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January wasn't a very good month for Apple

Throughout 2008, Apple consistently posted higher growth than Windows PCs.  Thanks to this trend, Apple skyrocketed to third place in total quarterly sales.  However, in Q4 2008 the first signs of trouble appeared as Apple fell to fourth place as its growth slowed. 

The source of its problems seemed to be the bad economy, as cash-strapped customers are less likely to pay for Apple's pricey luxury machines when they can buy more affordable offerings like netbooks.

Now another significant landmark has been passed by Apple, further signaling that it is not immune to the economic downturn.  In January, for the first time in almost a year, total Windows PC sales growth surpassed that of Apple.  Apple sales and revenue dropped 6 percent and 11 percent respectively during the month of January compared to December.

Windows PCs, on the other hand, saw sales increase by 13 percent.  The revenue ended up being virtually flat, though, as much of the growth was attributable to the burgeoning netbooks sector which features low-priced machines with low profit margins.

NPD analyst Stephen Baker says price is not Apple's only problem.  He says that Apple's Mac mini line is quickly becoming out of date, in terms of technology due to the fact that it has not been refreshed in some time.  Apple had the chance to refresh it at its January MacWorld appearance, but instead chose to release a high-end 17" refresh to its MacBook Pro line.  Many Apple users may be waiting for the rumored update to the Mac mini, according to Mr. Baker.

He states, "
I don't think there's a lot of Apple people switching.  We think people just aren't buying."

Indeed, while the latest sales paint a grim picture for Apple, a company used to prolific growth over the past few years, it still can count on its unquestioningly loyal customers.  Mr. Baker though believes that Apple's MacBook laptop needs to drop in price from $999 to $799 to convince more of these loyal fans to buy again.  Such a price would be cost competitive with Windows laptops with similar specs, and might lure more than a few Windows users.

However, such moves seem unlikely from Apple, which revels in offering products with large profit margins. Steve Jobs stated in an October interview, "
We don't know how to make a $500 computer that's not a piece of junk."

Overall, laptop sales continue to grow as desktop sales shrink.  Part of Apple's problem, according to NPD, may be cannibalization.  Its users may be switching from iMacs to MacBook laptops, which ultimately cut Apple's revenue.

The NPD report only accounted for sales in U.S. retail stores and excluded online sales, so Apple still has some hope for posting a less disappointing quarter.  However, even if the final numbers aren't quite as bleak, Apple still finds itself in the very unfamiliar territory of contraction.





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