With all eyes fixed upon the expected iPhone 5 announcement next week, it's too easy to overlook the extent of the challenge Apple's other products are posing to Microsoft. Not only are sales of Macs continuing to grow much faster than that of PCs (which we all knew), but a recent report out of Wall Street indicates Apple is making strong gains in business -- Microsoft's seemingly impregnable fortress -- and the iPad is cannibalizing sales of PCs and even Macs in the education market.
"The role of the iPad cannot be overemphasized. Some observers estimate the iPad sales in the business market might represent up to half of all iPad sales," writes Charlie Wolf, who follows Apple for Needham & Co., an investment bank.
As I've written many times, Microsoft is hardly on the ropes; PCs still outsell Macs by a huge margin. But Wolf's analysis underlines how crucial this fall's launch of Windows 8 and the related Surface tablet, as well as its struggling tie-up with Nokia to gain a meaningful presence in the smartphone market, are for Redmond's hopes to finally succeed in the mobile market and remain dominant on the desktop. A generation of new users (and their parents) are being exposed to the iPad and iOS, and unless Windows 8 and devices like the Surface strike them as compelling, they may never be willing Windows customers again.
What's more, Apple is riding the crest of the "consumerization of IT" trend. Indeed, BYOD (bring your own device) has practically become synonymous with "bring your own iOS device to work," maybe even to the detriment of real user choice and empowerment.
The halo effect even works in businesses
Apple's overall sales of laptops and desktops have grown faster than PC sales for about six years now -- for 25 straight quarters, to be exact. That margin was a bit narrower last quarter, but not in the business market.
During the April-to-June quarter, Mac shipments to businesses in the United States grew 56.6 percent, while overall PC sales slipped 8.8 percent, says Wolf. Meanwhile, Mac business shipments worldwide increased 22.1 percent, amid a 4.5 percent decline in overall business PC sales. Of course, Apple still has a very long way to go in the business market: Apple's share of that segment last quarter was just 5.9 percent, an all-time high.
It's not easy to know exactly why Apple is gaining ground in business, but there are several good suspects. The most likely is the so-called halo effect. As users learn to love Apple hardware and software via consumer products like the iPod, iPhone, and iPad, they start wanting to use them in the office; replacing PCs with Macs, a once unthinkable alternative for many, becomes increasingly attractive.
Writes Wolf: "No doubt many mobile professionals purchased an iPhone for their personal use, which cast a favorable light on Apple's app ecosystem. ... The iPad undoubtedly reinforced the more positive perception of Apple products, encouraging some IT professionals to consider the Mac in their purchasing decisions." It's worth noting that many pundits dismissed the existence of a halo effect several years ago, entirely missing the start of a significant trend.