Both companies beat expectations last week, but only one of them was growing

Click to enlarge. Source: Company reports, Oct. 2009.

A year ago we ran a bar graph similar to the one at right. It showed that Apple (AAPL), despite the Mac's tiny market share compared with Microsoft (MSFT) Windows, was gaining on the software giant. The main reason: revenue pouring in from the iPhone but hidden as deferred earnings in Apple's balance sheet. (That chart is posted below the fold.)

Last week Apple and Microsoft once again reported quarterly earnings — and enjoyed nice pops on the stock market. But their growth rates turn out to be very different.

This quarter, deferred iPhone revenue isn't as big a deal for Apple as it was last year (non-GAAP earnings actually grew more slowly than GAAP; see here for why). Ironically, it was Microsoft that had to use deferred revenue from Windows 7 to show any growth at all. Otherwise, Microsoft's revenue for the third quarter was down 14% year over year and its earnings down 17%.

Apple's revenue, meanwhile, grew 25% and its income 46.6%.

Apple's war chest, in terms of cash and cash equivalents, is larger than Microsoft's, $34 billion to $33 billion, taking long-term debt into account (Apple has none).

And as far as market share, that depends what market you're looking at.

The bar graph above shows the Mac's share of the U.S. personal computer market, which has inched up to 9.4%, according to IDC.

Meanwhile, the iPhone's share of the worldwide smartphone market has grown from 2.8% to 13.3%, according to Gartner, while Windows Mobile has been relegated to "Others." And the iPod continues to command roughly 70% of the MP3 player market; Zune's share hovers around 2%.

The consensus on Wall Street is that Microsoft has turned a corner, and both Apple and Microsoft rallied last week. But over the past year — since we last did this exercise — Apple's shares have grown four times faster.

Below, as promised, last year's version of the bar chart:

Date: Oct. 26, 2008

Click on the chart to see last year's post.

Thanks to reader Mark Taylor for the suggestion.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Photo: Apple Inc.

Approximately 12% of U.S. computer households own an Apple (AAPL) computer, up from 9% in 2008, according to the results of a survey released Monday morning by the NPD group.

But here's the kicker: the vast majority — 85% — also own at least one PC running Microsoft (MSFT) Windows.

There's a simple explanation for this. Mac users tend to own a lot more computers. In fact, 66% of Mac households own three or more computers, according to NPD, compared with 29% of Windows households. This probably means that Mac users know more about Windows than Windows users know about Macs.

More than 2,300 NPD panelists completed the survey. Among its other findings:

• Mac owners are richer. 36% have household incomes greater than $100,000, compared with 21% of all U.S. consumers.
• Mac households are more mobile. 72% own a notebook computer, compared with 50% of Windows PC households.
• Mac users have more iPods. 63% own an iPod, compared with 36% of all computer-owning households
• Nearly 50% of Mac households own some kind of electronic navigation system, compared with 30% of all computer-owning households.
• In general, Mac users own a lot more gadgets. The average Apple household owns 48 consumer electronic devices, compared with an average of 24 in all computer-owning households. (See chart below.)

Said NPD vice president Stephen Baker, in conclusion: "Apple household owners' actions and purchases can be used by the industry as leading indicators for hot new products and adoption."

Apple's (AAPL) share of global Internet traffic is just a thin green slice in a great pie of Microsoft (MSFT) blue, but that slice grew more than 5% last month as Windows' share fell — as it has for eight of the last 12 months — according to data released overnight Thursday by Net Applications.

The Mac's share in September, as measured by the Net metrics firm, was 5.12% — up from 4.87% the month before — while Windows' was 92.77%, down from 93.06%.

The Mac's 5.12% seems quite puny when compared with the 9.77% share Net Applications reported for Mac OS X in May. But that was before the company changed the way it weighs its data in order to more accurately reflect worldwide market shares, as opposed to the U.S.-centric numbers it used to report.

The iPhone's share also grew in September — to 0.35% from 0.33% — a 6.06% increase from a very small base. In May, before the re-weighting of the data, Net Applications reported the iPhone's share as 0.6%.

Net Applications’ monthly surveys are conducted by sampling browser data from some 160 million visits to websites operated by its clients. The company describes the results as “market shares,” but they do not actually measure share of market in the sense of sales revenue or unit sales. They used to provide a consistent methodology by which to gauge operating system trends. Now, not so much.

You can see Net Application's September report here. The results are summarized in the chart below.

See also:

• Net Applications: Apple just lost half its 'market share'

Image: Apple Inc.

There are, as far as we know, no Mac OS X viruses in the wild.

To prove that assertion wrong, you only have to name one.

Academic proofs of concept and theoretical vulnerabilities don't count. Neither do computer worms, Trojan horses, spyware, adware, spam or any of the other nasty species in the zoology of malware.

That eliminates Inqtana-A, iBotNet, MacSweeper and a handful of other examples of Mac malware usually trotted out at this point by PC apologists. Nor can you count the 10-second Zero Day Pwn2Own Safari exploit that got so much press attention last March. None of these, strictly speaking, were viruses.

