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The Honolulu Advertiser

Posted on: Sunday, July 20, 2003

Ads haven't boosted Apple market share

By Jon Fortt
Knight Ridder News Service

Ala Moana Apple store assistant manager Donovan Canon shows off one of the popular and comparatively inexpensive iBook laptop computers. Apple reports that half of those who purchase in the company's retail stores are new users of Macintosh computers.

Advertiser library photo

SAN JOSE, Calif. — It has been a year, and the masses aren't switching to Macs.

Last summer, Apple Computer began airing the TV commercials that were supposed to chip away at Microsoft's empire and sell more of its underdog Mac computers. There was the girl who switched to a Mac after her Windows computer ate her homework, the daughter who used her Apple laptop to rescue digital photos on Christmas.

With a year's worth of sales numbers under their belts, three major market research firms show roughly the same thing — Cupertino-based Apple is holding its ground, but the only PC company attracting a lot of switchers is Dell Computer.

The numbers should give the Dell dude something to cheer about. Research firms Gartner Dataquest and IDC show Dell climbing from about 15 percent of the worldwide PC market last summer to 17 percent this spring. Hewlett-Packard was a close second with about 16 percent. Apple stayed between 2 percent and 3 percent. Overall, manufacturers shipped about 133 million PCs in 2002.

"The big deal with Dell has been to gain share. That's been the Dell strategy for some time," Dell spokesman Dwayne Cox said.

According to NPD Techworld, in the U.S. consumer market Round Rock, Texas-based Dell jumped from 30 percent a year ago to 37 percent in May, while Apple hovered between 3 percent and 4 percent.

There are other signs that the numbers are not shifting in Apple's favor. Subscriptions to Macworld, a major magazine for Apple followers, are unchanged at 400,000 compared with last year. Also, Apple said last week that it sold fewer computers this spring than it did a year ago, though it brought in more money because more of those computers were high-end laptops.

Apple said its profit in the quarter ended June 28 fell to $19 million, or 5 cents a share, from $32 million, or 9 cents, a year ago. Sales rose 8.1 percent from $1.43 billion to $1.55 billion, their highest level in 11 quarters.

The results of the switcher campaign so far underscore Apple's odd status in the computing industry. Though its image is widely seen as cooler and smarter than its peers, that doesn't always help the company outsell its rivals.

"It's not likely that Apple can do anything to change the structure of the industry," said Steve Baker, analyst at NPD Techworld. "For them to get to 5 or 8 percent market share doesn't seem like something that can happen, given the way the business is going right now."

Windows PCs dominate large businesses, and Apple has little influence there. In the small- and medium-size-business market, customers often buy generic "white box" computers. "Basically, what you end up with is consumers, and some specific professional groups who demand a name-brand product with some specific features," Baker said.

The trend toward standardization is hurting Apple where it traditionally has been stronger — in schools, where information-technology workers are increasingly deciding what computers to buy, despite the protest of Mac-loyal teachers. When Quality Education Data surveyed school districts last fall, 54 percent said their schools used some Macs, while 91 percent said their schools used some Windows PCs. The number of Macs was lower than the year before.

"Apple's market share is declining steadily," said Jeanne Hayes, QED president. "Dell is definitely the leader now both in installed base and in share, because they've moved into the server business as well."

Despite the losses, Hayes said there is hope for Apple to regain its position in education.

"Apple could certainly come back in far less than five years — there's still strong support for them," Hayes said. She related how angry teachers from Minnesota and Wisconsin told her several months ago that they didn't appreciate being forced to switch away from Apple. "A lot of them feel, especially in elementary grades, that they are missing out on something that is very useful for kids."

Chief financial officer Fred Anderson said Apple gained ground in the education market last quarter. Also, pre-orders are strong for its new Power Mac G5 computer.

Outside of the worldwide PC market-share game, some things are looking up for Apple. The iTunes Music Store, Apple's download-only venture, sold 5 million songs last quarter and was close to break-even financial performance. Also, Apple sold 304,000 iPod music players in the quarter, making it Apple's most popular piece of hardware for the quarter, eclipsing even the iMac.

Apple says surveys show half of the people buying Macs from its stores don't own one already.