Yes, They Do Like Them Apples (Macs, That Is)

Nearly 5% Market Share Boosts Bottom Line, with Sales Topping 1.3 Million

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Mac is back.

Industry watchers are pleasantly surprised that it was Apple Computer's design-inspired and user-friendly machine, not its small white music wonder, that bolstered the bottom line in the company's just-reported fiscal third quarter. Apple shipped more than 1.3 million Macs in the U.S. for a 12% increase year-over-year. That puts it on the cusp of a 5% market share-the company's biggest slice of the pie since 1998.

"It's not gigantic market share, but the momentum proves they're doing something right," said David Daoud, analyst at IDC, who puts Mac's share at 4.8%. "The numbers tell us the company is gaining traction."

The rising numbers are important because Mac adds considerably more to Apple's bottom line than iPod. And while 5% seems small, it's not shabby in a highly fragmented market. According to Gartner's latest U.S. data, leader Dell has a hefty 32% share, followed by HP with almost 19%, but the rest quickly dissolve into single digits: Gateway is at 6% and Lenovo has just under 4%.

So is uptick due to the much-discussed iPod halo effect? Industry experts say it's more complex, pointing to Apple's recent switch to Intel processors, its renewed push into education and continued success with its retail stores.

They also factor in Apple's aggressive, big-budget advertising and marketing campaigns for the Mac this year. The first began in January and touted the switch to the Intel processor, bragging that Intel chips have been set free from years inside "dull little boxes dutifully performing dull little tasks."

The larger effort, begun in May, centers on the "I'm a Mac" ad campaign created by longtime Apple agency partner TBWA that has become wildly popular and oft-parodied online (see sidebar, this page). The campaign has helped bolster the Mac's image among consumers and businesses and legitimized its competition with the PC by comparing the two side by side.

The series of nine TV spots also drew attention by using popular comedic actors John Hodgman and Justin Long as the respective PC and Mac characters. And while some people identified more strongly with one or the other, or thought (as Slate did) that the ads were "mean-spirited," the campaign has only contributed to a renewed Mac vs. PC battle.

And that equal footing-even if it's anti-Mac-is exactly what Apple wants. "The fact that the two are even in the same room is important," said Jupiter Research analyst Emily Riley. "Apple's name recognition is very different today than it was 10 years ago. They've infiltrated a whole new generation with the iPod. Now they're taking that and trying to transfer the brand recognition into another product category."

Still a ways to go

Analyst Tim Bajarin of Creative Strategies said "there is no question that Apple believes that the Mac as a platform is vital to its future." He added: "I think they'll become even more aggressive in pushing the Mac as the center of digital living."

If so, it's got a ways to go. According to TNS Media Intelligence, Apple spent less than $7 million in measured media on Mac for the first 11 months of 2005, compared to some $57 million for iPod. Spending on Mac presumably has risen considerably this year with the new effort, though figures were not available.

Apple did not return calls for comment.

The recent Mac success, of course, is still distant from its zenith in the '80s. In 1986, for instance, Apple had a 16% market share and was the No. 2 seller of computers behind then-leader IBM. Even as late as 1990, Apple held a 10.7% share. Some optimistic analysts say Apple could once again reach a double-digit share in the U.S. computer market, but others believe modern market conditions will make that difficult, if not impossible.

"Can they keep going? Sure they can, but even 6% is going to be challenging. To double their shipments [to get to 10%] would require monumental effort," said IDC's Mr. Daoud. "It's a zero-sum game, so to gain market share, you're going to have to grab it from someone else."

NPD Group analyst Steve Baker said he's withholding his opinion "for another quarter or two. The iPod halo and the switch to Intel and all the other stuff is real, but what the final result or gain will be is still to be determined."
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