Apple (NASDAQ:AAPL) revolutionized the personal computer industry with the release of the Macintosh thirty years ago. But the weight of the name of IBM (NYSE:IBM) moved MS DOS systems and later MS Windows, both made by Microsoft (NASDAQ:MSFT), to become the standard in business and from there, in the home.
That dominance was complicated, multi-faceted affair, and continues to this day, with Microsoft operating systems holding 91% market share, and the Apple's OSX and others sharing the rest. However, a report by research firm Gartner, released Thursday evening, says the Mac is making gains, at least in the U.S.
The press release is titled Gartner Says Worldwide PC Shipments Declined 6.9 Percent in Fourth Quarter of 2013, and notes:
"Although PC shipments continued to decline in the worldwide market in the fourth quarter, we increasingly believe markets, such as the U.S., have bottomed out as the adjustment to the installed base slows," said Mikako Kitagawa, principal analyst at Gartner. "Strong growth in tablets continued to negatively impact PC growth in emerging markets. In emerging markets, the first connected device for consumers is most likely a smartphone, and their first computing device is a tablet. As a result, the adoption of PCs in emerging markets will be slower as consumers skip PCs for tablets."
[Note: The data shown is for calendar quarters, not Apple's fiscal quarters. December ended Apple's fiscal Q1 2014.]
As the table above shows, Apple moved up almost 4 percentage points in market share - a growth rate of 28.5% by units. This is by far the highest growth rate of any major vendor, as most others had shrinking sales.
In a sense, this is not really surprising. Last holiday season (2012) Mac sales were hampered by severe shortages of the new iMacs. With these not a factor, it is only natural for this year to show greater growth. (Additionally, there were some channel run down issues a year ago that distorted sales numbers somewhat.)
The unanswered question is how the Mac line is doing globally. Unfortunately, Apple does not make it into the top 5 vendor list globally, so we do not get to see Gartner's figures here. We can, however, try to estimate them ourselves.
We begin by accepting Gartner's figures for last year's and this year's sales (1.688 and 2.168 million Macs). We do know for certain last year's FQ1 total Mac sales (4.061) so if Gartner's numbers are correct, then last year's foreign sales was 2.373 million units.
Now let us suppose that the foreign growth was greater than that in the U.S. Last year, in the FQ1 conference call, Apple CFO Peter Oppenheimer said that overall revenue growth in China was up 67%. Even if we halve this, it would still be well over the U.S rate of 28% unit growth. Of course this is only China, so I will estimate a foreign growth rate of 30%, just slightly higher than domestic.
This would give us a figure of 3.085 million, to which we add the domestic for a total of 5.253 million units worldwide. This represents a market share of 5.9% versus 4.6% last year. This is a huge jump.
Note also, that this is just a shade short of the figures for ASUS (OTC:AKCPF) - less than 3% short. If Apple growth continues, they may soon be on the chart.
My figures here are based on several assumptions each of which may not bear out. First, the Gartner numbers may be wrong. They are only estimates, and they are only preliminary, according to the press release. Second, the 30% increment for foreign growth could also be seriously off. However, the final figure of 4.773 million represents only a small growth over last year if we take into account the problems with iMac availability and channel draw down. So it is not a particularly optimistic figure. There remains, as well, the possibility that it is actually higher.
Whence the growth?
Where is the growth coming from when overall PC shipments are shrinking? The fact is, MS Windows is not considered the absolute necessity that it once was. As iPhones and iPads have invaded the enterprise, and the sleek, well built MacBooks began to invade the boardrooms, resistance to Macs has very slowly eased.
Apple laptops spread quickly after Cisco gave employees the option to switch from Windows-based laptops. Today, one-fourth of Cisco's company-provided laptops-roughly 35,000-are Apple MacBooks. Macs cost more than PCs, a hurdle for Apple in the past. After taking into account factors like maintenance and support, Sheila Jordan, a Cisco senior vice president, said the costs end up about even over the life of the machine.
This is surprising. When given the choice, 25% of employees would choose a Mac. Perhaps the erosion of the Windows PC share has only just begun.
It should be noted that the price issue has just been addressed to some degree. When Apple released the new MacBook Pro with Retina Display last February, they introduced a $200 to $300 price reduction.
Finally - profit
Apple investors love Apple's bottom line. To this we should note, as pointed out by astute researcher Horace Dediu of Asymco, while Apple's unit share is only around 5%, its share of PC profits is around 45% (see here).
In November, Apple reached a 15 year high in PC market share, at 5.2%. Today we most likely are even higher.
All reports for Apple mobile sales are very positive. Now here is data that Mac sales as well are better than expected, and market share for Apple's computer line is growing heartily. U.S. share growth from 9.9% one year ago to 13.7% now is enormous. It becomes a virtuous cycle, as more people adopt Macs, their friends and associates lose their misgivings and do so too.
The new thing is that a lot of this growth seems to be coming from enterprises, the traditional bastions of Microsoft, as companies open up to Macs. If this change in corporate attitude continues, then it is likely that Macs will continue to grow market share well into the future.
What do you think?