Apple's Mac leads sales growth as PC market begins to recover

[AppleInsider]

The worldwide PC market began a slow rebound from the recession last quarter with overall home sales surging, and strong Mac sales with business buyers.

In a note to investors, Charlie Wolf of Needham & Company said that a surge in home PC buyers has offset significant decreases in computer sales to the "saturated" business market. But here again, Apple bucks the industry trend, actually performing relatively better in the business market than for home sales. Wolf calls the Mac's business performance an "event" he can't explain.

In the June quarter, Apple's share of business sales declined only 1.7 percent year over year, while the overall market saw a 20 percent drop in shipments to the same demographic. And while business sales made up only 18.4 percent of all Mac shipments for the period, with business sales stronger than the rest of the industry, Apple's numbers fared well.

The overall market in June saw an 18.5 percent increase in home PC sales, while business, government and education fell behind. The total industry-wide loss for the quarter was 2.4 percent, while Apple gained 5.5 percent year over year.



Strong Mac sales, Wolf said, were achieved through the price cuts enacted on June 8. He believes that widely known high profit margins on the iPhone have allowed the company to cut prices without affecting its bottom line.

"The one thing Apple has resisted is listening to pundits who argue that the current recession demands that the company lower the prices of Macs to make them 'more competitive' with Windows PCs," Wolf wrote. "This is a misguided suggestion for two reasons. First, Mac shipments actually grew faster than the PC market in both the March and June quarters. Second, while lower prices might stimulate some additional sales, the price elasticity of demand for Macs is so low that it’s unclear whether price reductions would actually translate into increased revenues. The one thing price cuts would clearly do is destroy Apple’s margin structure."



Wolf also noted very strong sales of netbooks, which have been reported elsewhere as well. He goes on to discuss the long-rumored Apple tablet, but does not provide any inside information, just skepticism and speculation.

"In our opinion, it would be premature to expect the iTablet to be introduced this soon because it’s likely to incorporate chips developed by the PA Semi engineering team, which Apple acquired last year," the report states. "It’s also our opinion that the so-called iTablet, if it exists, will not simply be an iPod Touch on steroids, if only because the market for such a product would probably not be that large. Of course, we couldn’t understand Apple’s rationale for introducing the iPod Touch in the first place two years ago. But with access to all of the applications running on the iPhone, the Touch has evolved into the must-have iPod, especially among teenagers."

[ View this article at AppleInsider.com ]

[Quadra 610]

More positive Apple news. It just doesn't stop.

In a note to investors, Charlie Wolf of Needham & Company said that a surge in home PC buyers has offset significant decreases in computer sales to the "saturated" business market. But here again, Apple bucks the industry trend, actually performing relatively better in the business market than for home sales. Wolf calls the Mac's business performance an "event" he can't explain.

I'd really like an explanation, though.

[al_bundy]

Originally Posted by Quadra 610

More positive Apple news. It just doesn't stop.

In a note to investors, Charlie Wolf of Needham & Company said that a surge in home PC buyers has offset significant decreases in computer sales to the "saturated" business market. But here again, Apple bucks the industry trend, actually performing relatively better in the business market than for home sales. Wolf calls the Mac's business performance an "event" he can't explain.

I'd really like an explanation, though.

5 year old PC's have more than enough power to run most business apps. worst case you need to max them to 2GB or 4GB of RAM

iphone is a hit and you need a Mac to develop for it so people are buying Mac's

[Dr Millmoss]

Originally Posted by Quadra 610

I'd really like an explanation, though.

I'd like a another analyst, one who isn't clueless.

[Quadra 610]

Originally Posted by Dr Millmoss

I'd like a another analyst, one who isn't clueless.

Don't hold your breath.

[Dr Millmoss]

Originally Posted by Quadra 610

Don't hold your breath.

Whew, thanks. I was turning blue over here.

[dantherevelator]

Originally Posted by AppleInsider

Of course, we couldn’t understand Apple’s rationale for introducing the iPod Touch in the first place two years ago. But with access to all of the applications running on the iPhone, the Touch has evolved into the must-have iPod, especially among teenagers."