The issue comes up anew because Apple's (AAPL) latest Get a Mac ads are once again hammering Microsoft (MSFT) for those "thousands of viruses" to which its operating systems and application suites are heir. And that, in turn, has led to a resurgence of comments in this space to the effect that a) Macs are just as vulnerable as Windows machines and b) the only thing that protects them is their miniscule market share.

Those ideas, while widely promulgated on the Web, are wrong. The fact that Mac OS X represents less than 4% of the worldwide installed base of computers might explain why there are fewer Mac viruses. But it wouldn't explain why there are none.

So what's the answer?

First, let's define some terms.

A Mac OS X virus in the wild, to use the definition put forward in a short-lived contest that offered $25,000 to the first hacker who could write one, is executable code that attaches itself to a program or file so that it can spread from one Mac to another. "In the wild" means it has infected, or is currently infecting, new machines through normal day-to-day usage.

By this definition, there have been hundreds, if not thousands, of Windows viruses (see partial list), a handful of Mac OS 9 viruses, and not one for Mac OS X.

The reasons for this have been extensively debated by security experts, who offer several explanations:

• Small market share. There is some truth to the "security through obscurity" argument. Many virus writers are motivated by the power they can command — and the money they can make — by seizing control of large numbers of computers. That puts a financial premium on Windows viruses.
• Mac OS X, with its Unix-based file system and kernel, is harder to infect with a self-replicating program. (See Claudiu Dumitru's MacOS X Vulnerabilities for background.) Windows, as I understand it, allows users to write run executable code outside their own protected memory space; Mac OS X does not.
• Viruses are going out of style. The action these days, I'm told, is in Trojans and spyware.

This is not to say that OS X is invulnerable. The frequency of Apple's security updates and the emphasis the company is putting on the new security features in Snow Leopard are proof that it is not. Maybe Apple is just lucky. Or maybe it's better at protecting its users from infection than Microsoft.

That said, if the built-in anti-virus protection in Windows 7 is as good as some earlier reviewers suggest. the security gap could close when Microsoft's new system finally launches next month.

Which may be why Apple is hammering home the "thousands of viruses" message now.

Source: Net Applications

The so-called market share reports issued every month by Net Applications have long been controversial — mostly because they didn't actually measure market share (which business people typically express as the number of widgets they sell in a given period divided by the total number of widgets sold).

What Net Applications did instead was sample data from browsers visiting their clients' websites and report what percentage came from machines running Windows, Mac, Linux, etc.

But despite their flaws, we tracked the net metrics firm's reports because their sample size was relatively large — some 160 million visits per month — and because they offered regular snapshots of broad market trends. They revealed, for example, the rise of Firefox, the decline of Internet Explorer, the failure of Windows Vista to catch on. Their reports were consistent, dependable, and free.

Until now.

Net Applications' reports are still free, at least some of them (mobile market share data now costs an arm and a leg). But their dependability — and perhaps their credibility — just took a huge hit.

Starting in June the company changed the way it weights its data, giving more weight to page views from countries with large Internet populations that aren't well represented by their clients (such as China) and less weight to hits from countries like the U.S. that are over-represented in their data.

Wrenching changes

The effect was to cause wrenching changes in the results — so wrenching that Net Applications skipped its June report entirely. And on Saturday, when it finally issued its July report, the new country-by-country fudge factors were applied retroactively to all past reports.

The new market shares for the major operating systems are represented in the pie chart above. To see how different they are from the old, we have to go back to May, the last month for which we have comparable data. The results are summarized in the table below. The major effect of the new weighting system:

• Microsoft (MSFT) Windows' share grew more than 6%
• Apple (AAPL) Mac OS X fell more than 51%
• The iPhone OS lost nearly 60%
• The iPod touch — whose rapid growth was the subject of a Net Applications featured report — fell off the chart
• Java ME — Sun Microsystem's (JAVA) plaform for mobile devices, barely a blip in previous reports — grew 212%

Net Applications has retroactively revised previously published data before (see here), but never to this extent.

In defending the changes, the company argues that they provide a much more accurate view of worldwide usage share statistics. But it also acknowledges that the new method produces "some significant changes in usage share" — usage shares it published with great confidence only a few months ago. The changes it highlights:

• Baidu – Baidu goes to 9% of global search engine usage.  Baidu is on a major growth curve, which is affecting the relative share of all other search engines.
• Google – Because of Baidu's growth, Google's global share is actually going down.  This is almost completely due to Baidu and does not reflect the rest of the world.
• Apple – Since Mac share in the U.S. in significantly higher than the rest of the world, Mac and Safari share drop in the global reports.
• Opera – Opera goes up to 2% in global reports.  This reflects the significant share they have in Eastern Europe and Asia.

[What the company doesn't mention -- but several readers have pointed out -- is that their operating system numbers are now much more in line with StatCounter's global stats.]

You can see Net Applications July market share reports here, and read about the new methodology here. See Ars Technica's primer for a good review of the different ways to measure market share.

See also:

• Mac Internet share hits record 8.87%; Windows drops below 90%
• Apple starts 2009 with strong Net gains
• Apple's Net share slipped in February
• iPod touch Net share grew 36% in April