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    Home Apple
    • Apple
    • PC Hardware

    The Mac Still Proves a Winner for Apple

    Written by

    Scott Ferguson
    Published January 18, 2007
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      Apple may not want the word “computer” in its title anymore, but its hard to ignore the impact of the Macintosh on the bottom line.

      Despite a report of flat shipments, plus all the attention given to the iPod, iPhone and Apple TV in the last month, the Mac had a solid quarter for the period that ended on Dec. 30. Apple reported selling about 1.6 million of its signature product during the quarter. The Mac also saw its revenue share increase by about 40 percent compared to last year.

      Apple released its first quarter financial figures on Jan. 17, and the company announced its net income rose more than 30 percent compared to last year.

      The recent upswing in Mac sales follows the availability of the first Intel-based machines in January of 2006. In addition, many analysts believe the Mac is benefiting from a “halo” effect from the iPod.

      For whatever reason, the Mac numbers for the whole year remain impressive and analysis is calling for additional growth as the company moves more into digital entertainment and away from the enterprise market.

      According to both Garter and IDC, Apple saw its U.S. share of PC shipments increase about 30 percent from 2005 to 2006, which far outstrips the rest of the market.

      /zimages/3/28571.gifClick here to read David Morgensterns opinion on Jobs keynote at the 2007 Macworld Expo.

      Internationally, while not as robust as the U.S. market, Apple saw its share of the PC shipments grow three times as much as the rest of the market during 2006, according to Gene Munster, an analyst at Piper Jaffray of Minneapolis.

      “The December 06 quarter marks the eighth quarter out of the last nine that the Mac has outgrown the computer market internationally and in the United States,” Munster wrote in a report to investors on Jan. 18. “We believe that Apple is gaining momentum with Mac sales.”

      Munster added that Apple typically experiences a downturn in Mac sales during the first fiscal quarter but that usually has a minimal impact on the rest of the year.

      While Apple might not be lavishing that much attention on the Mac in recent months, Martin Kariithi, an analyst with Technology Business Research, in Hampton, N.H., said that Apple will use the Mac as the base for its venture into the more lucrative market of digital home and consumer products.

      “I think the Mac will follow that line of thinking,” said Kariithi, referring to CEO Steve Jobs keynote address at this months Macworld Expo that ushered in the era of the iPhone and Apple TV.

      “The companys emphasis on the Mac has not been the highest in the last few months, but I think they now view it as a device that will help create the whole Apple ecosystem,” Kariithi said.

      Next Page: The Mac momentum.

      The Mac Momentum

      Kariithi believes that the Mac still has a lot more room to grow in the next year, possibly as much as a 30 to 35 percent increase. That will help in what Kariithis view will be a pivotal year for Apple as the Cupertino, Calif. company looks to sustain the phenomenal growth it produced in 2006, mostly from sales of its music player.

      “I dont think we have seen the full affect of the Intel switch just yet,” Kariithi said.

      For the quarter that ended Dec. 30, Apple reported that its net income was about $1 billion, or $1.14 per share, compared to $565 million in net income—65 cents a share—from a year ago. Revenue for the first fiscal quarter of 2007 stood at $7.12 billion.

      Apple also announced that it had shipped more than 21 million iPods.

      For the next quarter, Apple executives are calling for revenue of $4.8 to $4.9 billion and earnings of 54 cents to 56 cents per share. Reuters is calling for revenue of $5.2 billion and earnings of 60 cents a share.

      Richard Farmer, an analyst at Merrill Lynch in New York City, noted that Mac sales for the quarter were below Wall Street expectation—1.6 million shipped compared to a prediction of 1.75 million—but that sales will pick up once Adobe Systems releases its Photoshop CS3 digital imaging software later this year.

      “Although we concede the Mac result was below our expectation, we still view 28 [percent] growth as very solid against a market growing 8 [percent] and we expect the pace to remain healthy as new Macs are introduced and as pent up demand in the creative professional segment is released this Spring with Adobe creative suite native on Intel/Mac,” Farmer wrote in a Jan. 18 report.

      Munster also agrees that CS3 could increase Mac sales. Analysts have said the release of the Mac OS X 10.5, also known as Leopard, could help sustain Mac growth as well.

      Shaw Wu, an analyst at American Technology Research of Greenwich, Conn., believes that the Mac will be part of a four-prong strategy that will include the iPhone, Apple TV and the iPod, and Apples desktops and notebooks will benefit from this strategy.

      “We see several catalysts in the quarters ahead, including Mac OS X Leopard, new movie and carrier partners, lower cost cell phones, and further extension of its core technology franchise into new business areas,” Wu wrote.

      The only real issue that could slow Apple down could be how far the stock backdating probe reaches into the company and if Jobs will be directly affected at some point.

      “Unless there is direct action, I dont expect [the backdating probe] to bother the day-to-day operations,” Kariithi said.

      Check out eWEEK.coms for the latest news, reviews and analysis on Apple in the enterprise.

      Scott Ferguson
      Scott Ferguson

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