Mac sales: Undone by the calendar
The latest retail numbers from the NPD Group have thrown Apple investors for a loop — and sent share prices down sharply.
To put the worst possible spin on the news, as the Wall Street Journal did in Tuesday's edition, domestic Mac shipments were down 1% year-over-year in November even as industry-wide PC sales rose 2%.
That was the data point that inspired Goldman Sachs' David Bailey to cut his 2009 estimate — saying that "some nicks have started to emerge" in Apple's growth curve and warning that the company faces "a tougher environment" in the first two quarters of next year.
To put the best possible spin on the news, as he is wont, Piper Jaffray's Gene Munster skipped over November's decline and focused on October's Mac sales, which were up 28% year-to-year, thanks to the release of new MacBooks on Oct. 4. He expects that by the end of the quarter, Apple will have sold 2.5 to 2.7 million Macs, up 8% to 16% from the same quarter last year.
So why did November's Mac shipments take that 1% hit? There could be several reasons.
I'd put my money on a global recession and the fact that Steve Jobs offered only one-day Black Friday discounts on Macs of 5% to 10%, while competitors like HP (HPQ) and Dell (DELL) were slashing already low prices as much as 50%.
Munster also blames the calendar, which offered Apple and the others 62.5% fewer premium shopping days this November:
"The month of Nov-08 included 5 fewer holiday shopping days (or days in November following Thanksgiving) than the Nov-07 timeframe," he wrote in a report issued to clients Monday afternoon. "In other words, Nov-07 provides a tough comparison for the y/y Mac and iPod growth."
NPD's data suggests iPod sales of 18.5 to 19 million units for the quarter, according to Munster, down 14% to 16% year-to-year. He had been expecting iPods sales to be slightly slower than they were.
UPDATE: NPD analyst Stephen Baker gave Reuters a different set of numbers that suggest Apple's notebook sales were actually quite strong in November, and that any weakness in Apple's computer sales was concentrated in its iMac line.
Sales of desktops were down 20 percent overall, with Windows desktops sales falling 15 percent and Macs down 38 percent. Apple's notebook sales, however, were up 22 percent in November, while Windows sales rose 15 percent.
"For notebooks, there is a little extra value to consumers (to buy Apple). For desktops I'm not so sure," NPD analyst Stephen Barker (sic) told Reuters. "To me the real story is the iMacs need a refresh." (link)
Apple (AAPL) fell 3.6% in Monday trading, to close at 94.75.
[Chart courtesy of the Wall Street Journal.]
"…if Jobs and Co. ever reduce margins and jump to low end sales just to keep numbers up, it would be mark the end of a winning formula."
The end is near. They're going to sell iphones in the one retail store that most resembles a flea market, Wal-Mart.
PC unit sales being influenced by the new netBooks which are very cheap. I'd love to see the same graph by revenue and opposed to units. Or, if netbooks were excluded would the PC side show a big drop?
The consumer is on life support right now so it shouldn't be surprising to see a y-o-y decline by Apple. However, given their better margins, another interesting graph would be profitability of Apple Mac sales to the rest of the industry. The firesales may be keeping the unit flowing, but if their not making money and Apple is — which would you rather be?
And what was the change in average selling price for Macs and PC's? This is a 1% drop in Mac units, at NPD monitored outlets – outlets that primarily sell PC's, but also Macs. Last year if they didn't want Vista, consumers had a choice between Mac and doing their own XP downgrade. This year netbooks offer a cheap pre-installed XP option, and anyone simply looking to replace an old PC is going to go with a netbook.
Let's now hear about the dollar value of those Mac and PC sales YOY, and about the YOY unit sales change for Vista platform (PC's excluding netbooks) versus OS X platform (Mac, iPhone, iPod touch).
Market manipulation if you ask me. OS X continues to grow at a huge rate, but we're supposed to pretend it isn't happening.
I suspect the real story is Vista PC's YOY change, forcing Microsoft to dust off a discounted XP.
PED is reporting well here. And 'Undone by the Calendar' may be a clue. What we have is a classic "what happened to the [items] X in the [time window] Y. Back in the 1970s, during the first energy crisis there was a big flap over US Petrol imports and reserves. Conspiracy nuts claimed the secret US government was hoarding/stockpiling or lost millions of barrels. My colleague's research showed there was no petro-conspiracy or even waste. It was just that the DOEnergy and DOInterior had different definitions for: what's a month, what's the US (border) and what is gasoline. One measured February resources as those that passed through during February and the other by what was on hand at month's end. One department counted as gasoline any petroleum destined to become gas that month and the other didn't. And Energy counted tankers in US waters headed for refineries while Interior didn't count refineries serving the US but located outside US borders. And so on.
Ultimately I can't believe a 1% drop after a 28% rise is really a significant drop. As Jay Leno said the other day, "President Bush now has a 4% approval rating but the accuracy of the poll is +-5%, so he could actually disapprove of himself."
Phil is there anyone investing in Apple for the long term anymore? 3-5 years? Is this the New World Order of investing where every ounce of data is under a microsope 24/7? Seems to me that with $25 Billion in the bank Apple is a good 3-5 year investment? Will there ever be an analyst that looks at where Apple will be 3-5 years from now? I guess all this data is great for daytraders but for old school buy and hold it's relatively useless…
First of all, since when is a 1% decline considered "down sharply"?
Second, you should point out that there are many factors involved. For instance, Apple introduced it's new operating system at the end of October in 2007. It would make sense then that there would be a big spike in sales for November of 2007. Also, other companies are churning out cheapy computers by the millions. So sales are high. This report discusses "sales" and not "profits".
Would everybody be happier if Apple sold 50% more computers, but they were priced at $250 and they made no money?
ex ped: The shares were down sharply, not the sales.
I agree with John's point. What specifically is NPD measuring? How has their accuracy been in the past? Why are their results massively inconsistent with data like this:
What's the basis for the NPD group data? Unless this information is divulged it should be considered questionable.
It seems Apple is in a position to take a hit in sales to preserve profit margins. In the long run, I think this is the right strategy, if Jobs and Co. ever reduce margins and jump to low end sales just to keep numbers up, it would be mark the end of a winning formula.
Therefore, I look at this as a good thing.
The statement "for notebooks, there is a little extra value to consumers (to buy Apple)" shows that Stephen Baker is severely out of touch. Desktops are approaching end of life – a trend that is clear from consumer preference for mobile devices, ie computing infrastructure they can take with them. Apple notebooks provide huge extra value to consumers because they work out of the box – ask any non-savvy user who's primary use-case is to browse and communicate (email/skype). Savvy users are definitely laptop-friendly and are beginning to ask for better "docking" infrastructure – Apple's cinema displays with integrated support for docking macbooks is first coherent step in this direction from Apple and I predict we'll see more here in the quarters to come. They are pulling huge margins on this (compare the 24" cinema display from Apple to one from Samsung) and they are going to continue to do so. This is a much saner and definitely more lucrative strategy than trying to re-up iMacs.