Apple's focus on value in 2014 has sent Mac sales surging

Posted:
in Current Mac Hardware edited July 2014
Hardware updates to the Mac lineup thus far in 2014 have been generally unexciting, and yet Apple has still achieved record sales this year, as consumers are seeing plenty to like about the company's newest and more affordable computers.




Earlier Tuesday, Apple refreshed its MacBook Pro with Retina display lineup, adding slightly faster Intel Haswell processors. But the real emphasis from Apple has been on value: The company trimmed $100 off the starting price of the top-of-the-line 15-inch configuration, and also made 16 gigabytes of RAM standard for all 15-inch models.

The entry-level 13-inch MacBook Pro with Retina display also comes with added value, doubling the default RAM to 8 gigabytes. The RAM upgrades alone represent a significant discount over what Apple had previously charged for those specifications.

And Apple also slashed $100 off its legacy non-Retina MacBook Pro, selling it for just $1,099.

Tuesday's moves are not surprising: Value has been the primary focus for Apple thus far throughout 2014. In April, Apple boosted the processors on its MacBook Air lineup by just 100 megahertz, but cut $100 off the models to reach a new starting price of $899 for the 11.6-inch model.




With their current pricing, the new MacBook Air models are the most affordable mass-market notebooks that Apple has ever sold.

And then in June, Apple debuted a new $1,099 iMac with low-end hardware that serves as the new entry-level model for the company's all-in-one desktop brand. That undercuts the previous base model by $200.

These kinds of upgrades don't represent the bleeding-edge hardware that enthusiasts crave, which is why Apple's 2014 updates have been met with general indifference or even disappointment by some in the tech community.

Reaction from the general public, however, has been quite the opposite: Mac sales were up 17.6 percent to a record 4.4 million units in the June quarter, which was the same three-month span in which the more affordable iMac and MacBook Air lineup launched. And with price cuts helping to drive sales last quarter, Apple is clearly hoping that lower prices and greater value on its MacBook Pro lineup will do more of the same.




The company has even been experimenting with even lower pricing through authorized Mac resellers, allowing the company to move inventory at new price points without having to budge on its own direct sales. AppleInsider has been tracking such deals through its official price guide and has noticed the company allowing major partners like Best Buy to offer big savings -- the likes of which were previously unseen -- which are then matched by the company's various other authorized resellers.

There has been added value on the software front as well, as last year starting with OS X 10.9 Mavericks, Apple made its annual Mac operating system updates available for free. That means that everyone who buys a new Mac today will get OS X 10.10 Yosemite for free this fall.

Benchmarkers and power users are likely waiting for Apple to introduce next-generation Macs running Intel's upcoming Broadwell architecture, which aren't expected to begin arriving in mass quantities until early 2015. Broadwell CPUs will be a 14-nanometer die shrink of Intel's existing 22-nanometer Haswell architecture, and the new, smaller chips are expected to bring a 30 percent reduction in power consumption while offering the same horsepower.

But Apple's surge in Mac sales in the June quarter suggests that the average consumer sees no such need to wait. To those people, lower prices and greater value were enough to seal the deal on a new Mac.
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Comments

  • Reply 1 of 26
    rogifanrogifan Posts: 10,669member
    Meanwhile Ford just announced its replacing Blackberry's with iPhones.

    http://www.bloomberg.com/news/2014-07-29/ford-plans-iphones-for-global-employees-job-posting-says.html
  • Reply 2 of 26
    blastdoorblastdoor Posts: 3,425member
    This is a nice little experiment by apple to see how much sales volume they can get from price cuts. I wonder if the sales gain has been large enough for apple to consider the lower margins worthwhile....
  • Reply 3 of 26
    I recall seeing some market stats on the market size at $100 price bands below $1000. It's quite interesting how much the market expands for each $100.

    Apple wisely pursues this. Mac's, even more than iPhones, are sticky. Now with the IBM deal, the Enterprise is open.

    Finally, 2nd hand Macs address the price band from $400 to $900.
  • Reply 4 of 26
    herbapouherbapou Posts: 2,228member

    They should update the mac mini and hopefully put it at $499 to gain some serious market shares. Regardless of they lower the price on the mini, its still needs a update.

  • Reply 5 of 26
    trumptmantrumptman Posts: 16,464member

    I don't think Apple will have lower margins. Their sales had actually begun to shrink and match the market overall rather than growing while the market was shrinking.

     

    There is a point where you don't go and compete with the garbage out there, but there is also a point where you price yourself out of the market. Apple is smart to not try to compete with $500 laptops because they were garbage. However lower component pricing now means it is the $300 laptops that are garbage for the most part and the $500 laptops are really quite good on the PC side. Apple dropping from $999 to $899 is smart.

