Apple's Mac growth a standout in ailing PC market
With unit growth and revenues that beat the Street's expectations, Apple's resilience in the face of global economic woes is great news for its investors, but bad news for competitors, according to a note Connexiti issued by supply chain analyst Richard Davenport.
Davenport's career focus on supply chain analysis is reflected in his comments, which pared Apple away from the core of the tech market in terms of expectations. Apple's positive earnings results are "not a positive tech data point," but rather "an anomaly (from a supply chain perspective, IBM?s recent results were negative, not positive), as evidenced by the plethora of negative data points up, down, and around its supply chain," according the Davenport note.
Apple reported sales of 2.52 million Macs in the final quarter of 2008 (the company's fiscal 2009 Q1), down 3% from the previous September quarter but up 9% from the year ago winter quarter. According to IDC, the worldwide PC market actually shrank slightly over the past year, making Apple's 9% growth, and its ability to once again beat analyst's expectations, a standout success.
Apple reported revenue growth of 4.4% above street expectations this quarter, hitting a new record of $10.167 billion; the Street had called for $9.742 billion. Apple's quarter over quarter revenue growth was 28.8%. Both figures reflect Apple's GAAP reporting, which banks away much of its iPhone revenue on a subscription reporting basis.
PC expectations coming to a sad realization
In November, Dell and HP reported revenues and guidance that were 8.6% and 5.9% below Street expectations. Davenport called particular attention to weaknesses in the supply chain reported this month, with CPU maker Intel guiding revenues 3.8% below expectations, GPU maker NVIDIA bracing for revenues 38.7% below expectations, hard drive maker Seagate reporting revenues 7.7% below and guiding for results 17.7% below the Street.
PC operating system supplier Microsoft reported revenues 2.7% below expectations and declined to provide guidance use to the unpredictable level of volatility in the market. Microsoft's poor earnings reports reflected the company's unrealized forecast that the PC market would expand by 10-12% in the December quarter rather than falling flat. Microsoft stated that traditional PC sales were actually down 10%, a drop offset only by netbook sales.
Microsoft CFO Chris Liddell reported that the drop in conventional PC sales resulted in a 1% decline in Microsoft's OEM Windows unit sales to PC makers, but a 12% drop in OEM licensing revenue. The shift toward netbooks has hammered Microsoft's ability to sell its more expensive business and consumer premium versions of Windows, as Vista is not designed to work on the low end mini-notebooks with reduced memory and performance characteristics.
Even as premium PC sales erode away and are replaced by cheaper netbooks, Microsoft expressed confidence that the new form factor wouldn't give Linux any competitive standing to make further inroads into the PC market, citing statistics that 80% of netbooks ship with a copy of Windows. Even if Microsoft can continue hold back Linux adoption on netbooks, it will still face a growing chunk of the lucrative premium PC market falling to a device that can't run Vista or the new Windows 7. At the same time, Apple is expanding its footprint over the remaining premium PC market, syphoning off customers who are unlikely to return to the Windows fold.
PC sales poised to slip further
With so many PC suppliers posting bad news and pessimistic guidance, Davenport wrote that the current estimates for Dell and HP are too high. The Street is currently modeling Dell's revenues to slip 2.9% quarter over quarter, and for HP to fall by 4.3%.
Neither PC maker has the brand loyalty of Apple among consumers, and both will suffer from tighter corporate and government spending, just has Apple has in its education sales. Apple itself is preparing for a tough year, with weaker retail sales and no end in sight to the economic pressures hitting institutional buyers.
Apple still has a couple tricks still up its sleeve; it has yet to refresh its flagship desktop, the iMac, as well as its lower priced Mac mini model. The company will also be releasing the new Mac OS X Snow Leopard this year, which promises to give the Mac maker a new bump in mindshare among consumers. Microsoft's new Windows 7 operating system may provide a shot in the arm for PC makers, but won't run on the netbooks that are currently defining all the growth in the PC market.
Davenport's career focus on supply chain analysis is reflected in his comments, which pared Apple away from the core of the tech market in terms of expectations. Apple's positive earnings results are "not a positive tech data point," but rather "an anomaly (from a supply chain perspective, IBM?s recent results were negative, not positive), as evidenced by the plethora of negative data points up, down, and around its supply chain," according the Davenport note.
Apple reported sales of 2.52 million Macs in the final quarter of 2008 (the company's fiscal 2009 Q1), down 3% from the previous September quarter but up 9% from the year ago winter quarter. According to IDC, the worldwide PC market actually shrank slightly over the past year, making Apple's 9% growth, and its ability to once again beat analyst's expectations, a standout success.
Apple reported revenue growth of 4.4% above street expectations this quarter, hitting a new record of $10.167 billion; the Street had called for $9.742 billion. Apple's quarter over quarter revenue growth was 28.8%. Both figures reflect Apple's GAAP reporting, which banks away much of its iPhone revenue on a subscription reporting basis.
