The Macintosh Revenue Paradox
On October 30th I published Apple's FY2010: A Retrospective. In that blog post I charted the Mac's 27% contribution to Apple's FY2010 reported revenue. In fiscal year 2010, Apple sold 13.662 million Macs and those CPU sales produced revenue of almost $17.5 billion dollars. Yet record revenue from Mac sales continue to have a diminishing percentage contribution to Apple's overall revenue results.
Macintosh Revenue and Contribution To Overall Revenue Results
In the recent December quarter, Macintosh CPU sales produced revenue of over $5.4 billion yet represented just over 20% of Apple's reported revenue. To put the Mac's unit's revenue performance in a broader perspective, in FY2011 Macintosh CPU sales will produce revenue at or above $21 billion and revenue from Mac sales will exceed Apple's revenue from all sources as recently as FY2006. This paradox of record revenue and declining percentage of revenue contribution to Apple's overall results is due of course to the popularity of Apple's iOS-based products such as the Apple iPhone and Apple iPad.
However, for Apple to sustain rates of revenue growth similar to or near the December quarter's 70.5% growth throughout FY2011, continued growth in Macintosh revenue figures prominently in the outcome.
The graph and table data below illustrate and indicate both the Macintosh's rising revenue and falling percentage of revenue contributions to Apple's overall revenue results:
Fiscal | Desktop | Desktop | Laptop | Laptop | Total | Total Mac | % of Total |
Quarter | Units | Dollars | Units | Dollars | Units | Dollars | Revenue |
FQ1 ’09 | 728,000 | 1,045,000,000 | 1,796,000 | 2,520,000,000 | 2,524,000 | 3,565,000,000 | 30.01% |
FQ2 ’09 | 818,000 | 1,056,000,000 | 1,398,000 | 1,904,000,000 | 2,216,000 | 2,960,000,000 | 32.58% |
FQ3 ’09 | 849,000 | 1,134,000,000 | 1,754,000 | 2,220,000,000 | 2,603,000 | 3,354,000,000 | 34.46% |
FQ4 ’09 | 787,000 | 1,089,000,000 | 2,266,000 | 2,891,000,000 | 3,053,000 | 3,980,000,000 | 32.60% |
FQ1 ’10 | 1,234,000 | 1,692,000,000 | 2,128,000 | 2,758,000,000 | 3,362,000 | 4,450,000,000 | 28.37% |
FQ2 ’10 | 1,147,000 | 1,532,000,000 | 1,796,000 | 2,228,000,000 | 2,943,000 | 3,760,000,000 | 27.85% |
FQ3 ’10 | 1,004,000 | 1,301,000,000 | 2,468,000 | 3,098,000,000 | 3,472,000 | 4,399,000,000 | 28.02% |
FQ4 ’10 | 1,242,000 | 1,676,000,000 | 2,643,000 | 3,194,000,000 | 3,885,000 | 4,870,000,000 | 23.94% |
FQ1 ’11 | 1,227,000 | 1,731,000,000 | 2,907,000 | 3,699,000,000 | 4,134,000 | 5,430,000,000 | 20.31% |
Laptop and Desktop Macs
To understand the Mac's unit sales and revenue growth one must understand the performance of the Mac's two major product lines - desktops and laptops. Although Apple's popular line of laptops including the MacBook Air and MacBook Pro currently constitute about 70% of the Mac's unit sales, the importance of Apple's desktop Macs can not be dismissed. No matter the slight decline in desktop unit sales in the December quarter, desktop Macs achieved a small revenue gain in the quarter due to a rise in the average selling price. On average, each desktop Mac sold has a slightly higher revenue value than each laptop sold. The unit sales contributions of desktop and laptop Macs will vary based on product refresh cycles. Although laptops currently represent roughly 70% of all Macs sold, desktop Macs buoy the Mac's continued sales growth and impressive revenue growth performance.
The graph below illustrates the revenue contributions from desktop and laptop unit sales:
Macintosh ASPs
One of the unexpected outcomes in Apple's December quarter was the conspicuous sequential rise in the Mac's ASP or average selling price. In the quarter Mac unit sales rose about 23% YOY while the average selling price rose sequentially from $1,254 to $1,313. The slight decline in the year-over-year average selling price was due to Apple's more aggressive approach to product pricing in the PC market.
The graph below illustrates the Mac's quarterly revenue performance and the change in average selling prices. There are definite seasonal fluctuations in the Mac's average selling price due to changes in the quarterly sales mix between laptop and desktop Macs. Changes in the sales mix are influenced by product refresh cycles and seasonal changes in sales to schools, students and consumers.
Fiscal | Combined | Desktop | Laptop | % of Units | % of Units | % of Dollars | % of Dollars |
Quarter | ASP | ASP | ASP | Desktop | Laptops | Desktop | Laptop |
FQ1 ’09 | 1,412 | 1,435 | 1,403 | 28.84% | 71.16% | 29.31% | 70.69% |
FQ2 ’09 | 1,336 | 1,291 | 1,362 | 36.91% | 63.09% | 35.68% | 64.32% |
FQ3 ’09 | 1,289 | 1,336 | 1,266 | 32.62% | 67.38% | 33.81% | 66.19% |
FQ4 ’09 | 1,304 | 1,384 | 1,276 | 25.78% | 74.22% | 27.36% | 72.64% |
FQ1 ’10 | 1,324 | 1,371 | 1,296 | 36.70% | 63.30% | 38.02% | 61.98% |
FQ2 ’10 | 1,278 | 1,336 | 1,241 | 38.97% | 61.03% | 40.74% | 59.26% |
FQ3 ’10 | 1,267 | 1,296 | 1,255 | 28.92% | 71.08% | 29.57% | 70.43% |
FQ4 ’10 | 1,254 | 1,349 | 1,208 | 31.97% | 68.03% | 34.41% | 65.59% |
FQ1 ’11 | 1,313 | 1,411 | 1,272 | 29.68% | 70.32% | 31.88% | 68.12% |
Conclusion
Although the Mac's impressive unit sales and revenue performance is overshadowed by the success of the Apple iPhone and the Apple iPad, the Macintosh line of personal computers remains a significant contributor to Apple's overall revenue and earnings performance. The Macintosh's percentage contribution to Apple's overall revenue results will continue to fall throughout fiscal year 2010. But for the company to sustain the pace of revenue and earnings growth realized in the December quarter for the balance of this fiscal year, continued gains in Macintosh unit sales and resulting rise in revenue in essential to that outcome.
It's only in comparison to the current rates of revenue growth realized by the Apple iPhone and Apple iPad that Apple's $20+ billion dollar Macintosh division could be overshadowed.
Robert Paul Leitao
Robert, the consistent Mac ASP seasonality in the Sep quarters is mostly due to the free iPod student promotion. I think we talked about this last quarter, but basically the promotion is charged to Mac and iPod revenue proportionally (thus impacting ASP). Due to the high ratio of iPod to Mac units sold, the effect on ASP is much stronger on the Mac side.
ReplyDeleteDaniel:
ReplyDeleteI am intrigued by the rise in the FQ1 Mac ASP due to the slight drop in desktop unit sales and Apple's more aggressive product pricing. I'm looking forward to the release of the FQ2 numbers to better determine a trend.
Robert