Long shot? Apple's could grow Mac share to 20%

Lower prices, free OS upgrades give Apple opportunity to steal share from Windows as buyers see personal computer as investment, analyst contends

Apple has a shot at growing the Mac's share of all personal computers even as total shipments of desktops and notebooks continue to contract, an analyst argued today.

"The Mac is a growth story," said Ben Bajarin of Creative Strategies in an interview. "Mac has outgrown the total PC market in 29 of the last 30 quarters, and I see that continuing."

Yesterday, Apple said it had sold 4.6 million Macs in the quarter that ended Sept. 30, a 7.1% decline from the same period a year ago. According to estimates from researchers IDC and Gartner, global PC shipments fell 7.6% or 8.6%, respectively. The one quarter of the last 30 that Apple didn't beat the industry average was the final in 2012, when Mac sales contracted 22% -- while the PC business declined just 6% -- after Apple uncharacteristically announced new iMacs but then didn't have any to sell for nearly two months.

Even with the decline in sales, Bajarin was bullish on the Mac's chances of making inroads on Windows PCs and growing its share.

"The PC still plays a fundamental role in consumer computing," said Bajarin. "There will be 300 million personal computers sold this year." And as the business contracts -- as consumers buy fewer personal computers and wait longer before buying replacement systems -- the Mac has some important advantages.

He ticked off several, including the tight integration between hardware, software and services that Apple's known for; Mac notebooks' better-than-the-industry-average battery life; and their new, lower prices.

"And they've strengthened their story with the announcement that all future OS upgrades will be free," Bajarin said, referring to last week's declaration that OS X Mavericks can be downloaded and installed free of charge on Macs up to six years old.

Yesterday, Peter Oppenheimer, Apple's chief financial officer, confirmed that all OS X upgrades, not just Mavericks, will be free. "We're also making Mavericks and future OS X upgrades ... free to our Mac customers," Oppenheimer said.

Mac prices have been falling, a signal that Apple sees an opportunity, Bajarin noted. Since the start of 2013, the price of the 13-in. MacBook Pro with a Retina screen, one of Apple's bestselling notebooks, has dropped $400, or 24%. That model now lists at $1,299.

The Mac's ASP, for "average selling price," has slid as well. In the third quarter, the line's ASP was $1,230, the lowest since the second quarter of 2012, before the introduction of the Retina-equipped MacBook Pro.

While that is almost double the current ASP of touch-enabled Windows PCs, Bajarin argued that the total cost of ownership of a Mac may be similar to a Windows PC, what with the free OS upgrades to all and the iWork productivity suite free to new buyers. "I think consumers are savvy to this idea," he said.

And increasingly, those still buying personal computers see them as an investment because they know that they'll keep them longer, and are thus willing to pay more to get more. There the Mac has an advantage, not only because of the free operating system upgrades, but also because of the machines' top-of-the-line construction quality. "Looking at these devices as investments strengthens the case for a Mac," Bajarin said.

The Mac ASP, or 'average selling price,' fell to $1,230 in the third quarter, $114 lower than a year ago. (Data: Apple.)

In the third quarter, Macs accounted for about 6% of all personal computer shipments if IDC's 81.6 million global estimate was accurate. In some countries, like the U.S., the Mac's share was double that, or 12%.

"If Apple can increase its share to 20%, gaining share at the expense of other PCs, it would mean 15 million [in unit shipments] a quarter," said Bajarin. That would put it at the top of the world's personal computer sellers.

Revenue from a share increase of that magnitude -- over $15 billion a quarter -- would rival that of the iPhone, Apple's biggest money maker.

"The Mac could tell an interesting growth story at a time where the trend of the PC is down," said Bajarin.

Apple sees the opportunity, he said, ticking off the company's shift to lower prices even as component costs climb, as they undoubtedly did for the newest MacBook Pro models, which dropped 9% to 13% in price even as they added the more expensive Intel Core processor known as "Haswell."

"I think they're deeply aware, and they know that there is this opportunity," said Bajarin, who speculated that the long game -- a year, perhaps two -- could play to Apple's advantage.

In addition, Tim Cook, Apple's CEO, has recently rejected the idea that Apple is downplaying the Mac, and instead has reaffirmed the company's commitment to personal computers.

"Our competition is different. They're confused. They chased after netbooks. Now they're trying to make tablets into PCs, and PCs into tablets," Cook said last week before Apple unveiled new iPads and refreshed Mac notebooks. "[But] we have a very clear direction and a very ambitious goal. We still believe deeply in this category [of traditional notebooks] and we're not slowing down on our innovation."

To further its ambitions, Apple may refuse to do what many have predicted: Add a Retina-quality display to its lower-priced MacBook Air ultra-light notebooks. Instead, Bajarin theorized, Apple could keep the Air as a lower-resolution laptop to save costs.

"The question is, do they move the Air to Retina or drop the price of the Air?" Bajarin asked. If the latter, Apple could lower the price of the MacBook Air, especially the bottom-end 11-in. model, which now costs $999, to make it a more affordable entry-level notebook with battery longevity that almost matches a tablet.

"Is there still a market for first-time PC owners?" Bajarin asked, then answered his own question. "Yes. Over time, those with smartphones and tablets might graduate to some kind of personal computer, a more heavy-lifting computing device. That's the bull case for the personal computer."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

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