A miss on computer sales for Apple

When you make a "billion" dollars, very few people care if you don't hit your computer unit sales targets.  However, turning in a 28% increase in computer sales over a quarter where people were waiting for the announcement of new products last year isn't exactly stellar computer sales.

According to what I remember  Apple shipped 1,610,000 in the previous quarter ending September.  In what should have been a strong quarter in computers for Apple, they just shipped 1,600,000.  Granted Apple has a strong educational business that influences the July to September quarter, but Apple should be going on all cylinders if they are actually going to make progress in the world computer market.  Last I checked they had migrated everything to Intel so there should be no product or shortage excuses which have been so popular over the years with Apple.

ZDNet has a post, "Putting Apple’s allegedly soft Mac sales in perspective."  Tim Cook doesn't seem to be worried about the quarter to quarter decline in Mac sales, but he should be.

I have no doubt that Mac sales are growing, but as Tim used to tell me when I was turning in 70% growth on Apple's federal sales, a higher percentage doesn't mean much if you are starting from a small base.  So even the 28% growth isn't really that much because Apple's sales are small relative to the rest of the industry.

Here's how to understand the math.  HP grew their Q4 06 year over year sales 23.8% from 9,612,278  units to 11,900,000.   They increased sales by 2,287,722 units.  Apple grew their same period sales 28% from 1,250,000 units to 1,600,000 units.  Apple increased sales by 350,000 units.  HP's growth was 43% greater than Apple total sales in spite of having a lower growth percentage.

Apple operates on a totally different profit margin so it probably doesn't matter.  They will continue to do exceptionally well as long as they can find new products to carry their computer business which is a very fine sideline for which most companies would kill.

Apple computer customers are people like me who are willing to pay more for an Apple product.  What we get for those extra dollars is in our minds better usability and more elegant design.  However, the truth is that we are a small part of the overall computer market.  I don't see that really changing.

Apple will continue to grow computer sales, but they likely will be lucky to ever reach 10% market share. 

What everyone is missing in saying that Apple is doing better than the rest of the industry is that there are boatloads of people, me included, who are waiting for Vista to be released.  Apple numbers look even worse (how can a billion in profit look worse?) when you factor that in.  Actually maybe we should just admit that Apple with the name change is acknowledging where they make their money.

It will be very interesting to see how Apple's sales in Jan-Mar compare to the Windows world when Vista starts shipping.

I know Apple is doing fine, they just aren't selling computers like they should be. I have said it plenty of times, Apple doesn't have enough resources devoted to sales or the sales leadership to really kick butt in computer sales.  That's their decision and who am I to argue with a billion in profit.

Still for those who would like to see their computer business stronger, one of the big challenges is the company (or Steve more specifically) is uninterested in the enterprise market.  You can say you want,  but enterprise business makes a huge difference in the numbers.  The sad thing is the enterprise market would love a serious choice between Apple & MS.

You can also argue that Apple is redefining what a computer is and will do great with the iPhone.  They might be the case.  Time will tell.

Will any of this matter to Apple in the long run?  No,not if the iPhone turns out to be successful, and they can keep selling iPods by the millions. 

The biggest worry for Apple is what happens after Steve Jobs.  That should scare lots of folks. 

Their core computer business isn't growing like it should because Steve doesn't care about it.   Unless it gets kicked into a higher gear if might not be able to carry Apple if they miss on a product.  Of course that's quite the war chest they have, so there's lots of room for error. Still I suspect one miss in a product would devastate the stock.

I guess if times got tough, they could always make a few billion by releasing OS X for a select few other Intel computer companies.

Should investors care about Apple slow computer unit growth? I think so, but I'm not one.  So I'll just watch from the sidelines as the great Apple story continues to unfold. 

My thoughts on their previous quarter's numbers are in the post, "Get a grip Apple folks."

Comments

[Leonard]

My, you are full of good news, aren't you? Well, it is good news that there are more Macs being sold. I would like to see a great leap in terms of Mac sales.

