With the economy in decline, many fear that the one company to take the financial blow would be Apple. The company focusses on the higher end of the market (at least in price), and with many people having less and less money to spend, as well as facing insecure financial prospects, people may decide to choose for a cheaper, non-Apple computer. Piper Jaffray, an Apple-friendly analyst firm, has projected that the Cupertino company is about to face a decline in year-over-year Mac sales; for the first time in six years.
The conclusion by Piper Jaffray is based on sales figures of the first month of this year, during which less Macs were sold than the same month last year; Mac sales declined 6%, a sharper decline than expected. iPod sales were also down January, with a decline of 14%, also worse than expected. Piper Jaffray estimates that during the entire first quarter of 2009, Apple will sell between 2.0 and 2.2 million Macs, opposed to 2.3 million in the first quarter of 2008. Now, analysts are of course just doing educated guess work with lots of data, but still, the question remains: is Apple going to face its first serious headwind in years due to the economic crisis?
Every indication is that it will. Apple’s most popular form factor market is the notebook section, and it has been pretty much established now that that market is moving towards cheap, small laptops, also known as netbooks. Figures worldwide and from Europe show that currently, people prefer cheap and small laptops, most likely (but not surely) dictated by the economic climate.
Apple has nothing to offer in this market. Apple has never been attainable for people who were already in the lower segments of the market, but due to the crisis, this lower segment is increasing. As long as Apple has nothing to offer to the people who previously could afford a Mac, but no longer can – they are going to loose these customers, at least for the duration of the crisis. And with every indication being that the crisis will have its effects until at least 2010, Apple could face some serious blows in their computer hardware business.
One thing that could turn the tide for Apple is the release of new iMacs and Mac Minis. Sales of desktop Macs were down pretty heavily during the holiday season, so an injection in that segment might make sense. Especially the Mac Mini hasn’t been properly updated in ages, so a new Mac Mini might lead to a spur in Mac sales.
All in all though, only time will tell. Analysts are analysts, and even for them it’s still guess work. Still, right now might be the time to release an affordable portable Mac that can compete with netbooks. 10″ Display, sleek Apple design, Intel Atom with Nvidia’s Ion, USD 499. Sales will be through the roof.
Knowing that most people don’t bother to actual read the link analysis you omit the fact that Piper’s analyst states that he projects Apple to be almost recession resistant in this quarter, but that the competition won’t be.
There’s no spin that I can detect. The conclusion is that Mac, iPod etc. sales will slow down and that’s exactly what is stated. Given the current climate, it’s not a terribly great surprise. As for Apple laughably being ‘recession resistant’, that’s based on last quarter’s performance and not now. We’re not exactly at the bottom of the curve where this recession is concerned as so many people think either. Not by a long way.
Personally, I’m expecting it to be a lot worse over the next few months than Piper is seemingly claiming. No one can keep producing volumes of products right now, keep growing and expect to keep turning them over at the rates that have been enjoyed – most bought on credit that has yet to fully catch up with people along the chain.
Apple is by no means immune to all that given the nature of what they sell, so Thom is right to look at what Apple have to sell. The only saving grace is that Apple seem to be retaining large amounts of money in the business.
Edited 2009-02-18 23:28 UTC
Of course there was spin. The article was Apple’s sales relative to the rest of the Industry.
Cite the Industry players mentioned and you have the complete circle. Otherwise, you have an arc of information that is nothing but a half-observation.
Apple’s unit computer sales in the United States fell six percent in January from the same month last year, the first monthly decline in three years, The Wall Street Journal reported Thursday.
…
Unit sales of all brands of personal computers grew by two percent in January in the United States over a year ago, according to NPD.
This was from the WSJ, quoted on Ars. Now, is this spin?
I’m still very suspicious of anyone who says the market is moving toward Netbooks as a preferable computing option. Netbooks do have some definite benefits, but are they going to be a long lasting product? Are they really giving the best value for a consumer’s money? Do they seem like a good value in the short run, but in the long run, will they leave customers disappointed? None of these sorts of questions have been answered, which is why it probably is wise for some companies to stay away from the line until they know more.
