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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.

Many have looked at new features in OS X Yosemite, the upgrade slated to ship this October, and seen clues that Apple realizes the opportunity for increased Mac sales and has begun to act. Continuity, the umbrella term for several components that promote sharing and interaction between iOS and OS X, and specifically the "Handoff" feature, which lets users start a task on an iPhone or iPad, then pick it up on a Mac, have been the basis for such thinking.

Continuity in general, Handoff in particular, promotes a greater commitment to Apple's hardware ecosystem: It only works with iOS 8-powered mobile devices and Macs running Yosemite. Because there are far more iPhones than Macs, a boon from Continuity should result in more sales of Macs than, say, iPhones, as people with the latter but not the former decide they want the feature, and buy accordingly the next time they purchase a computer.

Another factor: Continuity appears to require a relatively new Mac — two to three years, or younger — because of the need for Bluetooth LE (low energy) technology, perhaps a prompt for current Mac owners to upgrade. In other words, more sales.

Apple's price changes, especially those for the MacBook Air in April, also had an impact on sales, another clue that the company understands that when the larger industry has problems it has a chance to grow volume. It used that tactic to some success when Microsoft's Windows Vista was widely panned in 2007 and 2008.

In last month's quarterly earnings call with Wall Street, both CEO Tim Cook and CFO Luca Maestri credited notebooks, the MacBook Air in particular, for fueling sales. "The [18% year-over-year] increase was driven by portables, thanks to very strong growth of MacBook Air," said Maestri.

The growth was fed by price cuts to the MacBook Air early in the quarter. Those cuts, $100 off for each of the line's four stock models, represented discounts of between 7% and 10%, and resulted in the first sub-$900 notebook from Apple.

Those price cuts dropped the ASP by 7% — probably no coincidence that the decline was in the price-cut range — compared to the prior quarter, but the slip came after two quarters of sequential ASP growth.

The decline returned the Mac to the same ASP from nearly four years ago.

 

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