Apple Investors Overlooking Mac's Windows Capability

Much, if not all, of the attention regarding Apple (AAPL) has been focused on the iPhone. Apple’s recent $200 price reduction on the iPhone resulted in analysts, journalists, and investors debating the true demand for new device. Additionally, the effects of the price cut on Apple’s earnings has been a hot topic of discussion. Certainly the iPhone is relevant to Apple’s performance, but ostensibly it’s the Macintosh computers that will have the most impact. Specifically, the Mac’s ability to run Windows natively has the potential to be a colossal catalyst for boosting Mac market share.

Apple released “Bootcamp”, which allows Mac users to install and run Windows just like one would on a PC. Apple’s new OS, OS X 10.5 “Leopard”, slated for release this November will include Bootcamp software. Additionally, third party software called “Parallels” allows users to run Windows and Mac OS simultaneously.

The Windows capability has not yet been aggressively publicized by Apple, and analysts and investors have been relatively quiet on this issue. Yet, for more than two decades, the lack of Windows compatibility has been the primary reason behind consumers’ decision to NOT purchase a Mac computer. Now that Windows can be installed on Macs, sales could really explode. I believe that this aspect of Apple should garner more attention, and I will explain why.

Macs are a perennial top award winner in consumer surveys and industry publications. Marketing research has suggested that for many PC buyers Macs were their first choice, yet they declined to purchase due to the need to run Windows software. Computer buyers employ what marketers refer to as a “non-compensatory” purchase decision model. For every product attribute evaluated and compared, supremacy in most categories cannot offset a deficiency for a particular attribute. Explicably, Macs may score higher in a consumer’s mind for every attribute, but the fact that it’s a non-Windows machine eliminates the purchase possibility from the buyer’s selection set of product alternatives.

Simply, consumers want a machine that runs the same operating system that 95%-99% of all other computers run. In most cases, consumers require a machine than runs windows due to work or school related factors. Alternatively, there is a significant risk in buying a computer that may become extinct or no longer supported by software developers. That was a real concern years ago, when Apple was against the ropes as market share had been estimated to fall as low 1%.

A popular statement: “I really want and prefer to buy a Mac, but I need a Windows machine since that is what we use at work.” The lack of Windows compatibility has been an insurmountable hurdle for Apple for decades even though significant demand for its machines exist.

Apple has certainly recovered since the days of old with market share currently estimated well above 5%. While still miniscule, Apple has delivered substantial progress. The bright side of the matter is the enormous room for potential growth from seizing share from the Windows PC makers- Dell et al.

In one aspect, the Mac’s ability to install and run Windows OS makes them no different than Dell (DELL), HP (HPQ), Gateway (GTW), etc.; there is little difference among those traditional PC devices. In essence, installing Windows on a Mac means that there are no longer grounds for consumers to eliminate Macs as a products choice on that reason. Thus, a consumer could just as well buy a Dell or Gateway or Mac. Think about it. The primary factor keeping buyers from purchasing a Mac for decades has been overcome. Plus, if that barrier hadn’t existed we know that Mac sales would have been significantly higher. The bottom line: pent-up Mac demand can come to fruition now.

Given that Macs now compete with Dells and HPs as product choice in buying a PC, Macs retain an edge. Macs provide all of the functionality as other PCs, yet the Mac OS serves as a bonus, if you will. Why would someone choose a Dell or Gateway when that can buy a Mac, and not lose Windows functionality, yet gain all the benefits of Mac OS? I think that is a very central question. Especially since Mac prices have become more competitive.

Despite the lack of publicity I think this is huge. We know that there are a significant number of consumers who would prefer to buy a Mac but can’t get past the Windows issue. Now that this is no longer an issue, how many Macs can Apple sell? I can envision some individuals buying a Mac to solely run Windows just because they prefer the aesthetics of Mac’s design.