Translation: We were clueless before, so there's no reason to expect anything different from us this time.

[caliminius]

Originally Posted by Quadra 610

I'd really like an explanation, though.

It seemed pretty clear from the first chart. The only business sector Apple grew in was the category of "small office" which is probably some place with only 1-4 computers in the place. I wouldn't be surprised if most of those "small office" sales were computers that actually got used as home computers as well. Apparently, this analyst can't even understand his own charts.

[anantksundaram]

Apple's government share fell by 66.9% in June (while that of all computers in this segment fell by only 12.7%)?!

Hmmm..... I wonder how much of it is the Obama effect (considering he is a BB user and all)......

[Tofino]

Originally Posted by anantksundaram

Apple's government share fell by 66.9% in June (while that of all computers in this segment fell by only 12.7%)?!

Hmmm..... I wonder how much of it is the Obama effect (considering he is a BB user and all)......

but he's also a mac user.

http://williamsboard.com/thread/view/74014/

[kerryn]

I think the biggest concern is Apple's lackluster performance in the home market. It seems that PC is growing faster than Mac so they will be losing market share here.

Still its hard to tell what the real performance as we do not have a volume breakout or revenue growth valuation. I'd bet a lot of the PC home growth is in Netbooks and cheapo desktops.

[christopher126]

Originally Posted by Quadra 610

I'd really like an explanation, though.

Agreed, isn't he getting paid for 'informed conjecture?'

My own thought is the iPod and now iPhone 'halo' effect on consumers who want the Apple experience in their workplace.

I know I would have a devil of a time taking a job and being handed a Blackberry and a Dell laptop with XP/Outlook/Word/PwrPt., loaded.

I think I would rather go pack groceries!

[mpw]

I wonder when the 'green shoots' of economic recovery are really established, and larger organisations get round to restoring budgets to their IT department how market share will be effected? Every office I've every visited with more than a half dozen employees (with the possible execption of one architechs office) uses MS Windows PCs. When you're stood in an office with 2,500 desks with IBMs as far as the eye can see, you wonder how many student buying Macs are gonna make a dent in that market share

[al_bundy]

Originally Posted by anantksundaram

Apple's government share fell by 66.9% in June (while that of all computers in this segment fell by only 12.7%)?!

Hmmm..... I wonder how much of it is the Obama effect (considering he is a BB user and all)......

Uncle Sam is a huge Microsoft customer. but with SL they may start buying Mac's again

[anantksundaram]

Originally Posted by al_bundy

Uncle Sam is a huge Microsoft customer.

Yeah, but that doesn't explain the relative change.

[ouragan]

Strong Mac sales, Wolf said, were achieved through the price cuts enacted on June 8. He believes that widely known high profit margins on the iPhone have allowed the company to cut prices without affecting its bottom line.

"The one thing Apple has resisted is listening to pundits who argue that the current recession demands that the company lower the prices of Macs to make them 'more competitive' with Windows PCs," Wolf wrote. "This is a misguided suggestion for two reasons. First, Mac shipments actually grew faster than the PC market in both the March and June quarters. Second, while lower prices might stimulate some additional sales, the price elasticity of demand for Macs is so low that it’s unclear whether price reductions would actually translate into increased revenues. The one thing price cuts would clearly do is destroy Apple’s margin structure."

Analyst Charlie Wolf is short-sighted in defending Apple's higher profit margins for the following reasons:


1- Sales' growth for Home buyers was slower for Macs (+14,6%) than PCs (+18,5%), despite Vista's perceived weaknesses, for a number of reasons, including:

a) a 40% lower price for PCs reflecting a 10% to 20% profit margin, instead of Apple's 36% profit margin,

b) the availability of desktop PCs and netbook PCs, while Apple doesn't make either desktop computers with a desktop CPU and graphic card or netbook computers,

c) faster and more powerful quad-core desktop CPUs on desktop PCs,

d) Blu-Ray drives on desktop PCs instead of older, cheaper mobile DVD drives on iMacs, and

e) newer and more powerful desktop graphic cards on desktop PCs instead of slower, less powerful mobile graphic cards on iMacs.


