December 11, 1997 6:00 PM PST

Apple market share sinks again

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"We're number eight" isn't as rousing a motto as "Think Different," but it accurately reflects the current market share position of Apple Computer.

Apple sank to eighth place from fifth in the U.S. market during the third quarter, according to a final report on PC shipments released this week by International Data Corporation. The market research firm attributed the slide to public skepticism about the company's future.

Worldwide, Apple went from fourth place overall with a 5.5 percent market share, to ninth place with a 3.3 percent share, in a year-on-year comparison. Apple also slipped from this year's previous quarter: In the second quarter of 1997 it had a 3.8 percent market share.

The company's share in the U.S. PC market went from 7 percent in the third quarter of 1996 to 4.4 percent in the same quarter of 1997. Although the U.S. computer market grew as a whole by around 20 percent, Apple's shipments for these periods dropped from 490,000 computers shipped in the third quarter of 1996 to 365,000 for the corresponding period in 1997, a 26 percent decline.

Worldwide, shipments dropped 31 percent, from 939,000 to 648,000. During the same period, the computing market as a whole grew 16 percent. The quarter before (second quarter 1997), Apple shipped 698,000 computers.

Most of the decline can be attributed to internal problems at Apple and doubts among the buying public about the company's viability, said Eric Lewis, computer analyst at IDC, who nonetheless added that the company has begun to address internal problems.

"Factor one is people saying the Mac doesn't deliver sufficient extra value to deviate from the standard. Factor two is that people are concerned that the platform needs fixing and that the company is in trouble," Lewis said. Lewis added that the company released new "G3" machines during the quarter, but then could not manufacture enough to meet demand. The G3 computers are based on a faster and more powerful version of the PowerPC processor.

The third fiscal quarter kicked off with the resignation of then-CEO Gilbert Amelio. Sales plummeted soon after, reaching a nadir in July when the company achieved a 2.8 market share, according to Computer Intelligence.

While sales may have dipped slightly because of inventory clearance sales by clone vendors held during the quarter, Lewis stated that the effect of these sales were likely limited. "The clones weren't a help in the third quarter, but you can't attribute much to that," he said.

Despite the gloomy sales picture, Apple has started to take action on some of its pressing problems, Lewis said. The powerful G3 computers refreshed the product line. In addition, Apple moved to streamline its distribution network, which should cut costs, and landed a marketing alliance with retail giant CompUSA.

Apple also began to reinvigorate its branding strategy with the "Think Different" ads, unveiled just after the quarter ended. Lewis noted that Apple chose to highlight Apple, not Macintosh, in the ads, which could signify a shift to non-Mac based products.

Still, the company has a long way to go to right itself, staring with conceptualizing a business strategy.

"As a first step in a rebound, they need to develop a business strategy that makes sense in the current environment," he said. "It's been a number of years since they've had one...And then they have to execute [on the plan]."

 

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