Image: MacBook
With the economy in the tank, is the Mac starting to lose its appeal?
By contributor
updated 3/30/2009 9:09:44 AM ET 2009-03-30T13:09:44

Microsoft chief executive Steve Ballmer recently proclaimed "the tide has really turned back" against Apple computers. The straitened economy would seem to be a strong argument for PCs, which overall cost less than Macs for essentially the same hardware. But is the Mac — the darling of artists, designers and the generally stylish — really starting to lose its appeal? Will self-expression through brand affinity yield to raw economics?

Some of the roughly 8 percent of U.S. computer owners who prefer Macs say absolutely not.

Ballmer's remark "seemed like bluster to me," said Leander Kahney, the author of three books on Apple's culture and Webmaster of the site Cult of Mac. "Everything he says about Apple is wrong.” ( is a joint venture of Microsoft and NBC Universal.)

The dustup began at a March 19 media summit in New York, where Ballmer told an interviewer, "Apple gained about 1 point (in the laptop and desktop market), but now I think the tide has really turned back the other direction. ... Paying an extra $500 for computer in this environment, the same piece of hardware, paying $500 more to get a logo on it — I think that's a more challenging proposition for the average person than it used to be."

Correction: $800 more. The average Mac selling price last month was about $1,500 — more than twice the industry average of $700, according to Morgan Stanley analyst Kathryn Huberty.

Apple's February sales were down 16 percent year over year, while the overall computer market increased by 10 percent, said Huberty in a March 16 research note. The same month, the Cupertino, Calif., company's revenue was down 22 percent year over year, while the overall market declined only 11 percent.

"Mac unit and revenue growth continue to deteriorate, and the company is losing share amid the shift to lower-cost hardware," Huberty wrote.

But, to be fair, Apple's computer sales climbed year over year in every month but one during the most recent fiscal year, which ended Jan. 31. Apple’s U.S. retail sales increased 1 percentage point from January to February.

And some PC makers are doing worse than Apple. In February, year-over-year PC revenues fell by 33 percent for IBM/Lenovo and by 34 percent for Sony.

Some observers think Apple took a hit only because it unexpectedly delayed introducing upgraded products.

"At Macworld [in January], there was a high expectation for new models of the iMac, Mac mini and Mac Pro," said Larry O'Connor, chief executive of Apple developer Other World Computing Inc., in Woodstock, Ill. "When they didn't come out, a decent percentage of people were holding out. Those machines all started shipping in March. I bet for this quarter, they make up a lot of the downtick they experienced in February."

He also said Ballmer is wrong in attributing Apple's success to a logo.

Buyers are "paying for the reliability and quality behind the logo," O'Connor said. "When you buy something with the Apple logo on it, it works. When you buy something that works, it pays for itself."

He and other Mac fans recited everything they love about their machines: ease of use, relative resistance to malware and freeze-ups, sophisticated design, light weight, quick boot time, even low power consumption. Some don’t even try to defend the higher price.

"Apple is getting new customers who see the Mac as a value proposition," said Kahney, the author. "It runs OS X, and it's a really good-quality product that's thoughtfully designed. It's like buying a nice car. Apple's machines aren't the cheapest, but overall, they are very competitive."

He acknowledged that the horrendous economy may affect Apple.

"The entire world economy is cratering, so yeah, I'd be really surprised if Apple were unaffected," he said. "But their business didn't drop off a cliff."

Microsoft last week began highlighting the lower price of Windows-based computers in a new series of ads, asserting that while some people may not be cool enough for a Mac, many of them would prefer to get more for their money on a Windows machine anyway.

Still, there's no question that PC sellers are seeing a retrenchment. At Puget Systems, a boutique PC system builder in Auburn, Wash., president Jon Bach said demand for systems costing between $3,000 and $4,000 has vanished. Customers who would have bought those systems are now spending about $1,500 less, a trend he said began last July.

Puget Systems doesn't sell Macs, but Bach said he hears his customers refer to "the Apple tax" — the payment of between $500 and $1,000 more to Apple for the same equipment available in a PC. Apple moved to an Intel-based platform, like that of a PC, several years ago, and "in terms of hardware alone, Apple isn't a good value compared to PCs," he said.

"There is a lot of pressure to save every penny," Bach said. "That said, with the rap Vista has gotten over the years, the popularity the Mac has gained is in the OS. It just works."

Ah, yes, Vista. Since its introduction in January 2007, the first new Microsoft operating system in six years is a strong contender as the most reviled OS in computer history.

Industry analyst IDC predicted at Vista’s debut that it would generate nearly $19 in hardware, software and ISP revenue for every $1 spent on it. Less than two years later, Computerworld reported that "home users hate it [and] businesses are uninstalling it."

Two analysts from Gartner Inc. said Vista — resource-intensive, monolithic and initially unable to power many devices — rendered the situation for Microsoft and its customers "untenable." Uptake has been slow, hitting 30 percent only in mid-March, according to StatCounter.

PCs could see a "major resurgence" if Windows 7 — Microsoft’s next operating system, likely to be released before the winter holidays — is as good as initially reported, Bach said.

"People are putting Windows 7 up on a pedestal, saying it will solve all our problems," he said. "And it might."

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