The Mac Pro is a workstation with 2 quad-core server class CPUs and error correction server class RAM, while the iMac is an all-in-one computer with slower, cooler, less powerful mobile CPU, graphic card and RAM.

With the education market, Home buyers are the core of Apple's market. If home sales don't improve because of Apple's higher profit margins, and lack of true desktop Macs, business sales will follow, as most employees want to use the same computer at home and in the office.


2- Sales' decline for Education buyers was just slightly better for Macs (-6%) than PCs (-10,7%), mostly for the same reasons as Home buyers, especially the 40% lower price for PCs reflecting a 10% to 20% profit margin, instead of Apple's 36% profit margin, and the lack of true desktop Mac computers.

If education sales don't improve because of Apple's higher profit margins, and the lack of true desktop Macs, home sales will follow, as most students and children want to use the same computer at home and in school.


3- Sales' decline for Government buyers was catastrophic for Macs (-66,9%) when compared with PC sales (-12,7%), basically for the same reasons than Home and Education sales, including a 40% lower price for PCs reflecting a 10% to 20% profit margin, instead of Apple's 36% profit margin, and the lack of true desktop Mac computers.

If government sales don't recover because of Apple's higher profit margins, and the lack of true desktop Macs, home sales will follow, as most government employees want to use the same computer at home and in the office.


4- Sales' decline for Business buyers was less important for Macs (-1,7%) than PCs (-20%), mostly because small businesses and home offices were less impacted by recession than large corporations. But, over time, Apple can't maintain a 40% higher price reflecting a 36% profit margin and must offer a choice of desktop computers if it is serious about the business market.

If business sales don't improve because of Apple's higher profit margins, and the lack of true desktop Macs, home sales will follow, as most business employees want to use the same computer at home and in the office.


Over the long term, Apple cannot survive and grow as a Mac computer builder unless it adresses every computer market, including the desktop and the netbook markets, and offers its computers at a lower, comparable price reflecting a lower, more reasonable profit margin.

A 4% world market share is a problem in itself, but coupled with a non-standard operating system and non-standard programming language, the failure to address every computer market becomes suicidal, just as the failure to offer competitive prices.

[Quadra 610]

Originally Posted by ouragan

Analyst Charlie Wolf is short-sighted in defending Apple's higher profit margins for the following reasons:


1- Sales' growth for Home buyers was slower for Macs (+14,6%) than PCs (+18,5%), despite Vista's perceived weaknesses, for a number of reasons, including:

a) a 40% lower price for PCs reflecting a 10% to 20% profit margin, instead of Apple's 36% profit margin,

b) the availability of desktop PCs and netbook PCs, while Apple doesn't make either desktop computers with a desktop CPU and graphic card or netbook computers,

c) faster and more powerful quad-core desktop CPUs on desktop PCs,

d) Blu-Ray drives on desktop PCs instead of older, cheaper mobile DVD drives on iMacs, and

e) newer and more powerful desktop graphic cards on desktop PCs instead of slower, less powerful mobile graphic cards on iMacs.


The Mac Pro is a workstation with 2 quad-core server class CPUs and error correction server class RAM, while the iMac is an all-in-one computer with slower, cooler, less powerful mobile CPU, graphic card and RAM.

With the education market, Home buyers are the core of Apple's market. If home sales don't improve because of Apple's higher profit margins, and lack of true desktop Macs, business sales will follow, as most employees want to use the same computer at home and in the office.


2- Sales' decline for Education buyers was just slightly better for Macs (-6%) than PCs (-10,7%), mostly for the same reasons as Home buyers, especially the 40% lower price for PCs reflecting a 10% to 20% profit margin, instead of Apple's 36% profit margin, and the lack of true desktop Mac computers.

If education sales don't improve because of Apple's higher profit margins, and the lack of true desktop Macs, home sales will follow, as most students and children want to use the same computer at home and in school.


3- Sales' decline for Government buyers was catastrophic for Macs (-66,9%) when compared with PC sales (-12,7%), basically for the same reasons than Home and Education sales, including a 40% lower price for PCs reflecting a 10% to 20% profit margin, instead of Apple's 36% profit margin, and the lack of true desktop Mac computers.

