July 19, 2006 4:59 PM PDT

Macs see growth spurt

With a wider range of systems available, consumers have been snapping Macs up, giving them a growth boost that outpaced the rest of the market.

Macintosh shipments were up 12 percent compared with last year, Apple Computer said Wednesday during its third-quarter earnings call. That's in contrast to a shipment increase in the second quarter of only 4 percent year over year--something that Apple described as a "pause" in buying activity.

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The Mac is back Chief Financial Officer Peter Oppenheimer credits strong Mac sales with Apple's soaring profits and improved sales.

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In announcing its switch to Intel's processors months before systems became available, Apple set itself up for a little pain: Consumers hesitated to buy PowerPC-based systems, with new Macs on the way. But now that MacBook Pro and iMac systems have been available for several months, and because of the strong demand for MacBook systems released in mid-May, any signs of hesitation among home users appear to have been erased.

"I believe the key take-away is that the Mac business is starting to accelerate," Shaw Wu, an analyst at American Technology Research, said in an e-mail interview after Apple's earnings announcement.

Macs accounted for 55 percent of Apple's revenue during the third quarter, ended July 1, said Peter Oppenheimer, the company's chief financial officer. Notebook shipments and revenue both increased by 61 percent, and Apple believes it doubled its share of the notebook market in retail channels, he said, citing data from research firm NPD.

About half the Macs sold at Apple's own retail stores during the quarter were bought by people who had never owned a Mac before, Oppenheimer said. That is roughly the same percentage that Apple has seen in recent quarters.

Educational customers also helped Apple's Mac sales during the quarter, Oppenheimer said. The new notebooks were well-received by the educational community, which likes to make purchasing decisions by the end of the last quarter, analyst Tim Bajarin of Creative Strategies said.

One downside of the Mac results was the performance of the desktop segment, which is tied to Apple's professional customers. The Power Mac desktop, used by creative professionals who need the most performance Apple can provide, has not been refreshed as of yet with Intel's newest chips. As a result, desktop shipments and revenue declined compared with last year.

However, Apple is expected to fix that pretty soon, with the launch of Intel's new Core 2 Duo processor coming in a few weeks and Apple's Worldwide Developers Conference scheduled to visit San Francisco in August. Apple hasn't said whether it will use the Core 2 Duo or the Xeon 5100 processor in the new professional desktops, but it's likely to let its developers know before or during that conference.

Another reason why developers have continued to wait for the Intel systems is the transition to universal applications that run natively on Intel's chips, Oppenheimer said. Applications that have not been ported to Apple's "universal binaries" run on Intel's systems in an emulation mode, which run noticeably slower than applications that have been written specifically for Intel's x86 chips.

By September, Apple expects that developers will have moved 70 percent of what the company considers the 500 most important Mac applications to the universal binary, Oppenheimer said.

Apple CEO Steve Jobs has said he doesn't worry as much about the fluctuations of the larger PC market because of Apple's relatively small size. Gartner and IDC reported PC market share numbers on Wednesday, and overall shipment growth was only around 10 percent worldwide. Apple's 12 percent shipment growth outpaced the market during what is considered the slowest quarter of the year.

The upcoming release of Mac OS X 10.5 could provide a boost to Mac shipments when it is released later this year or early next year. Apple is expected to provide more details about the operating system, code-named Leopard, at the developer's conference.

New iPods expected in the second half of the year might also give a shot to Mac shipments. Apple hasn't said what it has up its sleeve for the portable media players, but bloggers and analysts expect new video-capable iPods and a refresh of the iPod Nano design. Despite worries from analysts that iPod sales were stagnating, shipments grew by 32 percent, and revenue grew by 39 percent compared with last year, Apple said.

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