I could understand a change in strategy when the Mac hits it's realistic marketshare ceiling ..... So why are you using some arbitry "revenue share" data point?
Everything is arbitrary. The Mac is still rising nicely in sales. So where exactly do you think its realistic marketshare ceiling is? If you're talking about marketshare as relating to PC's, then I offer the observation that it will likely keep increasing. So that wouldn't be a useful determining factor. But as a percentage of Apple sales in dollars, it would be. At some point, Apple could determine that it's low enough for them to not be concerned about it not growing if they can get the OS out to a much larger number of people. I'm saying that it could be when the percentage gets down to 10%.
I use that number, because lack of hardware sales growth from that wouldn't cause a noticeable change in Apple's overall growth, especially when larger OS sales, with their much higher margins, are taken into account.
It?s about relative value. Companies and people do this all the time; if you can make more money focusing finite resources elsewhere you should do it.
That said, while Melgross? strategy is sound I disagree Apple will move to Mac clones at or around Mac revenue being 10% of their total revenue. Personally I can see Apple licensing the AppleTV OS or licensing some iOS derivative to automakers before i can see licensing Mac OS.
I'm not saying they will do it. I think it's possible that Jobs is deadset against doing something like that. But it would make sense.
Are you referring to Jobs's truck quote? Well, its hard to deny that he is wrong. For example, Japan has already bypassed the PC, and most people there do the majority of their computing on their cellphones (this was even before the iPhone).
The problem is that people with little financial sense (which, unfortunately, most tech folks are) are trying to estimate Apple's future actions on the basis of finances.
Lets assume, for argument's sake, that the mac reduces to just 5% of Apple's revenues by this time next year. Lets assume further, that there is only about $1Bn in growth in the mac. It still makes ZERO financial sense for Apple to drop the mac.
1) Although the mac is only 5% of their revenues, it is still a HUGE number (it would be a Fortune 500 company by itself). How would you propose Apple would replace the $18Bn or so they are already making? Besides, Apple still has less than about 10% of the PC market. Even if the entire market is shrinking, the Mac still has a lot of growth left in it (as quarter after quarter has shown).
2) How could Apple invest any savings they would achieve from ending the Mac, and get better ROIs for their shareholders? I think this is literally impossible, because if it was, Apple wouldn't have $50Bn sitting in the bank.
3) Then there is the cross pollination. The vast majority of iOS technologies are first developed on the mac. A few of the new Mac technologies came from iOS (especially power savings related ones). Macs are needed for iOS devices (although this is unlikely to be true for too long), but, they will be needed for developing for iOS devices. That isn't a market Apple is going to simply give away.
The only way Apple gives up this revenue stream is if iOS is perfectly substitutable for the Mac. Well, if/when that happens, there will be no reason to complain if the Mac is killed, because iOS will do everything the Mac can. Until there is a large PC market, there will be a large Mac market.
We could refer to his truck quote, but I was referring to his; "I would milk the Mac for all it was worth, and then go on to the next big thing." he was asked that after he had left Apple, and when Apple was in trouble.
The Mac is still rising nicely in sales. So where exactly do you think its realistic marketshare ceiling is?
I don't know where it is but I bet Apple does. There is a limit to the share that Apple can achieve while maintaining it's current price points. Plus there is a the whole, Windows entrenched, enterprise market. With PC ASP of around $700.00 i would guess that the Mac's max potential share is well south of 20%, possibly 10%.
Quote:
If you're talking about marketshare as relating to PC's, then I offer the observation that it will likely keep increasing.
Exactly! So why start to sacrifice profits and control by revisiting clones?
I don't know where it is but I bet Apple does. There is a limit to the share that Apple can achieve while maintaining it's current price points. Plus there is a the whole, Windows entrenched, enterprise market. With PC ASP of around $700.00 i would guess that the Mac's max potential share is well south of 20%, possibly 10%.
If you're talking about marketshare as relating to PC's, then I offer the observation that it will likely keep increasing.
Exactly! So why start to sacrifice profits and control by revisiting clones?[/QUOTE]
Apple's Mac sales this quarter was up 28% worldwide YOY. PC sales were down 3% YOY (estimated). So apple looks to have a long time before its marketshare rise stops, if it will.
But percentage of Apple's own sales are a different thing altogether. It's decreasing at a rapid rate, while increasing in absolute numbers. At some point, those two numbers will be optimum for Apple to begin a clone program if they want to do that.
