Apple's holiday not looking great, could be worse
Fewer people are expected to buy iPhones and iPods this quarter, but Mac shipments may hold down the fort for Apple.
(Credit: CNET)Even Apple may not be immune if consumers continue to sit on their wallets this holiday season.
Piper Jaffray, usually able to find the bright side of any Apple news, predicted Monday that iPhone and iPod sales are set to decline in the coming weeks amid what is expected to be the worst holiday season for the PC and consumer electronics industries in quite some time. Mac sales seem healthier thanks to Apple's latest crop of notebooks, but aren't growing as fast as they were last year.
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Piper based its outlook on surveys it performed inside Apple retail stores around the U.S. during a 25-hour period in November, counting the number of Macs and iPhones sold inside each store. It supplemented those expectations with data from market watcher NPD for sales of both the Mac and iPod for the month of October.
With $24 billion in the bank, no debt, and products that still appear popular with the public, Apple is in excellent shape to ride out what is expected to be a rough couple of quarters for companies that depend on consumer spending. The company's several-year run of double-digit percentage increases in revenue and profit may be coming to an end, however, as most such runs eventually do.
Let's take a look at the numbers:
iPhone
Piper's data suggests that Apple will sell 6.4 million iPhones during the September to December quarter--Apple's first fiscal quarter--compared with the last quarter, when the company blew away expectations by selling 6.9 million units. The handset market in general tends to enjoy a 15 percent sequential boost in the holiday quarter compared with the June-September quarter, though this won't go down as a typical holiday season.
Apple retail stores were each selling on average 98 iPhones a day in July, when the iPhone 3G was released. In November they were only selling around 28 per store, which looks like a 71 percent decline and helps explain reports that Apple was cutting iPhone production heading into the current quarter.
However, those numbers don't tell the whole story, according to Piper. There was obviously pent-up demand for the iPhone 3G following a quarter in which Apple was sold out of iPhones for almost six weeks. And Piper also notes that Apple's retail stores are not the only place to find iPhones this quarter. AT&T obviously sells a few, and Apple added Best Buy as a distributor during the quarter.
When you factor in the increased number of countries selling the iPhone this quarter as well, Piper only expects a decline of 8 percent. Not that that's good news for Apple, of course, given how important the iPhone has become to its finances.
Mac
Apple can take comfort in the fact that the Mac numbers don't appear to be cratering, according to Piper's numbers. Piper is predicting that 2.6 million Macs will be sold during the quarter, which would be flat compared with last quarter's totals.
Last year in a healthier economy, Mac shipments increased by 7 percent in the first fiscal quarter compared with the fourth, so this year's totals are a bit off but still growing at a solid pace year-over-year. If Apple sells 2.6 million Macs during the holiday quarter, that would be a 13 percent improvement over the 2.3 million Macs shipped during the year-ago period.
On the last Apple earnings call, COO Tim Cook said he thought Mac sales were a little weaker than expected during the July to September quarter because potential buyers delayed their purchases of new notebooks, knowing that new models were around the corner. NPD's data seems to suggest that theory was on track following the launch of the redesigned MacBooks, recording a 28 percent jump in Mac sales in October compared with October 2007.
Still, Piper expects Mac demand to slow down in November and December. No new models are expected between now and Macworld in January, and the rush of buyers who upgraded in October are likely done buying Macs for a while.
iPod
Apple's best-selling product looks set to take a hit during the quarter, which is traditionally a blowout quarter for the iPod division. Shipments are expected to decline about 15 percent compared with last year's holiday quarter, coming in between 18.5 million units and 19 million units this time around.
There's no way to know at this point whether that is a reaction to Apple's latest crop of iPods unveiled in September or another symptom of an economic slowdown. A key number to watch will be the revenue growth or decline associated with the iPod group: Apple has been heavily advertising the iPod Touch as the "funnest ever" (and currently most expensive) iPod, and if revenue growth comes in slightly down or even flat against a 15 percent decline in unit shipments, the upselling strategy is probably working.
Competitive outlook
Apple's competitors aren't expected to fare much better during the quarter. Intel may not be a bellwether for tech anymore, but it is most certainly a bellwether for PC demand, and the $1 billion shortfall between Intel's previously expected fourth-quarter revenue and what it now expects indicates that the HPs and Dells of the world aren't expecting a stellar quarter.
On the handset side, Research In Motion could capitalize if iPhone shipments do decline, with the Storm and Bold making their way onto the stage. But it's unlikely that RIM will have a standout quarter itself, given the epic slowdown in business tech spending that usually accompanies one of these recession things.
And seven years on, there still doesn't seem to be a major competitor to the iPod. Apple is pushing the iPod into new territory as well, taking on portable gaming systems from the likes of Nintendo and Sony.
Apple's ability to post consistently strong growth figures quarter after quarter looks like it's coming to an end. If it's any consolation to fanboys and investors, however, at least it wasn't the company's fault.
Tom Krazit writes about the ever-expanding world of Internet search, including Google, Yahoo, online advertising, and portals, as well as the evolution of mobile computing. He has written about traditional PC companies, chip manufacturers, and mobile computers, spending the last three years covering Apple. E-mail Tom. 
Cool.
