I wrote last time
about Apple's small but fast growing market share. It is important to
remember that Macs are selling 30% more each year* while PCs are at
best doing 15%. All this leads to another important question: installed
base. The installed base affects both future sales and third-party
development. Both of these are key to the computer business.
I searched around the Internet to find the size of
the Mac installed base: 22 million as of March 2007. That isn't too
bad, but I couldn't find the same info for PCs. Here we can be creative
and assume that, like market share, Macs have a similar installed base
ratio of about 3%. If so, there are roughly 733 million PCs in use.
That's a lot of computers to support. No wonder Microsoft makes
billions each year.
Anyhow, we can now make some additional estimates. (Sorry for
estimating, but we are only going to be interested in the relative size
of the numbers. Precision is less important.) I want to get an idea of
how often computers are replaced/upgraded.
Out of any population of computer users there will be those who
replace a computer every other year, and those who wait 2-6 years. It
is likely that most computers are replaced every 2-3 years, so we'll
assume that is the largest group and break up the population
accordingly. We will also assume that Macs and PCs are bought at the
same percentage.
People may argue that Macs last longer, but we'll give PC the
benefit of the doubt. We'll also assume that all computers are replaced
within six years.
Mac Replacements Computers
(millions)
Every other year 5% 1.1
Every 3rd year 50% 11.0
Every 4th year 30% 6.6
Every 5th year 10% 2.2
Every 6th year 5% 1.1
Total 100% 22.0
PC Replacements Computers
(millions)
Every other year 5% 36.7
Every 3rd year 50% 366.5
Every 4th year 30% 219.9
Every 5th year 10% 73.3
Every 6th year 5% 36.7
Total 100% 733.0
With the population divided up, we can project the number of
replacements based on each group's buying practices, e.g., the people
who buy every other year have a 50/50 chance of wanting a new computer
in any year. The people who buy every 6th year have a 1/6 chance of
buying. This gives us a total number of replacement sales needed for
Macs and PCs as a portion of their installed base. Obviously PCs with a
large installed base will have more demand for replacement
computers.
Mac Replacements Computers % of Repl.
(millions) Upgrades Sales
Every other year 5% 1.1 50% 0.55
Every 3rd year 50% 11.0 33.3% 3.67
Every 4th year 30% 6.6 25% 1.65
Every 5th year 10% 2.2 20% 0.44
Every 6th year 5% 1.1 16.7% 0.18
Total 100% 22.0 6.49
PC Replacements Computers % of Repl.
(millions) Upgrades Sales
Every other year 5% 36.7 50% 18.35
Every 3rd year 50% 366.5 33.3% 122.16
Every 4th year 30% 219.9 25% 54.97
Every 5th year 10% 73.3 20% 14.66
Every 6th year 5% 36.7 16.7% 5.86
Total 100% 733.0 216.00
While these estimates are probably not very accurate we can make two
conclusions.
- Apple can sell over 6 million computers each year just to keep up
with normal replacement demand based on the size of the installed
base.
- There is a huge opportunity for more sales - around 200 million -
by getting PC users to switch to Macs instead of replace with PCs.
These relative differences work in Apple's favor. The total number
of replacement sales for Macs are so low that no other computer vendor
is going to put much effort into stealing customers away from Apple. On
the other hand, Apple and every other PC vendor has a huge interest in
getting people to switch to their brands. Dell and HP are in a battle
to be number one in sales, but even combined (app. 35%) they still
leave plenty of market share (65%) for the taking.
Apple has to pick up just a small percentage, say 2% of the
replacement sales, and turn them into switchers. That would be 4.3
million new Mac users and just under 50% growth in sales. That would
lead to an almost 20% increase to the installed base and one hell of a
boost to sales. Wouldn't Wall Street love those numbers?
This is already happening to a lesser degree. It's no fluke that Mac
sales are growing at 30% while the PC world is below 15%. Apple has
been stealing customers for years. Thank goodness Vista is such a piece
of crap. If it weren't, then all the iPods in the world wouldn't make a
big enough halo to help Apple. No, this time Microsoft screwed up, and
Apple is on the winning side.
Every new switcher is a plus for Apple and a minus for the
PC/Windows world. This has a potential for explosive growth for Apple.
If the 30% growth so far has been good, what happens as Macs become
ever more common and people start treating them like a regular PC
replacement - only better because Mac are free of crapware and viruses.
Each small increase in the percentage of switchers makes Mac sales
grow, and the installed base grows that much faster. The sale of Macs
could snowball and start breaking all estimates and predictions.
Is this really going to happen? I won't make any predictions, but
the sales trend and market conditions point to this being a likely
possibility. Apple is in a strong position as the innovative company,
and its ad campaigns are aimed directly at switchers.
In a strange way, all of this energy in growing Mac market share
makes this a wonderful time to use Macs. To attract switchers, Apple
has made a great selection of products to choose from, and Apple keeps
coming up with new ideas. Let's all enjoy the ensuing battle for
customer loyalty and expect the royal treatment all the way.
On a sadder note, think about all those poor PC users who are being
slowly forced to switch to Vista - or beg Steve Ballmer to keep selling
XP. Let's all say a silent prayer that those 200 million souls
replacing PCs this year will "Think Different" about their next
computer choice. 
* Apple experienced 35.2% year-over-year growth in
calendar 2005, 19.3% in 2006, and 37.3% in 2007 for an average of
30.6%. Total annual sales: 3.1 million in 2002 and 2003, 3.5 in 2004,
4.74 in 2005, 5.65 in 2006, and 7.76 in 2007.
