Keeping track of how Apple is doing as a company is hard. The stock price goes up, the stock price goes down – often without any apparent reason. We hear one set of marketshare numbers for smartphones, tablets and computers one day, and an entirely different set the next. Apple is doing well, says one group of analysts, while another says Apple is doomed. So how is Apple doing, really?
To get some sense of the company’s health, we asked four writers to dig into four different sets of numbers: the ones that Apple itself publishes every quarter, as part of its required financial reporting, regarding the sales of its four principal product lines – Macs, iPhones, iPads and (yes, still) iPods. We asked those writers to look at those numbers over as long a period as they could, to see if they could extract some long-term signals from those short-term trends.
The bottom line: Apple is doing just fine, thanks, but it is also facing some very definite – and very dangerous – threats in each of those four product lines. Those threats make this period – the spring and summer of 2013, when the company is announcing and ship new products in at least three of its lines – one of the most crucial in the company’s history.
The PC market as a whole may be shrinking, but one segment of the market that isn’t declining is the Mac. Even as the Mac makes up an ever- diminishing portion of Apple’s overall revenues, the Mac’s popularity has grown by leaps and bounds in the last decade.
MAC SHIPMENTS UP
In 2003, Apple shipped just more than three million Macs worldwide, the majority of which were desktop PCs.
At the time, the Mac was the largest contributor to Apple’s bottom line, accounting for more than 72 percent of Apple revenue. Jump ahead to Apple’s 2012 financial year: the company sold more than 18 million Macs, and yet those Mac sales amounted to less than 15 percent of Apple’s bottom line.
How does that happen? The most significant shift in Apple’s business over the last decade, of course, was the advent of its mobile operating system – iOS – and its related devices. Beginning with the release of the original iPhone in 2007, followed by the iPad three years later, Apple set off a tectonic shift in personal computing – a change that is still wreaking havoc on the entire PC market, as well as on Apple itself.
Because many of us are now equipped with smartphones and tablets, we have less need for PCs in 2013 than we did even five years ago. Analysts and critics still debate whether mobile devices have outright decimated the PC market or have just delayed purchases of PC replacements by a few years.
The market impact of iOS aside, the Mac has unquestionably increased in popularity compared with other, non- Apple computers. Between 2009 and 2010, the number of Macs sold rose by more than 31 percent. The following year, Apple recorded nearly 22.5 percent growth for its computer business.
That continued success has three reasons. First, Apple’s own retail stores gave the company more direct communication with Mac buyers and let them get hands-on time with the company’s products. “Direct retail is one of the big success factors for Apple,” says Mikako Kitagawa, principal research analyst for market research firm Gartner.
Second, Apple made the decision in 2006 to switch from using PowerPC processors to using Intel chips, a change in CPUs that gave the Mac’s performance a leg up. “There was no comparison between PowerPC and Intel at the time,” said Patrick Moorhead, principal analyst with Moor Insights & Strategy. “[Intel] was more powerful, it was more power efficient, and it also scaled from the low end with notebooks to the high end with workstations and the pro market.”
The third reason for the Mac’s continued ability to thrive is that in the same year that Apple switched to Intel processors, demand for notebooks began to regularly exceed sales of desktop machines for the first time. Soon after, Apple introduced the MacBook Air, a laptop designed for the mobile era. Initial Air models were criticised for being slow and lacking ports, but they were slim, light and beautifully designed, and that’s what seemed to matter for the mobile market.
Design touches first seen in the MacBook Air filtered through the rest of the Mac product line. Other MacBook models were soon sporting Air-like components such as solid-state drives, sealed batteries and unibody designs. These same features have now filtered through to the rest of the PC industry.
MACS NOW A SMALLER SLICE OF APPLE’S PIE
A decade ago, Apple’s share of the PC market was small – around two percent of all desktops and laptops worldwide.
“In 2003, [the PC industry] really was all about desktops,” Moorhead says. “It was still a pretty big period of growth, particularly in the emerging regions that weren’t really able to ever afford a Mac.”
In more established markets, says Moorhead, consumers were becoming fascinated with Apple’s industrial design and with the benefits that OS X offered such as easy-to-use video and photo management. But Apple’s higher prices compared with what you could buy on the Windows side meant that Apple’s primary consumers were those willing to pay a premium for the Apple experience.
As recently as 2006, Apple’s market share was still hovering around two percent. But by the end of 2012 the Mac’s popularity had more than doubled to about five percent of worldwide desktop and laptop shipments.
Apple’s evolution as a company, its industrial design aesthetic, and the ability of products like the iPod and iOS devices to draw new users to the platform – all helped to push the Mac’s growth as well.
But at the same time that the Mac was becoming more popular, the overall appeal of personal computers would begin to wane. The rise of tablets, especially the iPad, would help precipitate a dramatic decline in worldwide PC demand.
Tablet shipments surged from zero in 2009 to more than 100 million by 2012, thanks to tablets’ ease of use, faster response times, greater portability and sub-$600 prices compared with PCs.
PC shipments, meanwhile, have steadily declined quarter after quarter. Gartner reported in July that the PC industry was in the longest slump ever seen, and it’s not clear when – or even whether – things might turn around.
“We think that Mac share will grow gradually, but continue to be small,”
says Gartner’s Kitagawa. A PC market in retreat, combined with Apple’s minimum $1000 price tag, will keep the Mac beyond the reach of mass-market buyers who aren’t willing to pony up that much for a computer.
Whether or not the Mac’s popularity exceeds current expectations, MacBooks and iMacs still have an important role to play in Apple’s overall business.
Along with Samsung and Lenovo, Apple is at the forefront of the so-called post-PC era. Instead of desktop or laptop computers handling each and every computing task, smartphones, tablets, laptops and PCs are playing complementary roles in our everyday lives. Each device now suits specific situations, from crunching massive spreadsheets at the office to catching up on reading into the wee hours before bedtime.
Looking into the more-distant future, it’s anybody’s guess as to what’s in store for Apple’s desktops and laptops. Will the Mac and iPad remain separate, or will the two converge into one device?
Anything’s possible, but given Microsoft’s struggle to realise its vision of a world of tablets, laptops and desktops all running Windows 8, Apple’s steady approach to the Mac’s evolution seems like the right course.
Still to come: Apple’s iOS devices. How is the iPhone, iPod and iPad travelling?
Find out shortly.