Report: 1 Million Mac Switchers in 2005

As many as one million Windows users may have switched to Mac OS X, according to a note released on Monday to clients of financial firm Needham & Co. Analyst Charles Wolf disclosed the estimate and said Apple's current stock price of $61 has met the company's price target.

Due to this, the company is downgrading the stock to "hold," although with reservation.

Wolf said Apple's stock price could go higher still, as "the frenetic pace of innovation at Apple could present new opportunities." However, at its current level, the company feels the stock is fully valued.

But the most notable part of the report was not the stock downgrade.

Needham & Co. had earlier forecasted a half-million Windows users would switch to Apple's Mac platform during the entire year. Wolf now says that the estimate was too low because the firm had only taken into account switchers who had bought an iPod first.

Instead, one million Windows users have likely purchased a Mac in the first nine months of 2005, and it could even eclipse the company's 1.3 million-unit target for 2006 before the year is out. The firm is assuming that much of the growth behind Apple's computer sales is due to Windows switchers.

Growth in Apple's retail store chain also led eedham & Co. to reassess the "halo effect" -- locations are seeing 46 percent more visitors and 45 percent more sales year over year.

While the iPod may be fueling much of the growth, Wolf said that the reason why people are switching is not only due to a "positive user experience" with the ubiquitous music player, but rather continued virus and malware issues that plague the Microsoft operating system.

Also, instead of purchasing a Mac Mini, which most analysts at launch said was an obvious effort at introducing Windows users to Macs, switchers are opting for higher-end models that bring Apple larger profit margins.

"New products and innovative strategies from Apple should keep coming," Wolf told clients. "However, we can't quantify them in our valuation model since we don't know what they are."