Tuesday, November 03, 2009


Today I clicked on a CNNMoney article with the headline "Mac share grew after Windows 7 debut".  Okay, I'm thinking that's an interesting topic.  So I clicked. 

Turns out it's a regular column titled "Mac news from outside the reality distortion field."  So now I'm thinking that this is very interesting because I have Mac friends.  You know who you are.  I know who you are.  You and I both know that you are not rational.  So I figure I'll get the alternative viewpoint.  You know, the one that's an alternative to "Steve Jobs is like God, only perfecter."

Before I being reading, I see the headshot of the column's author, Philip Elmer-DeWitt. In the blurb about Mr. Elmer-DeWitt it says:

Philip Elmer-DeWitt believes that an ounce of skepticism never hurts when writing about the company. He should know. He's been covering Apple – and watching Steve Jobs operate — since 1982.
And now I'm thinking, "Whoa!  We're finally going to see rational news about Apple, how fun!"

The article begins:

If Microsoft (MSFT) was hoping that the launch of Windows 7 would halt the erosion of its operating system market share — and curb further inroads by Apple (AAPL)  — there is no evidence that it's working yet.
I don't follow the OS wars very closely, so I'm thinking that this sounds reasonable.  I know MSFT has had as high as 90% of the OS market, but I figure that this mus be slipping.  I wait for the next paragraph.  I see:

...preliminary data released overnight Sunday by Net Applications show Mac OS X's Internet share growing by 2.73% in October, from 5.12% to 5.26%.
And then:

Windows' Internet presence, meanwhile, fell from 92.77% to 92.54%

Seriously?  This is from "outside the reality distortion field"?  And he's written an article about "eroding market share" and "curb[ing] further inroads". 

For reference, Dell is the #1 seller of PC's with a 13.9% market share.

Nokia is the #1 cell phone company with about 38% market share.

Coke, the #1 beverage company in the world, has about 43% maket share.

MSFT?  92.54%

Mr. Elmer-DeWitt, you are firmly within the distortion field.


shadowfax said...

Funny, and completely correct. Tough Mac does have a substantially higher share of the consumer market (I've seen estimates of 20%) but due to the huge corporate preference for XP, MSFT still totally dominates the overall OS market.

The OS wars ended a long time ago -- hell, W7 already has market penetration approaching that of MacOS. It's impossible for MacOS to "win", period. It certainly is possible for MacOS to survive & flourish.

It's absolutely fascinating to compare their financials:

Market Cap: $244b
Revenue: $58b
Profit $46b
Margin 25%

Market Cap: $160b
Revenue: $36b
Profit $13b
Margin 15%

Market Cap: $28b
Revenue: $61b
Profit $11b
Margin 3%

My understanding is that 15% is a ridiculously high margin for a computer manufacturer (compare Dell at 3%) but it totally pales in comparison to MSFT's 20% which is just bloody staggering. Given the lower absolute profit levels, the market cap of AAPL seems high -- possibly reflecting an inflated stock price? I put in $5k when it was at about $20, and it's worth $100K now, and I've never sold it, but I've also resisted the urge to put in any more. OTOH, I've been a long-term investor in MSFT and never made much, despite the consistent performance of the company.

It's things like this that I reflect upon when people talk about the rationality of the market. It just doesn't make sense. Is AAPL's stock price also influenced by the RDF? Hard to argue that it isn't. But a rational market shouldn't be buoyed to the tune of $160b by mere enthusiasm.

BTW, I'm completely rational about AAPL. I'm an enthusiast and an advocate, no denying. But I can also look at the facts and see what's what.

Matt Dick said...

BTW, I'm completely rational about AAPL.

I know, but since you have an iPhone, and iPod and a Mac I have to kind of hang this at your feet, right?

Yes, Mac will survive, somehow APPL manages to make profits on their PC sales, so that's good.