Apple gains despite low-cost competition

Apple continues to sell comparatively expensive computers while maintaining market share, as makers of Windows-based PCs slug it out in a market marked by a price free fall.

3 min read
NEW YORK--Apple continues to sell relatively pricey computers while maintaining market share in retail and catalog sales, allowing makers of Windows-based PCs to slug it out in a segment marked by a price free fall.

For the month of June, Apple Computer maintained its No. 3 ranking in the retail and mail-order market with strong sales of the iMac, despite falling Windows-Intel PC prices and a crush of sales generated by offers of "free" PCs, according to a report from Reston, Virginia-based research firm PC Data.

The report comes as Apple is unveiling new products here at Macworld, an industry trade show focusing on the company.

The average selling price of Apple's systems, including Power Macintosh systems, was $500 more than the average selling price of a Windows-based PC, according to PC Data. The iMac was the most popular system for the month. It was priced $604 more than the average selling price of the most popular PC model, a system from Hewlett-Packard.

Despite the disparity in average selling prices, Apple maintained a market share of 11.2 percent in June. Though this is a slight decline from a month ago, Apple's unit shipments leaped 110 percent over the same period a year ago. Compaq was the overall leader with market share of 29.1 percent.

Not only did Apple resist the average 20 percent year-over-year downward price spiral PC makers have been following for the last nine months, it has so far successfully resisted the free PC craze, as well. The free PC term refers to the practice of letting a consumer have a PC for free or for a low price in exchange for entering into a long-term contract for Internet service.

During the last two weeks of June, sales for PC makers picked up significantly because of these subsidies, said PC Data senior hardware analyst Stephen Baker, resulting in an increase in units shipped of 35.4 percent over last year's June results.

"The [Internet service provider] rebate deals are basically not targeting [Apple's] potential customers, so it shouldn't affect them a lot," Baker explained. "The other part is that a lot of the stores that did offer these rebates don't sell iMacs."

In a press conference yesterday in New York, Apple interim chief executive Steve Jobs would not discuss upcoming strategies but seemed dismissive of the plan to subsidize the cost of a Mac with ISP rebates.

While he offered that Apple is "watching the market closely," he also said that such subsidies come with the penalty of a long-term contract. Early on it appears as if customers wanting a Windows-based PC are interested, but the market for Apple is basically its own ecosystem that isn't yet being influenced by trends in the rest of the PC world. Not only that, the trend may not even last that long, said Baker.

"I don't think the ISP [rebates] have the legs to last a long time. They will bring in a whole bunch of people who weren't willing to [buy from] the ISP, but that market will be exhausted pretty quickly."

Emachines, HP continue to grow
PC Data said Hewlett-Packard continued to pressure leader Compaq, garnering 24.7 percent of unit sales in June based on unit growth above 170 percent compared to June, 1998 results.

IBM was in fourth place with 9.9 percent market share followed by Emachines with 9.7 percent.

When looking at retail stores only, however, Emachines is in third place, based largely on the popularity of the free PC deals.