Apple bucking trend of declining PC prices

Posted:
in General Discussion edited January 2014
Apple's capacity to maintain (and even raise) the average selling price of its personal computer systems in a market rife with yearly declines is just one of the reasons analysts at JMP Securities remain bullish the company's shares.



In a research report Friday, analyst Ingrid Ebeling noted that of the top 25 computers on Amazon.com?s best-seller list for the category of computers, Apple desktops and portables command 10 of the 25 spots, with an average selling price (ASP) of $1,482, compared with an ASP of $579 for the remaining 15.



Similarly, for fiscal year 2005, the ASP for Macs was $1,442, compared with $1,384 for fiscal 2005 in an industry characterized by declining ASPs, which fell from $1,042 to $957 over the same time frame, according to market research firm IDC.



"Although economic uncertainty in the US looms overseveral names in our sector, including Apple, we believe the overall PC industry market in 2008 will continue to be fueled by consumer demand for digital media, increased adoption of portable computers, and growth in emerging markets," Ebeling said. "The adoption of portable computers has been a contributing factor to growth, with units up 34 percent in 2007, a trend that has helped Apple given the response to the MacBook line."



However, she added that Apple?s desktop sales have also been very robust following the release of the new iMac, which drove year-over-year unit growth to 53 percent in the December quarter.



"Over the past two years, we estimate Apple?s worldwide market share has risen from 2.3 percent of 207 million units sold to 3.0 percent of 262 million sold, or from 4.7 million Macs sold in 2005 to 7.9 million Macs in 2007, representing a 2-year Compound Annual Growth Rate (CAGR) of 29 percent, compared to a 12 percent CAGR for the PC industry," she wrote. "In the US, we estimate that Apple?s share has increased from 4.5 percent to almost 7 percent, and that itsshare in the laptop market now exceeds 15 percent."



In respect to iPods, the analyst acknowledged recently disappointing results, but said she's still forecasting revenue growth of 17 percent and 14 percent in fiscal 2008 and 2009 based on unit growth of 5 percent and 13 percent, which assumes that the iPod touch -- with price tags of $299, $399,or $499 -- will help boost the product line?s ASP.



Over time, she expects the product should gain momentum as not just an iPod but also an Internet device. "It is considered one of the best WiFi mobile platforms and has a powerful interface to run Web applications," she said. " As Apple continues to add content to its iTunes store,such as movie rentals, consumers could be compelled to upgrade to the more expensive devices."



The JPM analyst reiterated her Market Outperform rating and $200 price target on shares of the Cupertino-based company.
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Comments

  • Reply 1 of 68
    Quote:
    Originally Posted by AppleInsider View Post


    Apple desktops and portables command 10 of the 25 spots, with an average selling price (ASP) of $1,482, compared with an ASP of $579 for the remaining 15.







    Great for shareholders, but not so great for potential Switchers.
  • Reply 2 of 68
    Quote:
    Originally Posted by cherrypop View Post


    Great for shareholders, but not so great for potential Switchers.



    Sometimes you get what you pay for...



    (Not that I don't want less expensive Macs, I just don't want cheep ones.)
  • Reply 3 of 68
    crebcreb Posts: 276member
    There is a great deal of junk PCs on the market at least Apple is the not the manufacturer of any of them; if Apple turns the profit into designing and manufacturing a still better PC then more power to Apple.
  • Reply 4 of 68
    lkrupplkrupp Posts: 7,101member
    Good grief, the nay-sayers have gotten cut off at the knees again. First came the news that the iPhone has increased Google searches exponentially, indicating massive popularity of the device. Then came the report that cellphone pundits can't figure out why the iPhone is so popular but, by god, they are going to try and copy it. Now comes the news that Apple can and does charge more for their hardware and sales are heading up, up, up, along with market share.



    What's a "Apple needs a low end, headless desktop priced at $5.00 in order to survive" clueless expert to do these days? All their theories are crumbling before their eyes but, never fear, they'll find yet another reason to question Apple's marketing decisions. Well I'm not questioning Steve's competence these days. Are you?
  • Reply 5 of 68
    And this is good for shareholders, not so good for customers. I passionately dislike when a company strives to hard to please shareholders at the expense of their customers.



    A company can survive without shareholders but cannot survive without customers.



    Quote:
    Originally Posted by Bageljoey View Post


    Sometimes you get what you pay for...



    (Not that I don't want less expensive Macs, I just don't want cheep ones.)



    It's not a matter of cheap hardware. It's about good code. Hardware only operates as well as its told. In many many cases, Apple uses the same exact components as can be found in Windows PCs. They just are writing for a much smaller set of hardware, which makes it easier to have more reliable operation.