I agree with you, I would like to see Apple pay more attention to business. Particularly the small business arena, where I am. I would like to see more business software available for the Mac, serious accounting software, and other industry software.

Another thing I agree with you on, and that is that Apple has a poor advertising programme. Little advertising.

Vista, eh? Hmmp. We will see. It will be that many people will buy this for an upgrade, but since there are so many pc users in the world today, it will mean virtually nothing that many will upgrade, as that is what they are used to. It will not mean that this is a shining advancement in computerdom, even if it does bring some improvement.

Roll on, Ubuntu. Too bad that IBM decided to get out of computer making, in stead of them and HP switching to running a linux like Ubuntu. Now there would be a bit of a switch.

I used pcs for some time in libraries and elsewhere(not in my home), and I frankly do not see any thing that would make me want to have one over having a Mac. It is not pleasant to do so. I enjoy using the Mac OS. There are ways that it can improve, but Apple does seem to be trying to do that.

So for our small business, and my home, it will be Macs.

[Larry Crockett]

I am not sure the comments are internally consistent (perhaps that's because the topic is Apple), but a 28% growth remains quite good. Admittedly, many were hoping for iPod-like growth in Macs. Just one thought: if Apple grew consistently by 28%, quarter over quarter, it would eventually become the largest computer manufacturer in the world. So I think we can relax a little on this one.

[ocracokewaves]

Actually you're completely wrong on this one. Assume Apple continued its growth of 28% and HP continued their growth of 23.8%.

It would be Christmas of 2014 before Apple sold more computers than HP did the previous quarter this year. At that point HP would be selling 81M per quarter while Apple would have just passed 14M.

My math is right and the article is consistent. These numbers are just something Apple people have a very hard time accepting. The simple fact is that Apple is a very influential but boutique computer company in the grand scale of things, ie the worldwide computer market. Apple's had an internal goal to get to 5% worldwide market share for as long as I can remember. It's still not there.

Apple and other current manufacturers may all miss out on the next computer revolution which could be very low cost computers.

I doubt Steve Jobs will be interested in computers by 2014. Who knows if HP and Apple will both still be around? So we probably don't have time to wait for Apple's 28% growth to get us to 14M computers per quarter.

You cannot talk about sequential quarter to quarter growth and Apple because Apple actually shrank from their Q4 06 to this present quarter. With no shortages or IBM to blame, they haven't been able to demonstrate sequential quarterly growth. They position themselves as a consumer computer company.

This was the consumer computer quarter. They barely did okay given what they're selling and the competition. It certainly isn't what one would expect from the world's best operating system and some very good computers being sold in some of the world's fanciest stores.

The truth is that Apple isn't very interested in selling computers these days or they would apply more resources to the challenge. Apple's whole enterprise sales force in the US is smaller than the number of people who showed up at our neighborhood Christmas party, and I live in a small neighborhood.

I actually suggested in a previous post that a good goal for Apple would be sequential quarterly growth of 17%. That would get them to the end of the year with nearly 10M units.

http://viewfromthemountain.typepad.com/applepeels/2006/10/get_a_grip_appl.html

It's certainly doable if Apple wants to be aggressive in computers.

Apple has become a money making machine which is fine, but it might not bode well for the future of the Macintosh computers we all love to use.

[R Boylin]

I agree that small business, rather than enterprise, is a good growth market that Apple itself has identified. Apple should buy a good accounting software firm and package that product with Microsoft Office on small business computers. An employer ID would be required as a screen. An option might be Parallels plus Vista if available at a discount. Apple could utilize the subsidiary Filemaker to support and market the accounting software cross platform.

[Edward Ayres]

Nothing like snatching defeat from the jaws of victory. There are more Macs everywhere these days and that's all that matters. I doubt the business sector will ever embrace the Mac in a big way. They are are concerned with utility and price. The Apple brand represents something they don't really understand. If there is going be a huge shift toward Apple it will be driven from the grass roots not from suits.

What ever...Chicken Little.

[Larry Crockett]

My point is that 28% growth is far above yearly growth for the industry as a whole; I did not assume HP would grow by 23% a year, which I think is unlikely because any number in the 20s is unlikely over the longer term. Most companies would kill to grow by 28% a year. By the way, you want "its" not "it's".