Just like Apple did with mp3 players, coming in late might give them a huge advantage. Time will tell, but I don’t think this is a weakness in Apple’s line at the moment. Plus, an upgraded or expanded or larger iPod Touch would probably do enough to crush most of the Netbook market anyway. Amazing little devices.
For a lot of people, a netbook (or nettop) is the perfect device because they do not need any more processing power. The Atom is definitely enough for day-to-day tasks that a whole range of consumers only do.
Plus you can’t compare netbooks and notebooks in terms of compactness, weight and battery life. Unless spending thousands of €/$ there is nothing like a netbook. And even for notebook at that price, the netbook may be better depending on your needs.
A larger iPod Touch would be a good move for Apple but it won’t replace a netbook unless — you guess it — there is an hardware keyboard. As far as I know, there is no way to compete with an hardware keyboard when you have some serious typing to do.
So now it depends on the customers. Some people buy a netbook because they want some cheap small laptop to play videos and do basic surf — which covers indeed a lot of people. In that case a larger iPod Touch could be a killer device.
But other people buy a netbook because they need a laptop they can take with them everywhere and which has the battery life to be able to use them everywhere and in order to do more than basic typing. For these people, the larger iPod Touch can’t do the job.
My (totally un-educated) guess for the next years is that more and more people will go after the netbook first and eventually after for the desktop in addition to the netbook.
Because if you’re needing more than a netbook, you’re better with a desktop than with any laptop in terms of performance, price and customizability.
And when you’re on the go, you’re better with the netbook because it’s so small and light and you’re still able to do most of the tasks, without any power outlet.
From what I see, if you need more processing power than an Atom it’s much better to spend 1000€ in a desktop plus a netbook than to spend 1000€ in a notebook.
Well they are definitely not the best value in terms of computing power per watt-hour used. (Atom compared to Core 2 Duo)
http://www.tomshardware.com/reviews/dual-core-atom-330,2141-10.html
So use your netbook for browsing the web, and your Core for running BOINC. My quad runs BOINC for about 20W per project (over and above the total system power consumption when idle. Total system consumption 240W with BOINC running), and my netbook draws a total of 7W when I’m using it for casual tasks. I would suggest devoting a core or the Core to the World Community Grid’s “Clean Energy Project” or to a climateprediction.net model, just as a prudent practice.
Edited 2009-02-18 17:24 UTC
This is a recession, I might like a $900 notebook but I only have $400… compromises must be made. It’s the contract manufacturers that created the market. The bottom scrappers that got tired of competing for table scraps went and made their own way rather than what the bigger companies (intel, microsoft, etc) pushed on them.
Apple really has no interest in the market. I’d argue that by Apple making their Unibody Macbooks at the higher price point, they maintain their brand. Apple is counting on that when people do save up, and break the piggy, they’ll want the nicer computer.
Well, I have a first generation Asus EEE PC running EEEbuntu Netbook Remix. I used to spend the vast majority of my time with my desktop PC, very occasionally using my regular laptop. Now, while I still spend most of my time on the desktop PC, I spend a rather significant amount of time with my EEE PC. Far more time than I ever spent with my regular laptop. It’s particularly nice for browsing while lounging in bed, or for watching some of the excellent programs available from psb.org, nasa.gov, etc. (I gave up on regular TV many years ago, so my PCs are my main entertainment and educational devices.)
I would have a couple of criticisms of my particular netbook. Being first generation, it has an 800×480 screen. This is workable, but a bit inconvenient. I think that one of the later units with 1024×600 would be just peachy, though. The Asus does not have the best keyboard layout. But again, it’s not a show-stopper, and later models, like the Acer Aspire units, look rather attractive to me in that respect.
What can I say? I’m quite happy with my netbook. It’s a very convenient size. And if anything happens to it, it’s inexpensive enough to just replace and go on.
No. I don’t think they are a fad. And they are not just small notebooks. They are a different class of product that make computing more “go anywhere” casual and ubiquitous.
