Mac Sales Up, Surface Sales Down

May 3rd, 2017

One of the more interesting results in Apple’s March quarter financials was not iPhone sales. I’ll get to that soon. Instead, it was the growth of Mac sales. Despite the fact that only one new model was refreshed in recent months — the MacBook Pro — sales increased slightly from 4.03 million to 4.2 million. But total revenue was up by over 14% due to higher average sales prices.

I wouldn’t suggest how long this might last, but those who assumed the MacBook Pro was a huge fail because it was allegedly overpriced and underpowered for a professional notebook are largely off base. Clearly decent demand still exists, but it wouldn’t hurt to see other Macs receive updates real soon now to keep things going. All right, we know the Mac Pro won’t arrive till next year, but what about the MacBook, Mac mini and iMac?

And here’s the inevitable comparison:

While the media wants to pretend that Microsoft is the PC hardware maker to beat nowadays, Surface sales aren’t doing so well, such as they are. In the last quarter, they totaled $831 million, which is practically nothing at Apple’s scale. This was down from $1.3 billion in the year-ago quarter.

Perhaps to rescue the product, Microsoft is making an educational push, a Surface Laptop lineup that was introduced along with a restricted version of Windows, Windows 10 S. Did I say restricted? Well, yes, because you’ll only be able to load software from Microsoft’s App Store, which I gather is still a fairly barren place. I just wonder how long it’ll take hackers to wipe that limitation away.

Somehow Microsoft hopes to compete with the MacBook Pro at a lower price, but also make gains in the educational market, which is more and more dominated by cheap Google Chromebooks. This seems awfully contradictory to me, since the MacBook Pro isn’t Apple’s educational model.

But it’s doubtful cash-starved school systems would be inclined to buy notebooks that start at $999. Evidently Microsoft hopes other PC makers will manage the cheap stuff.

Or maybe this is a desperate excuse to resurrect the failing Surface line. After losing the mobile handset race big time, I suppose Microsoft could use a win somewhere.

Now about Apple’s sales, while Mac sales improved slightly, iPhone sales dipped once again.

Overall, Apple reported revenue for $52.9 billon, with a net quarterly profit of $11 billion, or $2.10 diluted share. This compares to revenue of $50.6 billion, with net profits of $10.5 billion, or $1.90 per diluted share, in the year-ago quarter. An improvement yes, if below analyst estimates.

iPhone sales totaled 50.8 million, down from 51.1 million in the year-ago quarter. That said, average sale prices rose due to higher-than-expected demand for the iPhone 7 Plus. During the quarterly call with financial analysts, Apple made excuses for lower sales, such as claiming that the inventory mix meant that the sell-through was higher.

I won’t comment on this number’s game. Apple may be right of course. That said, Apple CEO Tim Cook claimed that, “Earlier and much more frequent reports about future iPhones” evidently caused a “pause” in sales of the current model. But that should be nothing new, since rumors about the next iPhone routinely spread far and wide months ahead of the introduction of the new version. Why should this year be different?

Well, perhaps because expectations are higher than ever, amid reports that a special iPhone is being developed for its 10th anniversary. You know the score: An edge-to-edge OLED display, virtual Home button and other snazzy features. Even though prices may be higher than the usual iPhone, demand may be huge because customers have been holding off upgrading their older gear. Well, it’s a good theory.

iPad sales continued to slip, but not as quickly as in recent quarters. So last year, Apple moved 10.25 million iPads, falling to 8.92 million this year. Cook was ready with the positive spin there too, that, “iPad results were ahead of our expectations. We believe we gained share during the March quarter in a number of major markets, including the U.S., Japan, and Australia. iPad remains the world’s most popular tablet, and it’s the primary computing device for millions of customers around the world.”

Did the arrival of a cheaper 5th generation iPad, with a starting price of $329, make an impact? There probably wasn’t enough time, since it debuted without much fanfare near the end of the quarter. Meanwhile, little is being said about the expected major upgrades to the iPad Pro lineup, including a model with a 10.5-inch edge-to-edge display, which was rumored to arrive in the last quarter. So when, if ever, will that happen?

But there are two areas where Apple doesn’t have to equivocate or make excuses about sales. Services revenue totaled $7.04 billon, compared to $5.99 billion in the year-ago quarter. That covers such services as iTunes, Apple Music, iCloud, App Store sales and so forth.

Revenue for “Other Products” totaled $2.87 billion, compared to $2.19 billion last year. That category includes the Apple Watch, Apple TV, Beats headphones, and the still backordered AirPods. Did that increase represent a boost in Apple Watch sales, or was it mostly driven by unexpectedly high demand for AirPods? Maybe both, since it was reported that Apple Watch sales more than doubled compared to last year.

This quarter, Apple is estimating revenue of between $43.5 billion and $45.5 billion. It would represent an increase compared to last year, where revenue totaled $42.4 billion.

Wall Street will have its own judgement. I suspect it’ll be mixed, although the market is apt to be freaked by the unexpected dip in iPhone sales.

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One Response to “Mac Sales Up, Surface Sales Down”

  1. Joe S says:

    Tim Cook specifically singled out iPhone sales weakness in China. China has one of the most brutal and intrusive governments in the world. For example Tiananman Square, Falun Gong, one child policy, Tibet, kidnapped book store owners. It also has a new leader, Xi Jinping, who made two “suggestions” buy Chinese and partner with foreign companies in order to steal their technology. Is it any surprise that the sales of the more secure iPhone is down in China?

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