ChangeWave Research Report:

PC Market Trends: 1st Quarter 2008

Leopard Has Apple Mac Sales Rolling

December 10, 2007

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Overview

With the holidays upon us and the end of year in sight, we recently conducted two ChangeWave surveys to get a close-up look at personal computer demand for 1st Quarter 2008 – a consumer survey on PC buying trends (n=3,872; Oct 29–Nov 5) and a corporate survey on PC purchasing plans (n=1,964; Nov 12–23). Here’s what we found:

(I) Apple Mac Sales Set to Hit New All-Time Highs

Apple (AAPL) computer sales continue to show strong consumer momentum. Not only is Apple maintaining the highest satisfaction levels among all manufacturers, but consumer purchases over the next 90 days look exceptionally robust – as seen in the chart below.

Importantly, nearly one-in-four respondents (24%) say that the release of Apple’s new Leopard operating system makes them More Likely to buy a Mac in the future.

On the corporate front, Apple Mac purchases also appear set to reach new highs.

Bottom Line. Over the next 90 days, Mac laptop and desktop sales to consumers will remain the biggest growth story in the PC industry – driven in part by the new Leopard operating system. Moreover, Apple’s corporate market share is increasing as well.

(II) Is Dell Finally Stabilizing?

After two horrific years of trending downward in our ChangeWave surveys, the tide among consumers appears to finally be stabilizing for Dell (DELL) going forward.

However, we believe the data should be interpreted cautiously, as Dell has previously shown signs of stabilizing among consumers (e.g., Jan 2007) only to resume its downward spiral in the following survey.

Corporate Findings: The chart below shows the percentage of respondents involved with corporate purchasing who say their company plans to buy Dell PCs in the next quarter. Importantly, our latest findings show a Dell uptick for the first time in more than 2 years.

In sum, the overall picture for Dell PC sales going forward appears brighter than we’ve seen in years, and supports the thesis that a modest turnaround has already begun for the beleaguered manufacturer. Just how much of an uptick is something we’ll revisit in early January in our post-holiday consumer spending survey.

(III) Mixed Signals for Hewlett-Packard

In a surprise finding, Hewlett-Packard (HPQ) computer sales appear to be weakening among consumers going forward – with planned buying of desktops (24%) and laptops (21%) both registering a dip of 4-points for the next 90 days. Simply put, visibility look unexpectedly weaker for H-P among Alliance consumers.

The story is better for H-Ps corporate market share going forward, where planned desktop purchases (18%) appear stable and laptops (16%) are ticking up by 1-pt.

All told, the survey results present a surprisingly mixed bag for Hewlett-Packard going forward. We’ll be keeping a close eye on the company as it attempts to raise its overall share in an increasingly competitive PC marketplace.

Summary of Key Findings

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Apple Mac Sales Set to Hit New All-Time Highs Next 90 Days: Consumers Desktops (29%; up 6-pts) Laptops (29%; up 1-pt) Apple Consumer Satisfaction 80% Very Satisfied 18% Somewhat Satisfied Corporate Market: 1Q Planned Purchases Desktops (6%; up 1-pt) Laptops (7%; up 1-pt)

Are Dell PC Sales Finally Stabilizing? Next 90 Days: Consumers Desktops (31%; unchanged) Laptops (28%; down 1-pt) Dell Consumer Satisfaction 61% Very Satisfied 32% Somewhat Satisfied Corporate Market: 1Q Planned Purchases Desktops (35%; up 1-pt) Laptops (33%; up 1-pt)

Mixed Signals for Hewlett-Packard Next 90 Days: Consumers Desktops (24%; down 4-pts) Laptops (21%; down 4-pts) Hewlett-Packard Consumer Satisfaction 57% Very Satisfied 34% Somewhat Satisfied Corporate Market: 1Q Planned Purchases Desktops (18%; unch) Laptops (16%; up 1-pt)

The Findings

(A) Apple (AAPL) Mac Sales Will Continue to Hit New Highs

(B) Is Dell (DELL) Finally Stabilizing?

