NPD's Stephen Baker: How can Apple capitalize on its 91% premium PC share?

It's a very big slice of a shrinking pie. As the netbook form factor serves as a much-needed lifeboat for most PC manufacturers, driving average selling prices (ASPs) lower across-the-board, premium PC maker Apple is left with almost complete command of the higher end of the market. Those are the findings of research firm NPD earlier this week, as first reported by Betanews blogger Joe Wilcox. He computed the numbers NPD delivered, and concluded that in terms of revenue (not unit sales), more than nine of every ten dollars spent by Americans on computers whose prices are $1,000 or greater, are collected by Apple.

For the Apple faithful, being able to quote any Microsoft-like market share number in their favor is like Christmas come early. It means there's a genuine market segment where Apple is in complete control. But as those who know Apple very well are saying -- folks like NPD Vice President of Industry Analysis Stephen Baker, who is responsible for the numbers Wilcox cited and who spoke with Betanews this morning -- Apple has a little secret: It doesn't really care about market share.

"I just don't think that the state of the economy in the long run matters a lot to Apple, or impacts them one way or the other," said Baker. "They have a pretty stable market, [and] they're able to continue to sell into that market...Let's not forget that Apple is really, on the hardware side, two different companies. The MacBook computer company is a premium company that has no interests in being #1 in market share, has really no interest in volume. It has an interest in building great products and managing the business to the right profit margins at the right prices."

While Apple is by no means immune to the ill effects of the bad global economy, it is clearly not suffering. Late last month, the company posted quarterly results showing net sales rising 11.7% over the year-ago quarter, and margins rising just over a point to 36%. But even though those are overall margins -- which also takes into account iPhones, whose cost of production continues to decline -- they're still not ideal, especially for a company that essentially owns the premium computer market. And even though Apple is selling 4% more Macs now than it did at about this time last year, it's reaping 8% less net profit from those sales.

"Their notebook sales have struggled so far in 2009, their overall sales in the first six months were negative versus 2008. So they've struggled, they recognize that in a more recessionary economy, they need to be a bit more price competitive," Baker told us. "[With] the last MacBook Pro upgrade, they definitely reduced their prices; and certainly at the entry level price points, their products are pretty competitively priced when you do all the math."

So is Apple's firm stake to the premium market actually a tenuous position to be in, given the state of this economy? Illuminata Senior Analyst Gordon Haff told Betanews this morning that he believes there's a danger in folks overstating Apple's case, even on the company's behalf.

"There's something to be very careful of with respect to those numbers. They are specifically Apple's share of >$1000 PCs in US retail," said Haff. "That's not at all the same thing as overall share when you consider that Apple has a fairly substantial network of their own retail stores; and many of the premium PC models, such as the Dell Adamo and HP Blackbird, aren't commonly available at retail outlets such as Best Buy, if they're available at all. That's not to contradict the basic point that Apple has a much bigger slice of the high-end market than they do overall, but those numbers do somewhat overstate the case."
But does that mean Apple's 91% isn't really much of an island to stand on after all? Stephen Baker says no:

"I think the short answer is, look at their earnings. I don't think there's any question that Apple knows what they're doing, and they're in a position that they're very comfortable with. Not everybody has to sell a zillion units to be profitable or be successful, and I think from Apple's perspective, given -- as they continually say -- that they could make crappy computers the same way other people do, but they wouldn't feel comfortable doing that, and they feel comfortable where they are...they're certainly viable as being positioned as a more premium brand."

To remain competitive, all the other players that lack Apple's unique ability to stake claim to premium PCs, have had to rush to the "value" side of the market in order to eke out a profit. The netbook form factor has saved the rest of the PC economy. Meanwhile, Apple plays this game as though it doesn't need a netbook and doesn't want one. As I argued to NPD's Baker, maybe market share really doesn't matter to Apple -- maybe it's just fine where it is.

"You know what? I think you're not incorrect, but I do think that even in these economic times, Apple needs to find some ways to be more accessible to a bigger range of consumers. In the PC side of their business, they likely need to do some kind of permanent SKU, permanent product at about a $799 price point, to make sure that their customer base stays focused on that. Because they are a little separated from the rest of the PC market, they really do need to offer a little bit better in terms of value. They don't need a $399 netbook in their MacBook line, clearly; nor do they need something [MacBook] at $599, none of those things are a benefit to them.

"They need to do something around the $399 - $599 price point that is netbook-like, but that re-invents the concept of what the netbook has been thought of," Baker continued. "I think there's a huge opportunity for them there in what Intel and others have called a Mobile Internet Device."

Next: Analysts debate the merits of the "iPhone-Plus-Plus"