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About this siteFor six years, the Internet Nexus served as my technology blog, but I've since started blogging at the SuperSite Blog instead. If you're looking for the blog, please head there. --Paul Friday, April 28, 2006A couple of quick points about market shareI often get asked why I focus so much on market share. After all, if Apple has just over 2 percent of the market for PCs (as it does now) and is doing well financially, what's the problem? There are a couple of points to be made here. I focus on market share because it is measurable. But market share is not the end of the story. Obviously, Apple is doing well regardless, though one has to wonder how much the iPod plays into that. Is the Mac really a sustainable business at this point?I think so. But I saw some figures this week that bear repeating in light of this discussion. First, during Apple's annual shareholder meeting this week, the company again had to answer questions about its tiny PC market share. Steve Jobs said the transition to Intel chips should eventually help, and that Apple will overcome its tepid Mac sales pace this year after the transition is complete. Peter Oppenheimer, Apple's chief financial officer, added, "Each point of market share means $2 billion in top-line revenue." There's one reason why market share is important. If Apple could double its market share, that's another $4 billion in revenues. I was asked by a few people why Apple's 4 percent growth rate in Mac sales in the most recent quarter was so bad. After all, at least it's going up. The problem is that Mac sales aren't rising as fast as PC sales this year (and that even with last year's huge gains, the Mac only gained .28 percent market share). Microsoft's quarterly earnings give us an idea of how far behind Apple's sales were in the most recent quarter (because Microsoft provides the OS that runs on the other 98 percent of PCs sold worldwide). According to the software giant, sales of its Windows software rose 7.5 percent in the same quarter, almost double that of the Mac. (One might ask: Are these measuring the same thing? Not exactly, but close enough: Microsoft hasn't raised prices on Windows, so the sales lift is based on more sales not a price hike.) This means that Apple has lost ground so far this year. (For whatever its worth, Microsoft sold $3.19 billion worth of Windows software in the quarter--and $2.95 billion in Office--yikes.) As for the obvious retort to Apple's low market share, comparisons to BMW seem interesting until you realize that BMW doesn't compete against a single global monopolist car maker whose vehicles run on a different kind of fuel and drive on different roads. The point here is that the car market and the PC market are not the same thing, and ultimately, Apple has had to embrace some of the market economy realities of the PC market in order to continue to be a viable choice. The move to Intel processors will help, as does offering customers a chance to run Windows on Mac hardware. Opening up Mac OS X to generic PCs, too, I think would help, though there's an argument to be made about the impossibility of a company Apple's size supporting all that hardware out there. Another option, of course, is Apple splitting off the iPod, which it may be working towards based on the recent second Cupertino campus announcement. Certainly, no one in the Mac community--or at Apple, for that matter--minds talking about market share when the iPod comes up. I guess market share only matters when it's good. [ Posted at 8:50 AM | Permalink ]
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