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Thursday, August 21, 2014

How Apple took over the only segment of the PC market that still matters | ZDNet

Apple, unlike most of its competitors, is remarkably
transparent about its sales. In its quarterly and annual earnings
reports, it routinely discloses both unit sales and revenue for each of
its operating segments.

In recent years, most attention has been focused on the eye-popping
numbers associated with the iPhone and iPad lines, which sold 150
million and 71 million units, respectively, in Apple’s 2013 fiscal year.

Compared to those stratospheric sales volumes, the Mac division
appears downright anemic, selling a total of only 16.3 million units in
the company’s 2013 fiscal year, the last full year to be reported. Macs
similarly represent only a tiny percentage of the global PC market, with
less than 6 percent of the 300 million PCs sold last year having an
Apple logo on them.

But those numbers are deceiving. Macs are still enormously
profitable, and their high average selling price makes this division a
formidable cash cow. In addition, Apple’s product planners have shrewdly
targeted the most important segment of the market, the only segment
that’s growing and the one that is by far the most profitable.

Thanks to that focus, Apple’s influence is much greater than those
seemingly puny market share figures would suggest. A closer look at the
numbers explains why.

Let’s start with a truism: Macs are PCs. They compete with high-end
Windows PCs in both business and consumer segments of the market.

Over the past decade, Mac unit sales have followed the same basic track as the rest of the PC market. After rapid growth in the
first decade of the new century (more than doubling between 2006 and
2010), sales appear to have stalled somewhat in recent years.

Overall Mac unit sales, 2004-2013. Data from Apple SEC filings.

That chart only tells half the story, however. During the past
decade, the mix of Macs sold has shifted. In 2005, Mac desktops
(primarily the iMac) outsold all Mac portables combined. But that year
marked the beginning of a long, steady decline for Apple-branded
desktops, as the following chart makes clear.

Mac portables (blue) versus desktops (gray) as a percentage of all Mac sales. Data from Apple SEC filings.

In 2012, the MacBook Air and MacBook Pro combined outsold all desktop
Macs by a three-to-one ratio. That trend has no doubt continued, but
you can’t tell from Apple’s SEC filings anymore: the company stopped
reporting the desktop/portable breakout beginning in the first quarter
of its 2013 fiscal year.

It’s a good bet that MacBooks now represent nearly 80 percent of all
Mac sales, with desktop models (iMac, Mac Pro, and Mac Mini) shrinking
quickly. By contrast, Gartner says 57 percent of all Windows PCs shipped
in 2013 were portables, including traditional notebooks and
ultra-lightweight MacBook Air competitors.

Apple is aiming quite deliberately at the one segment of the PC
market that matters, what Gartner calls “premium ultramobiles.”  (For
more details, see "High-end ultramobile devices carve a bigger share of the PC market as Chromebooks struggle.")

The MacBook Air is the quintessential example of this product
category, weighing under 1.6 kg in each of its two configurations but
with a display that’s large enough (at 11 or 13 inches) to be a credible
alternative to a more traditional notebook PC.

I estimate that Apple sold roughly 6.4 million MacBook Airs in its
2013 fiscal year, compared to about 6 million MacBook Pros. (I based
that calculation on two variables: First, I estimated that portables
made up 76 percent of all Mac sales in 2013. Second, I estimated an
average selling price of $1,050 for MacBook Airs and $1,500 for MacBook

If 6.4 million MacBook Airs sounds unimpressive for a full year’s
sales, put it in perspective: Gartner estimates that only 22 million
premium ultramobiles were sold in all of 2013. That gives Apple nearly
30 percent of this fast-growing market, which Gartner forecasts to grow
by roughly 50 percent this year and more than 70 percent in 2015.

It’s also a profitable segment, with average selling prices of $1000 or more.

That growth is why you see Windows PC makers falling over themselves
to deliver products in this category, with Microsoft’s Surface Pro line
and Lenovo’s Yoga series the best examples. All of the Windows-based
products include touchscreens, and most can be converted to a tablet by
either detaching and stowing the keyboard or flipping the screen over.

The MacBook Air is desperately overdue for a major makeover. Its
biggest competitive weakness is its non-Retina display, which offers
resolutions that can’t measure up to its Pro siblings or its Windows
rivals. I would not be at all surprised to see new MacBook Airs with
Retina displays this fall. I would expect those models to sell
spectacularly well in the holiday season.

Meanwhile, it’s impossible to compare Apple’s sales with those of its
rivals in this category, because none of them break out their results
with the same level of detail as Apple.

The detailed sales comparison every PC market watcher would love to see—Microsoft’s Surface Pro 3 versus the MacBook Air—isn’t
likely to happen unless Microsoft changes its longstanding policy and
begins disclosing actual sales figures for the Surface line.

| ZDNet

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