(C) Mixed Signals for Hewlett-Packard (HPQ)

Consumer Market

(A) Past 90 Days – Overall Consumer PC Purchasing Trends

(B) Next 90 Days – Consumer PC Purchasing

(C) Microsoft Vista and Consumers

Corporate Market

(A) Corporate PC Purchasing – Next 90 Days

(B) Corporate Servers

ChangeWave Research Methodology

About ChangeWave Research

Introduction

We recently conducted two ChangeWave Alliance surveys to get a close-up look at Personal Computer demand for 1st Quarter 2008 – a consumer survey on PC buying trends (n=3,872; Oct 29–Nov 5) and a corporate survey on PC purchasing plans (n=1,964; Nov 12–23).

(A) Apple (AAPL) Mac Sales Will Continue to Hit New Highs

Consumer Market

Next 90 Days for Apple: Consumer purchases over the next 90 days look exceptionally robust – with 29% of respondents planning to buy an Apple Desktop over the next 90 days (up 6-pts), and another 29% planning to buy a Laptop (up 1-pt).

Importantly, when we asked respondents how the release of Leopard was impacting their Apple purchasing plans, nearly one-in-four (24%) said it made them More Likely to buy an Apple in the future.

Has the release of Apple's new Leopard operating system made you more likely to buy an Apple computer in the future, less likely to buy an Apple computer, or has it had no effect?

Satisfaction: Apple continues to hold the highest satisfaction level among all major PC manufacturers. Eighty percent of Apple buyers say they are Very Satisfied with their purchase (with another 18% Somewhat Satisfied).

To put this in context, the following chart shows the percentage of respondents who say they are Very Satisfied with the computer they bought over the past 90 days – broken out by manufacturer.

As you can see, Apple remains the standout industry leader in consumer satisfaction.

Corporate Market

Next 90 Days for Apple: On the corporate front, Apple Mac purchases are also set to reach new highs. A total of 7% of respondents whose companies are planning to buy PCs in the coming 1st Quarter say they ’re buying Apple Laptops and 6% Desktops – both all-time highs for Apple in the corporate market.

In other findings, 7% of corporate respondents report their company will be Increasing Apple purchases for 1st Quarter, while just 1% say they are Decreasing. Another 16% won’t be purchasing in 1Q but are considering Apple computers for the future.

Which of the following best describes your company's Apple computer purchase plans for the 1st Quarter compared to the current quarter?

Bottom Line.  Over the next 90 days, Mac laptop and desktop sales to consumers will remain the biggest growth story in the PC industry – driven in part by the new Leopard operating system.  Moreover, Apple’s corporate market share is increasing as well.

(B) Is Dell (DELL) Finally Stabilizing?

Consumer Market

After two horrific years of trending downwards in our ChangeWave surveys, the tide among consumers appears to be finally stabilizing for Dell going forward.

However, we believe the data should be interpreted cautiously, as Dell has previously shown signs of stabilizing among consumers (e.g., Jan 2007) only to resume its downward spiral in the following

Consumer Satisfaction: Dell has significantly improved its satisfaction rating among those consumers who recently purchased a Dell computer – jumping to 61% Very Satisfied in the current survey.

Corporate Market

Corporate Findings: The chart below shows the percentage of respondents involved with corporate purchasing who say their company plans to buy Dell PCs in the next quarter. Importantly, our latest findings show a Dell uptick for the first time in more than 2 years.

Dell – Bottom Line. In sum, the overall picture for Dell PC sales going forward appears brighter than we’ve seen in years, and supports the thesis that a modest turnaround has already begun for the beleaguered manufacturer.  Just how much of an uptick is something we’ll revisit in early January in our post-holiday consumer spending survey.

(C) Mixed Signals for Hewlett-Packard (HPQ)

Consumer Market

Next 90 Days for H-P: In a surprise finding, H-P computer sales appear to be weakening among consumers going forward – with planned buying of desktops (24%) and laptops (21%) both registering a dip of 4-points for the next 90 days.  Simply put, visibility look unexpectedly weaker for H-P among Alliance consumers. 

Satisfaction: Among those who bought an H-P over the past 90 days, 57% say they are Very Satisfied – 4-points better than in the previous survey.

