updated 12:46 am EDT, Thu July 5, 2012
Factors include rising Mac popularity, declining PC sales
A new chart by Asymco analyst Horace Dediu has revealed that while PCs have always sold significantly better than Mac computers, the ratio of sales has dropped precipitously since its peak in 2004 and now stands at the most competitive range Apple has achieved since 1985. The figures paint a picture of two simultaneous factors at work: the increasing popularity of Macs, along with the decline of the traditional desktop (and mostly Windows-running) PC.
Even during the debut year of the Macintosh (1984), DOS machines (since Windows had yet to be created) outsold the stylish all-in-one by a factor of four times. That figure rose to an average of 15x during the 80s, though Apple was able to stem the tide down to about 7:1 in the early 90s, thanks to initiatives that made Macs less expensive, updated the OS and also introduced the first portable Macs.
The late 90s, as is well-documented, was a difficult period for the company, in part thanks to the introduction of Window 95 and Windows 98, two versions of Microsoft's OS that were seen as both lower-cost and "good enough" alternatives. In 1995, Windows machines were outselling Macs by a mere 8:1 ratio. The following year, that rose to over 15:1, near-doubling of PC sales. By 1998, it had risen to 32x the number of Mac sales.
Jobs' return to Apple and the introduction of the iMac helped the company lower that figure slightly in 1999, down to about 27:1, but the release of generally well-regarded Windows XP in 2001 and the further expansion of the number of PC vendors proved nearly unstoppable, and the figure rose from 2000 to 2004 to a dizzying peak of 56:1 ratio of PC to Mac sales (182.5 million PCs against 3.25 million Macs).
2005 marked the beginning of a general decline in PC sales that is continuing, due to a variety of factors. A business market that had reached saturation, a general dissatisfaction with Microsoft's follow-ups to XP, and the emergence of laptops as desktop replacements -- an area where Apple has usually had a very clear differentiating product if not outright advantage in terms of integration of hardware and software -- played a role along with other factors.
But 2005 also marked the year that Apple perfected its iPod line for both platforms (the form factor still seen in the iPod Classic today), switched to making USB the dominant connector for it (which dramatically increased sales to PC owners, beginning the "halo effect"), released OS X 10.4 "Tiger" (seen by many at the time as a completion of the first phase of OS X development) and announced a switch to Intel chips that would come in 2006. From 56 times the volume of Mac sales, in 2005 Windows PCs dropped to 44x in just one year.
The drop has been dramatic since then, as Apple went from strength to strength and Microsoft acquired a reputation for being staid and out of date. Today the ratio is down to where it was in 1985: around 20 to 1 in terms of Windows versus Mac sales. Apple, which makes most of its revenues from sales of iOS devices, now boasts Mac sales of around four million per quarter, an all-time high.
For historical comparative purposes, Dediu did not include tablet and iPad sales (which some analysts believe belong in the "computer" definition as much as portable computers like notebooks, netbooks and ultrabooks) and notes that if iPad sales were included the ratio in the last two years would have shifted much more dramatically in Apple's favor (down to a 6:1 "Windows computer" versus "Apple computer" ratio).
When iPad sales are included, Apple becomes the top individual computer brand, and responsible for nearly one-fourth of all computer sales. If one included iPhone sales (an unfair comparison at present), the ratio drops to 2:1 ("all Windows-type devices" versus "all Apple devices").
As Dediu points out, strong Mac sales are not just good for Apple in terms of revenue, it also reflects a position of leverage that allows the company the ability to grow further, to negotiate better prices for components, and to invest in R&D that results in additional products and services. Apple has diversified considerably from its Mac dependence on sales in the early part of this century, and is now a market leader in tablets, music players, mobile apps, digital media sales, and clearly the dominant influence in smartphones, OS design, consumer and creative-arts software and other, smaller markets such as e-books. More importantly, the company is far and away the most profitable and most highly-valued publicly-traded company in the world -- a far cry from the position it was in a decade ago.
Viewed as a referendum of post-PC devices, Dediu argues, the momentum is clear -- and Apple is likely to achieve parity with Microsoft's overall sales in a year or two, he predicts. Even if the Redmond giant's latest initiatives are successful -- and both Windows 8 and the forthcoming Surface tablet have sparked renewed interest, if only tentative praise -- it will take time (and more missteps from Apple) before the trend reverses.
More importantly, Dediu argues, Apple has gained a psychological advantage that may even prove permanent. The loss of the notion of a Windows hegemony -- through myriad factors including the rise of Firefox, then Android; the growth of Google and its ability to challenge Microsoft; the failure of the Zune to challenge the iPod; even the stagnation of the stock alongside the increasing influence and revenues of Apple -- have created a perceptual shift that forces MS to compete for developers, for press attention, and for sales in ways it hasn't had to do since the earliest days of Windows, a quarter-century ago.
Apple's continued growth is by no means guaranteed any more than Windows' continued slide: it too has market pressures and competition that could undermine its rapid expansion and staggering profitability. But as the charts below show, the change that has occurred in the industry over the last seven years or so has been remarkable -- and (to borrow a worn-out phrase) reveals a number of paradigm shifts that can only give analysts partial insight at best into what's to come.