If you’re so smart, why ain’t you rich?

Why Macs Have 4% Market Share.

*Video iPod -- is it the start of something big?Orlando Sentinel, October 29, 2005

Special report Why Macs Have 4% Market Share ©2005 California Computer Care page 1

Market share is determined by taking the totalnumber of computers sold (usually by fi-nancial quarter) and dividing that into thenumber of computers sold by each manu-facturer. So, if 100 computers were soldand your company made 25 of them, yourcompany has a 25% share of the computermarket. Currently Apple’s Macintosh hasabout a 4% share of the market. Microsoft’sWindows operating system (from many dif-ferent manufacturers) has about a 94% shareand exotic operating systems such a Linuxaccount for another 2%.

So far, desktop computer history breaks downinto two eras: BBB and ABB.

BBB is Before Big Business. This was thetime when desktop computing was domi-nated by many small manufacturers. Thesecompanies were creating a new industry.They were experimenting with different op-erating systems and hardware designs. Thiswas the most exciting and vital part of per-sonal computer history. Then big businessdiscovered personal computers.

ABB is After Big Business. When major cor-porations began to see desktop computersas useful, IBM, the manufacturer of that era’smost popular business computers (remem-ber huge, room filling computer systemsthat required air conditioning and techni-cians in white smocks?) took notice andcame up with their personal computer theIBM PC. The IBM PC was inferior to mostof the desktop computers already on themarket and cost more. Even so, the IBM PCchanged the personal computer world be-cause the major corporations, that wouldsoon buy PCs in the tens of thousands, al-ready knew and trusted IBM. To them thattrust was far more important than whichdesktop computer had the best technology.

Mac users are often faced with this question :

“If Macs are the best desktop computers[and they are, of course] why do they onlyhave a measly 4% market share?” This ques-tion is usually asked of us by MicrosoftWindows users who then volunteer their fa-vorite answer, as Chris Cobbs, technologycolumnist for the Orlando Sentinel, wrote:

“[Apple] chose to keep the Mac operatingsystem only for Apple, rather than lettingothers license it, a decision that opened theway for Windows’ dominance of globalcomputers.”*

A simple and easy to understand answer thatis completely wrong.

The questioner’s reasoning goes like this: Appleinvented the personal desktop computerand dominated that computer market withthe Macintosh. Then IBM created the IBMPC and allowed other computer companiesto copy it. Because many companies weremaking IBM PC clone systems, competitionforced prices down which made the PCclones popular even though they weren’t asgood as the Apple computers. Meanwhile,Apple tried to hold onto Mac OS exclusivelyand lost the race.

Such an explanation ignores several histori-cal facts. First, while Apple did invent thepersonal computer (Apple I) in 1976, theIBM PC dates from 1981; Macintosh didnot appear until 1984. Apple never held topplace in market share and by 1985, the mar-ket share race was already lost to IBM andthe clones. By the way, IBM did not licensethe clones, they were invented by Compaq(now part of Hewlett Packard) and IBMsued to stop them, but failed.

Some famous early computers

Tandy TRS-80 model 2

Market share leader 1977-79

Extinct.

Commodore 64

Market share leader 1983-84.

Extinct.

Kaypro model 2

One of the first portable

computers. Popular during the

early 1980s. Extinct.

IBM PC

Released in 1981

Special report Why Macs Have 4% Market Share ©2005 California Computer Care page 2

appeared, IBM and the early clones alreadyhad 32% of the market. Apple ][ was 16%of the market and the new untried Mac was6%. Apple had no idea if Mac was going tobe a hit or not. Nobody else thought so.Icons on screen, mouses for pointing, whiteWYSIWYG displays (What You See Is WhatYou Get) were all new to a world that wasused to typing obscure computer commandson green phosphorescent screens. Punditsand reviewers mocked the silly icons andmouse and called the Macintosh a toy com-puter for people who weren’t smart enoughto use an IBM PC clone.

But, Apple believed and began phasing outthe successful Apple][ line. They put all oftheir faith and effort into the new Mac.

If, at this time, Apple had tried to sell li-censes to Mac OS, they would have runinto another problem. Only Apple had thetechnology to run Mac OS. IBM cloneswere not powerful enough to do the job, soany computer maker that wanted to makea Mac clone would need to use special,cutting edge technologies. This would havemeant that Mac clones would be more ex-pensive than Macs made by Apple. Therewasn’t any good reason for a cloner to in-vest so much in an computer that may turnout to be a commercial failure.

