Analysis: How PC to Mac unit ratio will reach 1991 levels by 2019

There was once a time when the Mac and the PC were, for all intents and purposes, true equals in the computing universe. If you were entering computing as a user at that time, you would have had no sense that one computer platform was ever going to dominate the other to the extent that would eventually unfold by 2004. The specific time I am speaking about are the years between 1991 and 1993—the Mac’s best years.

Six to One

In the early 90’s there were dozens upon dozens of superb Mac-only applications driving many industries forward. Depending on the industry, resisting the use of the Mac was tantamount to pig-headedness. You simply didn’t have any logical reason to not use them, and often had far better arguments to use them than to not.

While publishing was the crown jewel industry for Apple during the late 80’s and early 90’s, it was actually the years leading up to the PowerPC transformation that solidified and bolstered the Mac enabling direct parity against the PC in industries such as architecture, law, medicine, scientific research, graphics, film and, importantly, education. Those industries, in fact, contained the diehards that would carry Apple through it’s darkest years (1996 – 1997).

Rise and Fall of the Windows Juggernaut

As the chart below does attest, the Mac began to struggle against the Windows juggernaut in 1995 and for a good ten years the Mac fought a seemingly up-hill battle to gain market share back. (see image 01) But by 2004, and thanks to the “halo-effect” of the iPod and the shiny new Apple stores, the Mac started to regain lost ground. [Ed. note: A detailed version of this chart was created by Asymco analyst Horace Dediu here, a few years back.]

There were many dynamics that drove Microsoft’s success and Apple’s failure, during the late 90’s. The Internet was in full bloom, the PC games industry was growing rapidly, and most businesses were well on their way through the analog to digital conversion. Truth be told, those things should have enabled Apple to grow, along with Windows, not decline so rapidly. But that was not the case.

The Brilliant Foundation

And the reasons for why that was not the case were brilliantly laid out by Steve Jobs during the first few minutes of his now famous “The return of Steve Jobs Macworld 1997 Expo” speech. You can watch that video in a moment but stay with me now. (video at bottom).

Here’s what Jobs said: “When I started to get involved a lot of people gave me advice.”  Let’s now look back at those three lines of advice.

“Apple has become irrelevant.”

“Apple can’t execute anything.”

“Apple’s culture is anarchy, you can’t manage it.”

Very quickly, Jobs rebutted the idea of irrelevance by making note of the industries in which it thrived. Jobs next said that Apple was executing wonderfully but on many of the wrong things (think Newton…). And lastly, that Apple’s culture was actually desirous to fall in line behind a great strategy.

The reason why I bring these tidbits from the past up is because Jobs helped build the foundation that runs through Apple today. This foundation serves as the starting point for countering the bearish views on any of its new endeavors. While this was the press’s view of Apple in 1997, such a view of Apple today would be ludicrous.

Apple Will Reach 6:1 Again

It seems silly to account for a 6:1 ratio (not in your favor) as a big accomplishment, but for the Mac it is a mega accomplishment. And it always has been. That’s why Apple’s implosion within the 1990’s was so shocking and why Jobs’ turn-around artistry was so stunning.

By the way, the day Steve Jobs turned around the Mac was, in this author’s view, the day he spoke to the Mac faithful at Macworld Boston 1997. It was a combination of re-aligning the thinking of Mac diehards as much as corporate re-alignment. It was about focus and setting up for the future. Here’s a snippet of what he said:

“Apple is About the Mac OS. We will be doing other things, because we are creative people…but at the core Apple is about the Mac OS.” (25:15 in video)

Jobs said during the talk that its best core assets are the dedicated 20-25 million Mac users. Today Apple has over 80 million dedicated Mac users and as our previous report calculated, Apple will reach 100 million Mac users by 2017.

Things look very up for the Mac over the next few years. (see chart below) As you can see my prediction is that the Mac will reach the same PC to Mac ratio as the golden years of 1991-1993 possibly as early as 2018 or as late as 2020. (see image 02)

There are several ways to help predict this conclusion but I’ll start with the basic foundation which rests with generalized PC unit shipment projections over the next several years. In essence, IDC and several other analysts firms are projecting more or less flat growth for the next 3 or so years. Windows 10 may spur growth once it is released, but until that time the Windows PC market should expect much of the same in recent times—steady decline.

In January of this year IDC projected essentially a flat to slightly negative PC market projection for 2015. It should be noted that Apple is included in their calculations, as you can see here. Apple, by contrast, for the Mac, grew by 18.9 percent year-over-year in 2014.  Looking at 2015 for the Mac, DigiTimes Research projected Mac growth between 10-15 percent. It has been stated many times now that Apple has gained market share versus Windows in all quarters since 2005 but one.

Other Analysis Factors

In order to estimate growth for the next five years we have looked back at the Mac since the iPhone introduction. After the iPhone introduction, and before the iPad introduction, we can call that period (2007 – 2009) the iPhone Era. After 2010 we can refer to the iPhone+iPad Era. (2010 – 2014) And now with the Apple Watch, from 2015 onward we can refer to the iPhone+iPad+Apple Watch Era. (2015 – ?)

