4 Overlooked Effects that Could Drive Mac Sales Higher

| Analysis

Looking at Apple's Macintosh sales by quarter, one can get the notion that perhaps Mac sales have peaked for all time and will continue to decline dramatically. However, forces in the market will drive the curve, not the curve itself. Let's look at some overlooked trends and forces that might slow the current decline.

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There are many factors to consider when looking at the chart of recent Mac sales by Apple. Here's the chart.

Total Macs sales by quarter, millions

The problem with drawing a best fit curve through this bar chart is that the downward trend has to reflect forces in the market. That is to say, if the forces change, the curve will change.

First, Market Share Itself

To first order, we're seeing a general decline in PC shipments -- and presumably sales -- in our Post-PC era. That appears to be dragging down Mac sales as well. The reason of course is the popularity of tablets, whose sales will soon surpass those of PCs. On Apple's side we call it cannibalization.

On the other hand, as Tim Cook pointed out in the Q3 earnings report, Mac sales aren't declining as fast as PC sales. That means a net gain in market share for Macs. The way I interpret this is that while Mac sales have been declining on a quarterly basis, sine 2012Q1, what's important is not the absolute number in millons, but rather the percentage of PCs sold that are Macs -- which will probably continue to rise. Apple can weather this because of its terrific gross margins. The company makes good money on every Mac sold.

Factors that Could Invigorate Mac Sales

Given this apparent trend in declining Mac sales, one has to ask if there are any counter forces. I believe there are some.

1. As the PC market shrinks, there will be less incentive for PC makers to invest in advanced R&D for PCs. On the other hand, because Apple makes good money on each Mac, the company can continue to make superior computers. The recent technology advance in MacBook battery life is an example. As time goes on, one can surmise that the gulf between a modern Mac and a dying breed of PC will widen. The new Mac Pro is another example of that widening gulf.

2. Most large companies have to take their time with a major rollout of a new OS. It may take a year to certify Windows 8.1 against in-house developed and other mission critical apps. We know that the reverse halo effect of iPads and iPhones is strong, as is BYOD. Many companies driven by the end of Windows XP support may opt for Macs running Windows 8.x in virtualization. Why? The available PC hardware will be so inferior compared to new Macs.

3. The new Mac Pro may have untended consequences. In my interview with Larry O'Connor of Other World Computing, he suggested that the new Mac Pro could sell 500,000 units per quarter compared to the current Mac Pro's 50,000 units per quarter. That's a net increase of 450,000 x 4 = 1.8 million Macs per year. That's almost enough to reverse the current mild decline.

Apple's new Mac Pro, a 7.5 teraflop black beauty. Inspiration will continue.

Moreover, the new Mac Pro could inspire Apple to diagnose declining Mac sales and remedy with a new design language for all its Macs. For example, and this is just a surmise, why build new iMacs with built in 2K displays that will worry new customers about quick obsolescence. Perhaps it's time to separate the display again so that a stand-alone iMac box, an awesomely beautiful box by Ive, could drive either older 2K displays or the new 4K displays. And remain affordable while making money for Apple. In other words, leverage from what was learned from the new Mac Pro engineering.

I'm not hanging my hat on this, but I am saying that the new Mac Pro could be a progenitor for a new wave of Mac designs that are so blindingly better than available PCs that the sales curve for Macs turns back up. Or holds steady, even as PCs decline.

4. Seasonal adjustments. Apple's first fiscal quarter is the Christmas quarter. If, as Apple has suggested, amazing new products are coming out in the fall of 2013, that could bump up the Christmas buying enthusiasm for all the other Macs in the line beside the Mac Pro: MacBook Pro, Mac mini and iMac, and spike the 2014Q1 sales. That could stem the decline on an annual basis, not just quarter by quarter.

Considered Speculation

All this is just informed speculation, but I think it's based on some tried and true principles about how Apple operates. Nothing remains static. While competitors are looking for weaknesses in Apple's iPhone and iPad strategy, Apple, in turn, is very good at analyzing industry trends and looking for openings. The new Mac Pro is an outward sign that Apple sees an opening in high performance desktops, and the PC industry, bored with PCs in the Post-PC era, should be wary of Apple's penchant for seizing on competitor oversights.

