How Far Can Apple Take Its Consumer Crossover?

Analysts predict that the $499 Mac mini will appeal to some PC switchers but won't compete with inexpensive PCs from HP and others. And they say the iPod shuffle's success depends on its availability-and on whether users can handle going without a sc

The Mac mini will help Apple Computer increase its market share, and the iPod shuffle will solidify the companys firm grip on digital media players. Thats the consensus among many analysts who watch the technology industry for a living. But while the cheaper Apple products look like winners, some believe they arent for everyone.

"Apple continues to show strategic flexibility with its lowest-priced Mac ever and an iPod at $99 with more capacity than I expected," said Merrill Lynch analyst Steve Milunovich. "I continue to think Apple is building a sustainable consumer electronics franchise rather than just getting lucky with hot products."

Steve Baker, an analyst at NPD, said that while he does not think the Mac mini will displace inexpensive PCs such as those from eMachines and Hewlett-Packard, it will gain market share slowly as "an adjunct U.S. $999 notebook."

"Its not a volume PC, "Baker said. "Its aimed squarely at the consumer adding multiple PCs to the house and who want a small form factor."

"I dont expect the $499 Mac will greatly affect purchases of more powerful Macs," said Joe Wilcox, an analyst at Jupiter Research. "But I do see it as a potential suitor to Windows users, particularly those that have iPods and enjoy the experience delivered by Apple.

"Apple might even increase market share," Wilcox added. "That said, I would discourage anyone from overexcited expectation that the Mac will surge against Windows PCs."

Baker said he doesnt think the Mac mini is a "volume shovel-ware product" that will be sold at Wal-Mart, for instance. What he sees are interesting uses and users for the inexpensive Mac.

"I think youll see a lot of uses for this product, given the form factor and it being so quiet," Baker said. "I can see this in a lot of environments that you normally wouldnt see. And I think education will be a big buyer."

"I believe the Mac mini will sell well to both PC switchers and Mac lovers wanting to put iTunes, iPhoto and iVideo into their entertainment room," Milunovich said. "The lower price point could entice PC owners to consider the Mac, particularly those with iPods."

/zimages/2/28571.gifRead more here about the Mac mini, the iPod shuffle and other new products making their debut at Macworld.

"The Windows market is huge, with massive, entrenched infrastructure," Wilcox said. "Apple could gain a few points of share—and the planets will have to align just so, as they appear to be moving—but doubtfully denting Windows PC market share in any immediate significant way. Still, if the mass-market strategy succeeds and ekes out even a few percentage points of share, the significance could be huge for Apple."

Baker said he thinks Apple will slowly gain "marginal" market share in the next 12 months, but he remains cautious.


"This is not the PC to make them competitive with HP or anyone," Baker said. "I think its going to be a difficult sell in a mass merchandiser because they havent bundled it with a monitor and keyboard. Best Buy could probably sell it if they wanted to."

Wilcox said he thinks distribution could be the deciding factor for the Mac mini.

"With iPod, Apple got many of the most important features right—size, battery life, functionality and, most importantly, synchronization," Wilcox said. "But iPods success also comes from good distribution. Consumers can buy the music player in thousands of retail outlets, not just Apple retail stores or CompUSA.

"HP opened up Radio Shack, adding thousands more available locations. If Apples initial target audience is the Windows user, then the iMac must be available where that consumer shops. Distribution needs to be broader than just Apple stores or CompUSA."

Next Page: Not a take-home Mac.