Apple blames 17% drop in Mac sales on iMac supply constraints

Posted:
in AAPL Investors edited January 2014
Apple on Wednesday released its earnings for the first quarter of the 2013 fiscal year, revealing a precipitous drop in both revenue and shipments for Macs, a sector that once made up the core of the company's business.

For the quarter ended December 31, 2012, the Mac division moved 4.1 million units, generating $5.52 billion in revenue. That figure is down from 4.9 million units and $6.62 billion for the previous quarter, and 5.2 million units and $6.6 billion in revenue year-over-year.

iMacs
Apple blamed iMac production difficulties in part for disappointing Mac sales.


Revenue from the Mac sector has continued to shrink as a proportion of Apple's overall revenue. Even as Apple's mobile offerings have thrived ? CEO Tim Cook said today the company had sold more than half a billion iOS devices ? the company's notebook and desktop segment have dropped to just 10.1 percent of overall revenue, compared to 18.4 percent for the previous quarter and 14.2 percent for the first quarter last year.

Apple's Chief Financial Officer Peter Oppenheimer attributed the Mac division's disappointing figures to constraints in the production chain of new iMacs. The company began and ended the quarter with between three and four weeks of Mac channel inventory, according to Oppenheimer, below Apple's target of four to five weeks of channel inventory.

Oppenheimer noted that market research firm IDC projected the PC market to have contracted six percent over the quarter, while Mac sales slowed by 16 percent.

Cook said there were three main factors that contributed to the decline in Mac sales performance: constraint of iMac supply; the loss of one week from the last year's 14-week first quarter; and channel inventory constraints that were down by over 100,000 units at the start of the quarter.

Commenting further on the issue, Cook reiterated the impact of iMac production issues, noting that "if you look at our portables alone, they were in line with IDC's projections of growth." Cook also pointed to the 23 million iPads Apple moved in the quarter, saying "we've always said there was some cannibalization, and I'm sure there was some cannibalization of Macs there."
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Comments

  • Reply 1 of 42


    Well, yeah.


     


    But don't blame, just fix it. Tim doesn't strike me as a "roam the halls, threatening to fire" kind of guy, but he's also supposed to be the operations guy. Maybe they're being too kind? Who can say.

  • Reply 2 of 42

    Quote:

    Cook also pointed to the 23 million iPads Apple moved in the quarter, saying "we've always said there was some cannibalization, and I'm sure there was some cannibalization of Macs there."


    Well duh...

  • Reply 3 of 42

    Quote:

    Originally Posted by Tallest Skil View Post


    Well, yeah.


     


    But don't blame, just fix it. Tim doesn't strike me as a "roam the halls, threatening to fire" kind of guy, but he's also supposed to be the operations guy. Maybe they're being too kind? Who can say.



    Agreed. I thought that this was Tim Cook's forte?! If they can't get their supply chain in gear, they should simply slow down product development. Better to meet demand with fewer new products than not meet it with a larger set.


     


    Execute, Tim.

  • Reply 4 of 42


    Originally Posted by anantksundaram View Post


    Execute, Tim.



     


    Yeah, that comma's really important.

  • Reply 5 of 42
    djrumpydjrumpy Posts: 1,116member


    I can believe this. I'm still waiting on mine to ship :\

  • Reply 6 of 42

    Quote:

    Originally Posted by Tallest Skil View Post


     


    Yeah, that comma's really important.



    image


    Whew.

  • Reply 7 of 42
    solipsismxsolipsismx Posts: 19,566member
    Agreed. I thought that this was Tim Cook's forte?! If they can't get their supply chain in gear, they should simply slow down product development. Better to meet demand with fewer new products than not meet it with a larger set.

    Execute, Tim.

    If that is the case. If it's an issue specifically with new method for bonding the display and/or friction-stir welding then not updating the iMacs last year or doing just a spec bump wouldn't have impacted the other products.

    Something else we need to consider are the long term uses for this new display and friction-stir welding. The iMacs probably can only sell a couple hundred thousand per month, at best, which makes it very low volume for an Apple product. Perhaps they choose the new iMac to help perfect the process for a high volume product for friction-stir welding (like the MBP or iPhone) or larger display product (like an Apple HDTV) for some future project. If either is the case then it makes sense to work this out with the iMac now.
  • Reply 8 of 42
    jragostajragosta Posts: 10,473member
    solipsismx wrote: »
    If that is the case. If it's an issue specifically with new method for bonding the display and/ot friction-stir welding then not updating the iMacs last year or doing just a spec bump wouldn't have impacted the other products.

    Maybe, maybe not - we don't know that. It could also be related to the new screen bonding method.