I'm not saying that desktop and notebook Macs will see a dramatic resurgence in their current form. But I wouldn't count Apple out on seeing opportunities, based on its vision and design experience, where others do not. That, in the end, could seriously slow the decline in Mac sales and keep us all happy for many years.

Comments

Gary Dauphin

“Factors that Could Invigorate Mac Sales”

I am so glad you wrote, “could.”  Otherwise, I would need to scold you for this dribble.

windwalker

The decline in Mac and PC sales is caused by lenghtening replacement cycles.
That trend could only be reversed if Intel could offer single threaded performance improvements of 40% or more per year, not 5% like these days.
They haven’t been able to do that for more than a decade and single threaded performance improvements have been trending downwards.

As a result, software stagnated and so did the need for replacing harware.
This is such a massively dominant trend that no amount of design or usability improvements can make up for its effects.
Macs might do better during this quarter or the next, but the overall trend could only be reversed by a massive switch from Windows.

skipaq

Reason 3. This one is interesting. Perhaps the biggest competition Mac OS will have if this comes to fruition is IOS.

Lee Dronick

For most internet users tablets and smartphones have replaced the need for a “computer”

adamC

The Macs are so well made that they last and last.

And good read, thanks.

Paul Goodwin

More rapid obsolescence of the 32 bit machines still out there running may also have an impact. As support and software falls by the wayside, these machines, even though they still run fine will more rapidly reach end of life. iMacs and MacBook Pros went 64 bit in late 2006. Sales weren’t as high back then. 4.5 million in FY2005, 5.3 million in FY 2006, but there are likely 10 million possible sales from the retirement of the 32 bit machines. That may be enough to flatten the curve some too.

iJack

” Otherwise, I would need to scold you for this dribble.”

Drivel. For gawd’s sake, the word is DRIVEL!

webjprgm

@windwalker The main driving factor in my last upgrades was GPU. GPUs have continued to improve and newer games, and even desktop animation effects and movie playback, take advantage of these improvements. I was only barely able to play StarCraft II on my 2006 iMac, and Minecraft stutters with lowest distance rendering on my 2007 MacBook. So in the past couple years I’ve bought a new iMac and new laptop.

A secondary factor was HDD vs SSD. It makes a difference for boot and application launch times, so once I got used to one computer being fast I needed to upgrade the others too lest I be constantly annoyed.

On a side note, related to what @adamC said: I used a 1998 iMac until about 2004. My sister then used it until about 2006/2007 (when she could afford to buy her own Mac mini).  However, since then I’ve developed too much of a taste for cutting-edge computers so I doubt I’ll wait 6 years between upgrades anymore.

webjprgm

It will be interesting to see what happens. I am especially interested in what happens with iMacs. Currently the Mac mini is underpowered compared to the iMac while the Mac Pro plus a nice iMac-quality monitor is much too expensive. iMac has been the midrange, which is right where I sit.

I also feel a bit of loyalty to iMac, since the first computer I bought with my own money was a 1998 iMac and I’ve used iMacs exclusively since then. (Plus laptops, plus whatever I get at work.)


—Rambling about costs (ignore this part if you want)—
A top-of-the-line iMac can be about 3k ($2749 using the options I would likely choose on current models). A MacPro starts at 2.5K (but with some options worse than the iMac options I pick), but then you have to buy a monitor. That’s 1k from Apple, so the cheapest Mac Pro to compete with iMacs is 3.5K.  Is there a chance than the new Mac Pro would sit in the 2k range so the total cost is about equal to the 3k iMac? Maybe Apple wouldn’t do that right now, but in a year or two when we’re further along the curve Mr. Martello suggests?

Or I could take the longer view. If you keep the 1K monitor for 6 years and buy a computer every 3 years then you can amortize the cost and say it’s essentially 500 + Mac Pro now, 500 + Mac Pro in 3 years. That puts the cost similar to an iMac already I guess.

The current Mac Pro is a huge box and I would never get one. Not when I’m so used to an iMac. I don’t know if I’d want the new Mac Pro though. We’ll see in 2014/2015 when I’m considering upgrades again.

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