The Apple Macintosh: Success In The Era of Handheld Devices
For much of Apple's storied history the company's revenue was generated primarily from one product line - The Macintosh line of personal computers. The release of iTunes for Windows and the opening of the iTunes music store in 2003 transformed a Macintosh peripheral called the Apple iPod into a global success unimagined when the first iPod hit the market in 2001.
I purchased an Apple iPod soon after it came to market and used it as an external FireWire drive for storing files and copies of the various Web sites I managed. I remember attending a conference for technology educators in 2002 at which the Apple iPod was pitched as a tool for moving curriculum content from one classroom to another and as a portable storage resource for educators. The Apple iPod became for a time Apple's flagship product only to be supplanted by the Apple iPhone and the resurgence of the Mac following the Intel transition.
From the company's humble beginnings in a Silicon Valley residential garage to today, the Macintosh remains one of Apple's most important product lines. Even in this post-PC era ushered in by the success of the iPod and subsequent development and release of the Apple iPhone and Apple iPad, the Macintosh line of personal computers remains an integral component of the company's continuing revenue and earnings success.
The Apple Macintosh In The Post-PC Era
On January 29, 2011 I published a post titled The Macintosh Revenue Paradox and on February 5, 2011 I published a post titled Apple Retail Stores: Macintosh Sales Center And More. Today I'm completing this thematic look at the Macintosh line's unit sales and revenue performance with a comprehensive review of the product line's results for the most recent nine fiscal quarters.
The graph and table data below illustrate and delineate the Mac's consistent revenue growth over the most recent nine fiscal quarters.
Desktop | Portable | Combined | Desktop | Portable | Total | ||
Quarter | Units | Units | Mac Units | Dollars | Dollars | Dollars | |
FQ1 '09 | 728,000 | 1,796,000 | 2,524,000 | 1,045,000,000 | 2,520,000,000 | 3,565,000,000 | |
FQ2 ’09 | 818,000 | 1,398,000 | 2,216,000 | 1,056,000,000 | 1,904,000,000 | 2,960,000,000 | |
FQ3 ’09 | 849,000 | 1,754,000 | 2,603,000 | 1,134,000,000 | 2,220,000,000 | 3,354,000,000 | |
FQ4 ’09 | 787,000 | 2,266,000 | 3,053,000 | 1,089,000,000 | 2,891,000,000 | 3,980,000,000 | |
FQ1 ’10 | 1,234,000 | 2,128,000 | 3,362,000 | 1,692,000,000 | 2,758,000,000 | 4,450,000,000 | |
FQ2 ’10 | 1,147,000 | 1,796,000 | 2,943,000 | 1,532,000,000 | 2,228,000,000 | 3,760,000,000 | |
FQ3 ’10 | 1,004,000 | 2,468,000 | 3,472,000 | 1,301,000,000 | 3,098,000,000 | 4,399,000,000 | |
FQ4 ’10 | 1,242,000 | 2,643,000 | 3,885,000 | 1,676,000,000 | 3,194,000,000 | 4,870,000,000 | |
FQ1 ’11 | 1,227,000 | 2,907,000 | 4,134,000 | 1,731,000,000 | 3,699,000,000 | 5,430,000,000 |
The Macintosh Unit Sales Mix - Desktops and Portables
In Apple's most recent fiscal year the Macintosh represented about 27% of Apple's reported revenue and in the first quarter of FY 2011 the Macintosh represented 20.31% of Apple's revenue results. Although the Mac's percentage contribution to Apple's overall revenue performance is diminished by sales of the popular Apple iPhone and the recent success of the Apple iPad, the Mac's revenue totals continue to rise in year-over-year comparisons.
The Mac's enduring success is due to both the desktop and portable components of the product line. In FY 2010 the iMac delivered strong year-over-year gains in unit sales while the portable Mac products inclusive of the MacBook Pro and MacBook Air models delivered impressive unit sales gains. Continued year-over-year growth in Macintosh unit sales is all the more remarkable considering FY 2010 sales of almost 40 million iPhones and about 7.5 million Apple iPads. This fiscal year Apple is on track to sell over 75 million iPhones and increase fiscal year iPad unit sales at least fivefold. Although there are indications the Apple iPad is reducing global demand for Windows-based portable PCs, there are no indications yet the Apple iPad is cannibalizing sales of Apple's portable Mac products.