Edited 2009-02-18 16:30 UTC
Interesting enough, I used to think they were a fad too; but I’ve since bought an iMac and found that I now use my MacBook less because I find that it is far too big for my requirements. Lugging around 13.3 inches is too big and now on the rare occasion I do use my laptop – its kept at home rather than taking it with me.
Today I’ll be picking up a eee PC 901 from the local shop, it does what I want given that I have a desktop for all my high power needs and the Netbook fits into the portable market where I don’t really need a whole heap of power – just enough grunt to allow me to do some work but focused on portability rather than attempting to be a desktop replacement.
I have a feeling what you’re finding that in many of these countries – people already have desktops for their grunty needs but instead they want a low cost portable computer. The netbook fits into that market, in NZ for around NZ$650 you can pick up the eee pc 901. Its small, its battery life is pretty good and it does what it needs to do when it comes to user requirements.
As for whether Apple will enter it; good question – I personally think that the Air was one of their biggest blunders. The users I know wanted a light weight portable computer – what they wanted was the reappearance of the 12inch PowerBook but with an Intel processor. I’m confused as to what focus group data they used when deciding to design the MacBook Air given my casual observance was that, as noted, people wanted a 12inch laptop. So to answer the question, I don’t think they’ll enter – they’ve ignored market signals in the past, I wouldn’t be surprised if they did it again.
Edited 2009-02-18 20:02 UTC
Most people want browse the web, read emails, listen to music or watch videos and watch porn in their free time. Netbooks are ideal for all these activities.
I think you miss the real point. The fact is that in the current climate people will not be spending at all if they can help it, and if they are then they’re going to look for something an awful lot cheaper than a Mac.
Apple won’t create a cheap Mac though because philosophically they have always believed such a device would compete with their more expensive offerings when people could be spending more, according to their theory. It’s how they’ve got into trouble before.
I think that you are making a lot of assumptions about spending habits. If I only have $400 to spend, I want to get the best bang for my buck. A netbook with limited capabilities or a low end Dell? The Dell starts looking real good. I just think it’s weird to make all these sweeping statements about the market and consumers without anything to really back that up.
Now, yeah, maybe we are talking about second computers here, and there a netbook may be a better buy than a cheap low end refurb laptop. But then isn’t that just a niche unto itself? I don’t have any clue.
Good conversation though.
Back to the article, everybody’s sales are dropping. Apple’s sales are expected to dip a little – and I find that amazing – dip only a little? They are good at what they do.
And there, my friend, you make the mistake.
Not everybody’s sales are dropping. Acer and Asus have seen dramatic rises in sales. Remind me again, what product category do they focus on so much?
Bingo.
The one thing I don’t get is that Apple could easily put out a netbook that had great margins and still was a great deal cheaper than what they offer now….it might not give the users the experience that Apple wants them to have. But why not let the customer decide?
Something to consider is that “Apple is losing sales by not having a netbook” is not in and on itself a good reason for them to have one.
Why? Because an Apple netbook would canibalize sales of their notebooks to some extent. They must have figured out that selling more low-margin machines simply wouldn’t compensate the decrease it would cause in sales of their high margin notebooks.
Highly unlikely – that would be like saying the eee pc has canabalised the asus higher end laptop sales, which it hasn’t.
If Apple included a bare basics cut down operating system with an easy to use UI, maybe touch screen navigation; there would be no cross over. The netbook would be a targeted simple device with a set number of things it can accomplish whilst leaving the more expensive ones open to the more flexible needs of end users for general computer needs.
That’s the point I’ve made above, and how Apple has always thought. Why bother selling a computer cheaply when those same people could be spending more on something more expensive. The problem is that that is always a low volume market (more cheap stuff gets sold, suprisingly) and more at risk when people just stop spending at all on higher priced goods.
