iPad cannibals invade the Mac country club

iPad cannibals invade the Mac country club

Summary: Apple's Q1 2013 financial results have now presented strong evidence that the company's popular iOS-based tablets have cannibalized their Macintosh sales. But this is no reason to panic.

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On Wednesday of this week, Apple posted (yet again) record sales for their first quarter of 2013--a whopping $13.1 billion in profit based on $54.5 billion in revenue, a 17 percent increase over the same quarter one year ago.

You'd think that Wall Street would be happy, given such a stellar performance, but the expectations were that the company would outperform even those impressive figures.

Between market close Wednesday and market close on Thursday, the valuation of the company's stock has plunged approximately $64 per share, shaving just under $60.1 billion dollars off of the company's market capitalization within a 24-hour period as analysts on the Street adjusted their price per share targets.

None of this makes any sense given how healthy the company is in terms of the size of its war chest, its strong industry position in the mobile sector and expected pipeline.

After years working on Wall Street in trading environments and listening to the bawdy water cooler talk that goes on between financial power brokers, I've never truly been able to understand what goes on inside the minds of these guys that makes them react so irrationally.

I can hazard a guess as to what spooked them this time, though.

Back in July of 2010, I wrote a story called: "Dear rabid Apple fans, your precious Mac club is being disbanded".

At the time the article was written, the iPad was but four months old, however there was strong evidence to support at the time that the growth for the product was going to be massive.

How massive? I said:

...within three years, we'll see anywhere between 50 and 80 million iPad users worldwide as an extremely conservative estimate...eventually, the Mac OS will be completely eclipsed by iOS. That day may not come for four or five years. Perhaps even six. But when it does happen, "normal" people will outnumber Mac users by a significant margin.

By Apple's own admission, as of October 2012, there have been 100 million iPads sold.

That's up 15.4 million units from the same quarter the previous year, just in case anyone is taking notes.

Even if we were to aggressively eliminate about 40 percent of that 123 million unit plus figure due to obsolescence and retirement of first and second generation units, we would still be looking at around 73 million iPads in active use today.

So based on my original July 2010 projections, I would say I was pretty damn close to dead-on as to predicting the iPad market penetration we are seeing today.

Now, about those Macs.

Couched in all that awesome news about the iPad's stratospheric growth was the revelation that Mac sales are down from the same quarter in the previous year--4.1 million units sold in Q1 2013, versus 5.2 million in Q1 2012.

Why, oh, why is this happening?

Well, the answer is pretty damn obvious. A lot of people don't want to spend money on expensive personal computers like the Mac when they could be buying much cheaper iPads to browse the Internet, get their emails, check in with their social networks, and play casual games.

Indeed, the Mac is suffering from the very same post-PC malaise that has also been dragging down the sales of PCs. You didn't think Apple was immune to this, did you? You did? So sorry.

The age of the Mac desktop is coming to an end. The iPad cannibals have invaded the Mac country club and have begun to eat the membership.

So what does that mean, ultimately?

The entire industry as we know it is transitioning to an entirely different form of computing. Apple knows this, and so does Microsoft, the company I work for when I'm not writing blogs with these cute, obnoxious headlines.

Apple removed the word "computer" after the name of their company, and Microsoft has now re-envisioned itself as a "devices and services" company.

Both companies are effectively trying to achieve the same thing--bring down the cost of entry of the device, so that what eventually matters is services.

Now, in the Apple view of the world as it is presented today, those services are monetized from the sale of iOS and Mac App Store applications, in-app purchases, and consumption of content via their cloud. It's a consumer cloud, but it is a cloud nonetheless.

So what about all those people that need to get access to Mac OS X apps? Are they just going to have to sit back and watch their enabling ecosystem die? No, of course not. That's silly.

For years, I have been talking about a transition to cloud based desktop computing. I've used the term "the Screen" to describe a cheap terminal-like device that provides access to applications running in distributed datacenters, all over the world.

The first cloud desktops will almost certainly be Windows-based. I know this, not because I work for Microsoft and I have some secret insight into the company's product pipeline that none of you possess, but because it is public knowledge that Windows Server 2012 has been designed to be a world-class cloud-enablement platform for VDI and remote desktops.

And yeah, if you follow the VDI and remote desktop goings-on Citrix and VMware, those guys are not too shabby either.

There has been tremendous interest in the public and private cloud industry, in both horizontal and vertical applications, to make these desktops actual product offerings that you, Joe end-user can buy in the very near future. In vertical markets this is already happening for specialized industry applications.