    So, no, they aren't spending more on "quality" hardware, they're just designing better, programming better and taking bigger profits.



    Even after all is said and done, they are taking profits of 60% in some cases on their computers. This is more than twice that of other PC manufacturers. I understand charging more for a better product, but 60% profit is pretty ridiculous. Apple should make more of an attempt to befriend their customers because sooner or later people will start to realize they're getting robbed.



    If only OS X ran reliably on X86 hardware...



    -Clive
  • Reply 6 of 68
    Quote:
    Originally Posted by Bageljoey View Post


    Sometimes you get what you pay for...



    (Not that I don't want less expensive Macs, I just don't want cheep ones.)



    I was _not_ commenting on value. You get _more_ than you pay for with a Mac. Period.



    Those who know me, know that I bought my first Mac in High School (1986) and that I've never bought a PC and never will. But that puts me in the vast minority of computer users, then and now.



    I originally posted simply to make the point that Apple needs to compete at the low end, and has since the very beginning. This "study" of declining PC prices is just a reminder that Apple still needs a sub-$500 Mac. I'm not alone in this opinion, and the Mac mini doesn't count as a viable remedy; I'm talking about a complete computer for $500.
  • Reply 7 of 68
    ajmasajmas Posts: 556member
    If you want a product where a lot of effort has been put into R&D, and the final finish, then you have you accept that there will a higher price-tag to go with it. Apple is considered a luxury product and that is part of the reason people put their money down. Build something that looks like, and feels like, [email protected] and people will not want to put down the same amount of cash.



    Whatever has to be said about the MacBook Air, I think its limitations will encourage people to innovate to work around its limitations. This happened for the orginal iMac, and I believe it will be the same here.
  • Reply 8 of 68
    Quote:
    Originally Posted by Clive At Five View Post


    . . . It's not a matter of cheap hardware. It's about good code. . . .Even after all is said and done, they are taking profits of 60% in some cases on their computers. This is more than twice that of other PC manufacturers. I understand charging more for a better product, but 60% profit is pretty ridiculous.

    -Clive



    You said it all, you just didn't connect your ideas the same way I do.



    We love Macs first and foremost because of their code. No other PC maker is developing their OS and nearly every one of the most popular applications on that platform. So, Apple has designed a pricing structure where profits from their hardware sales can provide supplement financial support for good software design too, which no one else needs to do. In addition, they do revolutionary design.



    Where do you think Apple got money to spend on developing things like the iPhone, Apple TV and iPods? They experiment with a bunch of stuff we never see. Your basic computer companies aren't nearly as into redesign and risk taking with revolutionary devices.



    So, yeah, 60% is ridiculous for a company that just assembles parts, loads someone else's software and puts a sticker on it. 60% profit on a Mac if you are basing your profit numbers on hardware alone is much more acceptable.
  • Reply 9 of 68
    Quote:
    Originally Posted by cherrypop View Post


    I'm not alone in this opinion, and the Mac mini doesn't count as a viable remedy; I'm talking about a complete computer for $500.



    No you aren't alone. I think the fact that Apple sells a unit with a Combo Drive, 80GB HDD, and sub 2GHz processor for $600 is utterly shameful. The low-end iPod Classic has the same 80GB capacity as the MacMini! What an embarrassment! The Mini should either be $200 cheaper or upgraded to be worth a s***.



    Quote:
    Originally Posted by ajmas View Post


    Whatever has to be said about the MacBook Air, I think its limitations will encourage people to innovate to work around its limitations. This happened for the orginal iMac, and I believe it will be the same here.



    Why should people be forced to innovate on Apple's products in order to make them useable? That doesn't make sense to me. Apple's current strategy is to pull the wool over the eyes of as many people as possible and sadly it's working.



    Hey, I've got an idea, maybe you could use that high-powered USB port to attach a wormhole that sinks all your spare cash straight into Apple's coffers.



    -Clive
  • Reply 10 of 68
    wallywally Posts: 211member
    Quote:
    Originally Posted by Clive At Five View Post


    Even after all is said and done, they are taking profits of 60% in some cases on their computers. This is more than twice that of other PC manufacturers. I understand charging more for a better product, but 60% profit is pretty ridiculous.



    60%? Can you cite your sources? If it's iSuppli, then don't worry about posting that link... as iSuppli numbers are ridiculous. Apple's gross margins are usually in the 25-36% range. Now Apple's profit margins have been known to grow 60+% but not be 60%.
  • Reply 11 of 68
    Quote:
    Originally Posted by shippster View Post


    So, yeah, 60% is ridiculous for a company that just assembles parts, loads someone else's software and puts a sticker on it. 60% profit on a Mac if you are basing your profit numbers on hardware alone is much more acceptable.