  • Reply 6 of 26
    theothergeofftheothergeoff Posts: 2,081member
    Quote:

    Originally Posted by sog35 View Post

     

    Just in time to sell these Mac's with IBM's help


     

     

    Quote:

    Originally Posted by Rogifan View Post



    Meanwhile Ford just announced its replacing Blackberry's with iPhones.



    http://www.bloomberg.com/news/2014-07-29/ford-plans-iphones-for-global-employees-job-posting-says.html

    wow.  10,000 phones, over 2 years.  15 iPhones a day.   major impact on the bottom line. /s

     

    it says more about blackberry than it does about apple. 

     

    This is the part about the IBM deal people don't understand.  It's not a big deal for selling hardware... it's a huge deal to sell iOS as an end delivery platform (vs. say, HTML5).  That's the big win as it makes Apple Sticky to the Enterprise.

  • Reply 7 of 26
    theothergeofftheothergeoff Posts: 2,081member
    Quote:

    Originally Posted by herbapou View Post

     

    They should update the mac mini and hopefully put it at $499 to gain some serious market shares. Regardless of they lower the price on the mini, its still needs a update.


    why do you see this 'serious' market share gain? 

     

    No really... why?

     

    Do you see a massive pent up demand for PC users wanting to use their XVGA 19" monitors, black ugly keyboards and 3 button mice with a new Mini...

     

    F500 Enterprise's won't buy a Mini - No competitive bidding. 

     

    Small businesses... maybe... but only those that see some headless reuse...  otherwise, the iMac is a better solution for them.

     

    Home consumers don't want a mini... they hated all the cables in the first place.  a $1000 iMac is more than enough for them, and they give their old laptop as a donation to their church/synagogue/mosque/school. 

     

    PC enthusiasts don't want a mini, because it has no modding capability.

     

    Honestly, the Mini niche is small.   and getting smaller.

     


    Or is this what you want?

     

    I know I want a mini upgrade, but  Apple is a company that now sees 1 Million units a year as '+/-' error factor in most of it's products.   The mini is literally background noise, and given the consumer market Apple caters to, the mini is a gap system, not a flagship platform, like the macbook or the iMac.

  • Reply 8 of 26
    MarvinMarvin Posts: 15,401moderator
    blastdoor wrote: »
    This is a nice little experiment by apple to see how much sales volume they can get from price cuts. I wonder if the sales gain has been large enough for apple to consider the lower margins worthwhile....

    Macs make up less than 1/5th iOS revenue and the margins are lower than iOS. So this means Macs make up less than 1/6th Apple's combined iOS and Mac profit. This ignores App Store revenue. If they cut their Mac profit margins in half, that would lower their overall profit by less than 1/12th.

    I doubt they've cut margins in half. I doubt they've cut margins by much at all. The lower iMac uses parts from the Air. The Air price drop might have cut some margins and volume gains there probably don't offset the profit drop but I think gaining unit volume on the Mac side is the right strategy at this point because it's a long game and they need to keep building the userbase. People who buy Macs also buy iOS devices and vice versa. If someone buys an $899 Air rather than a PC and then decides to get an iPhone and iPad, the profit drop on the Mac was worth it.
  • Reply 9 of 26
    theothergeofftheothergeoff Posts: 2,081member
    Quote:
    Originally Posted by sog35 View Post

     

     

    The IBM deal is big all around.

     

    Hardware and software.

    10,000 iphones for 1 company.  Now try multiplying that by 2000 companies. 

    Now multiply that by 5 years and add 10% for repeat customers.  The numbers get real big really fast.

     

    And lets not forget international companies.  Apple has great penetration in US companies but not international.  IBM has a ton of international clients.


     

    I'm not forgetting, I think you're losing perspective of scale in today's market, and the true goal of BYOD.

    BTW, your numbers aren't based on fact.   There are not 10000 companies in the world the average size of ford.

    If there were, you just factored in a corporate employee base of 1.8Billion.  That's fantasy

     

    Fact: the Fortune 500 employs 24Million people.  that means 48,000 employees on average.  So ON AVERAGE, you need to take your number down by a factor of 4.   If you go to 2000, assume that your average drops even further

     

    But let's get to the real issue:

     

    These companies aren't trying to buy phones for most of their employees

    Only those that get phones as a perq of their rank. 

       Ford is a great example: 10,000 phones.  181,000 employees.  So Ford is buying phones for 5% of their employees (the stock option few)

     

       5% of the adult population of the world is 200Million,

        Assume only half of those work in corporations that buy phones for their employees - 100Million.

         (that's a very generous assumption).

        

        Current guesses are that there are 300 million iPhones in circulation out of a smart phone population of a billion.    at BEST, there are 100million iPhones to be sold... At worst... None, because the most affluent and smart people have already bought iPhones.