You say that they would be giving up profit, but that's not exactly true. Margins on Macs are about 25%, but margins on software are closer to 80%. If Apple gives up some sales, but increases OS sales by 100% they would be pulling in a good profit on much less cost. If they get a 200% increase, that would be substantial. I read very often that people would buy an Apple OS machine if they were cheaper. Well, if Dell and HP made those machines, many people, and companies, would have their wish.
Apple is already increasing Mac sales to the enterprise by several hundred percent over the past couple of years. This would speed that adoption. It would speed it in areas of the world where Apple has little penetration, but a lot of people, such as Latin and South America.
Overall, this could lead to a good deal more profit for Apple. It's how MS has made its money.
But percentage of Apple's own sales are a different thing altogether. It's decreasing at a rapid rate, while increasing in absolute numbers. At some point, those two numbers will be optimum for Apple to begin a clone program if they want to do that.
Perhaps I'm just being dumb.... But why should Apple wait until this "optimum" number?
Why should Mac revenue of 10% be more optimum than 20%.. or even 50%? Bearing in mind that (at current increases suggest) that tomorrow's 10% will be worth much more than yesterday's 50%.
Perhaps I'm just being dumb.... But why should Apple wait until this "optimum" number?
Why should Mac revenue of 10% be more optimum than 20%.. or even 50%? Bearing in mind that (at current increases suggest) that tomorrow's 10% will be worth much more than yesterday's 50%.
We have to look at the stock price here as well. If Apple decides to do this, it will affect sales. That will affect the stock price, possibly. If they start now, and Mac sales fail to continue their fairly steep climb in sales in anticipation, Apple could lose perhaps 5% of total sales. That would be more than made up by other increases. Still, it would be a big enough number to matter.
If the Mac drops to 10% of sales, it might affect total sales by 2.5%, much less.
Then, 2.5% is easier to make up with OS sales to OEM's than 5%. it would take less time, and affect lost profits to a greater extent.
My thoughts are that if it wouldn't affect Apple's balance sheet by a noticeable amount, it might be worth it. But if the effect was greater, it might not pay. We could even see Apple conceding most of their computer sales to others in the long run if they felt that OS sales were helping more than hurting. This could be possible if Apple wants to become more an electronics supplier of computing equipment that's mobile, which is likely the future for most computing devices outside of business and government offices.
Comments
I could understand a change in strategy when the Mac hits it's realistic marketshare ceiling ..... So why are you using some arbitry "revenue share" data point?
Everything is arbitrary. The Mac is still rising nicely in sales. So where exactly do you think its realistic marketshare ceiling is? If you're talking about marketshare as relating to PC's, then I offer the observation that it will likely keep increasing. So that wouldn't be a useful determining factor. But as a percentage of Apple sales in dollars, it would be. At some point, Apple could determine that it's low enough for them to not be concerned about it not growing if they can get the OS out to a much larger number of people. I'm saying that it could be when the percentage gets down to 10%.
I use that number, because lack of hardware sales growth from that wouldn't cause a noticeable change in Apple's overall growth, especially when larger OS sales, with their much higher margins, are taken into account.
It?s about relative value. Companies and people do this all the time; if you can make more money focusing finite resources elsewhere you should do it.
That said, while Melgross? strategy is sound I disagree Apple will move to Mac clones at or around Mac revenue being 10% of their total revenue. Personally I can see Apple licensing the AppleTV OS or licensing some iOS derivative to automakers before i can see licensing Mac OS.
I'm not saying they will do it. I think it's possible that Jobs is deadset against doing something like that. But it would make sense.
Are you referring to Jobs's truck quote? Well, its hard to deny that he is wrong. For example, Japan has already bypassed the PC, and most people there do the majority of their computing on their cellphones (this was even before the iPhone).
The problem is that people with little financial sense (which, unfortunately, most tech folks are) are trying to estimate Apple's future actions on the basis of finances.
Lets assume, for argument's sake, that the mac reduces to just 5% of Apple's revenues by this time next year. Lets assume further, that there is only about $1Bn in growth in the mac. It still makes ZERO financial sense for Apple to drop the mac.
1) Although the mac is only 5% of their revenues, it is still a HUGE number (it would be a Fortune 500 company by itself). How would you propose Apple would replace the $18Bn or so they are already making? Besides, Apple still has less than about 10% of the PC market. Even if the entire market is shrinking, the Mac still has a lot of growth left in it (as quarter after quarter has shown).
2) How could Apple invest any savings they would achieve from ending the Mac, and get better ROIs for their shareholders? I think this is literally impossible, because if it was, Apple wouldn't have $50Bn sitting in the bank.
