Apple’s Mac Growth Story Wiped Out By Recession


A year ago, Apple’s (AAPL) Mac business was its strongest growth driver. Now it’ll be lucky if it doesn’t shrink this quarter.

Wall Street expects Apple’s Mac unit shipments to drop 4% year-over-year this quarter to 2.2 million units, according to Piper Jaffray’s Gene Munster. That is an unbelievable drop in a year. Last year, Apple’s March quarter Mac shipments grew 51% year-over-year.

The quarter is only halfway over, but early reports don’t look good. Research firm NPD Group, which measures U.S. retail sales, says Apple’s Mac unit sales dropped 6% year-over-year in January. Its Mac revenues dropped faster: 11%, according to NPD.

What happened? A combination of several things: A huge drop in the PC market led by the U.S. financial crash; a stale desktop Mac lineup; and a perking up in one area of the PC market where Apple doesn’t participate — so called “netbooks,” or cheap, low-end, ultra-portable laptops.

So what can Apple do?

We think the most important changes are to refresh the desktop Mac lineup — the iMac and Mac mini are particularly stale — and to address the netbook market with an Apple tablet.

Apple executives have repeatedly slammed netbooks as barely functional devices with cramped keyboards. We don’t disagree. But we think Apple needs to address the ultra-portable computing market sooner than later. So something between a laptop and an iPod touch — perhaps an ‘iPod touch HD’ with a big multi-touch screen — could do the trick.

What about that cratering PC market? We think it’s unlikely Apple will lower prices across the board. That’s not Apple’s style — we assume that even now, they would sacrifice unit sales for margins.

But that — combined with a slowing iPod business, too — means slower growth for Apple. Wall Street only expects Apple to grow revenues 6% year-over-year this quarter, a massive drop from a year ago, when revenues grew 43% year-over-year.

Which at least partially explains why Apple is still trading at a lower multiple (17 times its last 12 months’ earnings) than some of its big tech peers, such as Google (26x) or Amazon (42x).