PC expectations coming to a sad realization
In November, Dell and HP reported revenues and guidance that were 8.6% and 5.9% below Street expectations. Davenport called particular attention to weaknesses in the supply chain reported this month, with CPU maker Intel guiding revenues 3.8% below expectations, GPU maker NVIDIA bracing for revenues 38.7% below expectations, hard drive maker Seagate reporting revenues 7.7% below and guiding for results 17.7% below the Street.
PC operating system supplier Microsoft reported revenues 2.7% below expectations and declined to provide guidance use to the unpredictable level of volatility in the market. Microsoft's poor earnings reports reflected the company's unrealized forecast that the PC market would expand by 10-12% in the December quarter rather than falling flat. Microsoft stated that traditional PC sales were actually down 10%, a drop offset only by netbook sales.
Microsoft CFO Chris Liddell reported that the drop in conventional PC sales resulted in a 1% decline in Microsoft's OEM Windows unit sales to PC makers, but a 12% drop in OEM licensing revenue. The shift toward netbooks has hammered Microsoft's ability to sell its more expensive business and consumer premium versions of Windows, as Vista is not designed to work on the low end mini-notebooks with reduced memory and performance characteristics.
Even as premium PC sales erode away and are replaced by cheaper netbooks, Microsoft expressed confidence that the new form factor wouldn't give Linux any competitive standing to make further inroads into the PC market, citing statistics that 80% of netbooks ship with a copy of Windows. Even if Microsoft can continue hold back Linux adoption on netbooks, it will still face a growing chunk of the lucrative premium PC market falling to a device that can't run Vista or the new Windows 7. At the same time, Apple is expanding its footprint over the remaining premium PC market, syphoning off customers who are unlikely to return to the Windows fold.
PC sales poised to slip further
With so many PC suppliers posting bad news and pessimistic guidance, Davenport wrote that the current estimates for Dell and HP are too high. The Street is currently modeling Dell's revenues to slip 2.9% quarter over quarter, and for HP to fall by 4.3%.
Neither PC maker has the brand loyalty of Apple among consumers, and both will suffer from tighter corporate and government spending, just has Apple has in its education sales. Apple itself is preparing for a tough year, with weaker retail sales and no end in sight to the economic pressures hitting institutional buyers.
Apple still has a couple tricks still up its sleeve; it has yet to refresh its flagship desktop, the iMac, as well as its lower priced Mac mini model. The company will also be releasing the new Mac OS X Snow Leopard this year, which promises to give the Mac maker a new bump in mindshare among consumers. Microsoft's new Windows 7 operating system may provide a shot in the arm for PC makers, but won't run on the netbooks that are currently defining all the growth in the PC market.
Comments
Imagine is Linux got serious and took another 10% from Micro$oft.
Apple's big advantage is once they've sold a premium priced Macintosh they can ?accessorise? with Apple Care, optional ProCare Membership, MobileMe Membership, iWork, bluetooth wireless peripherals, One To One training, various display connectors (DVI, VGA) not to mention an Wireless-N Airport base stations or Time Capsule. And that's just their own stuff. At Apple stores they get money on all 3rd party products they can sell.
Microsoft's new Windows 7 operating system may provide a shot in the arm for PC makers, but won't run on the netbooks that are currently defining all the growth in the PC market.
ahhh, yes it will...and already does in beta....
ahhh, yes it will...and already does in beta....
Yeah, I'm sure where the article got that one from. Windows 7 was always meant to be the optimized and smaller footprint version of Vista. Much like Snow Leopard will be to Leopard.
It is disheartening that Apple takes the stance of not competing in the Netbook and sub-$500 PC markets. The Mac Mini would sell like hotcakes at $399 as a loss leader. Apple could make it up with Applecare, MobileMe, iWork, and peripheral sales. A Macbook Mini at $599 (Apple's netbook) would do the same.
Apple could easily take Microsoft's marketshare but they choose not to compete there. They choose to lift the playing field to new heights. That's great too but you're leaving the poorer folks out of the deal Apple. How about creating desktops, laptops, and netbooks for the rest of the folks too (and don't say iPhone as a netbook)?
... The Mac Mini would sell like hotcakes at $399 as a loss leader. Apple could make it up with Applecare, MobileMe, iWork, and peripheral sales. A Macbook Mini at $599 (Apple's netbook) would do the same.
Apple could easily take Microsoft's marketshare but they choose not to compete there. They choose to lift the playing field to new heights. That's great too but you're leaving the poorer folks out of the deal Apple. How about creating desktops, laptops, and netbooks for the rest of the folks too (and don't say iPhone as a netbook)?
Ditto, ditto.