So make a high margin netbook. I’ve said this before, but I’ll say it again. Take the Macbook air, shrink it to a 9″ screen, chuck in an Atom CPU and a fast SSD drive, make sure it gets a great battery life and add an iPhone like touch screen. If Apple made a laptop like that I know I’d buy it, and I’m not even an Apple fan.
Actually I have an air. Besides the price which is ridiculous I already think of selling off my two other netbooks. The air is what a netbook was supposed to be. It is light and you basically can carry it everywhere around. But you dont get the eyestrains of the cheapish netbook displays. The air is sort of for me now the folder people carried around in the past. It has a folder like feeling and basically goes with me whereever I go. From the classical netbook side of things I have yet to see such a model. The Asus S101 probably comes close it fits into your description, but I really would miss the bigger display of the air. The only machine I have seen which is comparable is the Lenovo x300 which is even lighter and also has a DVD drive! But those two machines are basically another league pricewise!
I have said elsewhere there are many people like me that have bad eyesight and a netbook is unusable. I currently have and use a 12 ultraportable for traveling and that is the minimum that works for me. I can’t use a netbook for more than half an hour without getting a headache so what good is a 8 hour battery life on it. No netbooks are nice and they are not going away but they are not for everyone at least not yet.
My eyesight is reasonably good. And I don’t have this problem with my netbook. But one odd thing that I have noticed over the last 20 years is that if I spend hours on end working with smaller devices, like palmtops or high end calculators like the HP48GX, I start feeling vaguely nauseous. Which is a shame, because it means I have to limit myself. But the effect upon me is undeniable and replicable. I first noticed it in my 20s with my HP48GX. I do not remember having such an issue in my teens when I used to spend loads of time programming my trusty TI-59 calculator.
Anyone else have this issue?
No, but I have discovered that staring at broken router or server configs for hours at a time gives me a massive headache. 😛
First Person Shooters make me pukey these days, though, and strangely didn’t 10 years ago.
This global recession doesn’t look like it’ll get better anytime soon.
I suspect that Apple is facing a bigger drop in sales outside the U.S than inside.
I agree that Apple make some (not all) good hardware, but their prices outside the U.S market are tantamount to daylight robbery, especially in many Asian nations.
I live in Singapore, and although the price difference between Apple hardware and the competing brands isn’t as big as some other neighboring countries, there’s still a rather noticeable difference nonetheless.
Here, the only people that buy Macs are people in the graphic arts and the fashion victims. Some people I know have said they would consider a Mac (for whatever reason) if the prices were a bit lower, so lets hope Apple will lower prices for it’s computing products to gain more customers (if they care, that is)
As for me, I’m also in the arts, but my next workstation will definitely not be an overpriced Mac Pro. I’ve recently almost mastered Inkscape and CinePaint, and their output matches and sometimes surpasses anything I’ve created on Adobe software. So I don’t really see a need to stay with patent-crazy Apple (all that architecture, architecture, architecture nonsense doesn’t work on me) anymore. The only thing Linux doesn’t make easy enough for most people in my field is color management, but that too can can be overcome if you know what you’re doing.
As for the netbook comments,
Where I live, computer prices (with the exception of Macs) are pretty low compared to many other parts of the planet, and buying a reasonably good desktop + a netbook would be around the same cost as getting a full-featured laptop. Most people here do that, and they get a desktop for all the serious work at home/office and a netbook with good battery life for travel/road use (most people only type documents, use VOIP, watch Youtube and check emails when on the road anyway).
Just my 2 cents.
Certain premium products hold up better than others in economic downturns. Premium Coffee (if you can call it that) and foods usually take a hit during economic downturns, fast food consumption takes a leap (loosely translated, people will get their on-the-go coffee from McDonalds rather than Starbucks). Premium goods however don’t necessarily follow that trend, partly due to the strength of the brand and partly due to the target market.
I do think Apple will take a hit. BUT, it does have one heck of strong brand to ride on. Allot of apple users who might be looking for the next HW/SW release to upgrade won’t settle for anything less.*
* subjective views of Apple’s added value notwithstanding!, lest I spark off an apple != value discussion
A lot of people view Apple as “another computer company” and this is wrong. Apple never intended to be a generic computer company, they set their goals much higher. When goals and standards are high, quality is usually high. This is partly the reason Apple has developed a “cult following.”