So what’s the big deal with these device eras?

Each era has slightly different dynamics relative to Mac given the interdependencies and relations between devices.

iPhone Era

The iPhone clearly accelerated interest in Apple and ramped up the “halo effect.” (see image 03) What is key about this period is that the device didn’t compete with computers, but complimented them. This is a noteworthy difference compared to the iPad. In the iPhone Era years (2007 – 2009), Apple’s Mac share grew at a tremendous pace, especially its year-over-year values for 2008, with nearly 38 percent growth. This compared to 6.7 percent growth for the PC. In the following year growth slowed considerably for Apple and stayed rather flat for PC (6.9 vs 6 percent, respectively, IDC data). With the iPad rumors strong in 2009 and an early introduction in January 2010, this had an effect on Apple’s customers to some degree with regard to Macs.

The most important thing to draw out of the iPhone Era is how a truly revolutionary device, unlike anything in the market, created a massive interest and halo effect for Apple. Apple’s Macs were the recipient of all that attention and glorious rub-off. With the Apple Watch this may repeat itself, but the recipients of added attention are now pluralized and interdependent.

There will be people who are not yet Apple customers who will be drawn to the Apple Watch and will add both an iPhone and a Mac. This number will be accumulative to the Mac’s organic growth, including previous “halo-effects.”

iPhone+iPad Era

When the iPad came along one of the biggest questions was whether the Mac (particularly MacBooks) would suffer due to interest in the new tablet. But yet Apple averaged positive year-over-year growth from 2010 – 2014 for the Mac, despite the iPad; while on the other hand, Windows PCs saw an averaged, negative year-over-year declined in the same period.

In 2011, the year after the iPad was out, Apple shipped a record 16.74 million Macs, growing 22.5 percent (YoY). In 2012, Apple shipped 18.16 million Macs, growing 8.4 percent (YoY), while the PC market saw its first decline (-3.9 percent) year over year. In 2013, both the Mac and the PC markets saw declines, approximately 10 percent each. But in 2014 the Mac market rebounded with a record level of approximately 19 million Macs, exceeding 16 percent growth, while the PC industry declined mildly.

Analysis and Calculations on the Projections

In order for Apple to reach approximately 6:1 PC to Mac figures by 2019, Apple must ship 50 million Macs in 2019, up 2x from a projected 26 million Macs in 2016. And the PC industry must stall out and retreat to just 290.1 million PCs that same year.

The last time Macs grew that fast was between 2004 and 2007, doubling Mac shipments from 3.29 million to 7.05 million.

My bullish projection sees the Mac gaining 15 percent (YoY) and the PC market flat at 0 percent (YoY) in 2015. In 2016 the Apple Watch interest will crescendo and yield Mac growth (via “halo effect plus refresh cycles) 20 percent growth, while Windows 10 will help push the PC industry into a mild gain (this against the tremendous interest in Apple Watch) around 2 percent. (see image 03)

By 2017 Apple will pass the 100 million installed Mac base and the story will super-charge the Mac for several years to come, at the expense of the Windows PC. Apple’s IBM partnership will also field contributions to Mac growth pushing the Mac growth share to 25 percent (YoY), compared to flat growth for the PC, despite Windows 10’s input.

By 2018, the Apple Mac story will continue accrual benefits (e.g.: Apple-IBM enterprise growth story, Apple Watch halo-effect and the story of the Mac itself). Based on Microsoft’s track-record with Windows sequels, nothing of importance will spur interest in Windows following Windows 10. In 2018 the PC market may be in decline once more by modest percentages.

This  envisioned “bull story” on the side of Apple ends in 2019 when Mac growth steadies around 15-20 percent (YoY) and reaches approximately one Mac for every six (6) PCs shipped. I can hear the cynics and bears now…

Answering the Bears

When looking at such a bullish outlook for the Mac, even one that extends on superb percentage gains over the past eight years, there has to be a tipping-point assumption built-in. There can be several factors that nudge the market into that tipping point (some of them happening now):

• Cloud and SaaS continue unabated against any Windows advantage in applications (eg: Autodesk Fusion 360)
• Verticals regain back Mac only advantages (just as they held in early 1990’s. Eg: Sketch)
• Apple Watch gains Mac synergies too… (of course this will happen)
• iOS continues domination while OS X strengthens iOS connections (eg: Continuity, etc)
• Apple Ecosystem advantages overwhelm the competition

Any one, or combination, of these factors can cause a tipping point conversion to Mac from Windows, within whole verticals, industry segments, and massive enterprises. And then let’s factor in organic conversion rates for the consumer.

For Apple to screw this up they would have to do something stupid like abandon Intel for ARM on OS X, which would damage vertical software development which depend on specialized toolsets, damage developer morale, and most of all undermine loyal Mac customers with demoralizing disruption and setbacks in their workflows.

Moving to ARM is something Jobs might have done; abandoning a partnership with Intel is something difficult to imagine Tim Cook would do.

[Editor’s note: We changed the title of this article shortly after publication, a rare act indeed.]

Postscript: Steve Jobs Macworld 1997 Speech