Corporate Market

Next 90 Days for H-P:The story is better for H-Ps corporate market share going forward, where planned desktop purchases (18%) appear stable and laptops (16%) are ticking up by 1-pt.

H-P – Bottom Line. All told, the survey results present a surprisingly mixed bag for Hewlett-Packard going forward. We’ll be keeping a close eye on the company as it attempts to raise its overall share in becoming an increasingly competitive PC marketplace.

II. Consumer Market: A Closer Look at the Data

(A) Past 90 Days – Overall Consumer PC Purchasing Trends

(1) Question Asked: Overall, how satisfied are you with the computer(s) you purchased within the last 90 days? (Rate Only Those Purchased in Last 90 Days)

Overall Customer Satisfaction. Among respondents who purchased a computer in the past 90 days, Apple again receives the highest percentage of Very Satisfied users (80%). Dell – who ranked lowest in our previous survey – has moved up to second place.

(2) Question Asked: Which operating system came preinstalled on the computer(s) you purchased within the last 90 days? (Check All That Apply) (n=716)

(B) Next 90 Days – Consumer PC Purchasing

(3) Question Asked: Will you be buying a computer in the next 90 days?

The survey findings point to a relatively healthy PC market, with an increase in the percentage of consumers who plan to buy one over the next 90 days.

(4) (FOR THOSE BUYING A COMPUTER IN NEXT 90 DAYS) Who is the manufacturer and what computer type are you planning on buying?(Check All That Apply)

Desktops (n=329)

Laptops (n=407)

(5) Question Asked: Which operating system would you like to have preinstalled on the computer(s) you plan on buying in the next 90 days? (Check All That Apply) (n=639)

(C) Microsoft Vista and Consumers

(6) Question Asked: Microsoft's new Vista operating system is currently available in several different varieties. Do you currently use any version of the Vista operating system at home? (Check All That Apply) (n=1880)

(6A) Question Asked: Overall, how satisfied are you with the Vista operating system(s) you use at home? (n=391)

III. Corporate Market: A Closer Look at the Data

(A) Corporate PC Purchasing – Next 90 Days

(1) Question Asked: (FOR THOSE COMPANIES BUYING COMPUTERS IN 1st QUARTER 2008) Who is the manufacturer and what computer type(s) is your company planning on buying? (Check All That Apply)

Desktops

Laptops

(2) Question Asked: And for those companies buying computers in 1st Quarter 2008, what operating system will be installed on your new computer(s)? (Check All That Apply)

(B) Corporate Servers

(3) Question Asked: From which of the following vendors is your company purchasing servers from in 1st Quarter 2008? (Check All That Apply) (n=1,964)

Server Purchases for 1Q. Corporate server purchase plans for the coming 4th Quarter are little changed, with Dell (20%; up 1-pt) still the leader in planned server purchases, followed by Hewlett-Packard (17%; down 1-pt) and IBM (11%; unchanged).

(4) Question Asked:  Which of the following operating systems are currently used on servers in your company? (Check All That Apply) (n=976)

Operating Systems. With regards to server operating systems, Microsoft (66%) remains the dominant player – unchanged from previously. Red Hat (13%; down 3-pts), IBM (10%; down 4-pts) and Hewlett-Packard (8%; down 3-pts) are all noticeably down from our August survey.

(4A) Question Asked:  Which of the following operating systems is the primary system currently used on servers in your company? (Check All That Apply) (n=776)

(5) Question Asked:  Over the past 90 days, which of the following operating systems have been newly installed on servers in your company? (Check All That Apply) (n=433) 

(5A) Question Asked: And over the next 90 days, which of the following operating systems do you think will be newly installed on servers in your company? (Check All That Apply) (n=443)

Operating System Installs. Microsoft is still the clear leader when it comes to server installs, while Red Hat, Sun and IBM all look weaker.

This report presents the from two recent ChangeWave Alliance surveys. The first, conducted October 29 - November 5, focused on consumer demand for PCs (n=3,872); and the second, conducted November 12-23, looked at corporate PC purchasing plans (n=1,964).

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