July 30th, 2009
Crazy talk: Apple should ditch the Mac?
Industry observers point to the amazing margins of the iPhone and the declining margins for computers. So, of course, the logical course of action is for Apple to abandon the Macintosh? It’s crazy talk.
In a Thursday BNET Technology post, Erik Sherman pointed to some recent analyst figures on the iPhone margins. They are amazing.
You’ll have to read his piece for the details, but the short take is that the margin of the iPhone appears to be nearly 60 percent. That’s right, in the world of consumer electronics, Apple is making such a large margin than competitors would likely break out in tears in realization of what they are missing. But instead of simply pocketing the money, it uses the financial advantage to lower Mac prices so it can be more competitive in a cost-sensitive environment.
That raises the question of whether Apple plans a complete shift away from Macs. It needs them for now, but if it can bulk up enough on iPhones and the upcoming tablet, it may be that the Mac becomes an unnecessary endeavor.
The Mac is an “unnecessary endeavor?” Come on! This is crazy talk.
Is the success of the iPhone some kind of a sign that Apple should toss aside its computer hardware and software businesses and become a one-platform company again? A move that would make it totally dependent on the cycles of a single technology, again?
In the greatest turnaround in technological history, Apple executed on its OS transition for its computers and then an equally bold hardware transition to Intel. With the astounding success of its mobile music players and now smartphones, Apple is supported by several solution platforms, all of which leverage its Unix foundation and its object-oriented Xcode IDE.
For this moment, good fortune is shining on Cupertino: that one of its platforms is early in a market life-cycle and another is in a mature one.
Check out: iPhone adoption in the enterprise to climb
But it’s not as if Mac sales are chopped liver. Based on its latest financial reports, Apple sold 2.6 million Macs in the last quarter, a four percent year-over-year increase. The acceptance of the Mac in a number of markets is growing, not declining.
Still, Apple executives point to a number of factors hitting the margins on Macs, ignoring rumors of tablets. Here is one of the comments Apple CFO Peter Oppenheimer made in the company’s analyst call last week:
The teams are executing phenomenally well and so that’s something that we are very proud of and I think the results have benefited from that.
You know, regarding gross margins for the September quarter, we’ve had a chance to go through our complete process and I’m guiding to 34% for the September quarter, which is down from the 36% that we just reported.
We expect the margins to decline sequentially as a result of a full quarter of back to school promotion and a full quarter of our new portables and also higher component costs.
I don’t want to make comments today about future quarters but I will give you a couple of things that are on our mind.
First, for many key components, costs are rising and you are seeing that in the market as well. And secondly, we will continue to focus on delivering state-of-the-art products at price points that our competitors can’t match and we are going to provide customers ever-increasing value. And so as you think about quarters beyond September, I would urge you to consider those factors.
No, Chicken Little, the Mac sky isn’t falling.
David Morgenstern has covered the Mac market and other technology segments for 20 years. See his full profile and disclosure of his industry affiliations.
Subscribe to The Apple Core via Email alerts or RSS.