[running idiot]

Apple, Inc. is presenting these nubers as good, but I am more pesimistic - just as you. And there is one reason why PC will always win - there is an open competition in PC platform. Mac is monopolistic platform and monopol never works as good as normal competiton.

I will tell you an example - in my country (czechia) there is practically monopol in clasic phones - you cannot have a classic phone with another operator than with Cesky Telecom (Czech Telecom). But there is way different situation with mobile phones - there are three different operators. The result of this?

Classic phones has the most expensive calls, so nobody use them and people are canceling classic lines - they use mobile phones instead. And there is more and more people with mobile phones, but with no classic phone, (just like me), because it's waaay toooo expensive for me. So, I canceled contract with Cesky Telecom and I use only mobile phone.

The only way to profit is the competition.

So, Apple should stop being afraid of competition - they should release OS X as normal system. It might sound crazy, but the competition will force them to make better (and cheaper) computers and better systems. Get a Mac ads is just not good enough.

[Christopher Smith]

Apple needs to get much more agressive with corporate sales, it's just that simple. In every Apple Store there should be a corporate sales department set up on the phones and on the road SELLING to Enterprise!!! Also we need to re-hire all those great Apple Sales guys canned out of the Apple Power Rep program and the CompUSA Apple sales guys into an even more agressive Apple Sales Campaign with new Apple Stores, or at least grandfather in all those Apple Business Agents into a more structured Sales Agenda

[JD]

And how would it compare to Dell?

[Bob Forsberg]

Good observations. But like you I use both platforms and look to Vista as an improvement to the PC side as well as 10.5 on a speed bumped Mac Pro with HDMI.

I don't want shelves of hardware running my display. One box, one big display, running both operating systems with backup capacity built in.

Eventhough its Intel driving MACs now, the slower speeds and lower core values don't justify me buying a new MacPro yet.

Dual Quad core to run 10.5 and Vista with a 40" HDMI Mac display is the only incentive I need to spend big bucks on a new MAC. Apple is just not building the high end product I would spend money on.....devoting much too much time on toys for children I will never use....like an iPhone or Apple phone.

Apple spending too much time in the toy business might keep me building my own computers and looking for a Crack to run OSX on my own Intel chips, as many others will do....that will influence Apple sales....Boot Camp to run Vista will be replaced with Root Camp to run OSX on much cheaper but much better Intel PCs.

[James Katt]

I own stock in Apple.
And in the last few years, my Apple stock has gone up by 10 times.

I've own a Mac since they were first introduced in 1984.
I've been a Mac fan through the dark ages when everyone thought Apple was going to die - losing billions each year.

I'm pretty happy with Apple where they are.

The most important thing for Apple is to remain profitable.

So long as the Mac is alive, I'm happy.

It doesn't matter if Apple gains marketshare or not.

It doesn't matter if they don't grow as people expect.

It doesn't matter if Apple doesn't sell to big business.

So long as Apple is profitable, that is all that matters. No more losing quarters.

What Apple has done well is to expand its business into other markets which tie into the Mac as the hub.

Look at the iPod. It has attracted PC users in droves to the Mac - so much so that half of all new Mac users were former PC users.

Look at the iPhone. It will sell like hot cakes. I'm going to put an order for four when it is available. It ties into the Mac as the hub. Certainly it allows also PC use. But it will also attract people to the Mac.

The iPhone has the potential to double Apple's current revenue.

[ocracokewaves]

Well I have to respond to a couple of comments especially one which might be from someone that I know.

First all, I'm not saying Apple is doing terrible. Read the post again if you got that out of it.

What I am saying, as are other people who try to look at Apple, is that Apple didn't do as well as people expected them to do in the computer part of their business.

Now, JD would have us compare Apple to Dell which you could do by looking at the link "HP grew their Q4 06" in the story if Apple had sold enough to get in the top five worldwide. They haven't done that in spite of Apple leaders over the years putting together ever changing strategies to make that happen.