     

    Over your 5 years,  100M is basically the planned growth of the iPhone sales (15% a year compounded)

    In other words... no impact.

     

    Ford is trying to figure out how NOT to buy iPhones for those that already have one in their pocket.

    As will all the other 2000 companies in the world who employ 'knowledge workers' 

     

    So, as a guy who deals with BYOD every day as 'how do we do this'  the IBM deal is "Oh, IBM will do it for us... for a fee.   Great, we don't have to invest in how to do it, we just expense it as part of our IBM contract."

     

    The big deal is that 

    iOS is the internal app platform of choice, before Android or Windows (makes it harder to 'topple'... Apple has the corporate high ground)

    iOS now has a 'corporate support platform' via IBM (lowers risk of introduction)

     

    A bigger deal is when the iPhone becomes a 'tool' of the 'service employee'

    When every postal worker has an iPhone because of the apps deployed improve delivery

    When every counter employee at a fast food restaurant has an iPhone/iPod/iPad to do their job.

    When every school requires an iPad for every student to replace books.

     

    Those are big numbers.

     

    Mega Corp Phone purchases... Meh.

  • Reply 10 of 26
    boredumbboredumb Posts: 1,418member
    Quote:

    Originally Posted by TheOtherGeoff View Post

     
    Quote:
    Originally Posted by sog35 View Post

     

    Just in time to sell these Mac's with IBM's help


     

     

    Quote:
    Originally Posted by Rogifan View Post



    Meanwhile Ford just announced its replacing Blackberry's with iPhones.



    http://www.bloomberg.com/news/2014-07-29/ford-plans-iphones-for-global-employees-job-posting-says.html

    wow.  10,000 phones, over 2 years.  15 iPhones a day.   major impact on the bottom line. /s

     

    it says more about blackberry than it does about apple. 

     

    This is the part about the IBM deal people don't understand.  It's not a big deal for selling hardware... it's a huge deal to sell iOS as an end delivery platform (vs. say, HTML5).  That's the big win as it makes Apple Sticky to the Enterprise.


    I see the sarc, but, you know, I think it may be as important to Apple that (as the Ford spokesperson referred to) it will make the Apple ecosystem sticky at home for these thousands of people too…they won't be buying Apple TV's or iPods at work, but they'll be buying iMac's and Apple laptops and iPads for both.  I know the Enterprise is huge, but for, literally millions of workers to be exposed to that experience will make so many of them finally a bit more willing to spring for more quality at home, and that's huge too…

    Sorry, got a little breathless, there - nothing new about that strategy, but it's really fine to see it starting to bubble.

  • Reply 11 of 26
    maestro64maestro64 Posts: 5,043member
    Quote:
    Originally Posted by Blastdoor View Post



    This is a nice little experiment by apple to see how much sales volume they can get from price cuts. I wonder if the sales gain has been large enough for apple to consider the lower margins worthwhile....

     

    Apple could be doing a couple of things here, if they feel they sold as many mac as they could to the people who have money to buy its products they are now chasing the next tier down in the consumer base.

     

    In the PC world what I see happening is those with cheap PC have a couple of decisions, they can spend the little money they have on maybe upgrade a computer in their house which has window XP or maybe 7 to windows 8 and deal with all the associated issues that Microsoft creates when they come out with a new OS. Or they can buy a smart phone and if they are going to buy a smart phone do they buy iOS or Android and then pay the month fee for that privilege.

     

    The PC world has a issue they sell to corporations and people who do not have much money. Apple sells to people who have money so they can buy a phone as well as a new computer so they buy both. 

     

    Apple consumers will keep buying apple products so apple does not have to convince them to buy. For those PC people who are on the fence about getting a new computer verse a smart phone Apple throwing them a bone to come over their side with a new lower price. Also since mac sales are not the large majority of their Margin $ they could drop prices a bit to get more business and not see a big effect on their bottom line.

  • Reply 12 of 26
    capnbobcapnbob Posts: 388member
    Quote:

    Originally Posted by Marvin View Post





    Macs make up less than 1/5th iOS revenue and the margins are lower than iOS. So this means Macs make up less than 1/6th Apple's combined iOS and Mac profit. This ignores App Store revenue. If they cut their Mac profit margins in half, that would lower their overall profit by less than 1/12th.



    I doubt they've cut margins in half. I doubt they've cut margins by much at all. The lower iMac uses parts from the Air. The Air price drop might have cut some margins and volume gains there probably don't offset the profit drop but I think gaining unit volume on the Mac side is the right strategy at this point because it's a long game and they need to keep building the userbase. People who buy Macs also buy iOS devices and vice versa. If someone buys an $899 Air rather than a PC and then decides to get an iPhone and iPad, the profit drop on the Mac was worth it.

