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Monday, November 06, 2006

Apple's 2007 Problem: Vista (AAPL)(MSFT)(HPQ)(DELL)

A great deal has been made of the fact that Apple's Mac sales could be hurt at the holidays as companies like Dell and HP drop prices to keep up sales. Customers may be waiting for the early 2007 launch of Microsoft's new operating system, Vista, and the PC companies was to draw the customers in. The answer is too make the machines so cheap that customers can't resist. As Apple tries to push beyond its 6% market share in the US and its 1.6 million computer units sales in Q3, it faces a second obstacle beyond cheap PCs. Vista is coming.

Apple has the Mac OS X Version 1o.4 Tiger software. It has received excellent reviews. But, the PC market, still over 90% of the world's personal computers, is awaiting Vista with great anticipation. And, that is going to sell a ton of PCs through the entire 2007 year. Microsoft is saying that Vista revenue will be $12 billion to $15 billion in their fiscal 2007 which ends the middle of next year.

Some members of the press are saying that Vista will sink interest in the Mac OS. This is probably overstated.

But, what is not overstated is that Apple has two hurdles to clear to keep Mac sales moving up, one this year (PC price cuts) and one in 2007 (excitement about Vista driving PC sales). Together, these will make improving Mac unit sales very, very tough.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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