As a product manager in a previous life, I often looked at products to see which should live and which should die. The decisions are mostly financial, but there are also judgments around the impact on key customer groups and the rest of the product line.
Let's start with the numbers Apple doesn't break out numbers by individual product line. They do tell us that of the roughly 4.5 million Macs forecast for this quarter, two thirds will be portables. That leaves about 1.5 million desktop Macs.
Desktop Macs include the iMac, Mac mini and the Mac Pro. I guesstimate that the iMac makes up 80% of the desktops, the Mac mini three quarters of the remainder and the Mac Pro gets the rest, or about 75,000 units a quarter.
At an estimated average sale price of $3500, Apple has a nifty little $1 billion business with gross margins that probably exceed most of the rest of the product line. Say a GM of 40% and you're talking over a $400 million annual gross margin contribution.
But, and it is a big but, given Apple's rapid growth the Mac Pro is probably the slowest growing - if not shrinking - Mac in the lineup. Not only that, Mac Pro sales have nosedived since the advent of Thunderbolt 6 months ago. MacBook Pro buyers are affluent and not stupid: as the only non-Thunderbolt Mac still made, it's clear that a new one should be on the drawing board.
Will Apple pull the trigger? The arguments inside Apple against the Pro go like this:
- With Thunderbolt on the iMac the I/O advantages of the Mac Pro are rapidly disappearing.
- Moreover, as Intel continues its march to 6, 8 and 12 core processors with lower total power requirements, we'll be able to put almost as many cores into an iMac as we do a Mac Pro.
- As third-party Thunderbolt products proliferate, customers will have the option to upgrade their iMacs in a much more modular fashion than the Mac Pro ever allowed.
- With the Final Cut Pro X introduction fiasco, many of our most loyal and demanding users - video editors - are deserting FCPX.
- In short, the Mac Pro has a shrinking customer base while offering fewer unique features at a high cost compared to competitive Windows systems.
The Mac Pro team is responding:
- Yes, sales are down, but only because we don't have Thunderbolt and we haven't upgraded to the latest and greatest Intel processors. Our sophisticated buyers are only waiting to see what we can deliver.
- We will always be able to put more cores into a Mac Pro than we than an iMac, and as the benefits of multicore processing spread to more applications this will grow our total available market.
- For many customers upgrading in the box is much more attractive than upgrading across multiple thunderbolt cables and little boxes. These are workhorse systems whose value is not only performance but also their ability to meet business needs for investment protection.
- Yes, the Final Cut Pro X intro was poorly handled, but we will recover in unit sales because of the larger demographic the new product addresses. When that happens many of those customers will want the reliability, expandability and performance of a Mac Pro.
- Finally, do not underestimate the halo effect of the Mac Pro for all Macs. A high-end system makes customers much more comfortable buying smaller systems for critical work, because they know that if they have to they can upgrade with minimal disruption to their workflow and training investments.
Inside Apple This discussion takes place in a larger context: the fight for engineering resources among all the different Mac teams. The Mac business has been overshadowed in the last 5 years by the iPhone and now the iPad.
At every budget discussion someone will ask why we don't take the engineering resources devoted to the Mac Pro and give them to faster growing product lines. There isn't an Apple engineering manager that wouldn't like more resources. The weakest teams are always at risk.
Substitute technologies The Mac Pro has several key features:
- Storage expandability. More DIMM slots than any other Mac - and they're ECC - 4 SATA disk bays and 2 optical drive bays.
- 3 PCIe slots. Add media capture cards, eSATA and USB 3.0, upgrade graphics cards and more.
- Dual-Ethernet. Handy for link aggregation.
- Choice of CPUs. Up to 12 cores.
- Multiple displays.3 or more, depending on number and type of video cards.
Can these features be replicated on an iMac?
No ECC on other Macs, a downer for critical work. But you can get 32GB of RAM on a iMac with expensive 8GB SO-DIMMs.
3 PCI-e slots can be added via Thunderbolt for $1k, but you're limited to Thunderbolt-aware drivers. Assume you'll be able to get the most popular cards in a few months.
With those cards you could add eSATA and USB 3.0, another GigE NIC with 1-4 ports, another graphics card and more monitors. But what would it cost?
If you strip out the 27" iMac monitor at a hypothetical $800, a top-of-the-line quad-core i7 iMac costs $1500. Add the 3 slot cage and the cost equals the cost of a bottom-of-the-line Mac Pro - with a slower 2.8GHz Xeon. My iMac is looking better all the time.
The Storage Bits take If I were the Mac Pro product manager I'd focus less on processors and more on I/O. Replace the 4 3.5" SATA drive slots with 16 2.5" drive slots. Add 4 Thunderbolt ports. Dual 10Gb Ethernet ports. USB 3.0. And an optional 500GB SSD.
And then I'd get with my Intel buddies and figure out how to offer a credible processor upgrade. Not that many would buy it, but the investment protection message would be very comforting.
Obviously the future of Apple doesn't ride on big honking towers. But there is a core Mac Pro market whose demand for high-performance, high-value apps provides an entry point for new software technologies that will eventually come to lower-end Macs.
With probably no more than 25 people on the Mac Pro team, the payback to Apple is huge. I hope the desire for operational efficiency doesn't simplify the Pro out of existence.
Comments welcome, of course. My 4 year old Mac Pro sold for $2k a few months ago - double what many new Wintel towers go for. I like my iMac but I'd love a modernized Pro.