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Windows 7 to Challenge Apple’s Emerging Success?

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SAN FRANCISCO (Reuters) – Apple Inc’s Mac computers have steadily gained market share over the years, a winning streak that may be tested by next week’s launch of Microsoft Corp’s new Windows 7 operating system.

Few expect the new software to dent Apple’s standing in the market in the long run, given the company’s premium position and the fact that its dedicated user base largely ignores events in the Windows universe.

However, some analysts warn that Windows 7 — which is garnering strong early reviews — may initially slow Apple’s advancement and apply more pressure on Mac prices, particularly in the United States.

Microsoft’s Vista operating system, released in early 2007, was plagued by problems and bad press. For Apple, this meant an opportunity that the company seized upon.

But if the new Microsoft offering works as expected, Apple may not be able to count on Windows’ clumsiness as a sales driver.

For its part, Apple expressed little concern about the new Windows.

“New Mac users continually tell us that they are tired of all the headaches with Windows, and they want the ease of use, stability and security of a Mac,” spokesman Bill Evans said. “At the end of the day Windows 7 is still just Windows.”

And some analysts argue that Windows 7 hype might end up helping Mac by enticing customers into stores and lifting overall computer sales amid the marketing hoopla.

“The Apple story is pretty idiosyncratic, company-specific, not really dependent on other parties,” said Broadpoint Amtech analyst Brian Marshall, citing research showing that Microsoft’s launches over the years have acted as catalysts for Mac sales.

Although its iPhone gets more press, Apple still derives the largest chunk of its sales from computers. Macs generated about 40 percent of the company’s revenue in the June quarter.

Marshall thinks Apple can double its share of the computer market over the next five to 10 years. Enderle Group principal analyst Rob Enderle agreed that the Windows 7 launch could end up boosting Mac sales.

“It could very well be a tide that lifts all boats,” he said. “Windows 7, with a lot of marketing dollars, is going to drive a lot of people into stores. The extra traffic could actually help Apple.”

But Enderle cautioned: “Windows 7 is good. It doesn’t have the problems Vista did, so gaining share gets a lot tougher.”


Although Apple is not among the top five PC makers globally, it ranks No. 4 in the United States, according to research group Gartner, with a market share of 8.7 percent. Three years ago, Apple’s U.S. share was 4.6 percent.

Apple sold 2.6 million Mac computers during the June quarter, up 4 percent from a year earlier.

Windows 7 comes on the heels of the release of Apple’s newest operating system, Snow Leopard, in August. Early sales of the $29 upgrade have been strong, analysts said.

Although Microsoft’s software drives more than 90 percent of the world’s PCs, Apple has managed to carve out a highly profitable slice of the market.

It charges a premium price for Macs, which attract loyal consumers willing to spend. In June, on a dollar basis, Apple accounted for an eye-popping 91 percent of PCs that cost more than $1,000 and were sold at retail in the United States, according to research group NPD.

High prices help Apple enjoy margins on Macs that analysts estimate at roughly twice the average for PC makers.

Prices on Windows-based PCs have been declining for years, a trend that seems to be accelerating with the new crop equipped with Windows 7.

Vendors such as Hewlett-Packard and Toshiba are rolling out thin and light, full-featured Windows notebook computers in the $500 range. By contrast, the cheapest Apple MacBook starts at $999.

NPD analyst Stephen Baker said a bigger near-term threat to Apple was tumbling prices on Windows PCs and the still-sour economy. He said the Microsoft-Mac rivalry was not the whole story.

“We always want to pit Windows and Apple against each other, and I’m not sure it’s that simple,” he said. “People are getting both, and they see a value to both.”

Roughly 12 percent of all U.S. computer-owning households own Apple, NPD said, up from 9 percent in 2008. Of that 12 percent, close to 85 percent also own a Windows PC.

Copyright 2009 Reuters. Click for restrictions.

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