If you look at “the leader board” (see the Goopple article) of the big IT vendors, you notice that it includes only 5 vendors who are involved in the PC market; Microsoft(1), Apple(3), Intel(5), HP(6) and Dell(10) – (the number in parentheses indicating their position on the leader board). Intel is pretty much neutral amongst these vendors, even if it now has a “new friend” in Apple. Apple, HP and Dell are in direct competition, with Dell and HP shipping roughly 4 times the volume of computers that Apple ships. Microsoft competes directly with Apple and also looks nervously over its shoulder at Linux. Here are some thoughts for 2008:

1. Nothing will stop Apple in 2008 or any time soon after.

Apple’s share of the home computer market is growing. There was a breakthrough quite some time ago when Apple’s shipment of Macs began growing at 30 percent per annum. This was linked to some degree by the growing success of its retail operation. Roughly 50 percent of people buying Macs through Apple stores are new customers. The corollary is that when Apple opens a store in new geography its share of the local market starts to rise. This is why there’s a big disparity between Apple’s US market share and its global market share. (Apple has over 8 percent of the US market, including corporate PCs, but less than 4 percent of the global market).

Apple has over 210 retail outlets with less than 15 percent of them (about 30) outside the US (with most of those concentrated in Canada, Japan, and the UK). Apple gets more than 20 percent of its revenue from its retail stores. It only grows the number of stores by about 25 percent per year and this constrains growth in market share to some degree. With Apple “seeing is believing” for the home computer market.

However, now that the reasons for not buying Apple have melted away, I expect “the pull of the J curve” to have an increased impact. Apple is getting to the point with its computer products, where it is successful because it is successful. Nothing will stop Apple from growing its share of the home computer market by 30 percent in 2008, but I expect its growth to rise to 40 percent (or more).

2. Linux will see growth in 2008 in the home market.

Linux is not going to have the impact of Apple, but the simple truth is that Microsoft’s monopoly is coming apart. A low-end Linux market is developing and will continue to develop. It took Linux elephant years to actually produce a version that was viable for the home user, but it arrived with Ubuntu and now it will establish a market of its own. Linux always had the potential to undercut Microsoft and it is now in position to do this. I expect the Linux share of the home computer market to double this year, but remember it is growing from a very low base. Linux will continue to make in-roads in the area of computing appliances, as it has done historically, for example, with the TiVo. Google’s support for Linux on mobile devices will also serve it well this year. Nevertheless this will not be the “year of Linux on the PC”.

3. The home PC and the enterprise PC will continue to diverge in 2008.

The home PC is becoming a hybrid of office computer and entertainment device with the emphasis on the latter. This is why the Mac is doing so well. It is built to be consumer friendly. The corporate market has far different priorities, not least of which are manageability and security. The PC blade market is taking off (see Why The Desktop Is Broken) and virtualization is the order of the day. This could either be good or bad for Microsoft depending on how it handles virtualization (it has some very good technology) but it will definitely be bad news for PC hardware vendors that don’t move quickly into the PC blade market. IBM, HP and Dell already have a foot in this market and the market is growing quickly (at about 45 percent per annum).

I expect this market to continue to grow quickly in 2008. The potential economies of the PC blade (in conjunction with virtualization) are dramatic and very attractive.

4. Microsoft will not have a particularly bad year.

While its business model will start to crack at various points, Microsoft’s momentum is such that the damage will not show up strongly in its revenues in 2008. If you’re waiting for that then wait till 2009.

Note: There are 7 forecast postings for 2008. The others are:
Forecasts for 2008: #1 Chips & Virtualization
Forecasts for 2008: #2 The Server
Forecasts for 2008: #4 Google and the Cloud
Forecasts for 2008: #5 Communications Convergence
Forecasts for 2008: #6 The Application Layer
Forecasts for 2008: #7 Security