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11/7/2005
07:55 PM
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Financial Analyst Sees Windows Users Going Mac

IPod momentum and PC software infections are driving Windows users to switch, says Needham & Co. analyst Charles Wolf in a report.

Windows users are getting sick of computer viruses and are increasingly switching to Macs, according to a research note issued on Monday by New York-based investment firm Needham & Co.

The report downgrades Apple's stock from a buy to a hold based on the high price of the computer company's shares. But it cautions that "the frenetic pace of innovation at Apple could present new opportunities," which might merit a higher share valuation.

Much of that innovation of late has involved the iPod, specifically the company's video-capable fifth generation iPod and its iPod Nano.

On October 11, Apple reported the highest revenue and earnings in its history. The company shipped 1.2 million Macintosh computers and 6.5 million iPods during its fiscal 2005 fourth quarter, a 48% increase in Mac sales and a 220% increase in iPod sales compared to the same quarter a year earlier.

In his report, Needham & Co. analyst Charles Wolf observes that cumulative iPod sales have reached 28 million since 2001 and that the momentum of the iPod, in conjunction with the ubiquity of malware on the PC, has created a halo effect that benefits the Mac platform. "Windows users are buying Macs in increasing numbers," he wrote. "We estimate in the first three quarters of calendar 2005, over one million of them have purchased a Mac compared to our estimate of 500,000 for the entire calendar year."

Wolf's assessment jibes with at least one person's experience. When news of the report reached University of Pennsylvania computer science professor David Farber's Interesting People E-mail list, subscriber Robert Raisch, CTO of Financial Media Holdings Group, Inc., volunteered his experience switching platforms.

"I've recently switched my laptop from a Toshiba Portege running Windows XP to an Apple Macintosh Powerbook G4, and I must say I am impressed," Raisch wrote in an E-mail. "A number of factors contributed to this change, not the least of which was the soul-crushing weariness I've felt hunting down and eradicating each new Window's-borne virus or other malware."

Another reader was less impressed, noting that while Mac OS X had much to recommend it, he found the operating system to be extremely slow. Such concerns may diminish when Apple rolls out its Intel-based notebooks next year.

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