We have seen a dramatic increase in Mac sales and market share, yet I perceive the general consumer is unaware of the Windows capability. I am confident that when a more aggressive publicity campaign occurs, Mac sales will react robustly. I think that it’s the PC savvy segment, aware of Bootcamp that has been snatching up Macs recently, not entirely the normal, less aware consumer. Just from anecdotal evidence, people I have surveyed exhibit little awareness. Eventually that will change with time, and the impact on Apple’s revenues will be much greater than the iPhone or iPod.

Running dual OS on a single machine allows the Windows to Mac OS migration process much easier. Previously, it has been either one or the other. Moving to Mac OS means turning off the light on Windows. That’s a very difficult process and extremely risky. Any migration works best under a dual, parallel operating environment since it doesn’t require choosing one over the other. Particular tasks can still be handled in the Windows environment if the Mac OS proves to be unsatisfactory. Apple experienced much difficulty in persuading users to abandon Windows for a Mac, now that is no longer an issue.

It seems that the only benefit in using Windows is the fact that nearly everyone else uses it too. It’s unstable, crashes frequently and susceptible to a host of viruses. That’s the antithesis of the Mac. Granted there is much more software available to Windows, that will surely change as Mac OS gains acceptance. As more and more software is developed for Mac OS, adoption will follow suit. And as Mac share has been increasing, we have witnessed already increased interest from software developers.

It’s not unreasonable to predict that Apple can progress to 10% share soon. Especially given the “Halo Effect.” Sales of iPhones and iPods will drive consumer interest in Mac computers, and when consumers become more aware of the Windows capability I believe market share can easily reach 30%. It’s not unrealistic to think that Macs could capture even more share. Why not? Apple’s iPod has 70-80% share, and why would a consumer purchase a Dell over a Mac? Price is the only reason that I can think, but for a higher price, the consumer receives more. I know I will never buy a traditional PC again.

Comments

[Tom B:]

Exactly right. Whenever Users go to the IT "department of "No"., they are told that there is some dumb little program they MUST use and, tsk, tsk, it only runs on Windows. Funny how that works. Boot camp, (and Parallels and such) removes that arguement.

MSFT has a bigger problem than many people realize. Their OS is 15-20 years out of date. Windows is basically a hacked together update of VMS; the tech savvy have all moved to UNIX-- whether OSX, which is based on BSD UNIX, or one of the varieties of LINUX. The consequence is that Windows is slow, unstable, multitasks poorly, and will never have rock-solid security (And the Windows development tools are pretty primitive, as well). Yet, we demand more and more FROM our computers. MSFT can't just sit down and rewrite Windows from the ground up; it took them 5 years just to add eye-candy to XP and rebrand it as Vista. To do a full re-write of Windows would tie up all of MSFT's resources for years.

2007 Sep 20 08:53 AM

[Jon T:]

And don't forget VMware Fusion. Some say it's faster even than Parallels...

There is also plenty of evidence out there that users who switch soon leave Windows behind entirely.

2007 Sep 20 09:25 AM

[Werlingdervish:]

I think Leopard may be critical. When it becomes as easy to start up in Windows XP as in the Mac OS we will see your observation happen among consumers.

As a Mac Owner since 1984 I have been uninterested in Windows except as a necessary comparison for timely investing in Apple. Despite the ease with which young people and Apple techies take up Boot camp and Parallels, I found that trying them out was still very un-Mac like and difficult even for someone older like myself.

Also I think that both the average consumer and Apple staffers realize that being a switcher is still difficult--remember that using windows on a Mac is as difficult if not more so than using it pre-installed on a new Dell. Also, why switch now when one will have to relearn OSX's Leopard version in a month.

Apple is wise to wait the release of Leopard before pushing another switcher ad campaign. Leopard on iMac will be in perfect time for Christmas sales for the average consumer at Best Buy etc.

Apple's iPhone TV ad agency can then show just how easy it is to switch. If so, consumers will be licking their chops to get a shiney new iMac just as they where when they saw the iPhone commercials.

The bottom line for Apple is still to convey the ease of use and NOW the ease of switching. There are a lot of people holding on to old PC boxes waiting for something better from Vista, but they will actually find it happening on Apple's iMac with Leopard.

