Analyst: Survey Shows Mac Market Share Gains in 2006

| Apple Stock Watch

Piper Jaffray analyst Gene Munster on Monday issued a research report in which he covered the results of a recent survey he did of near-term PC buyers. He found that enough of them are interested in purchasing a Mac as their next computer that Apple should experience market share gains this year and next, along with significant increases in revenue and EPS (earnings per share).

While only 2.4% of the consumers he surveyed were Mac users, he found that 34% of the PC owners are interested in buying a Mac, and 14% are planning to do so for their next computer. Among those who plan to buy a PC, educating them about the ability to run Windows XP on a Mac via Boot Camp caused another 8% to change their minds.

Even after cutting the number of potential Mac switchers by two-thirds, Mr. Munster found that extrapolating the data across the entire computer-buying populace gave Apple a 3.2% boost in revenue and 6.8% to EPS for CY06 (calendar year 2006) and 6.8% and 11.8%, respectively, for CY07.

"While our survey indicates a strong correlation between the sample and the population in terms of Mac/PC market share," the analyst wrote, "it should be noted that our survey is heavily weighted with iPod owners. 43% of our survey respondents indicated that they own an iPod, about 30% above the national average.

"While our survey is iPod-rich, the fact that 12% of respondents are switching to Macs supports the Halo effect, as an iPod-rich sample is more likely to be switching from PCs to Macs after using Apple products."

Mr. Munster also noted that, among the respondents who plan to buy a PC for their next computer, approximately 70% of the concerns they raised, such as familiarity with Windows or using the OS for work or school, are addressed by Boot Camp. "There appears to be some level of misunderstanding," he said. "These respondents are either apathetic to the idea of being able to run both Windows and OS X on a single computer or they donit understand that Boot Camp enables users to run Windows on a Mac."

Given the fact that Boot Camp came on the scene after the second quarter of this year had already started, Mr. Munster sees the impact from it happening in the third quarter. "We expect the CPU number to be strong," he wrote, "offsetting weak iPod numbers for the quarter. Based on our Boot Camp tests, installing Windows on a Mac is time-consuming and i nvolves several steps that would easily deter the average computer user. Moreover, Apple currently does not support Boot Camp while it is in beta form, which als oeffectively weakens Boot Campis impact through CY06."

He added: "But the BootCamp Effect will gain a head of steam in CY07, when Windows functionality becomes an integral part of the Mac OS with the release of OS10.5, which we expect in Jan. i07. "

Piper Jaffray surveyed 42 consumers in San Francisco and Minneapolis. "The sample size may seem small," he acknowledged, "but it offers a 95% confidence level with a confidence interval of +/-15%, given the population of 67.5 million PC buyers in the U.S. in CY07."

The analyst maintained his "Outperform" rating on Appleis stock, with a US$99 price target. At 1:14 PM EST on Thursday, Appleis shares were selling for $55.39, down 0.02% for the day. The company will report its second quarter earnings on July 19.

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