What they produce, they produce with very high quality, creativity, and artistic appeal. Their products are as attractive as they are functional. Because of this, it makes sense that Apple doesn’t want to rush into the “netbook market.”
This “netbook market” isn’t really a market at all. People are buying these machines, but for what purpose? Some people use them to take notes, some use them to browse the web, some buy them because they are new and shiny. The netbook devices are going through an identity crisis. They are useful devices, but there is no market yet where someone would say “a netbook would be better than a laptop for this task, I need a netbook.”
As it stands today, the netbook market consists of cheap (well, cheapish) “throw-away” devices that can replace some functionality of a laptop, but not all. Until there is a real market for these devices where people actually need them, I don’t see Apple producing a “netbook.”
Don’t believe me? When did Apple successfully introduce an mp3 player? A phone?
Edited 2009-02-18 17:36 UTC
I disagree with you on this point. I want a small laptop that weights under 1kg for a reasonnable price and there is no laptop over there to do the job.
However I’m OK to say that most of the people buy netbooks because they are cheap and enough for their needs, not because they need a netbook instead of a laptop.
But it’s not my case, as for others. I want a netbook, not a laptop: something small and light above all.
Apple could work on it’s payment plans , lot’s of people mention the lack of easy and accessible apple payment plans as the real reason why they went with another company products.
Beside iPod sales slowdown where to be expected , why buy an mp3 only when the iPhone does so much more.
everybody is in the same boat!
Dell is on Carnival.
Apple is on the Titanic.
The rest of us are watching reruns of The Love Boat on cable.
Edited 2009-02-18 21:51 UTC
…Ferrari you better get that sub four thousand dollar hatch onto the market so you aren’t affected by the economic downturn!!!
If it develops into a full-out depression, maybe they should. I would not dismiss that possibility out of hand. My father grew up during the depression of the 1930s. And the World keeps looking more and more to me like the America of the late 1920s with all this virtual wealth.
Edited 2009-02-18 22:06 UTC
Ferrari are bankrolled by Fiat, and companies like Fiat aren’t exactly in the best of states right now ;-).
Ferrari is owned by Fiat. Lamborghini by VW and Aston Martin by Ford. Supercars are actually loss making operations used as technology test beds and for marketing purposes.
Porsche disagrees with your conclusion. (Porsche owns VW)
“The company (Porsche) has always had a close relationship with Volkswagen Group because the first Volkswagen Beetle was designed by Ferdinand Porsche. The two companies collaborated in 1969 to make the VW-Porsche 914 and 914-6, whereby the 914-6 had a Porsche engine, and the 914 had a Volkswagen engine, in 1976 with the Porsche 912E (USA only) and the Porsche 924, which used many Audi components and was built at Audi’s Neckarsulm factory (Audi is a Volkswagen subsidiary). Most Porsche 944s also were built there although they used far fewer VW components. The Cayenne, introduced in 2002, shares its entire chassis with Volkswagen Touareg, which is built at the factory in Bratislava.”
http://en.wikipedia.org/wiki/Porsche
Porsche only owns 35% of VW not a majority. This is considered ownership under German law. Porsche bought a controlling interest in VW to stop a takeover by Mercedes.
Ford USED to own Aston Martin
There fixed it for you…
No one that uses computers wants a glossy screen.
I honestly want both a full laptop and a netbook. I’d like a netbook for work, where I could easily carry it and a usb-serial cable for configuring devices up on a ladder and taking notes at meetings. Then I could email the notes to my desktop to make memo’s or whatever. Taking notes on a phone sucks and I haven’t seen a phone to serial cable yet.
I’d like a medium sized laptop (with a real graphics card/speed and DVD/bluray drive) at home so I can play games in the living room while I make sure my kids are hurting each other and watching violent TV. Would be nice during vacations/conferences (when I get back to the room) also.