The new Mac mini, the cheapest Macintosh computer ever, may be big news for Apple ( AAPL), but it's still small potatoes in the world of Microsoft ( MSFT). That said, Apple's latest offering, unveiled Tuesday at Apple's annual MacWorld confab, could still keep Microsoft on its toes as the world's largest software maker continues to fight for a greater presence in consumers' living rooms. "It's definitely an interesting development that I think will have a definitive effect on
Apple's shipment volumes," said Alan Promisel, a personal computing research analyst with IDC. But "I don't think at the end of the day it challenges the dominance of Microsoft." The Mac mini could help Apple nab a few more percentage points of market share of worldwide PC sales, translating into a substantial revenue jump for the Cupertino, Calif.-based company. Apple accounted for a tiny 1.9% of worldwide PC sales and 3.3% of U.S. PC sales in the third quarter, according to IDC. However, with Microsoft systems commanding more than 90% of the PC market, losing a few percentage points to Apple is unlikely to mean much for the world's largest software maker, Promisel said. The market for the Mac mini is likely to be largely consumer-driven, including both iPod and non-iPod users who own a Windows-based PC and are wondering about the Mac, as well as Mac users looking for another computer in a different room of the house. For the first category, buying a Mac mini is largely a "why not?" decision, given its price tag starts at only $499, said Joe Wilcox, a senior analyst with Jupiter Research who covers Microsoft. "I see the potential to be very significant for Apple but the consequences to be insignificant for the larger Windows marketplace," Wilcox said. However, Wilcox said the Mac mini could pose a disruption to Microsoft's efforts to extend its reach into the home, most notably with its Media Center PC operating system. That could happen if Apple can successfully capitalize on the success of its wildly popular iPod digital music player by convincing a few million iPod users to buy a Mac mini for their living room, noted Wilcox.
But SG Cowen analyst Drew Brosseau, who covers Microsoft, doesn't see iPod driving people's computer-buying decisions as much as Apple's bulls. That's because there are so many competitive alternatives on the Windows platform "coming fast and furious" with a lot more options offered by Apple, he said. "It's not clear to me at all that iPod is going to win" in the digital music arena said Brosseau, who is recommending Microsoft stock. (His firm hasn't done banking with Microsoft.) Apple is touting the Mac mini as "what you need to have more fun with your music, photos and movies" -- in a box that measures a surprisingly small 6.5 inches wide and 2 inches tall and weighs in at only 2.9 pounds. But it's still less robust -- though at a fraction of the price -- of Media Center PCs, which offer spruced-up applications to manage digital photos, play music and record television shows. Promisel said the Mac mini would need more ports, a TV tuner and stronger wireless support to offer the same experience as the Media Center PC. However, the Media Center PC's
performance out of the gate has hardly been anything to write home about. Since its debut in 2002, Microsoft has reported sales of 1.4 million Media Center PCs -- a drop in the bucket compared to the overall PC market. Chris Bonavico, a fund manager with Transamerica Investment management who holds Microsoft shares, said he is still a believer in Media Center, despite its lackluster performance so far. "The economics of an Intel processor and a Windows-based operating system ultimately will win the war, but it's been a little bit disappointing that Christmas came and went and we didn't see much exciting stuff for Media Center," he said. "Here we are moving to 2005 and Media Center is still getting started."