The graph below illustrates the unit sales growth over the the most recent nine fiscal quarters of Apple's desktop and portable Macintosh PCs. The table data delineates the unit sales performance on both a sequential and year-over-year basis for the nine most recent fiscal quarters.
Sequential | Sequential | Sequential | YOY | YOY | YOY | ||
Quarter | Units Desktop | Units Portable | Total Units | Desktop | Portable | Total Units | |
FQ1 '09 | -22.22% | 10.52% | -3.33% | -25.49% | 33.83% | 8.84% | |
FQ2 ’09 | 12.36% | -22.16% | -12.20% | -4.44% | -2.44% | -3.19% | |
FQ3 ’09 | 3.79% | 25.46% | 17.46% | -9.97% | 12.94% | 4.29% | |
FQ4 ’09 | -7.30% | 29.19% | 17.29% | -15.92% | 35.28% | 16.93% | |
FQ1 ’10 | 56.80% | -6.09% | 10.12% | 69.51% | 18.49% | 33.20% | |
FQ2 ’10 | -7.05% | -15.60% | -12.46% | 40.22% | 28.47% | 32.81% | |
FQ3 ’10 | -12.47% | 37.42% | 17.97% | 18.26% | 40.71% | 33.38% | |
FQ4 ’10 | 23.71% | 7.09% | 11.90% | 57.81% | 16.64% | 27.25% | |
FQ1 ’11 | -1.21% | 9.99% | 6.41% | -0.57% | 36.61% | 22.96% |
Macintosh Average Selling Prices - Desktops and Portables
Contributing to the Mac's continuing sales success is Apple's willingness to aggressively price the company's PCs products. The annual summer back-to-school promotions offering a free iPod touch with the purchase of a Mac boosts unit sales while lowering reported average selling prices. The recent refresh of the MacBook Air line featuring an entry model at $999 has also impacted average selling prices for the line. Apple's regular Macintosh product refreshes that include integration of new technologies such as the recent refresh of the MacBook Pro line without associated increases in product prices is also boosting unit sales. Macintosh unit sales and average selling prices have seasonal influences due to the annual education buying season in the spring, the annual back-to-school promotion in the summer and the popularity of Apple products during the annual holiday season.
Desktop | Portable | Combined | Sequential | YOY | ||
Quarter | ASP | ASP | ASP | ASP | ASP | |
FQ1 '09 | 1,433 | 1,398 | 1,408 | 1.56% | -8.07% | |
FQ2 ’09 | 1,291 | 1,362 | 1,336 | -5.14% | -12.49% | |
FQ3 ’09 | 1,336 | 1,266 | 1,289 | -3.54% | -10.91% | |
FQ4 ’09 | 1,384 | 1,276 | 1,304 | 1.17% | -5.97% | |
FQ1 ’10 | 1,371 | 1,296 | 1,324 | 1.53% | -6.00% | |
FQ2 ’10 | 1,336 | 1,241 | 1,278 | -3.48% | -4.35% | |
FQ3 ’10 | 1,296 | 1,255 | 1,267 | -0.83% | -1.67% | |
FQ4 ’10 | 1,349 | 1,208 | 1,254 | -1.06% | -3.84% | |
FQ1 ’11 | 1,411 | 1,272 | 1,313 | 4.78% | -0.76% |
Macintosh Unit Sales and Average Selling Prices
The graph below illustrates on a quarterly basis the continuing decline in average selling prices along with a corresponding rise in Macintosh unit sales. Although Apple has become more aggressive on product prices, the company is the only major PC maker able to maintain control of product prices. There is apparent price elasticity in demand for Macintosh PCs and the company has smartly guided average selling prices lower to boost overall unit sales. The combination of regular product refreshes and the willingness to aggressively price products has led to increasing unit sales and increasing overall revenue growth. The Macintosh line isn't immune from pricing pressure but Apple is able to manage product pricing while maintaining high margins for the benefit of unit sales growth.