/P
The iPod is pretty much at saturation, IMHO - everyone (relatively) has one, and they don't break as often or as easily, so how to sell folks on newer ones in tough times?
/P
Agreed on the iPod: Apple's plan for dealing with that is to upsell you to the iPod Touch. They might not ship as many, but they'll make more money overall.
The caveats involve sectors... Some sectors you simply cannot stretch out, while others you can. You can always put off a new core router for another year or two (depending) or simply expand the one you have instead of buying a whole new one. You can do the same with PC's. A SAN running short on disk space OTOH is something you can't simply put off (esp. if you're keeping SOX compliance). So, some sectors will still sell no matter what (storage), some you can put off for a shirt period of time (servers, routers), and some, well... you can push off for much longer (workstations).
/P
It's front page news because it's an opportunity to discredit Apple and kill sales of Apple products. It also brings out the PC gamer/haters, who are good for thousands of clicks on any negative Apple story. This is all good for Microsoft/CNet.
I don't need a new Mac, and I probably won't get an iPhone until late next year, so I'm not going to help any near quarter for Apple.
The iPod with the bad battery sits in an iHome2go portable player that I take out the garage, backyard, or wherever. The broke dick iPod is waiting on me to decide if I want to try fixing it, have someone fix it, or steam punk it into something else. I did get a lot of hours out of them so I feel that they did not die in vain.
Last January when the hard drive died in the one iPod I replaced it with a Nano, the more squarish design and I am quite happy with it. It doesn't hold as much as the 30GB dead iPod, but I was using that when I was traveling around the country a lot, these days are spent mostly around town.
In August we bought two iPhones, a decision that I don't regret, cost not withstanding. My wife was using a TREO 600 and the battery in that was going. She said she wanted to look into an iPhone, she tried it and liked it. I was going to stick with my garden variety cell phone until it croaked, but I took the plunge as well. We share the minutes in a family plan and the cost including the data is only a few bucks above our old plan.
Gotta get back to work, you all have a good afternoon
It should be an interesting time.
Now if one player had and held the majority marketshare and was still growing, then saturation would be something that one could see happening.
"@Dan: I doubt the smartphone market will be saturated anytime soon... marketshares in it still have plenty of room for change (e.g. companies dumping Blackberries and BES and going iPhone with just Exchange and no BES to save money). "
This clearly shows that you haven't actually used the product. Outlook / Exchange support on the iPhone is horrible. I have it on my Touch and it's slow, clunky, and makes a first gen Palm PDA look like a Ferrari by comparison. Yes, it has Exchange connectivity, but very very limited and poorly designed to the point to be unusable by any serious user. As for being in the enterprise market, the security on the iPhone is... non-existant. Literally- none. I can pick up an iPhone or Touch right now and have full 100% access to every single file and email on that unit. There is a pin lock for Exchange, but two key presses in combination with the power button causes the system to bring up errors that bypasses the lock. No, there is no fix for this. That means any and all mail for that account is exposed to the world. Visit a corrupted website and you can have your unit compromised. Will you ever know it? Nope- there is no security. Everything is run as root.
Go back and read the news again. IT company presidents get the iPhone because of the glitz and glamour at the exact denial by any competent IT department and are forced to support it. That becomes a major vulnerability right there.
Tell me, would you allow an unsecured device on your network with full access and zero means to protect it or control how it is used on your network? What IT person would ever allow such a thing?
It can get better, it really can, but I don't think this generation of the iPhone will be the one to do it. It simply has too many legacy limitations in it to really do that job well. If you use one for any length of time, I do believe you would find this to be true yourself.
iTunes, now the 3rd largest music retailer, is uniquely positioned to see a big increase in sales at the end of the year with this market down turn.
Having a base price of $.99 is within reach of most all consumers, and would not be considered an extravagance.
The iTunes store isn't much of a profit center, so relying on it would not be wise. OTOH, Piper Jaffray only counted brick-and-mortar stores, not the Apple website sales of hardware (which make for a pretty large chunk of sales). That's going to throw their estimates off by quite a bit.
Can't you guys cover Apple without the impeding dark cloud? Just once I'd like to see a CNET article that was just factual without the negative undertones. I'm not asking for "fanboy" coverage just leave the negative editorial stuff out. It just makes you look stupid and petty.
Seems like the economy is going to get everyone - at least Apple has money in the bank this time.
As for those who think Tom is being gloomy, check out the condition of some other Tech's... i.e. "Sun" may not shine much longer.
"HP got a cushy piece this morning in spite of (by comparison) mediocre numbers... you were saying? ;) "
As did Apple and Yahoo. So your point is ... pointless. Apparently you were saying nothing yourself.
Wait, how do other people call you?
Watch the Black Friday ads. I would be surprised if we didn't see Acer Aspire and Asus netbooks showing up in those at sub $200 prices.
Why do they allow computers in the sanitarium??
- by anany555 December 4, 2008 8:51 PM PST
- I wanted to buy a new ipod this season but Im not going to. Theres nothing for me. Their models have skimpy capacity for the price. I HATE the new nanos--the last model was better. The itouchs or iphones are great, but I cant afford them. I hope Apple comes up with something better soon. Im going to check out zen and zune.
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