Following Macs for a while, you start to see that Apple fans are eternal optimists. It's always wait 'til next quarter or the next product comes out. After a while I gave up my optimism for realism. So I'm going to tell you how Apple is REALLY doing. I am also going to post a thread What Apple Must Do To Grow. I am not trolling. To grow Apple must be daring and take on Windows head on.
But for this thread I am going to give you a real perspective of how Apple's fortunes are looking. It may not be what you want to hear but the truth is what matters. We live in a society that can't think past two months ago. Instead we analyze things in terms of the latest news events rather than a progression of events through months and years.
Let's start off with PowerMac G4 sales. Apple sold 212,000 last quarter and that's horrible compared to the 350,000 to 400,000 they were selling two years ago. This is due to the megahertz gap ONLY. First you might argue that the whole computer industry is selling less units as a whole. But this is because more people have a computer now and there is less reason to upgrade. THIS DOES NOT APPLY TO CUSTOMERS OF APPLE'S POWERMAC LINE. The creative professionals who pay more for the high end PowerMacs do so because they need as much speed as they can get. They always have and always will. If I'm not mistaken, at the beginning of this year the PowerMac was at 500MHZ but was upped to 733 and then 867. So there is plenty of reason for customers to replace their slower machines since 867 is almost double 500. But they are buying less because Wintels are faster and much cheaper. This is reality. You can say there was a slow economy. But this might reduce sales by 10 or 15 per cent, not 45%. If you think sales slow by that much in a slow economy you must also be frightened every time they hype the next big winter storm coming. These things are exaggerated to sell papers. And finally, you can also say that customers are waiting for Photoshop for OS X to come out to upgrade. But this is nonsense. If they are running Photoshop on OS 9 right now they can use the faster machine right now. I think Photoshop even uses dual processors in OS 9. There's no reason to wait for OS X because speed is speed and Photoshop on OS 9 is faster on an 867 than on a 500. I know it's not directly Apple's fault that the PowerPC isn't keeping up with the Pentium. It's just economics. The x86 market is 20 times larger and making fast processors is all about volume and billions of dollars to design them and make the factories to produce them. Motorola can't keep up with the economies of scale and PowerMac sales will NEVER return to previous levels. We have nothing but rumors now and it just doesn't make sense in terms of basic economics for Motorola to be able to keep up.
For Apple to get the PowerMac numbers back they must go to x86, but that's another thread.
Now let's look at iMac sales because here is another huge probelm. You might be saying that Apple says demand is big for the new iMac. I'm sure there will be some initial buyers who fall in love with it. But here's reality. No matter how cool or a great value the new iMac is, there simply is virtually no room for growth at the $1299 level. PCs sell for way less and customers don't expect to pay that much.
The iMac was a really strong seller when it was competitive specwise with PCs. But people got tired of 15 inch monitors and sales tanked. THE iMac WAS ONLY SUCCESSFUL IN IT'S TIME WHEN IT WAS A GOOD VALUE COMPARED TO MIDRANGE PCs. When prices fell and its specs were lousy it sold less and less, and only the sub $1000 models sold at all. WHAT APPLE NEEDED TO DO WAS MAKE THE MAC COMPETITIVE AGAIN IN THE SUB $1,000 MARKET. Let me repeat this again. WHAT APPLE NEEDED TO DO WAS MAKE THE MAC COMPETITIVE AGAIN IN THE SUB $1,000 MARKET. This is the only place to really grow. Apple is already an outsider and a niche, and $1299 PCs are not in the range people expect to pay. A Mac with 17 inch CRT for $999 or less would have been what Apple needed to make the iMac exactly as appealing as it was before.
$1299 is the high end for a computer. The new iMac is a fantastic value when you consider the LCD, BUT ONLY 15% OF MONITORS SOLD ARE LCDS. So Macs are a niche and LCDs are restricted to the high end. I hope the new iMac does well but I can't see much growth possibilities in that price range. The place to take customers is $700-$1100 and the old iMac is still anemic competition.
You can analyze things in terms of the headlines you read yeaterday about iMac have strong initial demand, but the plan for the iMac HAS ALWAYS BEEN to be competitive with the midrange of the PC pricewise. This is no longer happening. $1299 is more than most expect to pay and most don't plan to buy an LCD.