You don't have to look very far to find sub-$100, stick-like devices that run Android, which plug into HDMI monitors connected to Bluetooth keyboard and mouse combos and can use RDP and ICA session protocols to run all kinds of remote Windows applications.

It is not a big stretch to put two plus two together to see where all of this is going.

Sure, PC sales are yuck. That doesn't mean the desktop OS paradigm is sunk. Neither is Mac OS for that matter.

We're just going to have to get used to the idea that our consumer "desktops" will all eventually be running in a datacenter, and our applications will all be purchased using a subscriber-based model.

On the enterprise side, they will be living in private clouds. But the access methods will be exactly the same.

It is my belief that like cloud-enabled remote desktops that run on Windows, Apple is probably looking to move Mac to a hybridized cloud model. This could involve building an inexpensive ARM-based "Mac" appliance that runs a basic desktop and can locally execute iOS-like apps, but all of the heavy lifting of resource-intensive x86-based Mac desktop apps might run in the cloud.

This solves many of the issues of ARM not being ready for resource-intensive content creation apps, particularly if Apple ends up using similar server-based GPU technology that is present in Windows Server 2012 in order to create rich multimedia-enabled remote desktop experiences.

The iPad and the iPhone already have Airplay, which enable display mirroring and content streaming to Apple TV devices plugged into HDMI ports on monitors and HDTVs. It would not be a stretch of this technology to connect from an iPad-like device to a virtualized Mac or simply streamed Mac x86 apps running in one of Apple's huge datacenters using a monthly subscriber model.

To the end-user, and to most SMBs and content creation shops that use Macs, this would all be seamless and business as usual. There would be no disruption to business, productivity or workflow. But for Apple, this would be the true realization of the post-PC future that Steve Jobs envisioned.

Cannibalism, it seems, is in the company's DNA.

Is the future of the Mac based in the Cloud? Talk back and let me know.

Also Read:

Topics: iPad, Apple, Cloud, Mobile OS, Tablets, PCs

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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181 comments
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  • This is hitting macs WAY harder than other PC makers

    The PC industry dropped 6%.

    apple dropped 20%.

    Ouch.
    toddbottom3
    • Mac sales are dropping faster than PC sales

      Glad I'm not the only person who picked up on this https://jdrch.wordpress.com/2013/01/24/tablets-impacting-mac-sales-twice-as-much-as-pc-sales/

      *Actually, desktop sales dropped 6%. Laptops fell by 11%
      jdrch
      • That argument relies exclusively on one factor

        That ONLY the sales slowdown is due to reduced demand. That assumption is false.
        Vulpinemac
        • That and the fact that

          a 6% drop in Windows based system sales is probably a significantly larger number than the 20% drop in Mac sales.
          non-biased
        • apologist much?

          gotta love apologists' logic
          yeh the demand is strong, just didn't translate thru to sales that's all.
          LOL
          warboat
    • Apple

      is the canary in the coal mine. You never see how things really are todd and defend everything Microsoft to the death. What happens with Apple will befall the rest of the industry because for the last decade the industry has done nothing but copy Apple. Can MS shift to Post-PC devices as well as Apple? Their report has shown that their strength is in their traditional enterprise role.

      Interesting they have hidden Surface sales.
      CowLauncher
      • Apple BS

        I wish you people would do your research before you make such inane comments. Apple doesn't innovate much. They have stolen technology from many other companies in the past and are now accusing others (Samsung) from stealing from them? Totally laughable. Just shows true ignorance.
        hsbdobergirl
        • You need to do a little research too...

          Because every advance in the PC market has followed Apple's lead. USB was ignored before Apple put it on the iMac. Magnetic disks were standard until Apple chose to drop it. Sure, certain technologies were available before Apple adopted them, but Apple effectively adopted them before anybody else.
          Vulpinemac
          • It is great that you mentioned USB

            It came up on another thread and again apple got credit for putting it in the mac.

            Microsoft co-invented USB.

            "Apple effectively adopted them before anybody else"

            Sometimes. However, there are also many cases where apple is far, far behind. For example, 3G, LTE, and NFC are all more recent examples where apple trails everyone else.

            But, as you will quite rightly bring up, some of those technologies may not have been ready for prime time yet and only became ready later on.

            Oops, kind of crushes your whole "apple is great for implementing things first".

