IDC VP Roger Kay sees no evidence of Apple ‘iPod Halo Effect’ based on ‘Apple’s desktop share’

“This is Apple’s big week. The company kicks off its biannual Macworld conference in San Francisco today, with CEO Steve Jobs scheduled to give his widely covered keynote address on Tuesday. On Wednesday, Apple will report its first-quarter earnings, which include the holiday season. It’s expected to be the company’s strongest quarter ever,” Eric Hellweg reports for CNN/Money. “Analysts expect sales of Apple’s groundbreaking iPod device to come in between 4.5 million and 5 million units for the quarter, up from 2 million the previous quarter. And the consensus earnings estimate has risen to 48 cents per share.”

Hellweg reports, “…Coupled with the holiday season earnings report is the rumor that Jobs will introduce a less expensive, flash-memory-based iPod and a sub-$500 iMac. Both announcements, if they pan out, would be boons for the company and its investors, as they should allow Apple to preserve its high profit margins and finally usher in the “halo effect” everyone’s talking about.”

“As to the halo effect — the belief that the rocket-fueled growth of iPod sales would spur users to buy a more margin-rich Apple computer — it’s a nice theory,” Hellweg reports. But so far, that hasn’t happened, according to IDC vice president Roger Kay. “‘I have sifted through the numbers, and there’s no evidence of [a halo effect],’ he says. ‘The iPod is two years old, and Apple’s desktop share has been absolutely flat for that period. I would applaud Apple’s introducing a sub-$500 computer. It would address the company’s one glaring weakness in its computer line — nothing on the low end.'”

Hellweg reports, “For the much-heralded halo effect to occur, Apple needs to make it easier for goo-goo-eyed iPod consumers to make impulse computer purchases. A Mac that’s almost as cheap as a Hewlett-Packard PC but that makes it easier to manipulate music and videos might be the long-awaited incentive that consumers need to switch to an Apple computer.”

Full article here.

MacDailyNews Take: To properly measure the “iPod Halo Effect,” one wouldn’t use market share numbers because such numbers would be meaningless. You’d look to see if Apple’s Mac unit sales had increased and, if they had, you’d look to see if Windows iPod owners bought those extra Macs because of their positive experiences with their Apple iPods. Apple’s iPod could help sell more Macs, but if other PC makers’ unit sales also increased as much as or more during the same time period, you would not see any “iPod Halo Effect” by looking at Kay’s “Apple’s desktop share” numbers. To top it all off, everyone knows that people buying more laptops than ever before, so why does Kay exclude iBook and PowerBook share numbers anyway, even though they wouldn’t matter? You’d think that IDC vice president Roger Kay would know better, wouldn’t you? You’re sifting through the wrong numbers there, Rog.

We do know some useful numbers, though. Apple last quarterly earning report, issued on October 13, 2004, showed that they had shipped 836,000 Macintosh units representing a 6 percent increase in CPU units over the year-ago quarter. On November 22, 2004, we reported that Piper Jaffray said that in a survey of 200 users, 6% were former PC users who have purchased a Macintosh after buying an iPod, while 7% were former PC users who plan to buy a Macintosh within 12 months. So, the “much-heralded iPod Halo Effect” really is much more than “a nice theory” and there is actually compelling evidence that it began generating Mac unit sales a quarter or more ago.

Related MacDailyNews articles:
Analyst: With growing Mac market share, Apple has to start acting like a grown-up company – December 27, 2004
Survey: 13% of iPod owners have switched, plan to switch to Mac from Windows within 12 months – November 22, 2004
Mac market share primed to explode? If not now, when? – September 25, 2004
Apple smashes earnings estimates: posts net profit of $106 million on $2.35 billion revenue – October 13, 2004

18 Comments

  1. Just like any analyst, uses numbers that ar eactually unequated with the point their trying to make. His argument doesnt hold water. As long as Apple sales of systems continue to stay or increase the company will be around forever. No bad rumor of a new product that Apple charges more for than rumored (iPod mini) will kill Apple or even Apple sales. Honestly the only things that would keep me from buying Apples for the rest of my life are…

    1) Steve closes the company, buys back all machines in circulation and burns them in effigy

    or

    2) Steve descided to use Windows in all new Macs.

  2. Even taking into account increased mac sales, market share might not budge at all. For apple’s market share to increase they have to sell macs at a rate greater than the general growth of the computer industry. I would think, however, that for someone’s 2nd or 3rd computer they’d be more likely to consider a mac, and that as the market becomes saturated, we will see apple’s share of the pie increase.

  3. Slight misrepresentation: While you do accurately argue that the Halo effect should be measured based upon the number of Macs sold to former Windows users, and not through market share, you overly deligitimize the importance of market share. If there is a 6% increase in units sold while PC’s had a 50% increase, and thus the market share plummeted, while there might be more Windows users switching, then many Mac users are also switching to Windows. So I think you do need to take market share into account and look beyond simply how many converts are arriving to how many people are actually retaining their Macs.