Now you may be saying that the Apple retail stores will help the new iMac. Here's more bad news. First of all, the iMac is a little too out there design wise to sell well in a crappy setting like CompUSA, but it's possible. But there are only 27 Apple stores and they LOST $8 million last quarter. I don't buy this stuff about sales picking up strongly. There are many more shoppers in the mall during Christmas quarter than in other quarters. January through March is a slow quarter. Once you've seen the Apple store how many more times do you need to see it? Don't get me wrong. The Apple stores may soon break even or make a profit. BUT 27 STORES IS HARDLY ANYTHING, and a loss of $8 million shows there is much risk. If they had lost $1 million I would say "Great, that's almost nothing so open up another 200 stores right now.". But an $8 million loss, though certainly not telling of the future, says one thing for certain. Apple CAN lose a lot of money on these stores in bad times and has to move slowly in opening them. But to really grow marketshare, and to really show the general public a buying experience deserving of the Mac, APPLE NEEDS 200 TO 500 STORES. If one store converts 2,000 Wintel customers a year, that would be great, but that would only be 78,000 customers for Apple's current 27 plus 12 currently planned. 78,000 customers is less than 0.1% of the market. Growing marketshare from these stores is possible, but it's going to be a high wire act to achieve.
Now how about iPod sales. Apple might make a measly $150,000,000 in profits this year. This might sound like a lot but it means Apple is simply treading water to stay in place. To make a real mark on the marketplace, APLE NEEDS A NEW BEYOND THE BOX PRODUCT EACH MONTH. A new reason for the customers to buy the Mac or to visit the Apple store again needs to be given EACH MONTH. Apple can do this but it's all about having the resources to design, ramp up initial production, produce, and market the product. If Apple made $800 million this year, they could through an extra $300 million to R&D and spend it all on Beyond The Box.
But Apple will only make $150 million this year if things stay about the same. BUT IF THEY RELEASED iPod FOR WINDOWS THEY COULD DOUBLE THEIR PROFITS. Analysts have said that they could sell 4 TIMES AS MANY iPods if they released it for Windows. If you figure $75 profit
per iPod and figure they will sell 1/2 million this year, then that's 1.5 million more if they release it for Windows. That's more than $100 million dollars profits. Right now by keeping it Mac only, they will get a small handful more new Mac users. BY RELEASING IT FOR WINDOWS, THEY BUILD A NEW IMAGE FOR THE GENERAL PUBLIC AND HAVE 1.5 MILLION PEOPLE WALKING AROUND LOVING THEIR APPLE PRODUCT AND SHOWING IT TO FRIENDS. This makes those 1.5 million people much more likely to stop by that Apple Store again and eventually by that Mac. This strategy of keeping everything on the Mac island and expecting customers to swim over just isn't going to work. It's much wiser to get Apple products into people's homes and have them talking about these products by putting SOME Mac advantages on windows.
I just don't see where growth will come from. Apple sold only about 60% as many Macs last quarter as they did in the December of 99 quarter when they sold 1.377 million WHEN THE iMac WAS COMPETITIVE WITH MIDRANGE PCS. They aren't really growing until they've reached that level again.
And finally, let's look at the absolute worst news. Microsoft is building a cage for the entire industry with .NET. Soon they will be selling the HomeStation, a digital hub for the home. This is the kind of thing Apple would excel at, BUT THEY WON"T EVEN BE ABLE TO ENTER THE MARKET. The industry won't support two infrastructures for device networking. And Apple doesn't even have the software to compete. .NET IS OPERATING SYSTEM SOFTWARE that should come from Apple but won't. Apple will have to accept whatever support Microsoft offers. In other words. part of the basic functionality of what MacOS does WILL BE PROVIDED BY MICROSOFT AS THEY SEE FIT. .NET is basic operating system functionality as much Quicktime or OpenGL is. Microsoft is getting new people signing on everyday. They are making software for Windows XP, that CAN'T BE WRITTEN FOR THE MAC, unless Microsoft allows it to be and M$ will give itself advantages over everyone else. People WILL be using .NET services, AND WILL COME TO NEED THEM. I don't know what Apple will be able to do to differentiate itself. Apple made a measly $38 million last quarter, while Microsoft is pulling in a billion or so each month. Imagine all the programmers you can hire or the intellectual property or companies you can buy with $1 BILLION. Microsoft will have the future of computers to themselves because no one will have the capital to match their projects.
