Apples Halo Stays on Despite Switch to Intel

News Analysis: Industry watchers don't see the company suffering from its decision to change, as iPod brings more of the masses to the Mac.

Industry watchers have noticed a "halo" surrounding Apple Computers iPod: The popular music player is helping to bring new users to the companys Macintosh line of computers. However, could the uncertainty surrounding the Macs upcoming switch from PowerPC to Intel processors take the shine off that halo?

When Apple Computer Inc. made that dramatic announcement that it would leave long-time PowerPC suppliers IBM and Freescale Semiconductor Inc. (formerly the semiconductor division of Motorola Inc.) in favor of Intel Corp., many of the Mac faithful were shocked.

Investors and industry watchers wondered if this would put a freeze on Mac sales, which had seen a strong upturn recently, with buyers putting a hold on purchases to wait for the new machines. Apple CEO Steve Jobs said it would take a year to bring Intel-based Macs to the market, but had also promised new PowerPC-based products in the interim.

/zimages/2/28571.gifClick here to read about Apples moves to bring Podcasts into the mainstream.

Such a freeze is popularly known as "the Osborne effect," in which a company loses sales after pre-announcing upcoming—and superior—products. (Though the original story which gave the effect its name is an urban legend.)

The question was whether this so-called Osborne effect would counteract another sales pressure: the iPod halo effect. Non-Mac-owning purchasers of Apples popular iPod are switching from Windows because of their love of the iPod.

Are these two competing pressures on Mac sales real? In a recent quarterly earnings call, Apple CFO Peter Oppenheimer offered cautious guidance about upcoming sales numbers. Is this evidence that a lean year is ahead for Apple? Ziff Davis Internet News canvassed industry analysts and Mac retailers to see what they thought.

/zimages/2/28571.gifRead more here about Apples latest iBook and Mac Mini updates.

The Analysts Speak

"There is a halo effect, leading to a definite increase in Mac sales, but its much broader than the iPod," said Joe Wilcox, an analyst for New York-based Jupiter Research of Jupitermedia Corp. He said that a convergence of product releases—the iTunes Music Store, the iPod and Apple stores—"helped revive the coolness of the [Apple] brand." For example, he said, the Apple stores have a purpose, which, he said, is marketing: "showing the brand, the experience of using a Mac."

This venue, Wilcox said, also plays to another Apple advantage. "Apple is able to package a lot of value, such as their own software [iTunes, iMovie, etc.] into their computers," he said. Wilcox pointed out that competitors such as HP and Dell have to pay not only for Windows licenses but for any digital media software they bundle in their computers. This, Wilcox said, also helps support the margin of every Mac sold.

"The halo is iPod plus other things," he said. "If it was just the iPod"—which, he stressed, is still selling better than expected—"the increase in Apples profits would be much less."

"If thered been any downward sales pressure," Wilcox said, "itd have been in the first calendar quarter of 2005." This, he said, was the test for the iPod: whether it would be, in Wilcoxs words, "a blown-out supernova, or whether it had reached iconic status."

Next Page: The potential downsides.