Dell lost sales from last year's quarter. Still this quarter wasn't going to be Dell's quarter. They are a commodity and most of their customers are waiting for Vista to ship.

This was to be Apple's quarter, the one before Vista shipped.

There is no shame in 28% growth. It just will not get Apple where they should be.

The best way to look at growth is to measure the units Apple grew as a percentage of the worldwide growth.

That puts Apple's number at 7% in a quarter when most PC buyers are sitting on the sidelines. That's better than before, it's just not stellar and doesn't show the momentum that most people expected.

As to people who are saying, I'm fine as long as I have my Mac and Apple is profitable. I agree, except that what are you going to do when Steve is gone or gets tired of computers like desktops and laptops?

Apple needs to demonstrate that it can chew gum and sell iPods at the same time. Or put another way, Apple needs to show it can really kick butt in computers when Steve is focused on something else. Is 28% growth in this past quarter a demonstration of that ability? I don't think so.

It's actually a measure of Apple's greatest strength and it greatest weakness, Steve Jobs. He can only do so much. The rest of Apple has to step up while Steve is defining new markets.

I suspect at least one person who left a comment knows that I am completely right when I say that Apple business sales efforts, both enterprise and small business are so small that they are completely laughable.

Apple could sell lots more Macs. Macs are demonstrably better, OS X is more reliable as we all know.

So if is a better product, what's keeping it from selling at a faster clip?

There are plenty of theories, but the reality is that there are no really acceptable ones.

Apple has all the money they need to create a larger more motivated sales force, do great computer advertising, hire the right leaders, provide the world's best support and warranty, and deliver aggressive pricing to become a major player in the worldwide computer market if they wanted to do it. They don't.

They don't even pay their current sales people very well by industry standards. Just ask people who have left Apple to go to other PC companies. I know some at Dell who are making multiples of what they made at Apple.

I personally think Apple isn't far from treating the Mac like it treated the Apple II, or as it was called internally, the computer that people wouldn't stop buying.

Macs are now a sideline at Apple. We'll continue to get some new models and even an updated OS but Steve has moved on for better or worse.

I plan to enjoy my Macs as long as they last. I expect to buy a few more new ones, but I'm not counting on using one ten years from now.

There's no doubt the more billions that Apple makes the better the chance there is that the Mac will survive for multiple years.

Still Apple is a business so what will the Mac look like if it ends up being less than 10% of Apple's business. We can hope that it will still be the digital hub but who knows.

I do hope that Linux finally gets it all together before I really need it.

[Terrin]

I remember not too long ago when people would get excited when Apple sold a million computers a quarter out of the whole year. Apple is now consistently hitting over a million every quarter, and beatings its previous year quarter.

Moreover, Apple substantially beat its own guidance numbers this last quarter. In my view, the street picks unrealistic numbers based on nothing tangent. For instance, it is simply unrealistic that Apple's last quarter would beat the previous one where educational institutions are buying tens of thousand of computers at a pop. For the Christmas quarter people are merely buying gifts for others, and usually those gifts are not expensive computers, but less expensive iPods. In its own view, and mine, Apple did amazingly well with its Mac shipments. Moreover, Apple announced its inventory was at about a month on Macs, which is low. It shows Apple exceeded its expectations.

At Apple's conference call, an analyst asked Apple's CFO if Apple was going to more aggressively price its Macs to increase its market share. THE CFO flat out said no because Apple was exceeding its own expectations so it did not make sense to do this. Apple has never been willing to sacrifice margins to increase its market share. It certainly is not paying off for the rest of the industry, and there is nothing to suggest sacrificing margins would get Apple more business.

To the person who said the Christmas quarter was to be Apple's quarter before Vista shipped, I say three things. First, many potential Mac purchasers, like myself, are holding off for Leopard to ship. Second, many Mac buyers, like myself, never buy a Mac in the Christmas quarter. Why? I do not want to buy a computer that will be obsolete a month later when Apple updates its Mac line in January (yes, Apple so far has broke tradition this year, but I did not know that). Third, many Windows' Vista users, at least on the business side, are not in fact waiting for Vista to ship. Businesses are not interested in an untested OS. From my experience, many other Windows users have no idea what Vista is. Unlike Mac users, many Windows user could care less about what they are using.