2007 Sep 20 11:16 AM

[Philip Wing:]

I've been using Macintosh Windows emulation environments for years. I jokingly referred to my 25 MHz LC III as "The World's Slowest Windows Machine", until I saw 10 MHz 286 machines trying to run Windows (which was about as fast as the LC III emulation). With the Apple //e card, I could actually run three very different operating systems on the one machine. For ideas on working around at least one IT department, take a look for my upcoming website at www.macsinprimerica.in.../ .

2007 Sep 20 05:07 PM

[yet another...:]

Absolutely. The switch to Intel (and Boot Camp and other ways to run Windows--natively) is probably the biggest driver of earnings growth right now, and it gets very little attention. And it's very synnergistic with the halo effect and the retail stores. Remove the #1 impediment and let the retail and ipod experiences run full throttle. Plus there's a lot more profit in a mac than an ipod and plenty of room to grow when your share is in single digits.

2007 Sep 21 06:49 AM

[MacRand:]

Excellent analysis!
Add the reverse - a Mac User (Apple PowerBook w/IBM CPU) who needs Windows capability can now buy a new Intel MacBookPRO instead of a Dell or HP laptop just to run that one kickass Windows program (MS Streets & Trips with GPS Antennae) unavailable using Apple OS X.
MS Virtual PC emulation software for Apple OS X ran way too slowly on a older PowerBook laptop to keep up with real-time PC GPS mapping software so the choice of buying a PC (ugh!) or a new Intel Mac was a no brainer.
Since 1990 I've been a Mac User diehard, and you're right - sometimes we all need to run Windows. Therefore, an Intel Mac's dual OS capability keeps a Mac User happy and avoids the need to purchase a PC only machine.
More that "Once you go Mac, you'll never go Back...to PC" has become "Mac Users have it all -- Apple OS X, MS Vista/Windows XP, or Linux OS, -- capable of booting to any OS on one Intel-Apple computer.
So, who needs a PC anymore?"
Not me, a happy Mac User.

2007 Sep 22 02:20 PM

[Sue Young:]

I fully endorse the needs and opportunity that easy compatibility for macs with a PC world represent. I would also put forward a plea for more support available to mac users in a PC world and how they can tap into this.

I am a fully signed up and passionate Mac user of over 20 years I am also having to survive as a mac user in a PC dominated workplace. I joined the management consultancy I currently work for about 3 and a half years ago. Having been an independent consultant for 15 years the transition to this has had its challenges in more than one way!

I was determined to retain my mac which I have my life on and in many ways this has been well possible. I have a macbook pro of just over a year old and it easily picks up our server and finds and is able to use all printers on the network automatically without any complicated set-up process. I would say I have less networking problems than my PC colleagues. However I do have frustrations, not least the allergic response of our IT support people to when I do have any networking problems. "Oh, it must be a mac thing..." even when I know from my limited technical knowledge it probably isn't. As a result I am running an older version of Microsoft Exchange on my laptop than my colleagues with more restricted functionality, and am facing the issue of pressure to take up a Blackberry as most of my colleagues do, where I have my eyes on the iphone!

I may have to take up the Blackberry as I cannot face the hassle of trying to find out how I can set it up so I can get 'push' e mail coming through from our PC based Exchange Server, although I know this is possible. I am sure there are many people in my situation in organisations, where I sometimes feel like I am a covert radical having to survive in a PC world, in more than one way!

I am relieved that Apple recognise this as a potential barrier to increase in their market share and are taking some steps to better enable easier integration but I fear still underestimate how big a barrier it is for many in reality. I am having to take on responsiblity and active problem solving approach in an area where many newcomers to the mac would just say "No" to the hassle.

It is only due to the fact that I am a long standing convert to the user friendliness and creativity I have found the mac has brought to my life, that I have not given in to the easier (and cheaper) route which would mean I allow my consultancy to provide me with a PC laptop and provide me with full technical support - or at least the ability to say, "not my problem, sort it out..".

Does any such thing exist as a forum or source of support for Mac users in a similarly frustrating situation? I would be grateful if anyone can point me at resources that might be of help!

2008 Oct 19 06:09 AM