Putting Apple's allegedly soft Mac sales in perspective

Putting Apple's allegedly soft Mac sales in perspective

Summary: 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.

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TOPICS: Apple
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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?

To wit:

"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.

The question:

"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?"

Cook's answer:

"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.

His answer:

"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.

Topic: Apple

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9 comments
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  • 26% increase = soft sales?

    are these people crazy?
    Reverend MacFellow
  • No problem

    I believe there's a sucker in search of a lifestyle borne every minute - I just hope they earn enough to pay for Apple's design and marleting and they can put up with being eunuchs.
    TonyMcS
  • Macs are great, they had projections and the returns were disappointing

    just not the wet dreams of spectators and fanatics, though the latter would never admit it. Good enough, products and state of current user needs. Worry more if there was a 'switch' to the MS side, or even Linux, before worrying about the poorly advertised Mac. iPods, sell themselves. Macs, have semi insulting "I'm a PC, I'm a Mac" ads that have put off some of the curious, but spawned so wicked smack back parodies. Doesn't feel like the same advertising group or level of genius to the iPod. Heck, give Linux some air time, say it's free as beer (as well as speech), it'd probably 'sell' better, IMO.
    Boot_Agnostic
  • Have no fear Apple shareholders

    Apple has devised a new revenue generation scheme: charge all customers for driver upgrades. It's innovative and it should more than make up for the soft Mac sales. Slap any price on anything with an Apple logo and the Apple zealots will buy it. Watch for the iPoo to come out some time later this year.

    [i]Get an iPoo - lovingly and personally "hand" ;) crafted by Jobs (PBUH) himself. Only $5.99 or get the family pack at $14.99 for 5![/i]
    NonZealot
    • How much will it cost you to upgrade?

      How much for Windows users to upgrade to the new spec? Apple advertised & sold
      these computers at a lower spec. 2 bucks for the software to unlock the higher spec?
      That's gonna break me. If you own a Mac, which I don't know why you would,
      someone like you could just not by your usual weekly allotment of hand lotion &
      kleenex. Maybe you could ask your mommy for the money.
      SquishyParts
    • I will say it again, WinZealot

      [b]Your irational hatred of Apple Inc. makes you look silly.[/b]
      Rick_K
      • Irrational LOVE of Apple, makes them look silly!

        Admittedly Apple has risen from the dead several times. But ultimately they have a problem! While they have fantastic technology, they still can't command a very significant share of the market. Why is that. It's still the problem that they have had from the beginning. A wonderful market plan, that doesn't work. Force every kid in school to use a Mac and he will be a Mac user for life. It didn't work. Any real techie wants to play. Like it or not, Apple is not again allowing you to play. Only to follow their lead.

        I am actually thinking about making my 3rd computer a Mac of some variety. Probably one of the big new ones. But only because they have a unique technology. But it will cost me between 3k and 30k. How many Users will be willing to spend that kind of money? An insignificant number in the overall PC population. Think about it. I have in these blogs mentioned that I have in the past sold Apples as part of my Graphic Arts packages for 20 years. Only to accommodate customers who wanted the MACs. Except for a few intense applications, PC's are much easier to deal with, whether buying, updating, or moving on to newer software. Apple just doesn't make it easy for business or home office users to buy their product. Here comes the onslaught!
        jattas9
  • return of the native

    In a few short months, Apple will be announcing dual-
    quad-core Mac Pros along with OS X Leopard, and
    Adobe will be simultaneously releasing its Intel-native
    Creative Suite 3. Microsoft, too, will be readying the
    release of its newest Mac Office Suite as a Universal
    Binary.

    The lack of native versions of these two suites are what
    is holding back the Mac right now. Clear that bottleneck,
    and Mac sales will go through the roof (even more so
    than they are right now), and Apple's current stock price
    of $89 will begin to look like a bargain.
    buddhistMonkey
  • Intel-native Adobe apps

    I've seen it suggested that a large proportion of Mac desktop sales are in the creative industries, and that those guys won't bother upgrading until their apps (i.e. Adobe apps, and Quark) are native to Intel. Once that happens, sales might improve.
    pauldwaite