Analyst: Demand for Mac strong, iPod weakening

Market research firm Cowen & Co. recently completed a consumer survey that has some good and bad news for Apple. The report shows that despite cautious PC demand, the outlook for the Mac looks strong; the potentially bad news is the report shows a significant slowing in growth of the iPod. The findings have led the company to maintain a Neutral rating on Apple’s stock.

“We are maintaining a neutral [rating] because it is not a cheap stock,” Richard Chu, Cowen & Co. Managing Director, told Macworld. “We think Apple is incredibly positioned strategically, but it’s incumbent on the company to keep on delivering pretty dramatic surprises quarter after quarter. That gets tough to do.”

While it is difficult for a company with the market share Apple has in the iPod segment to keep up with ever increasing pressure to grow, Chu feels that Apple could potentially pull more customers into the fold with new products.

“Apple certainly has the capacity historically to consistently surprise and that may inject new people,” said Chu. “However, there is a clear caution flag that we ought to be prepared for growth rates to fall.”

Chu doesn’t expect iPod sales to fall through the floor, but indications from the survey show that the iPod is stabilizing instead of expanding. Even with that Chu said, “Apple’s iPod will likely continue to maintain a very substantial share lead over all other competitors.”

The Mac future is looking good

Chu said that 23 percent of respondents to the company’s survey indicated they have no plans to buy a computer in the next 12-18 months — that is the lowest number the company has seen in a survey since late 2003.

However, Apple fared much better among definite buyers. The Mac among definite buyers lifted from 6.1 percent in October 2005 to 7.0 percent in December 2005 and 7.8 percent in the most recent survey (April 2006). Planned purchases for Apple’s notebook since the launch of the Intel-based MacBook Pro has gone from 7.5 percent in December 2005 to nearly 10 percent in the April survey.

Chu said the Intel transition has been good for Apple. “A substantially higher percentage of respondents (8 percent) indicate that they are more likely to buy a Mac over the next 12 to 18 months as a consequence of Apple’s decision to migrate to Intel,” said Chu.

Boot Camp “Resoundingly Positive”

Chu characterizes Apple’s move to include dual-boot support with Boot Camp as “resoundingly positive.” Twenty percent of respondents to the survey said that Boot Camp makes it more likely they will buy a Mac in the next 12-18 months.

Many people speculated that with the release of Boot Camp Apple had the potential to sell more hardware — Windows users that wanted a Mac but had to use a Windows-only application could now have both in one machine. Although it is still very early on, that may be working.

Among respondents with definite plans to buy a PC in the next 12-18 months, 42 percent registered a more likely vote for a Mac purchase because of the ability to dual-boot.

“Not surprisingly, virtually all respondents who indicate that Boot Camp will influence their Mac buying plans say that the impact will be positive; plainly, with disk and main memory continuing to commoditize, the ability to run Windows and Windows applications even with all the shortcomings of Boot Camp (relating to the necessity of rebooting, XP rather than Vista, etc.) as it is presently envisioned, is viewed as a positive rather than a negative,” said Chu.

Lots of room for Apple growth

Apple has made some small attempts to judge consumers reaction to an Apple branded digital home theatre application. An expanded Front Row is what many speculate will power the Mac mini as Apple’s answer to a centralized home theatre component.

Chu isn’t worried as Apple continues to dip its toes in the home theatre market as others like Microsoft leap headlong into the segment. He said it Apple will release its products when they are good and ready to do so.

“Apple has a strong desire to be a major player in the home, but they haven’t played their cards yet,” said Chu. “They have been very careful to bring together a value proposition that’s consistent with everything else that they do, which is easy to use and integrated.”

This story, "Analyst: Demand for Mac strong, iPod weakening" was originally published by PCWorld.

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