Finally, Macs are not a side business at Apple. Apple makes close to fifty percent of its business from Macs. Moreover, all of its others successes (e.g. the iPod) are a result of Apple's Mac based loyal following. For instance, it was Mac users that made the iPod and iTunes successful enough for Apple to be able to branch out to Windows users. The same will occur with the iPhone. Apple's Mac loyalists will buy them up first. Others will see the devices, and follow suit. Apple knows this. Make no mistake, Jobs is back at Apple because of the Mac loyalists who love him.

People should also look at how Apple is structured: its Macs and iPod businesses are run as two different companies.

If you notice, Apple killed off names on its Mac line like "iBook", and Power PC, to empathize its Mac brand.

[Leonard]

Mr. Ocracokewaves, I sincerely hope that you are wrong. I hope that Mr. Jobs does care about the Macintosh computing platform.

It does make one wonder at why there seems to be little emphasis on pressing forward the Mac, advertising and saleswise. For several years it has bothered me how the advertising programme is lackluster, and shunted toward the iPod(which does such a nice job for us musically). It is like the computer for the rest of us must stand on its own merits, which I think seems to be the approach. Apple could do better in presenting the Mac to the world. One writes to Apple about such things to express.

I think you are right about how that Apple could make much stronger and better do about sales. But the Apple Stores has been a good direction, that addressed a real need.

While you may be much more closely connected than I am to Apple sales realities, it seems to me that the Mac must needs be the centre of the Apple experience. Apple would be rather lost without the Mac. It accounts for a good deal of Apple's margin. If the Mac were not, then the AppleTV would have to accomodate all the other computers of the world, which is fine to do this, but why cut off the fountain?

It seems to me that Apple aims at the home market, rather than the business market, regretfully. But even there it bothers and the heart chafes at a needfulness for Apple to address the home market more directly in advertising.

Linux, while having promise, seems to be splintering. Red Hat and SuSe/NOvell for enterprise, Ubuntu shows promise, and Mandrake seems to be eddying. The resources compete. I hope that the penguinistas are able to muster and gain traction, not just be on the sideline.

[Darryl]

All of your points are very valid. I imagine that there should be some concern about the amount of growth from fp 4 06 to fp 1 07 but, as an Apple shareholder, I've been hearing this type of banter for years. If were to listen to all the bears over the past 5 years, I would sold short by now. However, as mentioned by another poster, the growth, from a shareholder perspective has been tremendous.
As valid as your points are, I'm willing to continue to place my best on Steve and company as to the direction Apple should be going. They seem to have a pretty good handle on things. At the same time Wall Street, analyst, bloggers, tech journalist and most other prognosticators have consistently been wrong.
And to the poster that stated that Apple continues to make toys. That the same thing that was said when the GUI and mouse was introduced. Your still pulling your criticism out of the 80's.
It would probably be a good idea for you to continue using real technology like Windows.

[ocracokewaves]

http://www.appleinsider.com/article.php?id=2420

[Leonard]

It would be pretty sad to ditch the Macintosh, after taking so much time to develop OS X, and bringing this pleasant OS back to what seems to be a sound continuing source of cpus.

Will a father abandon the creation that he watched come to be? I know Jef Raskin really originated the Macintosh idea, but it then became Jobs baby, and grew under his eyes.

That would be pretty sad. If that were to be, I reckon the linux folk, either Ubuntu or SuSe(as it appears now) would be the beneficiaries. It would have the hacker spirit, but it is not quite the same ethos. The Mac is more imbued by the artist community, beginning for one from aesthetic sense that Jobs has. Atkinson is now in photography. And while Hertzfeld and Boich and the 'Bud' were at Eazel for a while, trying to help out linux, as good hackers, then Trible came back home to Apple.

So, I hope that Apple and Mr. Jobs desire to keep on, even as Apple branches out.