    However, there's a more fundamental strategic error. They stopped shipping the old one a couple of months before the new one was available. There were certainly no production problems with the old version so there was no real reason to pull it off the shelves. Continuing to sell the old one until the new one was available would have had a significant impact.

    I can't imagine a single reason why they stopped selling the old one as early as they did. In most cases, they even keep selling the previous model for a while after the new ones come out.
  • Reply 9 of 42
    solipsismxsolipsismx Posts: 19,566member
    jragosta wrote: »
    Maybe, maybe not - we don't know that. It could also be related to the new screen bonding method.

    However, there's a more fundamental strategic error. They stopped shipping the old one a couple of months before the new one was available. There were certainly no production problems with the old version so there was no real reason to pull it off the shelves. Continuing to sell the old one until the new one was available would have had a significant impact.

    I can't imagine a single reason why they stopped selling the old one as early as they did. In most cases, they even keep selling the previous model for a while after the new ones come out.

    1) The bonding of the display was the first scenario I gave.

    2) They did the same thing with the original iPhone, which isn't to say the reasons were the same. One possibility might have been to put those production lines into use with the new iMacs ASAP so they could ramp up faster knowing it was going to be a slow and arduous process to perfect. I assume they are well behind their plans for the new iMac but for all we know they are ahead of the proposed ramp up schedule.

    3) Since I'm coming from a 2010 13" MBP with Core 2 Duo and dGPU I would have been perfectly fine with a 2011 27" iMac that had the SSD capability but it wasn't until last week that I first noticed the 27" back on their refurbished site.
  • Reply 10 of 42


    I like the well duh


    Apple is rapidly becoming another Dell, Microsoft, IBM, Packard Bell, 


    They have lost innovation and copy others ideas


    and wait  didn't they start cutting off their own suppliers, one of them hmm, oh yeh  Samsung and then others? 


    They always point the blame, instead taking damn responsibility for it themselves


    next they will let the media know they are firing some bigwig over it..


    no need to worry , there are many other innovators


     


    oh yeh what happened to the billions in cash you gave the investors?  instead of using it for other things, you stuffed your big fat pockes full of cash


     


    i am happy they are diminishing,  i already got rid of everything,  no apple software of devices, except my ipod i use as a paperweight

  • Reply 11 of 42
    stelligentstelligent Posts: 2,680member

    Quote:

    Originally Posted by Tallest Skil View Post


    Well, yeah.


     


    But don't blame, just fix it. Tim doesn't strike me as a "roam the halls, threatening to fire" kind of guy, but he's also supposed to be the operations guy. Maybe they're being too kind? Who can say.



     


    Quote:

    Originally Posted by anantksundaram View Post


    Agreed. I thought that this was Tim Cook's forte?! If they can't get their supply chain in gear, they should simply slow down product development. Better to meet demand with fewer new products than not meet it with a larger set.


     


    Execute, Tim.



     


    Bear in mind that Apple is in hitherto unexplored territory. What company manufactures multiple products at such highly volumes? What company has introduced 3 products as challenging to produce as rMBP, iPhone 5 and the new emaciated iMac all in the same year, all of which to be manufactured in the millions and 10s of millions in each quarter? I am not mentioning the iPad because, presumably, neither iPad 4 nor Mini is much harder to make than iPad 3.


     


    Thank goodness that it is the iMac they had trouble bringing off the assembly line and not the iPhone.


     


    Regardless, we take Tim Cook and Apple for granted. But even if all the new products were not at all innovative, they have pulled off one hell of a year in manufacturing in 2012.

  • Reply 12 of 42
    analogjackanalogjack Posts: 1,036member


    It is now obvious with hindsight that the new designed iMac was a generation too early. They could have left the old design for one more generation and still put in the ivy bridge, usb 3, ugraded SSD plus HDD offerings/Fusion, and faster GPU's. They would have no supply problems and they'd have been able to delivery earlier. This would have more than satisfied pretty close to 100% of users. 

  • Reply 13 of 42
    quadra 610quadra 610 Posts: 6,737member


    *wants to buy a Mac*


     


    *tries an iPad*


     


    *reconsiders Mac purchase*


     


     


    Now multiply that by a lot of people. That's at least *in part* responsible for recent declines in Mac sales. 


     


    Apple has effectively re-imagined and revolutionized a particular product space: the PC.  Yet they still develop and sell products *in that space*. Naturally, declines in that space are now industry-wide. Apple is hit a little less because they make more money on it than others and still put out a superior product that dominates consumer satisfaction. 

