Deconstructing Apple's Halo Effect

Here's a piece about Apple's "halo effect" that I recently posted to Brandweek.com, but is now headed for the archives. (Apparenltly, I'm not the only one who's skeptical.) In case you missed it the first time, here it is:

NEW YORK -- Halo 3 notwithstanding, when analysts this week buzzed about a “halo effect” for computer sales, they were referring not to Microsoft, but to Apple. Hearty sales of iPods and buzz around the new iPhone packed Apple Stores and, if shoppers didn’t leave with either of those items, they at least tended to pick up a Mac. At least that’s one explanation for Apple’s 67% jump in profits in its latest quarter, which was announced earlier this week.

“Store traffic is what drives overall sales,” said Rob Enderle, president and principal analyst of the Enderle Group, San Jose, Calif. “Even if they’re not buying an iPhone, it drove an awful lot of store traffic.” But the halo effect is just one possible reason why Apple increased its share of the global PC market to 3.2% in its fiscal fourth quarter (which ended in September) from 2.5% in March, according to analyst Piper Jaffray.(In the U.S., the numbers are even more striking. Apple claimed 11.6% of the retail market through September versus 9.2% for the same period in 2006, per the NPD Group, Port Washington, N.Y.) Other reasons include:

Lower prices: Toni Duboise, a senior analyst at Current Analysis West, San Diego, said that Apple’s notebooks prices are much more competitive than even two years ago. “Apple is shrewd about pricing its products,” she said." [Notebooks are] more competitively priced than they ever have been.” But not everyone buys into this theory. Stephen Baker, vp-industry analysis at the NYPD, said at $1,099, Apple’s lowest-priced notebook is still about double the price of an entry-level Windows notebook. “If you look at a dollar-for-dollar basis, they’re missing an opportunity,” Baker said of Apple.

Mac mainstreaming: Years ago when you bought a Mac, you’d find that there was little in the way of Mac software or hardware, but now you can get pretty much everything, including Microsoft Office applications. Standardized hardware like USB drives has helped too. “Over the past five years or so [Mac has] become much more of an industry standard,” Baker said. “A CD that works in a PC will work in a Mac as well and a USB drive works everywhere.” That makes it easier to add a Mac to a PC household.

Vista is a flop: The days when a new Microsoft OS would spur huge PC sales may be past. Either that, or Vista, Microsoft’s latest wildly hyped OS, is getting bad word of mouth. “You can’t escape it,” said Duboise. “It’s on the blogs, the message boards. You have heard these stories. I don’t know how much of a factor it is, but I’ve seen some expressed disappointment with Vista.” While Baker doesn’t blame Vista per se (“Notebook numbers had to come down and this was a good year for that to happen,” he said), Duboise said Vista was a factor in weaker-than-expected back-to-school PC sales. “Let’s just say that Vista wasn’t the catalyst for PC sales that was expected.”

There is no one factor: Baker, for one, is mystified at how other analysts conclude that Mac sales benefited in some way from iPod sales. “There’s obviously something happening there, but how you can quantify that seems a mystery,” he said. “There are just so many moving parts.”

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