Will Mac Ever Become Mainstream?
Stephanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
At its recent Worldwide Developers Conference (WWDC), Apple (NASDAQ: AAPL) unveiled a revamp of its operating system, along with a more affordable MacBook Air line. The MacBook Pro is just around the corner, the company said, leading some longtime Microsoft (NASDAQ: MSFT) loyalists to consider making the switch.
Macs, at one time considered devices of graphic designers and video editors, have snagged a larger-than-ever share of the PC market in recent years. Although the company only ships 5% of all units shipped in the PC market, the company somehow manages to bring in 45% of all profits in the sector.
Apple's profit increasing
When he announced second-quarter earnings in April, Apple CEO Tim Cook hinted at exciting new products for fall. Revenue for the second quarter was up $4.4 billion from the same quarter last year, thanks to the iPhone 5 and the new iPad. Despite holding such a large part of the PC sector, however, Mac sales fell from 4.02 million last year to 3.95 million.
PC sales, overall, were down 14%, with analysts blaming the lackluster response to Microsoft's Windows 8 for the drop. The top PC vendor, Hewlett-Packard (NYSE: HPQ), saw worldwide shipments of its computers fall 23% in the first quarter of 2012, according to research firm IDC. IDC's vice president said not only did Windows 8 fail to jump-start the lagging PC market, it seems to have actually contributed to its decline.
Microsoft, meanwhile, isn't going down without a fight. At the recent Electronic Entertainment Expo (E3), the company previewed the upcoming Xbox One, but Xbox consoles and games account for only 13% of the company's revenue. Analysts are blaming the company's late entry into the tablet and smartphone market for its continued poor performance.
Microsoft's third-quarter earnings exceeded expectations, rising to $6 billion, up from only $5.1 billion a year ago. The company stressed an emphasis on its Cloud products and furthered that with a recent ad that showed how Microsoft products shape every area of our lives, from Skype to Office 365 to Internet Explorer and Xbox. But as Microsoft shifts its emphasis to mobile devices and Cloud offerings, where does that leave the PC manufacturers who run its operating system?
HP needs change
Hewlett-Packard, the top hardware manufacturer running Windows systems, saw its net income fall 32% in its second quarter. The company's signature products -- computers and printers -- are suffering the effects of changing technology, and servers, its other mainstay, are feeling the impact of customers increasingly choosing cloud providers.
Instead of aggressively tackling the iPad or the Windows Tablet, HP is instead focusing on the growing demand for cloud connectivity, providing services for businesses of all sizes. Of course, HP and Microsoft both know that as long as offices exist, there will always be a need for PCs and laptops. Not every worker today is traveling from meeting to meeting, iPad in hand.
Still, as the mass-market need for PCs continues to dwindle, Apple is claiming a definite edge, not only because of its iPad, but also its MacBook Air and MacBook Pro. Consumers who once headed straight for HP or Dell are becoming increasingly frustrated with both companies' penchant for careless outsourcing, liking the quality Apple's carefully-outsourced products provide. Additionally, the types of workers who will likely choose PCs for many years to come -- photo and video editors, graphic designers, journalists, and the like -- are the same people who have gravitated toward Macs all along.
For that reason, Apple may continue to claim a large share of the market -- as if the iPad and iPhone weren't reason enough for investors to believe in the company. Microsoft and HP, meanwhile, will have to continue to reinvent themselves to keep up with the rapidly-changing needs of today's technology consumer.
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Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!