“As Microsoft continues to waste time and resources figuring out how to win a sideline game it has already lost–Internet media–its shareholders have bigger things to worry about. Namely, the future of the Windows and Office cash cows,” Henry Blodget writes for Silicon Alley Insider.
Blodget writes, “It has been so long since Microsoft had anything real to worry about in these businesses that it’s easy to take their perpetual domination for granted. Don’t.”
Blodget reports, “SAI’s Dan Frommer recently noted a startling statistic: In personal computer sales in the US in Q2, Apple outgrew HP and Dell by a wide margin, continuing to regain market share it lost in the late 80s and early 90s. More surprisingly, Apple outgrew HP–the world’s largest PC vendor–on a unit basis as well:”
• Apple (AAPL) shipped 1.4 million computers in the US during Q2, representing 8.5% market share and 38% year-over-year growth. Mac shipments grew 9 times faster than the overall U.S. PC market (4.2%) in Q2.
MacDailyNews Note: Not 9 times, 20 times. You have to first remove Apple’s numbers from the PC market to make a proper comparison. (No, the PC market does not get to use Apple’s Mac numbers to prop up their faltering numbers.) The U.S. market as a whole (without Mac) in Q208 grew from 14,810 to 15,094 or approximately, or a paltry 1.9%. Mac grew from 1,011 to 1,397 or 38.2%. In other words: in Q208, Mac growth in the U.S. was more than twenty times (20x) that of the rest of the U.S. PC market. Contact:
• Q2 U.S. Mac sales grew by 386,000 computers year-over-year, handily beating no. 2 HP, which sold just 222,000 more computers in Q2 2008 (4.17 million total) than it did during Q2 2007 (3.94 million). Dell outsold HP and maintained its top U.S. market share; it shipped 5.25 million PCs last quarter, up 557,000 units/11.9% year-over-year, and representing 32% of the U.S. market. Meanwhile, HP (HPQ) maintained its no. 1 position worldwide
Blodget reports, “Looked at differently, the Big Three sold 1,165,000 more computers in the US in Q2 than they did last year…and Apple sold a third of these additional units. It is safe to say that the majority of these units won’t be running Windows. It’s also probably safe to say that most won’t be running Excel, Word, or Outlook, either.”
“Apple still has small market share (8.5% US, much less globally), so Microsoft is not going to fold up the tent overnight,” Blodget writes. “But at the rate Apple is gaining share, it won’t be long before Microsoft begins to feel a real bite. It is this threat, combined with the increasing attacks on its Office franchise, that Microsoft and its shareholders should really be worrying about.”
More in the full article here.
“There’s one more battle he wants to win. It has nothing to do with money, fame, or glory. Like all the best fights, this one is personal. Steve Jobs is going to best Bill Gates. This fight is Shakespearean, elemental, and emotional; watching it unfold should be the most fascinating business story of this young millennium,” Jeffrey S. Young and William L. Simon, co-authors of iCon Steve Jobs: The Greatest Second Act in the History of Business.
Guys, its nice to get excited about Apple succeeding, but lets not forget the biggest obstacle of all. Microsoft Monopoly in the business world. As long as that is allowed to exist, Apple can only get ahead by so much. Look how many Vista ( downgraded to XP ) were shipped/sold/moved/registered…. 180 Million. If they release another crappy OS, it will still ship/sell/move/register 200 Million the next time.
Microsoft’s real problem: Microsoft
Microsoft sold a version of Office for the Mac. Higher Mac sales means higher growth for Office in general. Microsoft makes a nice tidy sum on Office for Mac — that’s why they keep making it.
Blodget also asserts the old line that Microsoft once “saved” Apple buy becoming a shareholder.
Somehow, though, he still manages to read the writing on the wall and see that Microsoft is in trouble.
In the short term, Apple has already won the “cool” war.
I don’t think it is Apple’s strategy to “beat” Microsoft, if the metric is just sales. Basically, as the sole seller of Macs, Apple is structurally limited to no more than 20% or so of the market. But that still leaves a lot of room for growth.
On the other hand, iPhone is a whole new platform and it is clear that Apple intends to use it to redefine smartphones and own that market. The consequences of that are HUGE.
I doubt that most Macs won’t be running Office as the author claims. Office is still very important in the business world, and Pages simply isn’t able to translate Word docs completely.
That said, with no significantly different version of Windows being releAsed for several years if not a decade, Apple has a golden opportunity to take back a large amount of market share.
Micro$oft’s real problem: Steve Ballmer !!!!
Just for some perspective from an older person that followed all this history as it happened …
When Simon said that Steve Jobs wants to “win the battle” against Gates, it’s not about market domination or how many folks use Office. It *is* personal.