  • Reply 14 of 42
    solipsismxsolipsismx Posts: 19,566member
    analogjack wrote: »
    It is now obvious with hindsight that the new designed iMac was a generation too early. They could have left the old design for one more generation and still put in the ivy bridge, usb 3, ugraded SSD plus HDD offerings/Fusion, and faster GPU's. They would have no supply problems and they'd have been able to delivery earlier. This would have more than satisfied pretty close to 100% of users. 

    And what if that put the rest of their products behind another year because they waited an extra year to get the iMac sorted out? Would that then make sense that they had some growing pains with the iMac for a quarter?
  • Reply 15 of 42
    blackbookblackbook Posts: 1,361member

    Quote:

    Originally Posted by anantksundaram View Post


    Agreed. I thought that this was Tim Cook's forte?! If they can't get their supply chain in gear, they should simply slow down product development. Better to meet demand with fewer new products than not meet it with a larger set.


     


    Execute, Tim.



     


    Apple would have sold a LOT more Macs in the quarter if they had held off the iMac update till 2013. It was a dumb move to announce the product weeks before it was to ship AND THEN when the ship date did arrive not have enough AND THEN have manufacturing issues.


     


    Quite embarrassing actually and they paid the cost of their mistake this quarter.

  • Reply 16 of 42
    jim wjim w Posts: 75member
    I would prefer less emaciated and easier to produce designs anyway. Cheese cutters. The new iMacs are likely to be difficult if not impossible to upgrade after the fact as well. Some of us need more RAM, faster graphics, multiple cheap fast HD's, etc. The iMac is a stand in for the Mac Pro many of us who have been waiting far too long. The new iMac is going in the opposite direction of what I am looking for.
  • Reply 17 of 42
    jragostajragosta Posts: 10,473member
    blackbook wrote: »
    Apple would have sold a LOT more Macs in the quarter if they had held off the iMac update till 2013. It was a dumb move to announce the product weeks before it was to ship AND THEN when the ship date did arrive not have enough AND THEN have manufacturing issues.

    They didn't even need to hold off on announcing the new product. If they had just kept the old ones on sale until production of the new one caught up, they wouldn't have had such a drop in sales.
    jim w wrote: »
    I would prefer less emaciated and easier to produce designs anyway. Cheese cutters. The new iMacs are likely to be difficult if not impossible to upgrade after the fact as well. Some of us need more RAM, faster graphics, multiple cheap fast HD's, etc. The iMac is a stand in for the Mac Pro many of us who have been waiting far too long. The new iMac is going in the opposite direction of what I am looking for.

    Very few people ever upgrade their computers. Get over it.
  • Reply 18 of 42
    solipsismxsolipsismx Posts: 19,566member
    jragosta wrote: »
    They didn't even need to hold off on announcing the new product. If they had just kept the old ones on sale until production of the new one caught up, they wouldn't have had such a drop in sales.

    Apple isn't afraid to make money. They usually do continue to sell an older product right up until the new one is being put on the shelves. They even keep it hush hush for as long as possible like they did with the iPad (4). Because of all the historical data I am not satisfied with simply saying "Apple did it wrong" without considering why they did what they did with the iMac and at least one other product, as previously mentioned. The simplest answer to me is that they choose to lose some Mac units sales, revenue and profit from a severely limited number of iMacs to get an 3 month of progress on something.
  • Reply 19 of 42

    Quote:

    Originally Posted by SolipsismX View Post





    And what if that put the rest of their products behind another year because they waited an extra year to get the iMac sorted out? Would that then make sense that they had some growing pains with the iMac for a quarter?


     


    Well, it's a given that the problem with the imac (if it's not the actual casing) is the laminated screen. What I have suggested is pretty well what they released minus a thinner case and laminated screen, with regards to functionality. I can't see how waiting for the production of laminated screens while still releasing the iMac that everyone was waiting for anyway, would impact their other products in any way. 


     


    Screen problems were flagged eight months ago. The screen on the current imac is arguable the best there is so this whole imac cock up was completely unnecessary. If they weren't ready it was utterly useless rushing it out when a normal component upgrade is all that anyone wanted. 


  • Reply 20 of 42
    solipsismxsolipsismx Posts: 19,566member
    analogjack wrote: »
    If they weren't ready it was utterly useless rushing it out when a normal component upgrade is all that anyone wanted. 

    Neither you or I can be sure of that statement because we don't know what this represents to Apple. As I noted in post #18 leaving money on table by not having a product ready to ship at all or soon after they announce it uncommon for Apple so why now? It's unscientific, irrational and unfair just to say "Apple sucks, Cook should be fired" or other such nonsense.
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