| Home > Technology > Apple and "falling" market share - meaningful benchmark or an example of "fear of falling"? |
| Apple and "falling" market share - meaningful benchmark or an example of "fear of falling"? | | Date Created: 02 Nov, 2004, 05:03 AM |
 I keep reading that the Macintosh market share is falling while the iPod's is creeping off the chart, heading skywards (Hold on to that visual 'cos we'll come back to it soon).
Market share relies on estimates of sales of new machines per financial quarter, rather than installed user base. If Apple's market share falls from 2.5% to 1.8% does this means that there are less Macs in the world now?
No, of course not - there are likely more since - d'oh - Apple keeps making and selling Macs, and opening more Apple Stores. On the other hand, I wonder how many Mom and Pop stores, or online stores are closing as Apple opens more of its own stores.
Now knowing that Mac users tend to keep their computers for a long time in working condition what else can be said about this "falling market share"? Which some seem to use as a predictor that - yet, again - the Mac is on its last legs.
Is market share the best or only benchmark by which to judge a high tech company, even one whose products are aimed at domestic, educational and professional markets?
Steve Jobs has been quoted as asking Wall Street analysts to monitor Apple's profits not just market share as a measure of its health.
Others, like Gartner/Dataquest analysts Ranjit Atwal, a PC expert, and Adrian O'Connell, a server market specialist, last year suggested Apple's falling market share was not yet a concern given Apple's presence in education and specialist markets.
The concept of something falling is of course a basic concern for human beings. We have an innate fear of falling, and the concept of something falling can cause us to irrationally evaluate the information available to us.
Market share by definition is a comparative ratio. If Apple's market share is falling, it can also mean its rate of growth as a platform is falling behind the penetration of other platforms, predominantly Windows. In other words, sales of Wintel PCs are proportionally outrating that of Macs.
Does that mean the sky is falling? Maybe. But maybe not, if what are being sold are very cheap Windows boxes to parts of Asia, Africa and the Middle East where Macs have very little presence, despite being manufactured in Asia.
If this is the principle area of growth - or put it another way - a principal area where Apple has failed to make inroads as much as the Wintel brands, how badly does this reflect on Apple's survival in the US, the EEC, Japan, Australasia, and the UK?
Not much, I think.
It's very clear Apple is not interested in 3, 4 or $500 boxes of low quality components. It does what it does better than any other computer maker. It leads, others follow. This has been the pattern now for twenty years, and especially so in the period since Steve Jobs official return as iCEO.
So should the concept of falling continue to frighten the market place? Depends how you interpret falling.
Let me offer you an aviation metaphor.
If you've seen my other blogs, you'll know I work with fearful flyers in my psychology practice. Take off and turbulence are two domains of flying that frequently get mentioned in initial assessments as worrisome to fearful flyers.
Take off because this marks the transition from being earthbound to flying, it is a period of peak engine power and noise, it is accompanied by physical sensations related to the perception of acceleration, and the "safety" of being at home is left behind.
These are some of the concerns frequently mentioned to me.
As many of you who regularly fly know, often soon after takeoff, power is reduced to climb power, and accompanied by a reduction in the climb angle by a few degrees.
This can be experienced as a deceleration leading to a falling sensation. In fact we're still climbing and accelerating, gathering altitude and speed, except the rate of both is less than that at takeoff. So those susceptible to deceleration effects and who only know that reduction of engine noise is associated with descent put these factors together and decide: "The plane's falling! We're going to crash!"
In a few moments, once the aircraft has cleared noise abatement areas near populated zones, and exceeded 10,000 feet (below which airspeeds are restricted), acceleration usually occurrs once more as the plane quickly climbs to initial cruise altitude.
It takes some time and patience to explain this phenomenon to fearful flyers, but eventually most "get it".
Falling market share is but one "sensation" analysts need to consider before writing off a company. Like the aircraft taking off, there are other indicators of performance, and pilots spend their early careers learning to trust their flight instruments rather than their perceptual systems, ie, their eyes, ears, and tactile senses.
They know how easily these can be fooled and that a scanning of all the measures (flight instruments) is what's needed to know where their aircraft is at any specific moment. Most of all they want altitude and speed. In Apple's case, respectively, this equates to its cash reserves and its fundamental ability to remain innovative and competitive.
Like I have blogged earlier, safety is another factor when you choose your airline. Can you imagine an airline that had a safety record of breaches like certain operating systems in common usage? It's a risky expensive business.
Now if the Cruise/Hoffman film, "Rain Man" were to substitute safest computers for safest airline, can you imagine what the conversation between Raymond and Charlie would be? Here's the original script:
Charlie : Ray, all airlines have crashed at one time or another, that doesn't mean that they are not safe.
Raymond : QANTAS. QANTAS never crashed.
Charlie : QANTAS?
Raymond : Never crashed.
Charlie : Oh that's gonna do me a lot of good because QANTAS doesn't fly to Los Angeles out of Cincinnati, you have to get to Melbourne! Melbourne, Australia in order to get the plane that flies to Los Angeles.
Actually, a remake would change it to "Never had a fatality".
Anyway, this was the greatest freebie marketing effort ever seen in the media, giving QANTAS enormous publicity. If only consumers and IT departments would give computer safety its just due, then perhaps Apple's market share would show an increase.
My prediction is: the halo effect from the iPod mania, and the arrival of the iMac G5 and cheaper iBooks will soon slow the market share deceleration currently occurring for Apple. But I expect market share to slide further first, while Apple profits continues to increase. For the reasons I have cited above.
So, no, the sky isn't falling because market share is... industry analysts need to look at many more benchmarks for business performance than just one.
Otherwise, like Larry Walters who tied helium balloons to his lawn chair for a flight above Los Angeles, they are just flying by the seat of their pants. |
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