updated 03:05 pm EST, Thu November 17, 2005
\'iPod halo effect\'
Apple's small rise in marketshare over the past few years may be more about ratios and numbers than due to the "halo effect." A new study on Apple's Mac marketshare, saying that the often-touted halo effect may be a "misguided" theory at best, according to a report by Roger L. Kay, founder and president of Endpoint Technologies Associates. The report, issued late late Wednesday, contends that Apple's recent rise from 1.8 percent market share worldwide to 2.5 percent in the second quarter had more to do with how far Apple had fallen rather than any "belated halo cast by the iPod." The report notes that Apple's market share has fallen slightly in the third quarter to 2.4 percent, which bolsters arguments by those who question the iPod halo effect.
"No Sherman's march to the sea here," said Kay. "The argument against the halo effect says that while Apple's shipments have been up for the past four quarters, it is because they are coming off historic lows. And we are now in an upgrade cycle in which the Apple faithful buy new systems."
"Apple's share has risen from 1.8 percent in 3Q04 pretty steadily, albeit in baby steps, up to a high of 2.5 percent in 2Q05. It is not easy to determine whether this rise is due to a halo effect or just represents the normal cyclical of Apple users upgrading, which they do every few years," Kay said.
Apple's position remains below where it was from 1997 through the middle of 2002, and Kay said that it is in this "unenviable" position due to the fact that "its products have become increasingly less competitively priced and have lost their advantage over PCs in features and functions."
While Apple's rise in the market is real, the report says that the halo effect is illusionary at best. It also said that Apple's future is more clouded that many think, especially after the recent rejection of Mac OS X as the primary operating system for MIT's $100 laptop project.
"From the overall market's point of view, [the halo argument is] a tempest in a teapot," said Mr. Kay. "I believe the company continues to make suboptimal strategic decisions, even as its marketing and short-term tactical execution are astounding. What will trip it up again are the standards and pricing issues." [updated]