The Revenue Mix - Desktops and Portables
In searching through Apple's quarterly results in developing this post I came across an interesting outcome. While there is a difference in the average selling prices between desktop and portable Macs, the roughly two-thirds of Mac units sold in portable configurations essentially eviscerates the difference in average selling prices on all units sold. Over this nine-quarter period Macintosh desktop unit sales represented just over 32% of the total while the revenue contribution was scantly higher at 33% of the total. Conversely portable Macs represented about 68% of unit sales and 66.67% of the revenue total.
Desktop | Portable | Combined | Desktop | Portable | Total | ||
Quarter | Units | Units | Mac Units | Dollars | Dollars | Dollars | |
FQ1 '09 | 728,000 | 1,796,000 | 2,524,000 | 1,045,000,000 | 2,520,000,000 | 3,565,000,000 | |
FQ2 ’09 | 818,000 | 1,398,000 | 2,216,000 | 1,056,000,000 | 1,904,000,000 | 2,960,000,000 | |
FQ3 ’09 | 849,000 | 1,754,000 | 2,603,000 | 1,134,000,000 | 2,220,000,000 | 3,354,000,000 | |
FQ4 ’09 | 787,000 | 2,266,000 | 3,053,000 | 1,089,000,000 | 2,891,000,000 | 3,980,000,000 | |
FQ1 ’10 | 1,234,000 | 2,128,000 | 3,362,000 | 1,692,000,000 | 2,758,000,000 | 4,450,000,000 | |
FQ2 ’10 | 1,147,000 | 1,796,000 | 2,943,000 | 1,532,000,000 | 2,228,000,000 | 3,760,000,000 | |
FQ3 ’10 | 1,004,000 | 2,468,000 | 3,472,000 | 1,301,000,000 | 3,098,000,000 | 4,399,000,000 | |
FQ4 ’10 | 1,242,000 | 2,643,000 | 3,885,000 | 1,676,000,000 | 3,194,000,000 | 4,870,000,000 | |
FQ1 ’11 | 1,227,000 | 2,907,000 | 4,134,000 | 1,731,000,000 | 3,699,000,000 | 5,430,000,000 | |
Totals | 9,036,000 | 19,156,000 | 28,192,000 | 12,256,000,000 | 24,512,000,000 | 36,768,000,000 | |
% of Totals | 32.05% | 67.95% | 100.00% | 33.33% | 66.67% | 100% |
Conclusion
We are well into what Apple CEO Steve Jobs characterized as the post-PC era in his keynote presentation earlier this week while introducing the iPad 2. But in all of the success Apple has achieved through the sales of handheld devices following the release of iTunes for Windows in 2003 and the subsequent opening of the various iTunes stores, the success of the Apple Macintosh can not be overlooked.
What the iTunes stores demonstrate is that content sells devices. The recent opening of the Mac app store, Apple's willingness to aggressively price the company's Macintosh products and the Mac's continuing success in what has become the post-PC era suggests the Macintosh can not and should not be overlooked.
The Apple iPod, the Apple iPhone and now the Apple iPad have contributed to what can only be described as Apple's five-year period of startling growth. But all the while as the Apple iPod, the product that ushered in the global fascination with handheld digital devices, has seen its fortunes wane in favor of newer and more robust handheld products, Apple's most enduring product line continues to gain new users and maintain its relevance in this post-PC era.
Robert Paul Leitao
If the iPad has contributed only nine months to your '5 years of startling growth', so I would exclude it.
ReplyDeleteThe iPad is the big player for the NEXT 5 years of Apple's startling growth.
Jon T:
ReplyDeleteThe Apple iPad represented about 8% of Apple's FY 2010 revenue and 11.6% of the 52% revenue growth. It's mentioned because it had a significant impact on the revenue growth multiple for the five-year period of time.
The Apple iPad will of course have a much larger revenue footprint over the next five years and materially impact the rates of both revenue and eps growth moving forward. FY 2012 estimates have yet to be revised by many analysts and those revisions, including updated iPad unit sales estimates, will influence the share price performance over the next several months.