this year. Lethargic PC sales are the main reason Microsoft missed its earnings estimates for its fiscal Q2, and forced the company to start a round of unprecedented layoffs. IDC forecasts that PCs will grow by only 9 percent over the next two years.

Just yesterday, key Microsoft OEM Hewlett-Packard posted financial declines, with laptop revenue down 13 percent for the quarter. If you think this is bad for Microsoft, how do you think Apple feels when even companies selling lower-priced PCs are hurting?

Still, Microsoft will not be liberated by Apple's losses. Even explosive netbook sales will not uplift Microsoft because only the older Windows XP, and not bulky Vista, can run on low-cost netbooks; this will continue to lower Microsoft's client OS revenue margins. Upcoming Windows 7, designed to be able to run on netbooks, could be a game-changer.

But for the time being, having cash-strapped consumers wave off Macs can only help Microsoft. More people will look closely at the price versus functionality equation and see a compelling case to buy a PC.

What do you think? Will the drop in Mac sales continue as long as the economy stinks, and will Microsoft benefit? Or are they both screwed until the economy gets better?

You do not have flash or javascript support.
Average (2 votes)
5
 
 
Mon, Feb 23, 2009 17:35 EST
Anonymous user
Posted by: Jack Repenning
Rating: 90

How's that again? Apple sales are off 6%, Wintel are off 13%, and it's the Mac's losing out? Seems like over-all sales must be off about 13%, and Apple's gaining share.

The economy "stinks," as you rightly put it. This is what "stinks" looks like: lower sales. What was that slogan? "It's the economy, stupid."

 
Tue, Feb 24, 2009 16:17 EST
Anonymous user
Posted by: HD Boy
Rating: 10

Clearly Mr. ONeill, a myopic blogger, doesn't know what the heck he's talking about.

"...That's bad news for Apple, which has no netbook (that we know of)..."

The iPhone and iPod Touch are meeting the "netbook" need for Apple customers. With cellular radios and WiFi, these versatile products are part cell phone, iPod, GPS, eMail device, digital camera, eBook Reader, universal remote control and yes, a Web-surfing netbook, all rolled into one device. Plus these elegant little computers have a ground-breaking interface of the future and an AppStore with 18,000 software titles for further customization.

Mr. ONeill is blinded by all the PC netbook hype and perhaps, by watching Microsoft a bit too closely. Apparently, he couldn't see the obvious if he tripped over it.

To Eye on Microsoft readers: The iPhone is not the perfect device, but it is a terrific product. If you are considering a netbook, you do yourself a great disservice if you don't consider these devices. And the third-generation iPhone probably is coming in June, which is about 90 days away.

 
Sun, Mar 1, 2009 14:43 EST
Anonymous user
Posted by: Anonymous
Rating: 90

I will have to disagree. The iPhone and iPod Touch are great devices but no substitute for a netbook. I own a iPod Touch and while it is great fun to tinker around with, I shudder to think to use it to type a email of any length not to mention a document/spreadsheet.

 
Wed, Jul 8, 2009 20:03 EDT
Anonymous user
Posted by: Anonymous
Rating: 90

Apple has gained market share by creating hype...let's face it, a PC is far more versatile and offers MANY more options and choices (there really isn't any options or choices for mac users...fanboys have to do what ever apple says). Do a little research (google) and you'll see that Apple uses very unethical practices to lure new fanboys to it's products. It's funny...when MS gets sued it's by jealous competitors, when apple gets sued it's by its own customers...

What do you think will happen now that Jobbs health issues are public knowledge? (Which Apple Inc lied about to keep market share)

Apple will always be behind...the only reason they have the market share they do now is because they're pretty much PCs now...check out when their share increase...when they found intel...

Apple has been around since what the mid-70s and still have less than 10% market share????? Wake up Apple, you'll always just be an apple hanging on a tree (a tree controlled by MS)!

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This is Shane O'Neill's blog about Microsoft's corporate strategy and the Windows operating system -- the good, the bad and the ugly.

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