  4. Market share numbers are meaningless unless you can separate out the consumer market. Business purchases dominate any calculation of market share and thus the consumer switcher is buried in the noise.

  5. People will not just dump their PCs right away to buy a new Mac. The Halo effect will grow over the next 2-3 years as people upgrade their computers. Patience is a virtue and it will pay off in the long run.

  6. Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing
    Marketing, Marketing, Marketing, Marketing

    Developers, Delevolers, Developers, Developers!
    Developers, Delevolers, Developers, Developers!

    Developers, Delevolers, Developers, Developers!

    Developers, Delevolers, Developers, Developers!

    Developers, Delevolers, Developers, Developers!

    Developers, Delevolers, Developers, Developers!

    Developers, Delevolers, Developers, Developers!

  7. Slight misrepresentation: While you do accurately argue that the Halo effect should be measured based upon the number of Macs sold to former Windows users, and not through market share, you overly deligitimize the importance of market share. If there is a 6% increase in units sold while PC’s had a 50% increase, and thus the market share plummeted, while there might be more Windows users switching, then many Mac users are also switching to Windows. So I think you do need to take market share into account and look beyond simply how many converts are arriving to how many people are actually retaining their Macs.

    The only problem with marketshare and how it affects the consumer market is not so straightforward. Michael Dell said in an interview last year that 80% of the Dell PCs sold in the world go to the enterprise/business market (that’s about 80% = 13% of their overall 16% marketshare, leaving their consumer share of the market at around 3%). With IT managers keeping tight reins on private use on business computers, I doubt you’ll see too many people downloading music off iTMS (or Napster, etc…) at work, unless they’re looking to get fired or something.

  8. There’s no doubt that Apple would be selling more computers than ever before if they could manage demand and get decent supply.

    886K macs in the last quarter represents a big deal considering that the G5 iMac was on hold and that the 2.5 GHz G5’s were constrained.

    I truly hope that Apple shipped over 1 million computers over the Xmas period. Hopefully it will be 1.2 million if we’re lucky.

    With numbers like that and the ipod continuing to sell like hotcakes, I believe that these naysayers will start to eat their words.

  9. If there is a 6% increase in units sold while PC’s had a 50% increase, and thus the market share plummeted, while there might be more Windows users switching, then many Mac users are also switching to Windows.

    I don’t see how you can make the conclusion that Mac users are switching to Windows with those numbers. Mac users tend to stick to their Macs for much longer periods (we still have older iMacs and B&W G3s as well as some beige G3s) and don’t upgrade as frequently as PC users do. If anything, they’re not actively switching to Windows, they’re just more prudent about when they buy their next computer.

    As for market share, as someone else suggested, we should separate the consumer market from the enterprise market. Companies go for the cheaper boxes because they’re, well, cheaper, so the capital outlay is not as much as with a Mac. They don’t mind the upgrade cycle as much either because of tax deductibility.

    Home users will want to have a computer that they can use for a longer time. From my experience, people who are still using PCs are those who are clueless and don’t know much about computers at all, or those who just bought a PC and don’t want to junk their expensive machines just yet. Most of the ones who belong to the latter group are buying a Mac for their next machine. Funny thing: the PC repair people in my town have Macs for their personal use.

  10. No the dude didn’t mean 6 % people switching to Macs and 50 % switching to Windows. He meant that increase in sales of the relative systems.

    And he is right that if the rate of increase in PC sales is greater than Macs then the market share will go down.

    Apple won’t see much headway until businesses start taking up the mac. And unfortunately businesses are very slow to change their ways.

    If the headless mac does come out then maybe that will happen.

  11. I myself am a switcher because of iPod. I looked at the iPod a couple years back and thought to myself, “hey.. this is cool!” but it works with Macs only. So I went ahead and bought both – after my Compaq Presario crashed for the last time. No more crash. No more Windows for me (except when I need to do windows-only assignments.) So just by looking at my case here, I see two factors: iPod Halo effect, and Windows crashing. Go figure.

  12. How does it work out statistically if every POS windows system will be replaced in 2 years but Macs last longer?

    Lets say sales are:

    2002- 10 PCs (7 replacements, 3 new – 10 total users); 3 Macs (2 replacements, 1 new)

    2004 – 13 PCs (10 replacements, 3 new -13 total users); 3 macs (0 replacements, 3 new but now SIX TOTAL USERS)

    Ta-daaaaa! Apple Market share of new computer sales has gone down but user base percentage has gone up!!!!! I am not a mathematician and this is oversimplified but I am sure this give you an idea how this would work out.

    “There are three kinds of lies: lies, damned lies and statistics.”
    [Benjamin Disraeli (1804�1881), British statesman, author. Quoted by Mark Twain in his Autobiography, ch. 29, Mark Twain (1924)]

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.