One of the big alleged disappointments of Apple's otherwise stellar fiscal first quarter results was the company's Mac shipments.
The issue: Apple shipped 1.6 million Macs in the quarter and that was short of the 1.75 million analysts were expecting. Of course, Apple's outlook was weaker-than-expected, but many Wall Streeters were expecting that guidance anyway. That leaves Mac sales as a big reason why Apple shares are getting shellacked today.
Now it's time for perspective. Those Mac sales were up 28 percent from a year ago and flat quarter over quarter. In a PC industry that's showing growth of about 3 percent that's pretty impressive. Granted Apple's computer market share is about 3 percent, but Mac sales are outgrowing the rest of the industry by a wide margin.
But the big concerns are summed up by Citigroup analyst Richard Gardner:
"PC shipments of 1.6M were well below our estimate of 1.85M and consensus of 1.7-1.8M. While year-to-year unit growth was solid, it did not meaningfully exceed that of the consumers markets from which Apple derives the majority of its revenue despite a somewhat easy comparison (due to purchase deferrals ahead of the Intel transition one year ago). While notebook shipments rose an impressive 65 percent year over year, they declined 2 percent sequentially during a seasonally strong quarter."
That's a valid worry, but there's a key point that's missing. Apple has pricing power. The average selling price for Macs was $1,500 driven primarily by notebook sales (see reviews). So sure, Apple could have cut prices to get to some magic Mac unit shipment number, but why do that when demand is in line with internal projections?
"Apple has achieved an approximate 2-5 million increase in the number of active Mac OS X users-and this while increasing blended average shipment ASPs on its CPU category by almost 10 percent versus last year," said ThinkEquity Partners analyst Jonathan Hoopes.
That's a significant point. Meanwhile, Hoopes also notes that what Apple didn't say at Macworld--it didn't talk tablet PCs, didn't showcase new OS X features and stayed clear of any next-gen Mac notebook and PC designs. The hint: These things will come later this year to drive Mac sales. "We expect the next few months to contain a few special events where new software, services, and hardware will be announced," said Hoopes.
On the conference call last night (see SeekingAlpha transcript), Apple chief operating officer Tim Cook was asked about Mac sales in the quarter.
"You saw a pretty good sequential up-tick in the ASP, and I was wondering if you were starting to think about maybe pricing a little more aggressively to accelerate Mac growth even more going forward?"
"We grew at three times the market. Underneath that, if you look in some specific markets, like the U.S., we grew at 31 percent versus market growth of 3 percent, which is substantially above. Portables grew at 65 percent versus IDC’s forecast at 23 percent. This is also now eight of the last nine quarters that the Mac has outgrown the market, so I do not see -- I believe we have very, very competitive product offerings that are delivering substantially above market growth. We have no reason to change."
Cook was also asked about a quarter to quarter Mac sale decline.
"We have an extremely strong educational business in the Q4 period that includes substantial institutional business, and that institutional business corrects significantly as we get into Q1. The sequential decline that we saw is something that is very seasonal in nature. Frankly, we were very happy to overall have the same number of total Macs that we had in Q4, because we expected that given the high level of institutional sales, including two very large one-to-ones that total 50,000 units, we had predicted the Mac to be down from Q4, and it is not."
Bottom line: Put those Mac sales in context before getting panicky.