    I doubt if there is any margin erosion in these current moves. Most of the Macs have not seen a form factor change for years (which typically drives lower margins) so Apple is bumping basic components while riding the learning curve and economies of scale benefits of using older and well amortized production lines and commodity pieces (shells, keyboards, screens, SSDs, etc.) so margins are probably going up anyway even with the introduction of the new base models. The truly  interesting analysis is what these lower price models do to the ASP for the Macs. One would expect it to go down and per

    http://www.computerworld.com/s/article/9249910/Apple_grows_Mac_sales_by_18_on_the_back_of_the_MacBook_Air

    it has - 7% QoQ and 4% YoY. This is the slight compensating factor, rather than margins from these cheaper Macs since Apple is so skilled at margin maintenance or improvement. That said, the ASP is still very much in the range it always is suggesting that the current range is really only getting back to the point where the white unibody MacBooks were available at $899. You just get more for your money (unless you love optical drives and large spinning HDs ;-)

  • Reply 13 of 26
    richsadamsrichsadams Posts: 129member
    Quote:

    Originally Posted by Rogifan View Post



    Meanwhile Ford just announced its replacing Blackberry's with iPhones.



    http://www.bloomberg.com/news/2014-07-29/ford-plans-iphones-for-global-employees-job-posting-says.html


     

    Plus according to Apple, Ford is on the "to do" list for CarPlay. One can only hope that will be the demise of the God-awful Ford Sync.

  • Reply 14 of 26
    nolamacguynolamacguy Posts: 4,758member
    Quote:
    Originally Posted by herbapou View Post

     

    They should update the mac mini and hopefully put it at $499 to gain some serious market shares. Regardless of they lower the price on the mini, its still needs a update.


     

    since when has apple been about gaining market share at the cost of profit? apple is the most profitable PC maker in the business, eating the lion's share of profit for the entire industry...why should they do that?

  • Reply 15 of 26
    zoetmbzoetmb Posts: 2,655member

    I really have to disagree with the notion that the market sees Apple as "value".    Anyone looking for value is going to buy some low-end Dell, Lenovo or HP.   

     

    The market sees Apple as quality and style and has bought into the Apple ecosystem and therefore sees benefit in buying into Apple for computers as well.    They're willing to pay for the Apple brand and all that brings both in actual quality and perceived benefit.  I also think they're doing relatively well with computers because the economy is improving and there was a pent-up demand for upgrades built up during the recession.

     

    Jimmy Kimmel did a bit last week where they took a $20 Casio watch, put an Apple sticker on the back and told people it was the new iWatch and asked them if they thought it was great.   Of course, they would never play the videos of those who caught them at this or thought it was garbage, just the people who were suckered because that's what's funny, but it's amazing how many people thought it was fantastic solely because it was Apple, even when the features were described and it was nothing more than the features you'd find in any cheap watch.    That's what Apple has accomplished:  many consumers want their products no matter what.   

     

    Although I own Apple products myself and have for decades, I still see Apple as expensive.    And I'd have to pay a few hundred dollars more today to get the equivalent of the MBP that I bought in 2008, albeit with improved performance, but without an optical drive and without the ability to change storage, memory or battery.

  • Reply 16 of 26
    zoidbertzoidbert Posts: 16member
    #angrymacuser still waiting on a frigging updated display. Actually, no; ordered the LG 34UM95 ultra wide (3440x1440) yesterday as my open purchase order to buy a new display -- which has been open since August 1 of last year -- expires in a couple of days and the company basically told me to piss or get off the pot. So I had to order something.
  • Reply 17 of 26
    brlawyerbrlawyer Posts: 828member

    The fabled headless xMac is coming.

  • Reply 18 of 26
    asdasdasdasd Posts: 5,686member
    nolamacguy wrote: »
    since when has apple been about gaining market share at the cost of profit? apple is the most profitable PC maker in the business, eating the lion's share of profit for the entire industry...why should they do that?

    They go after market when they can.

    A cheap $600-$700 mac book air would create huge demand. I think.

    The Mac mini is not the future.
  • Reply 19 of 26
    adonissmuadonissmu Posts: 1,776member

    Apple needs to make great machines. "Value" is very much putting a positive spin on cheap. This article is a puff piece. Intel is blocking Apple from releasing new hardware that might warrant Mac users to upgrade their macs. It also would've been nice to get a decent display for once from Apple.

  • Reply 20 of 26
    tallest skiltallest skil Posts: 43,388member
    Originally Posted by brlawyer View Post

    The fabled headless xMac is coming.



    No, not in the slightest.

     

    Originally Posted by AdonisSMU View Post

    Intel is blocking Apple from releasing new hardware that might warrant Mac users to upgrade their macs.

     

    Uh, proof?

     

    It also would've been nice to get a decent display for once from Apple. 


     

    So since there isn’t a better panel than H-IPS, how do you propose Apple make a “more decent” display?

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