I have always continued to hope that Apple would reset and expand its sights and really be the computer for the 'rest of us' (where did that marketing quote originally come from??)
I agree that Apple is letting a huge portion of the market go just because the do not seriously wish to be competing in the sub $999 range for notebooks, or sub $1199 for iMac, or the sub $599 range for the mac mini.
Especially in this market, they could make a huge number of sales (IMO) to folks who want to spend less on the computer, and would be able to trust that realistically, the computer would not require more money for constant antivirus, etc that PCs usually do.
What's even better is that since Apple has been reporting better news than all their competitors, the forums have been much quieter and postings have been more informative. I guess the whiners and complainers screaming about how Apple is making terrible decisions are sticking their heads in the sand waiting for the time to spread more FUD.
To the whiners, pessimists, and complainers.. we optimists thank you for leaving the building. Please turn in your badge at the counter. You will NOT be missed.
Why?
Apple's numbers in the most recent quarter (in the worst market conditions in the last decade) prove that people are willing to pay for quality products. The cost of owning Windows-based hard- and software (not to mention that it's horrible to work with) is simply too high for me. I'd love to buy a new laptop, but my now 4-year-old IBM-chip PowerBook that runs Tiger still works fine, thank you very much. If I'd been running windows for the last four years, my cost might have been treble the $3000 I spent when I bought the Powerbook--who knows how many PCs I'd have burned up or had to replace?
Everyone talks about the need for an Apple netbook. They're right and they're wrong.
The product that is desperately needed is a touchscreen-based "super iPhone" which measures 6-7" X 8-10" that has a laser (barcode) reader. I've been in a number of apple stores in which the sales associates stumble around juggling a Macbook Air trying to answer customer questions, then have to switch to their holstered doo-hickeys to ring up the sale.
Such a device would fill a significant gap in the device marketplace. It would be useful not just for the 5000 sales associates at the apple stores, but also for the UPS, DHL, and FedEx employees who have to hook into their company mainframes AND often to the internet; what about gamers who want a screen that's 3-4 times bigger than what they now have with the iPhone; or business types who can live with a smaller keyboard for the sake of portability? Or people like me who travel for 2 weeks with only a daypack. Or the millions saying they want an Apple netbook?
Tie it in with monthly internet subscriptions that cost $20/month for the country of origin and shall we say $40/month for international roaming, don't forget how much Apple likes those subsidies and Apple could sell it for $399.
THAT is the netbook that we need; Apple has way too much class to compete at the bottom of the market; why make two cents on the dollar when you can make two bits?
I have always continued to hope that Apple would reset and expand its sights and really be the computer for the 'rest of us' (where did that marketing quote originally come from??)
I agree that Apple is letting a huge portion of the market go just because the do not seriously wish to be competing in the sub $999 range for notebooks, or sub $1199 for iMac, or the sub $599 range for the mac mini.
Let's pretend for a moment that Apple is in the business to make money.
The margins on sub-notebooks and netbooks are razor thin. Why would Apple choose dilute itself by doing this? To gain market share but at what cost? Look at the other players that do manufacture low-cost systems. They are seriously taking hits to their bottom line since they all basically sell the same cheap, low-cost systems and aren't profiting enough from them to survive any kind of rough times.
How much more proof do you need after the reports from big players like Dell and HP that do sell cheap systems?
I looked at netbooks and while some interesting, they were built like a toy. Durability and quality were a second thought and while some had interesting features, they were essentially disposable products. I could care less if some of them actually "looked" cool. There were flimsy. Apple is not ignoring the low-cost market. It just wants nothing to do with it. I respect that.
I don't come from big money and I certainly watch what I spend. But I'd rather save my money and get something that actually is enjoyable to use and have a high-quality factor. Just because something is cheap does not mean to me (and to Apple) that it is the better route. Everyone just got used to paying such low prices for essentially junk that they expect Apple to do the same thing. It's obvious Apple is doing something right and a lot of consumers obviously think the same way. The mentality of some people have that one can buy three or four netbooks for the price of one Apple laptop really, truly does not get it.
I'm sorry that Apple machines are too expensive for you. A company cannot be everything to everyone. Apple tried to playing like the other players in the 90's and almost went out of business. This bit of history is forgotten by many people.
Save your money. You'll be happier in the long run.
We get the fast graphics
FW and USB
GigE
C2D
iLife 09
and of course OS X.
That's a fair deal. The cheaper stuff is cheaper but Apple's not forcing rebates
down ur gullet to get the cheaper price.
Everybody wants apple to change its DNA to the produce a product that results in low single-digit profits
Why?
Because, as consumers, people want to pay less for items.
