...from: http://www.businessweek.com/technology/content/aug2004/ tc2004085_0709_tc153.htm

AUGUST 5, 2004   •  Editions: N. America | Europe | Asia | Edition Preference SPECIAL REPORT: APPLE: THE NEXT GENERATION

Apple Aces Academia Its college sales are surging as students flock to its well-designed laptops and the popular iPod/iTunes combo for digital music

The University of California at Berkeley has some of the best and the brightest students in the Golden State's vaunted university system. When they want to arm themselves with the best tech tools, they head to the Scholar's Workstation. The on-campus computer store sells thousands of machines each year. Lately more of those models have come with an Apple (AAPL ) logo on the box.

According to store administrator Mark Laws, the percentage of Apple computers sold has risen steadily. And in the fast-growing laptop category, Mac sales make up over half of the total at the Scholar's Workstation. That's a nice jump from less than 40% of total laptop sales at the store three school years ago. "People really seem to like them. We're definitely seeing more and more people come in to ask about them," says Laws.

ONE-TWO LAPTOP PUNCH.  Berkeley isn't the only campus where Macs are flying off the shelves. While the percentage of Macs sold at the Scholars Workstation is far higher than Apple's market share as tracked by PC market-research firms, CEO Steven P. Jobs and his troops have clearly been on a college roll. In each of the past three quarters, Apple has posted 40% increases in year-over-year sales for this segment.

During the first half of its current fiscal year, Apple posted an 18% bump in year-over-year education sales. And most of that has come from higher education, since the K-12 market has remained almost flat for Apple (see BW Online, 8/3/04, "Apple's Back-to-School Blast"). Clearly the Mac is climbing the Ivory Tower.

What's behind the college revival? Credit Apple's one-two laptop punch -- the lower-end iBook and the more powerful PowerBook, which are packing a wallop. "They have the right products at the right time," says Kenneth C. Green, director of the Campus Computing Project, an ongoing industry-funded study that examines how computing is used in higher education. (Apple helps to fund this study, along with rivals such as Dell (DELL ) and Hewlett-Packard (HPQ )).

IT'S ALL PORTABLE.  True, in higher education Apple has less ground to make up than in the broad PC market, where Jobs and his troops hold 3% or less of the total PC pie. That contrasts with Apple's 11.9% share in colleges in the first quarter of 2004. Moreover, that share could go up even more this year if Apple keeps up its torrid pace. Jobs & Co. sold 193,000 Macs into higher education in 2003, up 17.7% over the previous year. During that period, the entire higher-education market grew by only 11%.

The biggest reason for Apple's expansion is the growing popularity of notebook computers on campus. According to collegiate market researcher StudentMonitor, 36% of all university students had laptops by the fall of 2003, up from 21% in 2000. During that same period, desktop ownership remained roughly flat in the high 60% range.

No surprise, then, that notebook sales to universities soared by 33.8% from 2002 to 2003, according to IDC. Apple laptop sales rose by a whopping 58.5% in that same period. "When I go around and talk to colleges, I find out that well in excess of 90% of incoming freshmen have laptops," says Philip Schiller, Apple's senior vice-president of worldwide marketing. "They don't bring desktops anymore. It has all gone portable. So it makes sense we'd be doing better."

LURE OF MUSIC.  Surprisingly, this laptop explosion for Apple came without major product introductions. Schiller says the key is that Apple's core design expertise outshines raw speed comparisons with rival offerings. "You want a lot of features, but not a lot of doors and things that can break. And we're the only ones left that actually design our own products. Other companies don't have the talent or the tech to invest in breakthrough new designs and technologies such as widescreen [LCD laptop displays,]" says Schiller.

Indeed, the pricey PowerBook has become the favorite portable workstation of the campus Unix clique, which wants a nifty graphical interface and the ability to crunch serious code. Add Apple's smooth WiFi access software and its laptops are doing well in a highly competitive market. "They're well positioned in the mobile space, which is where the market is growing," says IDC analyst David Daoud (see BW Online, 8/3/04, "Apple: Sweetness Regained").

Then there's the music factor. Apple's iTunes software, which comes as a free download for either PCs or Macs, has become the de facto standard for managing digital tunes on the desktop. That, plus the runaway success of Apple's iPod music player, could be fueling a slow but steady increase in Apple customers. "My sense is that music and the iPod are influencing purchasing decisions," says analyst Charles Wolf of Needham & Co. (He owns Apple shares and has a "buy" recommendation on the stock).

YOUNG CONVERTS.  Will Apple's newfound success in the halls of higher learning add much needed fresh blood to the adult Mac user base? That's the million-dollar question. To date, no one has tracked the percentage of college Macs buyers who remain loyal to Apple after they receive their sheepskin.

In some respects, students may be more valuable customers because they're younger and have many more computer buying years in front of them. "It's hard to get people to move to a Mac, but once they do they tend to stay," says Wolf. If Apple can stay on a roll at college, then the Mac could well become a campus fixture once again.

By Alex Salkever, Technology Editor for BusinessWeek Online