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10/18/2006
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Is Mac Growth In Business World Next For High-Flying Apple?

Its popular iPod aside, Apple sold more Macs in the past quarter than ever before. The conditions are right for Mac to grow beyond its niche in business, and some say it's already happening.

While in the past few years Apple has gotten the most attention from iPods and iTunes, a financial report Wednesday shows it's selling more Macintosh computers than ever before. What's more, some see the company expanding beyond its niche status in the business world.

Apple sold 1.61 million Macs during its 2006 fourth fiscal quarter, breaking its previous quarterly record of 1.38 million Macs sold, in the first fiscal quarter of 2000. The company sold 8.72 million iPods during the fourth quarter. That represents 30% growth in Mac sales and 35% growth in iPod sales over the same period last year. (The company's fourth-quarter financial release could be restated, however, due to an internal investigation involving stock options grants).

Apple is also winning new users. In a Webcast detailing the quarter's financial results, Apple CFO Peter Oppenheimer noted that over 50% of customers buying Macs at Apple's retail stores were new to the platform.

Apple's only real strength in the business world is in graphics and publishing. But Robert Irlbeck, president of Evolution Networks, a systems integration and software development company based in Oakland, Calif., says he sees Apple making gains in other areas, particularly among "alpha geeks": Senior IT pros who have gravitated to the Mac because of its Unix foundation.

Irlbeck says he has seen several small companies move to the Mac platform, but notes that some barriers remain. While Apple's decision to move to Intel chips took some of the risk out of buying Macs, he says many businesses still have to run Windows for applications like Microsoft Project or Visio, or certain Web applications that depend on Internet Explorer.

Small- and medium-sized businesses will continue to be more receptive to Apple than larger companies, predicts technology analyst Rob Enderle. One problem is Apple's refusal to provide product roadmaps to large companies, Enderle says, the way that Microsoft, Dell, Hewlett-Packard, and other tech companies do. However, the fact that Intel details the direction of its chip development may satisfy IT managers looking for something more than Apple's semi-annual theatrics.

Another potential problem for Apple, says Enderle, is that government agencies want competitive bidding for contracts. Because of regulations like Sarbanes-Oxley, the government tries to avoid sole-sourced deals, and Apple is the sole supplier of Macs.

"You're held to such a high standard of documentation," Enderle explains. "Whenever you sole-source, you have to document the reasons why you're sole-sourcing and the decision process to make sure that you're not giving someone a sweetheart deal."

Still, Apple's growing popularity in the marketplace, its successful transition to Intel chips, the ability to run Windows using Apple's Boot Camp software, and Google CEO Eric Schmidt's decision to join Apple's board, all point to "a greater push into the enterprise," says Jonathan Hoopes, a financial analyst with investment bank and research firm Think Equity Partners in New York.

Hoopes defines "enterprise" in terms of professional purchasing, which includes not only media professionals but also the education and government markets. He expects Apple will recapture some of the ground lost in previous years to Dell.

And don't forget that the Apple generation will become tomorrow's professionals. "Fast forward four years from now, where this entire freshman class at college that has gone in with an iPod and a MacBook is getting ready to graduate," Hoopes says. "I think we're going to have a very interesting dynamic on our hands in that a lot of people, new workers in the workforce, knowledge workers, are going to demand that they work on Apple."

A CIO at a large U.S. university, who requested anonymity, says that the percentage of incoming freshmen using Macs at his college increased from 11% in 2005 to 25% this year, reversing years of decline.

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