http://www.businessweek.com/magazine/content/10_27/b4185030553308.htm

Computers

Why the Mac Is Still a Rock Star at Apple


Whatever happened to the Macintosh computer? During Steve Jobs' June 7 address at the Worldwide Developers Conference to introduce the new iPhone, the Apple (AAPL) chief executive only mentioned the word "Mac" twice in two hours. That followed the disappearance of Apple's "I'm a Mac" TV ads from its website.

In the first quarter of 2010, the iPhone accounted for 40 percent of sales, vs. 28 percent for the Mac. In the same period a year ago, it was 27 percent for the iPhone and 33 percent for the Mac. "It's a different company than it used to be," says Gene Munster, an analyst at Piper Jaffray (PJC). "It's not a traditional computer company. It's a mobile devices company."

The rise of the iPhone notwithstanding, the Mac is still a big part of Apple (a BBW50 company), which dropped "Computer" from its name in 2007. Macs sell for an average price of $1,300 with 30 percent gross margins, says Munster. By comparison, consumer-grade Windows machines sell for half that, or $687, according to research firm IDC. That's why Apple's relatively small slice of the U.S. market—only 6.4 percent in the first quarter of 2010, says IDC, up from 4 percent in 2005—doesn't matter much. For every half-point in market share Apple takes from Hewlett-Packard (HPQ), Dell (DELL), and all the other Windows vendors, it boosts its sales by about $3 billion, Munster says.

The better indicator is unit sales, which have grown substantially. In fiscal 2004, Apple sold 3.29 million Macs for the whole year. It sold slightly more than that—3.36 million—in the first quarter of fiscal 2010 alone. Charles Wolf, an analyst with Needham & Co. in New York, estimates that Apple will sell nearly 13 million Macs in 2010. "It's a real testimony to the power of the Mac brand that Apple sells these machines for nearly twice what the Windows competitors charge, and yet the sales keep growing faster than the rest of the industry," Wolf says.

There's also evidence that Apple is plotting to keep its edge. According to patent filings, future Macs may boast such features as embedded projectors that turn any nearby wall into a display for PowerPoint or the latest movie downloaded from iTunes. Newer products may also lure customers to consider the Mac. "It's a symbiotic interplay," Wolf says. "Once you get an iPhone or an iPad, you get exposed to the entire Apple gestalt in the Apple retail stores."

The bottom line: The iPad and iPhone get all the raves, but the Macintosh computer line remains a cash-spinner.

Arik_hesseldahl
Hesseldahl is a reporter for BusinessWeek.com
With Carlos Bergfeld in Silicon Valley

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