Apple CEO Tim Cook on Tuesday defended the company's iconic Mac line, which saw a second consecutive decline in sales last quarter, and promised that Apple would continue to crank out personal computers.
Apple CEO Tim Cook yesterday defended the company's iconic Mac line, which saw a second consecutive decline in sales last quarter, and promised that Apple would continue to crank out personal computers.
"I don't think this [personal computer] market is a dead market or a bad market by any means," said Cook during Tuesday's earnings call with Wall Street. "I think it has a lot of life to it. We are going to continue to innovate in it."
Apple sold 3.95 million Macs in the quarter ending March 30, down 2% from the same period the year before. The sales decline was not nearly as steep as the fourth quarter of 2012, when numbers were off 22% -- largely due, claimed Apple, to iMac shortages -- and not as dramatic as the personal computer industry's 14% decline worldwide.
But it was the second consecutive quarter that Mac sales declined year-over-year -- a first for Apple since at least 2006, when Computerworld began tracking Apple's numbers -- and did not indicate that any pent-up demand for the iMac was enough to make up for the overall slump.
Mac sales have been affected by many of the same factors that experts have cited to explain the poor performance of the PC industry, including longer stretches between computer purchases by consumers, a saturation in developed countries like the U.S. and -- most importantly -- a shift in dollars from computers, including Macs, to tablets and smartphones.
Even so, Cook stuck up for the Mac and gave no hint that Apple would abandon the market. "We're going to continue making the best personal computers. Our strategy is not changing," he said. "We've got some more great stuff planned [and] so this is an area we're continuing to invest in."
The Mac's contribution to Apple's total revenue for the quarter was 12.5%, a two percentage point increase from the previous quarter, and in line with the same period last year.
Apple first deemphasized the Mac in January 2007 when it stripped the word "Computer" from its name to call itself simply "Apple Inc." The name change was triggered by Apple's introduction of the iPhone on the same day.
Analysts interpreted Cook's defense of the Mac as a signal that, while sales have stalled, Apple plans to adapt its personal computer line as the PC market mutates.
"The personal computer market is not dead," asserted Patrick Moorhead, principal analyst with Moor Insights & Strategy. "Apple can redefine the market by creating a device in between the iPad and the MacBook Air."
For Moorhead, Apple has an opportunity to jump on the hybrid or convertible market -- defined as devices that share traits of both tablets and traditional notebooks, and typically sport detachable keyboards -- that Microsoft and its partners have tentatively entered with hardware like the former's Surface Pro and Dell's XPS 12.
"Apple can drive the heck out of the iPad, especially the [9.7-in.] model, but I believe in their future there's a hybrid device. There's lots of room, especially in the enterprise, for a $699 'convertible' iPad."
Moorhead envisioned such a move, if Apple makes it, in 2014.
Carolina Milanesi of Gartner had different thoughts, triggered by an apparent tilt in the mix of iPads sold last quarter toward the less-expensive iPad Mini. How Apple positions the next iteration of the iPad Mini, and whether it keeps the current model in its inventory, will hint at Apple's personal computer strategy, Milanesi said.
Mac unit sales were down 2% in the first quarter, the second consecutive decline. But CEO Tim Cook refused to abandon personal computers. (Data: Apple.)
"An iPad Mini in the enterprise could be seen, like other smaller tablets, as a companion to an ultrabook," she said. "It will be interesting to see how Apple deals with the MacBook Air then."
But like Moorhead, she said there's a possibility Apple will react to the PC business changes with a hybrid device. "In the enterprise, the power of having something that works, say, 80% of the time as a notebook, is powerful," Milanesi said. If Apple does take the hybrid/convertible approach with the MacBook Air, the iPad Mini, as small as it is, would nicely serve as a companion, even though the Air would be, as she said, "a tablet when you wanted it to be."
Others saw another Mac strategy for Apple.
"It's not that PCs are dying, that's silly," said Gottheil. "The PC is maturing, though, and the transition from adolescence to adulthood will be difficult. But the Mac is an anchor for them. It's important to Apple, and it's clearly profitable."
Mac sales in the first quarter generated $5.45 billion in revenue, up 7% over the prior year. Gottheil credited the revenue increase to a shift to more expensive models, most likely the 13-in. MacBook Pro with its Retina-quality display: The ASP, or "average selling price," of the Mac climbed to $1,378 from $1,359 in the previous quarter, and was $74 higher than a year earlier.
Riffing on the idea that consumers, but also businesses, are keeping their personal computers for longer periods -- spending the money for replacement machines on tablets instead -- Gottheil argued that Apple is better positioned to benefit from the trend than most Windows OEMs.
"That may be an opportunity, the pony in the manure heap," said Gottheil. "If consumers know they're going to keep their computers longer, they may be more tolerant of the Mac's higher entry prices."
He compared that thinking to what drives many consumers to buy higher-priced automobiles, thinking that a more reliable car, one with extra features, makes economic sense if they intend to hold onto it for nearer a decade than not.
"If I'm going to keep my computer for five years, six years, seven years, I'm going to get a Mac," Gottheil said of a hypothetical consumer's reasoning.
The Mac also plays a part in Apple's larger strategy, Cook said in his defense of the line, citing the familiar "halo" effect.
"We believe that if anything the huge growth in tablets may wind up benefiting the Mac, because it pushes people to think about the product they're buying in a different manner," said Cook Tuesday. "People may be even more willing to buy a Mac, where today they may be buying a PC."
Gottheil agreed. "The Mac remains a good, solid business, and it contributes to their other businesses," he said.
Apple also sold 19.5 million iPads in the first quarter, a 65% year-over-year increase.
When iPad and Mac unit sales are combined -- an approach many analysts are advocating because tablets have assumed some of the tasks once relegated to personal computers -- Apple posted year-over-year sales of 23.4 million units, a jump of 48% compared to 2012.
If iPads were considered equivalent to PCs, Apple's 23.4 million combined sales last quarter would have pushed the company into the top spot worldwide, with sales twice those of either Hewlett-Packard or Lenovo, the No. 1 and No. 2 OEMs in Gartner's and IDC's rankings.
HP shipped few tablets last quarter; Lenovo claimed it sold approximately 800,000 tablets in the fourth quarter of 2012, its most recently-reported period.
The Mac accounted for 13% of Apple's total revenue of $43.6 billion in the quarter ending March 30, up a few points from the previous period. (Data: Apple.)
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is firstname.lastname@example.org.
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This story, "Apple CEO defends Mac line; analysts foresee iPad hybrids" was originally published by Computerworld.