Does Apple's Market Share Gain Really Matter?

Wednesday, Bryan Gardiner over at Wired noted Apple's recent market share gains reported by Net Applications (which personally, I don't put much stock in, since they are largely browser-based). But Bryan was also kind enough to also reference my recent article citing Wharton's study debunking of market share strategies (Thanks Bryan).

Here's a quick question that will demonstrate how little effect market share has: Think about the manufacturer of the most expensive product you own, which is probably your car. What market share does that manufacturer have? If you're like most people (i.e., not a marketing and technology geek like me), you probably have no idea; you bought the car because it met your needs. So why should products that let you drive on the internet be any different than those on the highway?

But forget cars and browers; anyone wanting to figure out Apple's influence has only to look at 1) how crowded the Apple (AAPL) stores were over the holidays, 2) how many white headphones they see in crowds, and 3) how many Apple laptops they see at conferences. This is a company making 14% net profits on revenues growing 40%+ a year, while competitors like HP and Dell are living on single-digit profit margins and much flatter growth. I predict we'll see Apple report fiscal Q1 earnings of more than $1.3 billion on $9.6 billion in revenues. And with a strong new product pipeline ahead, including a 3G iPhone, new Macs, and a host of new media services, 2008 is going to be a very good year for Apple -- regardless of what its market share numbers look like.

Disclosure: Auhtor is long AAPL.

Comments

[thinking ahead:]

We'll see. I hope you're right, but nothing lasts forever. On the flip side, I have never lost money on AAPL, and I've owned it off and on for many years. But they gotta keep those plates spinning . . .

2008 Jan 03 01:34 PM

[Iowa:]

I think you're right about Apple's likely growth in 2008, unless the economy suffers a significant contraction. Even then, I believe Apple will do much better than its rivals, since I think a much higher percentage of Apple's customer base will be able to spend on consumer goods.
However, market share is important. I have several programs that will not work on an Apple, because the programmers don't see enough potential sales. My nephew designs websites for companies, and he doesn't consider whether the Safari browser will have problems with his code. He considers it an insignificant share of the market. I'm ecstatic that Apple's market share of MP3 players is sky-high, and its shares of computers and smart phones are growing. I am happily long AAPL, but wish I had more.

2008 Jan 03 04:51 PM

[beech_35:]

Safari and Firefox are compliant with international standards. MSIE isn't. Whether or not you consider this a factor in designing websites, it's a bad idea to exclude any portion of your potential market. Considering Safari an "insignificant share of the market" is, to put it mildly, a shortsighted business decision.

Every successful internet retailer's website functions with Safari. Imagine what would happen if Amazon or Ebay consciously decided to make their websites compatible only with IE. If a website requires IE to function, I can't use it.

2008 Jan 03 05:04 PM

[MacManMaz:]

Up until this last year, it seemed that the only people that I knew considering buying a Mac computer were much younger than me, and most of them didn't have the cash. Thanks to MSFT, Vista has been a huge disappointment to all my generation as we embrace the digital media revolution and start buying and using digital music players, cameras, phones, and movie cameras. We are watching and sharing more digital content every day. Things have changed and we (my generation) are now ready to spend more money on a premium product that just does the job with minimal hassles.

Windows in all it's many versions just does not fill that need. Vista - the supposed multimedia monster that was going to swallow up the mac is a huge failure in that respect. The game has changed and the only team making any yardage is Apple.

2008 Jan 03 10:06 PM

[brewer:]

I look for iPhone to make huge inroads in software development that create benefits for OS X. IOW, you want to develop for iPhone, but to do that you use Apple's development tools. So, an OS X version is a no-brainer.

What has hurt Apple development the most if when developers use Microsoft development tools.

2008 Jan 04 11:36 AM

[tom1234:]

carl --i am a strong follower of your articles and found them right on point --do have a position on VMW with respect to the product and market pricing --

2008 Jan 04 11:53 AM

[David Lentz:]

MSFT grew in a virtually uninterrupted manner from 1990 to 2000, based on a dominance over very narrow range of products that were expanding into a global marketplace. AAPL has a much wider spectrum of opportunities and a track record of innovation and successful exploitation of thoise innovations that is unmatched (at least in my limited knowledge). I see no reason that AAPL cannot grow in a similar manner for at least a decade, from 2003 to 2013.

Not saying that they will -- only that it is certainly well within the range of possibilities.

Many people stayed out of MSFT during most of its run of growth, saying it was "too pricey" and waiting for the inevitable correction to buy into. Now they keep waiting for MSFT to grow again, but I fear their growth is behind them.

I think that once you have identified a rocket that is moving up strongly, it's best to buy in at a price (ref: Danny DeVito in Taxi) "that is not so high that one shivers and walks away, but is just high enough they they grit their teeth and sign the check."

That said, I'm watching the economy pretty closely, as a recession might be an excellent time to pick up some more AAPL at a discount. I think it has many years left to run.

2008 Jan 04 01:26 PM