From the very beginning there were always two main, competing, computer visionaries Steve Jobs and Bill Gates. Steve had the better product, and was there “first” with most of the main innovations like mice, graphical interfaces, USB and a bunch of other things. Bill Gates, for some unknown reason, gets all the glory and is looked at as sort of the “father of the desktop computer” when in fact he never had a good idea in his life.
This pisses off Steve Jobs (rightly so) and has for years. He will not quit until he has “bested” Gates, and by that I mean when you read the history books in 2100 it will be Steve Jobs and Apple that you will be reading about, and it will be “Bill Who?” and “Micro-what?” if you mention anything else.
That’s what Steve Jobs wants before he bows out because he actually deserves it. He will get it too.
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and OUr solution
will be when Microsoft really FEELS the fear and starts to flail even more wildly and inefficiently, ruining (and failing to launch) their own products in ever more random ways like a bull in a china shop.
We’ve already seen their best. Heaven help us when they start cranking out the rest.
And long live Linux, so that there remains some semblance of competition for Apple in 10 years.
What will happen when Apples market share gets to, lets say 25%? Will they be forced to license their OS? Anyone with any views on this?
Jubei,
yes, but when Apple starts going into double figures and cloud computing becomes more widespread, Microsoft’s bottom line is going to start to hurt.
Nobody’s talking about overthrowing MS . . . not just yet.
When a company is completely dominant it looks impregnable; take IBM for example. Not many people thought ‘Big Blue’ would decline so rapidly.
I think MS is going to decline even faster than IBM did.
I hope Apple will one day return the favor and invest $150 million in MS.
The best fights are not personal. The best fights are lopsided blowouts starting with a sucker punch and ending with a sledge hammer to the face.
Billy Martin, Buddy Ryan and Mark Twain would all back me up on this. B-)
I posted you proper math on the article. Jst FYI though, it’s not Blodget’s math that’s faulty, they simply get the blame for not knowing basic math and checking well. SAI’s Dan Frommer is the one lacking basic math skills.
@Troy
You said, “What will happen when Apples market share gets to, lets say 25%? Will they be forced to license their OS?”
It is not illegal to have a monopoly. It is illegal to abuse it. Apple won’t get in trouble in your scenario for two reasons. 1) 25% market share is not a monopoly. 2) Apple uses open source and standard formats and protocols. They do not unfairly constrain competition. Apple doesn’t prevent anyone from making compatible hardware or interoperable software. Anyone can take the open-source code and build a company that competes with them.
People see the corporate secrecy and the vertical integration and think that Apple is something like the Borg, but it is not. Apple does nothing to prevent others from competing fairly.
@The Muffin Man
Nothing would make me happier. Still working with so many businesses, it seems impossible as MS is the standard, default deployment platform. Even if you have one CEO using a Mac, the rest gets the standard. One Mac license to 1000 Windows licenses.
In a way it’s meta-personal – for me it’s about ethics. I won’t get into Apples and ethics, but knowing what I do about Microsoft, I could not bring myself to purchase any of their products in the last 7 years and counting. I’ll admit, sometimes this is very difficult if not being naive and silly, to not use MS Office on my macbook pro. But I have taken my stance.
I have downloaded the free trial copy of iWork, and it didn’t work for me, sadly, and OpenOffice has been a difficult ride. One of these days, I may have to bite the bullet and purchase the iWork ’08 and not wait for ’09, $70 just for pages is still a decent bargain, maybe.
The Microsoft business franchise is MUCH more fragile than anyone realises..
Given the choice staff in every business would not choose Office or even Windows. The next item coming up on MDN demonstrates this point very well. The pilot at the Telegraph using Google apps rsulted in: “Overwhelmingly, the feedback was positive and there would have been uproar if we had said we were turning it off.” So, no more Office or Exchange at the Telegraph where the only IT feedback to staff was that their only feedback was that their exchange email boxes were full again…
Then look at the largest German newspaper group – Axel Springer – it switched entirely to Mac, 12,000 of them.
So, please don’t let anyone tell you that Microsoft has anything other a very tenuous, and increasingly so, grip on the business community. Just wait for the word from those who have switched to those that haven’t.
I don’t care what anyone says, but no-one will turn down a more productive and satisfying life…
iCon is a really good read for anyone facinated by Steve Jobs. Steve, I understand, did not like it. It shows him as a human being with flaws and strengths. It caused me to love him all the more. It is his courage that really stands out. That and the lessons he has learned along the way. Great book IMHO.