    You make a valid point, but even if you tack on the RETAIL prices of OS X and iLife, their profits would still be extreme.



    Quote:
    Originally Posted by Wally View Post


    60%? Can you cite your sources? If it's iSuppli, then don't worry about posting that link... as iSuppli numbers are ridiculous. Apple's gross margins are usually in the 25-36% range. Now Apple's profit margins have been known to grow 60+% but not be 60%.



    The high-end MacMini's profit margins have grown to 60% (or possibly more) on the hardware alone. This is based on a survey I performed on the RETAIL prices of the exact (or sometimes better) hardware on newegg.com, so they are possibly making more than 60% on their hardware alone.



    If you add in the "OEM" price of software you won't change much.



    -Clive
  • Reply 12 of 68
    Quote:
    Originally Posted by Clive At Five View Post


    And this is good for shareholders, not so good for customers. I passionately dislike when a company strives to hard to please shareholders at the expense of their customers.



    A company can survive without shareholders but cannot survive without customers.







    It's not a matter of cheap hardware. It's about good code. Hardware only operates as well as its told. In many many cases, Apple uses the same exact components as can be found in Windows PCs. They just are writing for a much smaller set of hardware, which makes it easier to have more reliable operation.



    So, no, they aren't spending more on "quality" hardware, they're just designing better, programming better and taking bigger profits.



    Even after all is said and done, they are taking profits of 60% in some cases on their computers. This is more than twice that of other PC manufacturers. I understand charging more for a better product, but 60% profit is pretty ridiculous. Apple should make more of an attempt to befriend their customers because sooner or later people will start to realize they're getting robbed.



    If only OS X ran reliably on X86 hardware...



    -Clive







    (BTW - what percentage does MS make on Windows?)
  • Reply 13 of 68
    Quote:
    Originally Posted by Clive At Five View Post


    Even after all is said and done, they are taking profits of 60% in some cases on their computers. This is more than twice that of other PC manufacturers. I understand charging more for a better product, but 60% profit is pretty ridiculous. Apple should make more of an attempt to befriend their customers because sooner or later people will start to realize they're getting robbed.



    Apple spends hoards of money on R&D, money on carefully designing cases and hardware to meet very unique needs, a very large sum on talented employees, and does some really incredible hardware testing. If Apple had half the problems that plague new hardware releases from other manufacturers their very vocal fan-base would be in a complete uproar. When someone buys one of the new Gateways which has a high chance of non-functional USB ports they don't blog all over the internet about it, they suck it up, go to the store, return it, and get something else.



    Apple is making a profit, yes, but there is a very good reason why their products are so amazing.



    Edit: This is the difference between a company that created the iPhone, and a company which has made a late-to-market poorly designed clone of the iPhone. One is copying the innovation of another, one spent years developing and creating the product. You can see the clear difference in the final result. A person who does not want to pay for that innovation and remarkable consistency of design has plenty of other options outside Apple. There they can save money.
  • Reply 14 of 68
    nasseraenasserae Posts: 3,157member
    I built my last Windows PC back in 2002 hoping that I can get high quality parts and high-end performance for less money. Well, I ended up paying more that what I paid for my current iMac. The CPU alone was more than $1200 plus 15" LCD monitor, Wireless mouse and keyboard, and speakers totaling almost $1900. A year after that, my PC became obsolete. I switched to Mac in 2006 and I have to admit that I never regret spending $1800 on my iMac. Almost 2 years without going obsolete. Thats the beauty of Mac.
  • Reply 15 of 68
    Quote:
    Originally Posted by Clive At Five View Post


    You make a valid point, but even if you tack on the RETAIL prices of OS X and iLife, their profits would still be extreme.







    The high-end MacMini's profit margins have grown to 60% (or possibly more) on the hardware alone. This is based on a survey I performed on the RETAIL prices of the exact (or sometimes better) hardware on newegg.com, so they are possibly making more than 60% on their hardware alone.



    If you add in the "OEM" price of software you won't change much.



    -Clive



    If you don't think that you left out a few things in your build to confirm your claim, I would suggest that you quit visiting this site. Otherwise some of you most ardent fans will not be able to support you. Unless they are dumb as doorknobs, which obvious sets you apart from them.
  • Reply 16 of 68
    I would love for the mini to get a refresh and price drop, but they aren't too far off in their value proposition today. The fact that it is an 8-month old spec is what kills it more than anything. All of the other computers give pretty good value relative to the competition, from the bottom-end iMac to the XServe, if you count the OS upgrade as having about a $200 value for desktop and $1,000 for a server.



