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Stable Mac prices fuel reliable profit engine

Gregg Keizer | Aug. 5, 2014
Even though iPhone revenue dwarfs the Mac, Apple's computer line remains important because its average selling price has held steady for four years.

Google's company-wide operating margin for the June quarter was 27%.

So, how does the Mac stack up against the iPad?

Nicely, in fact: Using Dediu's same generalized formula, Apple turns an average operating profit of $122 on each iPad. But because Apple sells far more iPads than Macs — 13.3 million versus 4.4 million in the latest — it ends up producing a larger amount, $1.62 billion during the April-June period, in operating income from tablets.

The bottom line, literally, is that the Mac, with just 33% of the unit sales that the iPad recorded last quarter, generated 94% of the iPad's operating income. In even plainer terms, that means that Apple must sell almost three iPads for every Mac to put the two lines in profit-generating harmony.

Increase the number of Macs sold, and the revenue produces a inordinate amount of profit, at least compared to the iPad (and also compared to the iPhone, but the comparison really breaks down there, as everyone needs a phone).

No wonder analysts like Ben Bajarin of Creative Strategies have been optimistic about the Mac, its future, and its impact on Apple.

While the Mac's ASP, or "average selling price," has fluctuated somewhat over the last four years, it's been remarkably stable over the long haul. (Data: Apple, SEC filings.)

"I maintain a very bullish narrative on Mac Sales," Bajarin said on Twitter during Apple's second-quarter earnings call of July 22.

For Bajarin and others who share his thinking, the personal computer industry, long in a slump — nine quarters of contraction and counting — will make a comeback of sorts as consumers inevitably upgrade old machines. Under that theory, the Mac, although now only about 6% of all machines sold worldwide, has a chance of gaining ground because as consumers realize they need fewer computers, they may opt for better-built, longer-lasting — and higher-priced — devices. That's the Mac's wheelhouse.

The evidence suggests that Macs have become mainstream: Of the last 33 quarters — more than eight years — Macs have beaten the industry average's growth rate in all but one. In the June quarter, for example, research firm IDC pegged the overall PC business as down 2% from the same period the year before. Meanwhile, Apple sold 18% more Macs in that quarter than the year prior.

Growth of Mac sales in the enormous China market, said Apple, was 39%, more than twice the global rate. In that market, said IDC, shipments of all personal computers were down 10% year-over-year.

A 12% share of the global market for the Mac — about twice the current share — would put another $20-$25 billion in annual revenue on Apple's books, and another $6 billion of profit in its pockets each year.


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