Maybe it's time for Apple to spin off the Mac as a separate company

While Mac sales keep growing and there are a few new machines, the platform is getting far less love than some users want. Here's a thought experiment to see if there might be another strategy.

Video: Should Apple spin off the Mac into a separate company?

Apple finally introduced a pro-level machine, and updated its iMac line in 2017. However, many Macs, including the Mac Pro and the Mac mini, haven't been updated in years. While these machines have marginal demand when compared to the iPhone, they're certainly important to Mac users.

Why haven't they been updated in so long?

The conventional wisdom is that Apple just doesn't have the share of mind to give these machines, compared to the behemoth that is the iPhone. In Q1 2017, Apple shipped just 5.4 million Macs compared to 78 million iPhones. Of course, it makes sense for the company to devote the lion's share of its attention to the phone market.

That said, the Mac's revenue is far from tiny. According to interviews Apple did with analysts this summer, Apple sells $25 billion worth of Mac products each year. That's more than McDonald's makes (for the record the Mc made $24.6 billion compared to the Mac's $25 billion).

Interestingly, according to Gartner's 2016 numbers (the 2017 figures should be out in a few weeks), Apple's unit share (6.9 percent) of desktop PC shipments puts it in the number five slot, behind Lenovo (20.7 percent), HP (19.4 percent), Dell (14.6 percent), and Asus (7.6 percent).

Before we go on, I want to note that the industry still refers to PC sales as "desktop sales" even though the bulk of the devices sold are laptops and notebooks, many of which will never, ever sit on a traditional desk. C'est la vie.

But if you look at revenue, the revenue share numbers tell a different story. The Mac's $25 billion in revenue is close to that of its rivals. Lenovo, the world's largest PC maker by unit market share did $6.7 billion in Q4, or an annualized run rate of $26.8 billion. HP did $8.4 billion in PC sales in Q3, which puts it at $33.6 billion annualized. Dell's PC revenues were stronger, with $9.9 billion in its last reported quarter, or $39.6 billion annually. Asus' PC revenues are a little more difficult to determine, because the company apparently doesn't release clear reporting.

Based on the Gartner data and my rough annual revenue estimates listed in the previous paragraph, Lenovo's average selling price (ASP) is about $479. HP's is $640. Dell's ASP calculates out to roughly a thousand dollars per PC. That said, it probably comes as no surprise that the Macintosh has a higher average selling price, coming in at just about $1,350 per machine sold.

So what does all this mean?

It means the Mac, as a business, is making pretty close to what the other PC leaders are making in terms of revenue, and while market share in unit shipments is lower, actual revenue per unit is higher. This becomes a particularly interesting data point, because if you compare Apple against unit market share leader Lenovo, the two companies are making almost exactly the same money on PC shipments, but Apple's ASP is almost three times as much per PC.

All this is to say that Apple's PC business is as good or better than the actual market share leaders in the PC business -- and Apple's PC business is merely a rounding error on its balance sheet compared to its phone business.

While overall PC desktop sales have been moribund for years. Apple has shown an astonishing 25 percent quarter-over-quarter growth in Mac sales from the previous quarter, and 10 percent year over year.

The Mac is clearly beating its rivals on a number of fronts. In other words, the Macintosh is a great business. It's just not as good as the iPhone, which is insanely great.

A thought experiment

All that brings us back to the idea of spinning out the Macintosh business. I know, I know. There are lots of structural reasons why this might not be possible for Apple. The company has merged development groups, macOS and iOS are growing ever closer, yada, yada, yada. Let's set all that aside and just brainstorm the idea for a few minutes.

Ask yourself a few questions. Would a stand-alone company on the verge of market dominance ever let its flagship top-end machine languish for five years? What about its most versatile (the Mac mini)? Would it let that machine languish, without even a processor bump, for three years? Apple went two years without updating the iMac, and that's a top-seller.

The answer to these questions is "of course not." Think about the Apple of the past, the one fully-focused on the Mac. Would it have allowed Microsoft to gain such innovation ground with the Surface Studio and Surface Book products? Would it have gone years without even processor-bumping its models?

Of course not. The only reason the Mac has been such a low priority to Apple is that it's been such a low priority to Apple.

So let's just wave our magic wand, and assume the structural challenges of developing Macs outside of Apple's core structure were possible. Maybe MacCo licenses the OS, or distributes through Apple stores, or uses some of Apple's contracted off-shore manufacturing facilities. We're just brainstorming here, so any of this is possible.

What would happen?

What would happen if a bunch of hungry Apple engineers were let loose on the Mac? What would happen if a whole company were imbued with the fanatic attention to detail Apple is known for, and the fanatic love for the Mac that Apple has cultivated for decades?

Would we finally get a new Mac mini? Would there be a touch-screen Mac? Would we have a Surface Studio-like mounting for the iMac? Would there be something new and exceptional introduced to the PC market?

I don't know. This is just a thought exercise after all.

But I'll tell you one more thing. If the Mac were allowed to shine again, if it were given enough runway to fly again, I'll bet it would put a smile on Steve's face, looking down on us from his own, personal iCloud.

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