Microsoft only makes office for Mac because they have to in order to avoid more anti-trust monopoly suits. It has nothing to do with sales. That is only a some what pleasing side effect. They would rather not offer it in order to force people to Windows.
I agree with kirkgrey; microsoft’s problem is itself. It has a ton of $, talented personnel, windows and office have a lock on the industry. To many regular people, MS is computers and regular folk don’t know alternatives exist. MS is NOT going away anytime soon but as long as MS is run by bean-counters and marketers they’ll continue to focus on making $ and not as much on great products.
@addashofflair, ” may have to bite the bullet and purchase the iWork ’08 and not wait for ’09, $70 just for pages is still a decent bargain, maybe.”
It is, but you also get Keynote, (which I use often) and Numbers.
By default, I always take anything from Henry Blodgett with a grain of salt. Never forget that he was a failed novelist, a failed Wall Street analyst who cost investors millions in the dot-bomb scandall, whose actions have banned him from working on Wall Street for life. I have often found that his e-rag, Silicon Alley Insider, might be rife with conflicts of interest with hedge funds. And more often than not, I think the guy is a complete self-important twit. After all, he’s the chowderhead who unleashed Sarah Lacey on the world.
That said, I might be inclined to give Mr. Blodgett a nod here. Frankly, I find his points of interest. One might argue with the specifics of his metrics, but some trends are pretty clear. My takeaways:
1. The iPod Halo Effect is definitely working. Sometimes, it takes a while for a trend to manifest itself, but there’s little doubt that the iPod, especially when it went cross-platform, opened many people’s eyes to what Apple is about, and gave them cause to take a hard look at the Mac OS. Going to Intel processors and adding Boot Camp/Parallels capabilities didn’t hurt either. In fact, if you conducted a poll of new Apple customers, I think this might be a big factor.
2. Vista is a bomb. Just look at the negative impact it has had on sales. PCs are not selling the pace you might expect. Microsoft’s growth has flattened, and its stock has grown only 2 percent in the last several years. People are so turned off with Vista that they are either continuing to use the PCs that they have, or looking for a better alternative – the Mac. Once they fell in love with their iPod and iPhone, taking a hard look at the Mac was only a matter of time.
The lion still has its claws. We can expect a Microsoft backlash soon. But the giant battleship has definitely lost momentum, and it’s hard to stop and turn a battleship, especially when your opponent has a smaller but more nimble boat. And those guys in the boat might have a shoulder-fired missile that can punch a nasty hole in your hull.
What Jubei said above has a ring of truth. It will be hard to dislodge Microsoft from the business enterprise, and they have a faithful corps of developers and IT Nazis whose vested interest is in the status quo. They’ll resolutely sing the song that Apples are toys, and not real business tools. They’re wrong of course, but they are a large choir, like it or not. A question to ask is, does Apple seriously want to get into that business? Does it want to offer low-margin commoditized computers just to win market share? Does it want to play the WinTel enterprise game? It might not. That’s a business decision.
Then there is international sales. It’s a problem or an opportunity, depending on your point of view. Last week’s launch of the iPhone worldwide (with more countries to come) may be the dawn of Halo Effect 2, the iPhone addition. Like the iPod Halo effect, this might be the catalyst to increase Apple’s penetration in other countries and continents. But this will take some time. And the economies and cultures of other parts of the world may want a commoditized computer at a price lower than Apple wants to sell. Again, is this the business that Apple wants to be in?
Still, there is no doubt that Apple is doing great things. The company’s sales and market share continue to grow. It’s a sign that Apple has done many things well, and that Microsoft has stumbled badly. What Microsoft must do next is pretty clear. Whether they will is up to Microsoft. But what Apple must do is equally clear: the company must continue to execute and innovate. The past week’s stumble with MobileMe is something that must be addressed immediately. I think this is far worse than anything that happened at last Friday’s launch of the iPhone, and one that could leave a bad taste in the mouths of new and long-time Apple customers.
But I am an optimist. And despite what may be a strange short-term decline in Apple’s stock price in the next month (which will be completely at odds with Apple’s sales and earnings growth, which makes absolutely no sense, but that’s Wall Street and its twisted logic), in the long term, as long as Apple continues to execute, the company’s prospects will be amazing.
Revel in this time, fellow Apple fans. To look back 11 years ago, conventional wisdom would have dictated that what we see now would not have happened. The day that Steve Jobs returned to Apple is the day the earth moved. It just takes longer for some people to realize that. You do. They’re just starting to comprehend that we’re at an inflection point.
Dells move to compete is to sell in Walmart? Not really working.
I bet their next move is those Kiosks in the middle of Mall hallways. Those mini stores that we all tend to ignore.