[ 01-18-2002: Message edited by: spindler ]</p>
But for this thread I am going to give you a real perspective of how Apple's fortunes are looking. It may not be what you want to hear but the truth is what matters. We live in a society that can't think past two months ago. Instead we analyze things in terms of the latest news events rather than a progression of events through months and years.
Let's start off with PowerMac G4 sales. Apple sold 212,000 last quarter and that's horrible compared to the 350,000 to 400,000 they were selling two years ago. This is due to the megahertz gap ONLY. First you might argue that the whole computer industry is selling less units as a whole. But this is because more people have a computer now and there is less reason to upgrade. THIS DOES NOT APPLY TO CUSTOMERS OF APPLE'S POWERMAC LINE. The creative professionals who pay more for the high end PowerMacs do so because they need as much speed as they can get. They always have and always will. If I'm not mistaken, at the beginning of this year the PowerMac was at 500MHZ but was upped to 733 and then 867. So there is plenty of reason for customers to replace their slower machines since 867 is almost double 500. But they are buying less because Wintels are faster and much cheaper. This is reality. You can say there was a slow economy. But this might reduce sales by 10 or 15 per cent, not 45%. If you think sales slow by that much in a slow economy you must also be frightened every time they hype the next big winter storm coming. These things are exaggerated to sell papers. And finally, you can also say that customers are waiting for Photoshop for OS X to come out to upgrade. But this is nonsense. If they are running Photoshop on OS 9 right now they can use the faster machine right now. I think Photoshop even uses dual processors in OS 9. There's no reason to wait for OS X because speed is speed and Photoshop on OS 9 is faster on an 867 than on a 500. I know it's not directly Apple's fault that the PowerPC isn't keeping up with the Pentium. It's just economics. The x86 market is 20 times larger and making fast processors is all about volume and billions of dollars to design them and make the factories to produce them. Motorola can't keep up with the economies of scale and PowerMac sales will NEVER return to previous levels. We have nothing but rumors now and it just doesn't make sense in terms of basic economics for Motorola to be able to keep up.
For Apple to get the PowerMac numbers back they must go to x86, but that's another thread.
Now let's look at iMac sales because here is another huge probelm. You might be saying that Apple says demand is big for the new iMac. I'm sure there will be some initial buyers who fall in love with it. But here's reality. No matter how cool or a great value the new iMac is, there simply is virtually no room for growth at the $1299 level. PCs sell for way less and customers don't expect to pay that much.
The iMac was a really strong seller when it was competitive specwise with PCs. But people got tired of 15 inch monitors and sales tanked. THE iMac WAS ONLY SUCCESSFUL IN IT'S TIME WHEN IT WAS A GOOD VALUE COMPARED TO MIDRANGE PCs. When prices fell and its specs were lousy it sold less and less, and only the sub $1000 models sold at all. WHAT APPLE NEEDED TO DO WAS MAKE THE MAC COMPETITIVE AGAIN IN THE SUB $1,000 MARKET. Let me repeat this again. WHAT APPLE NEEDED TO DO WAS MAKE THE MAC COMPETITIVE AGAIN IN THE SUB $1,000 MARKET. This is the only place to really grow. Apple is already an outsider and a niche, and $1299 PCs are not in the range people expect to pay. A Mac with 17 inch CRT for $999 or less would have been what Apple needed to make the iMac exactly as appealing as it was before.
$1299 is the high end for a computer. The new iMac is a fantastic value when you consider the LCD, BUT ONLY 15% OF MONITORS SOLD ARE LCDS. So Macs are a niche and LCDs are restricted to the high end. I hope the new iMac does well but I can't see much growth possibilities in that price range. The place to take customers is $700-$1100 and the old iMac is still anemic competition.
You can analyze things in terms of the headlines you read yeaterday about iMac have strong initial demand, but the plan for the iMac HAS ALWAYS BEEN to be competitive with the midrange of the PC pricewise. This is no longer happening. $1299 is more than most expect to pay and most don't plan to buy an LCD.
