TMO Reports - Analyst: 'iPod Halo Effect is Set to Resume'

by , 1:45 PM EDT, July 25th, 2006

Piper Jaffray analyst Gene Munster on Tuesday issued the results of his latest study of iPod users, coming to the conclusion that 9% of Windows users plan to switch to a Mac in the next 12 months, which he said was evidence that "the halo effect is set to resume."

The halo effect is a term that describes the influence something has over those who are near it. In the case of the iPod, many analyst believe that Windows users who are exposed to Apple's technology by owning the popular MP3 player will become more inclined toward considering a Mac as their next computer purchase.

Mr. Munster last completed his study in November 2004, finding then that 9.9% of respondents were planning to switch from PC to Mac in the next 12 months. He noted that in the next 12 months, Apple's worldwide share of the computer market rose from 1.8% to 2.5%, according to IDC data. With Apple reporting 1.33 million Macs sold last quarter, the analyst expects Apple's market share to rise from 2.1% to 2.5% this year, after having dipped slightly because of the transition to Intel processors.

He wrote: "The announcement of the transition to Intel chips in Jun-05 caused Mac sales to slide and market share decreased over the next several quarters. As Apple completes the Intel transition in the next several months, we are confident that Mac market share will begin to increase again." The fact that Apple has sold 58 million iPods since the product's introduction in October 2001 will also play a part in that, he said.

In addition, Mr. Munster pointed to Boot Camp as "another identifiable catalyst" in the increase of Mac market share. "In a separately conducted study," he explained, "we found that 8.3% of PC shoppers said that they would choose a Mac instead of a PC because of this new ability to run Windows ... When Leopard ships and Boot Camp is fully integrated into Mac OS X, we believe Mac sales will be increasingly driven by consumer interest in Boot Camp."

The analyst's survey did uncover some risks, however. The first study found only 0.5% of respondents saying they were unhappy with their iPods, a percentage that jumped to 9.5% this time. The average satisfaction response, on a scale of 1 to 10, slid from 8.9 to 7.8. Mr. Munster said that those who were unhappy cited battery life, durability problems, and general "glitches" with the iPod hardware and/or the iTunes software.

Piper Jaffray surveyed 200 computer owners, mostly those in their 20s and 30s and split roughly evenly between men and women. 200 people were surveyed last time too, although that sample was more heavily skewed toward men.

Mr. Munster retained his "Outperform" rating on Apple's stock, with a US$99 price target. At 1:45 PM EST on Tuesday, the company's shares were selling for $61.57, up 0.24% for the day. The stock has been on the rise since Apple last Wednesday announced quarterly earnings that satisfied many investors.

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