Mac and Windows, Tech's New Odd Couple
Judging from the 29% drop in Apple Computer's (AAPL) stock price from Jan. 1 through early April, it was beginning to look like the computer maker's era of infallibility with investors had ended. Then came Apr. 5, when Apple let loose with a software called Boot Camp, which lets owners of Intel-based (INTC) Mac computers install Microsoft's Windows (MSFT) as well as the MacOS operating system, which comes pre-loaded on the machines. Apple's share price jumped a few percentage points when the news was first announced -- and then kept right on rising. The stock finished the day at $67.21, up 9.9%.
Boot Camp was a surefire headline-grabber. Many analysts surmised that embracing Windows could help Apple boost sales to some of the millions of people who have come to rely on Windows-compatible programs, but have fallen out of love with their Windows-based PCs.
"SPECK OF DUST."
"This will probably increase Apple's market-share growth by 50% over the next two years," says Piper Jaffrey analyst Gene Munster. He previously reckoned that Apple was on track to increase its share of the global PC market from 2.5% in 2005 to 5% in 2010. "Now, I think it could go to 6% or 7%," Munster says. At $2 billion per point of PC market share, that's big money for a company that had $16.2 billion in sales in the 12 months ended in December.
But on further reflection, the euphoria ebbed for some observers. "[The stock rise] was quite perplexing," says Megan Graham Hackett, an analyst with Standard & Poor's, a unit of BusinessWeek parent McGraw-Hill Companies (MHP). "It seemed reasonable when it rose 2% or 3%, but I never expected it to keep going."
Roger Kay, president of market researcher Endpoint Technologies Associates, adds, "in the grand scheme of things, Boot Camp is like a speck of dust. But on Wall Street, its impact was tremendous."
Why the buzz-killing bearishness? Kay says it's a matter of math. He points out that Apple has sold only a few hundred thousand units of Intel-based Macs since October (Boot Camp won't work with earlier Macs built around PowerPC chips). And since Apple isn't pre-loading or selling copies of Windows XP, customers who don't already have a Windows XP CD may balk at paying the $200 retail price.
No doubt, many of those who do own XP will install Boot Camp for curiosity's sake. But how many will actually use both operating systems on a daily basis? Rather than toggle between the MacOS and Windows -- say, to check for your latest corporate e-mail while using one of Apple's iLife applications for making movies or managing digital photos -- consumers have to shut down the computer and relaunch it in the OS of choice. This process can take a few minutes.
Perhaps most importantly, neither Apple nor Microsoft has agreed to provide customer support for Windows on the Mac. That could scare off mainstream consumers. "When you come right down to it, this will appeal to PC enthusiasts and hackers," says Kay. "I think it's really just 2,000 or so people [who] will use this feature on a daily basis."
BUILDING APPLE'S ARMY.
For now, anyway. If Boot Camp works as easily and reliably as advertised, it could attract newcomers to the Mac when the time comes for them to buy a new PC. Apple Senior Vice-President Phil Schiller says the company's research found two main classes of customers who might be interested in running Windows. The first includes those who know they want to switch to the Mac, but can't because of one or two Windows-compatible apps they can't live without. The other is comprised of less tech-savvy shoppers who "want a safety net -- the knowledge that if they don't like something about the Mac, they can still run Windows."
Schiller concedes Apple isn't sure what impact Boot Camp will have on the company's market share. He says the company plans to build it into the next version of the MacOS, dubbed Leopard, which is due out later this year. "It's all about trying to reach more customers," and removing objections that have held back would-be switchers in the past, he says.
And, no doubt, Apple would like to see Boot Camp users ultimately drop Windows altogether as they come to see the Mac as superior, making them fully committed soldiers in the army of Apple faithful. "If you decide you don't really need Windows anymore at some point, [Boot Camp] makes it really easy to uninstall Windows, too," says Schiller.
AWAITING THE GRADES.
But much must go right for Apple to pick up meaningful sales in this manner. For starters, the software must work hassle-free. "We have to see how the performance is," says S&P's Graham Hackett. "Are there bugs? If the experience isn't good, this could be very frustrating for people -- and it could have the reverse effect Apple is hoping for."
And Apple will find out in coming weeks whether running Windows on the Mac is a key to share gains, or a Pandora's box of customer-service complaints. Beyond the Apr. 5 introduction, Schiller says, Apple has no marketing campaign planned to push Boot Camp. "We don't want to guess about what kind of impact this will have. We'd rather just rather put it out there, and learn together with our customers," he adds.
And if nothing else, the 10% stock-price gain -- assuming it holds -- is a nice shot in the arm.