Apple Dominant

2008 was the year in which Apple become the dominant vendor of desktop and laptop devices. It was the year in which Microsoft’s monopoly was clearly broken. This was in line with what I expected would happen (see Forecasts for 2008: #3 The PC Market)

The latest set of market stats, Net Applications’ December results, show Mac OS X having a 9.6% share of Internet traffic, which indicates a market share increase (by actual usage) of 2.3 percent. Most of that is reflecting Apple’s dominant position in the US retail market, where it has 30% plus market share by revenue. There’s a global lag which will gradually be “back-filled” over time and Apple establishes stronger routes to market in Europe and Asia. Apples momentum is being strongly reinforced by the runaway success of the iPhone.

There is little more to say about this except that the trend of Apple’s dominance will persist. However, it will persist in the midst of a severe recession, so it might not be as so easy to divine what is happening from the sales figures as they emerge. This is especially the case given the new category of “netbook” that has emerged in the PC market.

The Netbook Triumphant

Apple has no device for this market segment right now and it is unlikely to enter it because of the thin margins. Windows is dominating the netbook market (it’s about 30% Linux and 70% Windows right now). That’s mainly because Microsoft is implementing a blocking strategy in the same way that it did with the OLPC. The netbook should be seen as an evolution of the OLPC idea. The netbook will sell well in 2009 because of the price point, and the laptop market will continue to expand, but the bottom is already falling out of the desktop market.

The first reaction of many corporations to the recession was to freeze PC purchases and delay Vista upgrades that were planned. It was easy and reasonably painless to slash spending in that area without impacting much – in fact it was a no-brainer. This has been damaging all the PC vendors (even impacting Mac sales slightly) but the major casualty is Dell because of it’s big footprint in corporate sales. Right now, it’s hard to be optimistic for Dell in the near term. But it’s even harder to be optimistic for the desktop market.

Virtualization

Another pressure that is diminishing sales in the desktop market is virtualization. It is an early market and the development of the market is difficult to foresee except for one factor. Most corporations have accepted that they will implement some degree of desktop virtualization in time, because everyone seems to accept that it is significantly cheaper (if done right.) This further weakens the corporate PC market, either because desktop virtualization is in progress or simply because it is intended “sometime soon.”

Apple doesn’t have any position in the corporation, and doesn’t make products for the corporate market, but it has broken into the market anyway, primarily through staff selecting Apple laptops where they’re given the choice. The important trend here is that the PC market is visibly fragmenting into a set of distinctly different sub-markets. The retail market and corporate markets have diverged and the corporate mrket is itself fragmenting.

The Shape of Things To Come

The inertia of the PC market is such that it may take a few years for Apple’s dominance to be so obvious that no-one disputes it. The important point to understand here is that it is already in place. A major market shift would need to take place to alter that, so it is simply a matter of time before it is worked through. There is a secondary effect here. As Microsoft’s market grasp grows weaker, it’s ability to hold Linux back will diminish too. So far, this has happened only in a small way with netbooks, but the recession could hasten the overall effect. Microsoft is in for a bad year.