If government sales don't recover because of Apple's higher profit margins, and the lack of true desktop Macs, home sales will follow, as most government employees want to use the same computer at home and in the office.


4- Sales' decline for Business buyers was less important for Macs (-1,7%) than PCs (-20%), mostly because small businesses and home offices were less impacted by recession than large corporations. But, over time, Apple can't maintain a 40% higher price reflecting a 36% profit margin and must offer a choice of desktop computers if it is serious about the business market.

If business sales don't improve because of Apple's higher profit margins, and the lack of true desktop Macs, home sales will follow, as most business employees want to use the same computer at home and in the office.


Over the long term, Apple cannot survive and grow as a Mac computer builder unless it adresses every computer market, including the desktop and the netbook markets, and offers its computers at a lower, comparable price reflecting a lower, more reasonable profit margin.

A 4% world market share is a problem in itself, but coupled with a non-standard operating system and non-standard programming language, the failure to address every computer market becomes suicidal, just as the failure to offer competitive prices.

And yet, recession-proof Apple is posting record Mac sales . . . in a recession.

Did you miss their last quarterly report?

You don't really understand Apple's market, do you? Are you new to Apple?

"True Desktop Macs"?? We're moving away from desktops, industry-wide. Who wants to take losses on desktops when everyone and their dog is scrambling to get a notebook?

Over the long term, Apple cannot survive and grow as a Mac computer builder unless it adresses every computer market, including the desktop and the netbook markets, and offers its computers at a lower, comparable price reflecting a lower, more reasonable profit margin.

Now I KNOW you have no understanding of Apple's market. You do understand that Apple functions at the Premium end of the market, right?

[Ireland]

Originally Posted by AppleInsider

"It’s also our opinion that the so-called iTablet, if it exists, will not simply be an iPod Touch on steroids, if only because the market for such a product would probably not be that large."

I agree. To differentiate it from the iPod touch further they'll make it a Mac. The market for a revolutionary 10" multi-touchscreen Mac is positively astronomical, not to mention a money grab for Apple.

[anantksundaram]

Originally Posted by ouragan

Analyst Charlie Wolf is short-sighted in defending Apple's higher profit margins .... BLAH BLAH (SNIP)....
Over the long term, Apple cannot survive and grow ..... BLAH BLAH....
A 4% world market share is a problem in itself, but coupled with a non-standard operating system and non-standard programming language, the failure to address every computer market becomes suicidal, just as the failure to offer competitive prices.

What a clueless post from someone that sounds like he has an ax to grind!

Looked at the stock, and the company's financial performance lately?

[ed1776]

Originally Posted by al_bundy

Uncle Sam is a huge Microsoft customer. but with SL they may start buying Mac's again

The percentage decrease for Apple gov sales listed in the post are absolutely wrong.
In fact during the the month of June gov sales increased. I do not know how IDC does its sampling but to say there was a decrease means it is flawed.
Apple is doing good in gov and it continues to grow.

[caliminius]

Originally Posted by ed1776

The percentage decrease for Apple gov sales listed in the post are absolutely wrong.
In fact during the the month of June gov sales increased. I do not know how IDC does its sampling but to say there was a decrease means it is flawed.
Apple is doing good in gov and it continues to grow.

So instead of taking the numbers from a company that had done some actual research, we should instead take your word for it? Perhaps you could provide some sort of actual proof. As a government employee, I can't imagine that Mac sales increased in the current state of the economy. I know everyone likes to accuse the government of wasteful spending but even they must have some sort of justification. Let's see: Buy Macs that will insert non-standard machines into the network profile and cost a great deal more than a PC and then buy expensive licenses for all the necessary software or buy a much cheaper PC where you just use your Volume Licenses to install the necessary software. Which do you think is going to be approved in the budget? (Hint: it's not made by Apple)

[Crankenstein]

I'm sure once Windows 7 hits hard and heavy... Apples recent lucky streak will foddle, but, not to worry, they still have the ipod to fall back on (as long as they can fix that pesky cracking, and catching on fire glitch) but yeah!!! Long live Apple