    But, Apple stands to make more money convincing me to buy a 24" iMac from them rather than a 24" monitor from someone else and a mini from them. It's a logical business decision... to a point.
  • Reply 17 of 68
    Although I love working on MacOSX and with Apple hardware, I have problems justifying to my boss me getting a new one.



    A little more than three years ago I got the biggest Mac-laptop (after hefty negotiations). One of my arguments where that it would last one to two years longer than a PC. It has been repaired once (the LCD screen). Now, after expired warranty, there is a new error with the screen (I'm not the only one with this error, but Apple has chosen to ignore our frustrations).



    With Macs at 30 to 50 percent higher prices than PCs I could feel comfortable, but here in Norway they are sold at prices between 100 and 200 percent more!
  • Reply 18 of 68
    Quote:
    Originally Posted by Abster2core View Post


    If you don't think that you left out a few things in your build to confirm your claim, I would suggest that you quit visiting this site. Otherwise some of you most ardent fans will not be able to support you. Unless they are dumb as doorknobs, which obvious sets you apart from them.



    There's no doubt I omitted R&D and software. I'm not denying that. Neither am I denying that the quality of Macs exceed that of Windows PCs. I'm just saying that the premium, even for a "luxury item" is a bit excessive.



    Would you sell a computer with an 80GB HDD, Combo Drive, and 1.8GHz CPU for $600? My 6-year old iMac has a Superdrive and 60GB HDD! Even to the sanest of minds, buy a computer with those specs at that price doesn't even make sense, even if it does have the best software and stability available.



    BTW... I have fans? Pretty sure all I ever do here is argue with people who can't tollerate a mild dose of reason.



    -Clive
  • Reply 19 of 68
    Quote:
    Originally Posted by Xian Zhu Xuande View Post


    Apple is making a profit, yes, but there is a very good reason why their products are so amazing.

    .[/i]



    Agreed. But I feel that this is at the very crux of the matter. While Apple doesn't enjoy 60% margins, as mentioned by someone above, they do pull in about 20% margins on hardware, which makes them far and away a best performer in their category.



    As such, I said that Apple's price points are great for shareholders but not for customers. Now the issue: there is a large contingent of us out there that have no problem paying for Macs. We understand fully the value proposition. Apple has little or no work in this category.



    But there exists a vast majority of consumers that, despite all of the "studies" or head-to-head comparisons that CLEARLY DEMONSTRATE that Macs are really no more expensive in the mid-range than their PC counterpart, WILL NEVER consider paying more for a COMPLETE Mac than they will for a COMPLETE low-end PC.



    It's this truly mammoth number of consumers that I, and others, believe Apple continues to miss out on.



    To Apple's credit, they've taken a different path to Switching since the iPod became what could be considered a mature product. At that point they, I believe, understood the "halo" effect, and just now (with the Touch and the iPhone) are realizing increased Mac sales from otherwise-PC buyers.



    This increased Mac customer base is good, just not as good as it might otherwise be with a complete Mac available through Apple Retail Stores, etc for $500.



    If you're not convinced, and you think it's impossible for Apple to sell a $500 Mac due to all of the incredible things Apple puts into creating a Mac that PC makers don't, ask yourself why Apple discontinues Macs with older technology rather than ride that configuration down to the point where it competes with low-end PCs. Take the eMac for example. Sure, CRTs suck, but I can name a few PC users that have no problem with CRTs that might jump at a $400 20-inch eMac.



    The reason for this, IMO, is that Apple has LONG held price points to maintain, and sub $1k machines kills this strategy. Just look at Apple's price points over the years and you'll see the following trend +/-:



    Consumer laptops: $1100-1500 on average.

    Consumer desktops: $1200-1500 on average.



    Pro laptops: $2500-3500 on average.

    Pro desktops: $2500-3500 on average.



    There are examples in each category the drop below and exceed these levels, but off hand I would argue that these price points have been consistently maintained for at least 20 years.



    Circling back to the original argument, Apple continues to buck the plummeting PC price trend as outlined in the original article. It's working for them. No argument there. But I really have a hard time reconciling with the fact that Apple could not sell more Macs with a Mac that directly compete with low-end $500-600 PCs.



    End of rant, and time to do real work ;-)
  • Reply 20 of 68
    Quote:
    Originally Posted by Clive At Five View Post


    A company can survive without shareholders but cannot survive without customers.



    This is almost comical in light of current events. Yahoo is a company with no shortage of customers - #1 portal, #1 in email, essentially tied for #1 in IM, #2 in search and advertising and also a huge player in social networks (Flickr and del.icio.us) and yet its very existence as a separate company is threatened because its shareholders are unhappy.
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