Apple's Glass Ceiling

In a post called "Noted for Future Gloating," John Gruber from DaringFireball.net calls out Douglas A. McIntyre for this post, where McIntyre says:

"The big wall that Apple cannot knock over is the wall that being in second place erects. The really substantial buyers, corporations, who could move Mac sales toward 15 million or 20 million units, never did buy the Apple product and they won't now. It represents extra work for them, and extra costs. Extra costs are not popular these days.

The Mac has hit is glass ceiling. Apple investors may be hoping that the machine can make it out of the consumer market to keep the rapid growth going, but that is not in the cards."

I think McIntyre is way, way premature with his prediction, but I also agree, there is a glass ceiling for Apple for computer sales. But the reason that McIntyre's statement is worth ignoring from an investment perspective is because Apple's market share in the consumer market is still very small and there is still plenty of room to expand. Gene Munster from Piper Jaffray thinks Apple has 20% of the consumer market in the US and 10% outisde the US. I think those numbers are way too high.

If Apple hasn't even touched the corporate market, which is estimated to be about 70% of all computer sales, then there's also potential for a glass ceiling to be created for that market. McIntyre may be right in that, in this recession, some corporations are not interested in extra costs. But believe it or not, some don't really care. Especially corporate executives. As someone who works for a corporation, I can tell you there are those who toss away several grand a day on silly expenses and wouldn't blink twice toward ordering a MacBook Air on a whim--just to check it out.

Apple remains an investor's dream because surprise growth is what gives stocks really big moves, and Apple over the past few years has been relentlessly expanding into new markets, providing that surprise growth.

The most successful example of Apple invading a market then expanding into the mainstream is the move from the iPod to the iPod Mini, which was introduced at a price point that drove iPod sales to well over 100 million in a relatively short time.

The iPhone is Apple's most recent foray into a ripe mega-sized market and could easily follow the iPod to iPod Mini route. A more subtle move is the software Numbers, Apple's sneak attack at Microsoft Office Excel. Numbers is nudging its way into the consumer market, but it's really better suited for small businesses. Who starts small businesses? Consumers. What do small businesses sometimes grow into? Corporations.

The height of Apple's glass ceiling for their computer line probably defined by the fact that they make premium products. And premium products always start out with a premium price. But if they out innovate the way they did with iPods, one day they can be so far ahead they can release an iPod Mini-like product which is affordable yet still a premium technology-wise over the competition. The MacBook is a step in that direction. If we ever see a $600 MacBook or iMac (sorry the Mac Mini, without peripherals, doesn't count), I think it'd be game-set-match.

Link to Gruber's post.

Link to Fortune's "Analyst: Apple’s U.S. consumer market share now 21 percent."