Now you may be saying that the Apple retail stores will help the new iMac. Here's more bad news. First of all, the iMac is a little too out there design wise to sell well in a crappy setting like CompUSA, but it's possible. But there are only 27 Apple stores and they LOST $8 million last quarter. I don't buy this stuff about sales picking up strongly. There are many more shoppers in the mall during Christmas quarter than in other quarters. January through March is a slow quarter. Once you've seen the Apple store how many more times do you need to see it? Don't get me wrong. The Apple stores may soon break even or make a profit. BUT 27 STORES IS HARDLY ANYTHING, and a loss of $8 million shows there is much risk. If they had lost $1 million I would say "Great, that's almost nothing so open up another 200 stores right now.". But an $8 million loss, though certainly not telling of the future, says one thing for certain. Apple CAN lose a lot of money on these stores in bad times and has to move slowly in opening them. But to really grow marketshare, and to really show the general public a buying experience deserving of the Mac, APPLE NEEDS 200 TO 500 STORES. If one store converts 2,000 Wintel customers a year, that would be great, but that would only be 78,000 customers for Apple's current 27 plus 12 currently planned. 78,000 customers is less than 0.1% of the market. Growing marketshare from these stores is possible, but it's going to be a high wire act to achieve.
Now how about iPod sales. Apple might make a measly $150,000,000 in profits this year. This might sound like a lot but it means Apple is simply treading water to stay in place. To make a real mark on the marketplace, APLE NEEDS A NEW BEYOND THE BOX PRODUCT EACH MONTH. A new reason for the customers to buy the Mac or to visit the Apple store again needs to be given EACH MONTH. Apple can do this but it's all about having the resources to design, ramp up initial production, produce, and market the product. If Apple made $800 million this year, they could through an extra $300 million to R&D and spend it all on Beyond The Box.
But Apple will only make $150 million this year if things stay about the same. BUT IF THEY RELEASED iPod FOR WINDOWS THEY COULD DOUBLE THEIR PROFITS. Analysts have said that they could sell 4 TIMES AS MANY iPods if they released it for Windows. If you figure $75 profit
per iPod and figure they will sell 1/2 million this year, then that's 1.5 million more if they release it for Windows. That's more than $100 million dollars profits. Right now by keeping it Mac only, they will get a small handful more new Mac users. BY RELEASING IT FOR WINDOWS, THEY BUILD A NEW IMAGE FOR THE GENERAL PUBLIC AND HAVE 1.5 MILLION PEOPLE WALKING AROUND LOVING THEIR APPLE PRODUCT AND SHOWING IT TO FRIENDS. This makes those 1.5 million people much more likely to stop by that Apple Store again and eventually by that Mac. This strategy of keeping everything on the Mac island and expecting customers to swim over just isn't going to work. It's much wiser to get Apple products into people's homes and have them talking about these products by putting SOME Mac advantages on windows.
I just don't see where growth will come from. Apple sold only about 60% as many Macs last quarter as they did in the December of 99 quarter when they sold 1.377 million WHEN THE iMac WAS COMPETITIVE WITH MIDRANGE PCS. They aren't really growing until they've reached that level again.
And finally, let's look at the absolute worst news. Microsoft is building a cage for the entire industry with .NET. Soon they will be selling the HomeStation, a digital hub for the home. This is the kind of thing Apple would excel at, BUT THEY WON"T EVEN BE ABLE TO ENTER THE MARKET. The industry won't support two infrastructures for device networking. And Apple doesn't even have the software to compete. .NET IS OPERATING SYSTEM SOFTWARE that should come from Apple but won't. Apple will have to accept whatever support Microsoft offers. In other words. part of the basic functionality of what MacOS does WILL BE PROVIDED BY MICROSOFT AS THEY SEE FIT. .NET is basic operating system functionality as much Quicktime or OpenGL is. Microsoft is getting new people signing on everyday. They are making software for Windows XP, that CAN'T BE WRITTEN FOR THE MAC, unless Microsoft allows it to be and M$ will give itself advantages over everyone else. People WILL be using .NET services, AND WILL COME TO NEED THEM. I don't know what Apple will be able to do to differentiate itself. Apple made a measly $38 million last quarter, while Microsoft is pulling in a billion or so each month. Imagine all the programmers you can hire or the intellectual property or companies you can buy with $1 BILLION. Microsoft will have the future of computers to themselves because no one will have the capital to match their projects.
[ 01-18-2002: Message edited by: spindler ]</p>