Apple's numbers in the most recent quarter (in the worst market conditions in the last decade) prove that people are willing to pay for quality products. The cost of owning Windows-based hard- and software (not to mention that it's horrible to work with) is simply too high for me. I'd love to buy a new laptop, but my now 4-year-old IBM-chip PowerBook that runs Tiger still works fine, thank you very much. If I'd been running windows for the last four years, my cost might have been treble the $3000 I spent when I bought the Powerbook--who knows how many PCs I'd have burned up or had to replace?
What extra cost of owning Windows-based systems? I own Macs, and PCs, the PCs haven't costed me any more than the Macs, and have lasted just as long (well actually, speed wise have outlasted the PPC Macs)
ahhh, yes it will...and already does in beta....
Yep, runs fine. The performance you get is almost comparable to XP. Which it pretty impressive tbh.
If they come out with a netbook, that is Cheap it WILL take away sales of it's notebooks (enough to not come out with one ? only Apple knows this)
If Apple make the Mac Mini cheap, will it take way sales from it's iMac's ? yes, how much only Apple knows, and or how much can it take with Apple being ok with those lost sales ? only Apple knows.
Apple is trying, and doing a pretty good job of making and selling products that don't compete to much with each other, and a sale of one unit doesn't take away from the sale of another, and any that it does, is still a sale for Apple.
Now done right (which Im sure Apple will do), a new product priced right, WILL in fact take sales away from another unit, but ONLY until folks realize the benefits of purchasing the other unit would be. And in that case, IF they choose to know purchase the other unit, Apple has now sold 2 units. A win-win for them.
Now if these sales come about from converts ? this is a wonderful thing.
Right now, in my opinion, what Apple NEEDS to do, is announce something, anything, and do it with a fair amount of flair and public excitement. Why, well this would put the "Steve" is Apple thing a bit to rest (yes we all know Steve will be behind it, but not in the front / public eye).
The Apple world and many others are waiting with baited breath for something NEW and Exciting from Apple ? lets give them what they are waiting for - NOW!
Shit, boss man just came by and told me to get my ass to work,
Skip
Because, as consumers, people want to pay less for items.
But, as a shareholder, I want people paying more..... and the stock market effects of that help subsidize my Apple purchases!
A 4 year old laptop will still be running Windows XP very well. Not quite sure why one posted thinks that it wouldn't...
My 5 Year old mac runs the latest version of os x... do you see the difference?
My 5 Year old mac runs the latest version of os x... do you see the difference?
No, I don't. But I also don't understand why some Apple customers seem to want the company to squeeze as much profit out of them as it can, at the cost of innovating in new markets.
The product that is desperately needed is a touchscreen-based "super iPhone" which measures 6-7" X 8-10" that has a laser (barcode) reader.
Such a device would fill a significant gap in the device marketplace. It would be useful not just for the 5000 sales associates at the apple stores, but also for the UPS, DHL, and FedEx employees who have to hook into their company mainframes AND
thousands of physicians, nurses who can scan a patient's bracelet, access their chart, fill the data right away...I'd love to have a device like this. I still own a Newton 2000.
My 5 Year old mac runs the latest version of os x... do you see the difference?
I can see the difference if by running that OS you can do something you need to do that the old OS couldn't do. But Windows XP does pretty much everything Vista does, so there's really no need to try and cram the latest OS onto it. See the difference?
No, I don't. But I also don't understand why some Apple customers seem to want the company to squeeze as much profit out of them as it can, at the cost of innovating in new markets.
Well, the difference is, neverminds Mac was already 4yrs old as OS X 10.5 was released, a now 4yrs old notebook with XP basically runs an operating system that was already 4 yrs old as it was built.
Windows XP dates back to 2001, I would be greatly disappointed if it wouldn't run on any PC released afterwards. And a service pack not a new OS makes, although one could argue that XP SP 2 was to the original XP what Windows 7 wants to be for Vista: A fix for all the flaws it came with and then some.
Apples profit and gross margins have not changed much over the last few years and if anything, even their prices have come down. I payed 2700? for a 15" PowerBook five years ago, the upper MBP now is 500? less. In a sane market a company sets the price where demand equals supply, that's where the cost/income balance is best, I don't see Apple slowly rising prices to squeeze any more out of their customers. And fe. look at consumer satisfaction ratings for why people invest in premium market products. Apple does not compete in the bargain/volume markets anyway.
About netbooks. There is no innovation, it's just shrinkage to bring the price down and the volume up (which is not what Apples business is about), because customers did not buy more(enough) subnotebooks that were smaller/lighter than regular laptops but more expensive. As thus it's not a new market either, just an extension of the market for subnotebooks, just like the MBA was at the upper end, which is where Apples business is.
Apple has just recently stated that they are looking at the category, but they will only come in if they really can innovate, to set themself apart from their opponents and earn good money with it. Fe. when they have perfected the soft keyboard on an 8" multitouch screen. Not before.
just saying.
Ciao, Alex