It wasn’t until 1992 that Macintosh stylecomputing was finally accepted by themainstream of computing as a success andsomething that other computer makerswould want to buy into through a license.Macintosh had a 12% market share. IBMand the clones had an 88% market share.The race was already long over. Licensing,when it was finally tried in 1995, almostput Apple out of business and came veryclose to killing the Macintosh.

Also in 1995, Microsoft introduced Windows95. Now the IBM clones** could use Mac-intosh style computing. Windows 95 wasroughly equivalent in usability to 1986 vin-tage Macs, but that was good enough for

*Apple ][’s highest share during the BBBera was 16% in 1984.

The BBB period lasted from 1976 until 1985.

During this time the market share leader-ship was held by many companies.

From 1977 until 1979, Radio Shack’s TandyTRS-80 models outsold everything else by awide margin. Every city, town and villagehad a Radio Shack store, so TRS-80s be-came ubiquitous. They enjoyed a 48% share.

1980 through 1982 saw no clear winner.Atari saw shares in the mid 20s. RadioShack’s TRS-80 share fell from almost 50%to 10%. The winners were the small makerslike Commodore, Kaypro, Osborn, Compaqand others. All added together, they aver-aged about 50% of the market.

Then came the Commodore 64. For two years(1983 and 1984) the C64 was the king with40% of the market. By comparison, the Ap-ple ][ held 10%* and the new IBM PC wasjust making its mark with an impressive28% share.

By 1985, the BBB era was over. Compaqsuccessfully (and legally) cloned the IBM PCwhich allowed Compaq’s computers to runthe same software as the IBM PC. Compaqthen licensed this technology to other man-ufacturers and the ABB era began.

With the coming of the clones, the computermarket broke into three pieces. There wasIBM and the clones (since they all ran thesame software they are considered a unit),Apple, with its Apple ][ and Macintoshmodels, and the independent manufactur-ers that didn’t choose the IBM clone route.

1985 saw IBM and the clones take a 49%market share. 1986, 56%. 1987, 65%. 1988,80%. By 1988, Apple][ was less than 1%.Macintosh was there at 5.5% and virtuallyeveryone else was out of business.

It all happened so fast that there wasn’t timefor Apple to consider licensing. Keep inmind that in 1984, when Macintosh first

**By now IBM itself was re-duced to less than a 10%market share. The clonemakers and Microsoft werefully in charge.

Apple ][ 1977

The first of the Apple ][ line.

Extinct.

Macintosh Plus 1986

The third Macintosh model

Compaq Portable 1983

The first legal IBM clone.

Extinct.

Be Box 1995

The last serious challenger to

WinTel and Apple. Extinct.

IBM PC clone owners. Since then Windowshas improved greatly and is now only twoor three years behind Mac OS X in features,ease of use and technology.

Market share is a illusion. As such, it is uselessfor determining whether an idea is a successor not. Macintosh Market share continuedto fall until 2005 when it turned around andbegan increasing. 2004 market share wasthe low ebb being only 2%. According to thelatest estimates, market share for Macin-tosh computers has risen to about 4%.

Regardless of such good news, even the 2% fig-ure is unimportant because market share isan illusion.

The computer market has grown so greatlyand so quickly that even as Mac’s marketshare has fallen, the number of Macs soldhas grown. In 1992, when Macintosh mar-ket share hit its highest point of 12%,2,500,000 Mac were sold. In 2004, with a2% market share, Apple sold more than3,500,000 Macs. Last quarter, Apple sold1,236,000 Macs in only three months andthey made more money than in any otherquarter in the company’s history. Apple willprobably sell over 5,000,000 Macs in 2005.

That’s a lot of computers! Even though Appleholds a small market share they continue tosell more and more Macs. Apple continuesto be the only consistently profitable com-puter manufacturer other than Dell (anIBM PC clone maker).

And, because Macs remain useful much longer

than IBM clones, Macs account for about25% of all computers in use. Most IBM PCclones are replaced with new models aftertwo years. Macs are usually kept in servicefor about five years.

To the right you will see pie charts showingmarket share for two important years inpersonal computer history. Compare thepie charts to the line graph showing totalMacs sold. Yes, market share as a measureof success, is an illusion.

Special report Why Macs Have 4% Market Share ©2005 California Computer Care page 3

1984 1990 1995 2000 2005

IBM & Clones

Apple ][

Macintosh

Amiga

AtariCommodore 64

Market Share 1985

Macintosh

Other

IBM & ClonesIBM & Clones

Apple ][

Macintosh

Amiga

Atari

Commodore 64

Other

Market Share 2005

Macintosh Sales by year 1983 to 2005 (estimated)

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0