It so ties things together, to have the Mac as well as the iPod or any other goods.

One thing to think about is the presence of google. E. Schmidt on Apple's board made an attempt at a joke about merging, it was reported. If not throttled down, google could potentially be a replacement for much of what ms does. One wonders what all these board people talk about. I may have read too much of Cringely, but he is pointing up things that google is doing, and that we have wondered about already.

[spacecowboy]

Your saying Mac sales has declined when compared to Hewlett Packards sales? Hmmmm, how many desk top computers does Hewlett Packard sell that cost over $2,000? None - Just what price space is Hewlett Packard in? The low end. What market space is Apple in? The High End.
What OS System does Hewlett Packard write? None Which computer/electronics company has the most tightly wrapped, end to end, coolest and best designed products on the planet? How much is one willing to pay for the best? Soon . . . . . many.

[Paul]

While I think the author's points are valid, I think the fears are way overblown. Apple's growth has to be taken in context with the overall market. The overall PC market barely grew, so pulling in 28% yearly growth is a tremendous feat. Comparing it to HP is a case of being highly selective. No doubt in any quarter, you can always find at least one company that will have performed as well as Apple.

Your argument falls apart, for example, if you chose to ignore HP and compared Apple to Dell. Then the analysis would be, how did Apple achieve such amazing growth when the (former) #1 PC maker's sales dropped through the floor in the same period?

Again, be wary of cherry-picking your comparison - Apple is doing tremendously well in a PC market that is down overall.

Secondly, I agree with one of the posters above. You are seriously underestimating the impact of people holding off purchases as a result of Leopard and the anticipation of MacWorld. Do not forget that the rumor mill was in a frenzy before this year's MacWorld - everything from a new 12" MacBook Pro to 8-core Mac Pros was promised right around the corner. A lot of people held off purchases because of the memory of what happened at MacWorld 2006, when all the PowerPC Macs suddenly became obsolete with the new Intel iMacs and MacBook Pros.

And I know a lot of people are simply waiting for Leopard because their G5 Macs can easily last a few months more.

Also, in terms of sustaining growth throughout 2007, you curiously made no mention of the sales boost Apple should receive from the release of Adobe Creative Suite CS3. A lot of pro customers HAVE undeniably been holding off on purchases because Photoshop or Illustrator on any Intel Mac runs slower than than their existing set-up. No one is going to sink thousands of dollars into a brand new system just to immediately enjoy the "benefits" of lowered productivity.

The problem here is that it is unrealistic to simply expect a constant 17% growth quarter to quarter. The reality is that some quarters will grow faster, others will grow slower. Your "missing" growth may well indeed make itself up as the Mac business might experience 50% growth in the quarters to follow, which is not unprecedented.

So that being said - sure, more growth would have been better, but let's not cry the sky is falling at the sight of a single cloud. The lesson here is that more Mac stuff is coming down the pipeline in the next few months, and that will make it seem like Christmas will have arrived early this year.

[ocracokewaves]

http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=AAPL:US&sid=avHGLSZ.LfUI

Apple's Shares Fall as Mac Sales Remain a Concern (Update1)

By Connie Guglielmo

Jan. 22 (Bloomberg) -- Shares of Apple Inc. fell for the fourth straight day as analysts said a slowdown in Macintosh and iPod sales this quarter may damp enthusiasm for the stock.

[Leonard]

After thinking about this, I do find I agree with you on Apple missing opportunity. In the time when ms was struggling with getting something newer and for them more secure, Apple had a considerably good time. Sunny days.

It would not have hurt, but rather would have helped Apple to be appealing to the enterprise setting, as they once seemed poised to do, with the XServe. Apple does not seem to much seek sales here.

Now that vista is on the immediate horizon, if they have done their work half way decently, so that some things work better, then in the next year or two, or so, there will be a good deal of upgrading, as new computers come out and are sold. The cycle, as it turns, will inevitably be that vista will be on new machines. And it will be touted by ms.

I do wish that Apple would appeal more to the small and medium business world. It is a natural fit.