            The truth is that being the first to implement someone else's technology isn't "good" or "bad". It is a business decision, not a sign of innovation or brilliance. What is brilliant is inventing things like USB. Thanks Microsoft.
            toddbottom3
          • And a PS

            "Microsoft co-invented USB."

            apple did NOT co-invent USB.
            toddbottom3
          • "apple did NOT co-invent USB." Who said they did?

            I said Apple made it popular. What they co-invented was Firewire and Thunderbolt protocols.
            Vulpinemac
          • Apple had ADB

            how does Apple make anything popular when the Mac was a minority?
            lets not forget Apple was pushing their own Apple Desktop Bus before they adopted USB as it became popular. By the time Apple adopted USB, it was already common on 90% of PCs.
            warboat
          • USB was not "common on Windows PCs" when Apple adopted it.

            In fact, there were very few third-party peripherals available for USB before Apple, with Belkin becoming for a short time the largest USB peripheral manufacturer until others caught up. The Windows platform was quite happy using PS2 connectors for keyboard and mouse (separately), serial or parallel for printers and usually some form of DIN connector for almost any other device--including external monitors. No, USB didn't become "standard" until after the iMac.
            Vulpinemac
          • And prior to Apple's finally adopting 3G, LTE and not yet NFC...

            exactly how useful were they?
            3G was too new for wide enough coverage to adopt on any kind of broad basis.
            4G/LTE was too new for wide enough coverage to adopt on any kind of broad basis.
            NFC is too new--too insecure to adopt on any kind of broad basis.

            Apple waited to adopt the first two technologies you listed simply because there was not enough infrastructure to make the added cost worth the expense. Note that I said "waited", not lagged. As for NFC, it's simply not being used enough to even consider as a "feature", unless all you want to do is one-up a competitor.
            Vulpinemac
          • Apple waited on quad-core processors as well

            Even then, the 2010 models got to 105C under load, 2011 models got to 93C (find the review at my2011macbookpro dot com), and both due to poorly designed cooling mechanisms, which Apple's engineers could have chose to address outright.

            Never mind excessive globs of poor quality thermal paste (source: ifixit, my2011macbook)...

            The 2012 models FINALLY get cooling grilles, but some people still complain of overheating...

            Still, the CEO will shift the blame from his lot to the customers anyhow... that pattern already exists... he knew of the antenna issue and then yelled "you're holding it wrong"... any one of us saying that would be committing economic suicide... but that's why colleges must now teach ethics courses, much good will it do anyone when the almighty dollar means more than treating each other right...
            HypnoToad72
          • Agreed

            It is a business decision. What will hopefully appeal to the largest number of potential customers.

            Nobody does this out of altruism, otherwise there wouldn't be any walled gardens, deflated prices (meaning the developers who work hard to make apps are more likely to see smaller ROIs for their glossy apps that only serve to make Apple far more in the end than themselves, etc...)
            HypnoToad72
          • Sorry, those 'deflated' apps are usually the Android ones--pirated.

            The developer realizes 70% of the sale price of their apps for iOS and Apple has often reported paying out hundreds of millions of dollars to those developers. On the other hand, those Android apps--especially the more popular ones, tend to get pirated, hacked, corrupted and re-posted at low to free pricing in order to spread malware. We've read many a time about popular games especially getting hit by this. Apple's app store acts as a store--providing space and some advertising for a given app and charging a very low, by comparison, commission.
            Vulpinemac
          • Especially with the most recent example being Thunderbolt...

            You're not exactly incorrect, either, but as with all companies in all industries, someone strikes proverbial gold by re-combining existing combinations and hitting the right note... touch screens, icons on a grid, and everything else already existed - long before Apple patented any of it just for the sake of halting others from doing what they did. Ask Xerox about that...
            HypnoToad72
      • Are you kidding me?

        Apple hasn't innovated much since the first I-pad. The new hybrids from PC OEMs are not Apple innovations and Windows 8 is a fresh of breath air in an industry gone stale. The PC industry offers the consumer plenty of options! It also happens to be the most exciting tech around. Apple's become a bore over the years and their lack of commitment to R&D really shows. They are a cash cow and still spend only a 1/3 of what MS spends on R&D. Innovation usually starts with the amount of effort one puts into making new tech. They've become their own worst enemy.
        Rob.sharp
        • I will agree with you about Windows 8, but remember...

          roughly 50% of the people who trialled Windows 8 hated it for the "Modern" interface. Apple is still leading in many ways, though not always all that visibly. Only Windows 8 goes beyond where Apple is currently.
          Vulpinemac