3) Then there is the cross pollination. The vast majority of iOS technologies are first developed on the mac. A few of the new Mac technologies came from iOS (especially power savings related ones). Macs are needed for iOS devices (although this is unlikely to be true for too long), but, they will be needed for developing for iOS devices. That isn't a market Apple is going to simply give away.
The only way Apple gives up this revenue stream is if iOS is perfectly substitutable for the Mac. Well, if/when that happens, there will be no reason to complain if the Mac is killed, because iOS will do everything the Mac can. Until there is a large PC market, there will be a large Mac market.
We could refer to his truck quote, but I was referring to his; "I would milk the Mac for all it was worth, and then go on to the next big thing." he was asked that after he had left Apple, and when Apple was in trouble.
The Mac is still rising nicely in sales. So where exactly do you think its realistic marketshare ceiling is?
I don't know where it is but I bet Apple does. There is a limit to the share that Apple can achieve while maintaining it's current price points. Plus there is a the whole, Windows entrenched, enterprise market. With PC ASP of around $700.00 i would guess that the Mac's max potential share is well south of 20%, possibly 10%.
If you're talking about marketshare as relating to PC's, then I offer the observation that it will likely keep increasing.
Exactly! So why start to sacrifice profits and control by revisiting clones?
I don't know where it is but I bet Apple does. There is a limit to the share that Apple can achieve while maintaining it's current price points. Plus there is a the whole, Windows entrenched, enterprise market. With PC ASP of around $700.00 i would guess that the Mac's max potential share is well south of 20%, possibly 10%.
If you're talking about marketshare as relating to PC's, then I offer the observation that it will likely keep increasing.
Exactly! So why start to sacrifice profits and control by revisiting clones?[/QUOTE]
Apple's Mac sales this quarter was up 28% worldwide YOY. PC sales were down 3% YOY (estimated). So apple looks to have a long time before its marketshare rise stops, if it will.
But percentage of Apple's own sales are a different thing altogether. It's decreasing at a rapid rate, while increasing in absolute numbers. At some point, those two numbers will be optimum for Apple to begin a clone program if they want to do that.
You say that they would be giving up profit, but that's not exactly true. Margins on Macs are about 25%, but margins on software are closer to 80%. If Apple gives up some sales, but increases OS sales by 100% they would be pulling in a good profit on much less cost. If they get a 200% increase, that would be substantial. I read very often that people would buy an Apple OS machine if they were cheaper. Well, if Dell and HP made those machines, many people, and companies, would have their wish.
Apple is already increasing Mac sales to the enterprise by several hundred percent over the past couple of years. This would speed that adoption. It would speed it in areas of the world where Apple has little penetration, but a lot of people, such as Latin and South America.
Overall, this could lead to a good deal more profit for Apple. It's how MS has made its money.
But percentage of Apple's own sales are a different thing altogether. It's decreasing at a rapid rate, while increasing in absolute numbers. At some point, those two numbers will be optimum for Apple to begin a clone program if they want to do that.
Perhaps I'm just being dumb.... But why should Apple wait until this "optimum" number?
Why should Mac revenue of 10% be more optimum than 20%.. or even 50%? Bearing in mind that (at current increases suggest) that tomorrow's 10% will be worth much more than yesterday's 50%.
Perhaps I'm just being dumb.... But why should Apple wait until this "optimum" number?
Why should Mac revenue of 10% be more optimum than 20%.. or even 50%? Bearing in mind that (at current increases suggest) that tomorrow's 10% will be worth much more than yesterday's 50%.
We have to look at the stock price here as well. If Apple decides to do this, it will affect sales. That will affect the stock price, possibly. If they start now, and Mac sales fail to continue their fairly steep climb in sales in anticipation, Apple could lose perhaps 5% of total sales. That would be more than made up by other increases. Still, it would be a big enough number to matter.
If the Mac drops to 10% of sales, it might affect total sales by 2.5%, much less.
Then, 2.5% is easier to make up with OS sales to OEM's than 5%. it would take less time, and affect lost profits to a greater extent.
My thoughts are that if it wouldn't affect Apple's balance sheet by a noticeable amount, it might be worth it. But if the effect was greater, it might not pay. We could even see Apple conceding most of their computer sales to others in the long run if they felt that OS sales were helping more than hurting. This could be possible if Apple wants to become more an electronics supplier of computing equipment that's mobile, which is likely the future for most computing devices outside of business and government offices.