As hard as it is to believe, many Apple (AAPL) bulls are still missing the best part of the company’s growth story: The improving opportunity for Apple’s computer business. Unlike the last go-round, when Apple got clobbered by the Wintel keiretsu, the macro personal computer trends now favour Apple, suggesting that Macs are going to continue to gain share at the expense of Dell, HP, Microsoft, and others.
What has changed? The dominance of Windows and Office have waned. The most important personal computer application by far these days is the Internet, and there’s no advantage to having Microsoft Windows when you use the Internet. The other most popular personal computer apps, web-based email and instant messaging, as well as the advent of Google Apps and other web-based Office clones, there’s also a lot less reason than there used to be to use the PC platform that most applications are developed for.
In short, the network effect that supported the Windows monopoly–and bolstered the sales of all companies that hitched their wagons to this star–is disintegrating, enabling computer uses to simply choose the computers that they like best. And as Amazon’s current PC bestseller list makes clear (via Fortune), computer users overwhelmingly favour Macs, even when they have to pay more for them.
For now, businesses still favour PCs, because they have so much invested in legacy Windows- and Microsoft-based IT systems. But slowly but surely, web-based applications providers (Salesforce.com, Netsuite, Google Apps) are penetrating the enterprise, and as they do, corporations will increasingly allow employees to choose their own machines.
Despite the awesome attention focused on iPods and iPhones, Apple now generates nearly half of its revenue (and, presumably, profit) from Macs. The Mac franchise, moreover, is now growing 40% year-over-year, far faster than the iPod franchise, which is growing about 30% (26% for the iPods themselves in Q3 and 33% for Other Music revenue). Apple’s most important revenue and profit growth generator, in other words, is its Mac business. And the trends for this business are only getting better.
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