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Mac Sales - Not As Bad As They Could Have Been

First of all: I want to know what they're smoking in Cupertino -- and where I can get a duffel bag full of the stuff? The famous Steve Jobs Reality Distortion Field is apparently strong enough to enclose the company in an economic boom, even as the rest of the world is going through the toughest times in at least a generation.

For me, the most interesting statistics in yesterday's quarterly earnings announcement were Mac sales. They were down year-over-year -- but not as much as they might have been, and pretty much in line with what the overall PC industry is seeing.

According to quarterly earnings posted Wednesday, Mac sales declined 3% year-over-year to 2.2 million units, in line with IDC estimates for overall PC sales in the United States in the quarter, which fell 3.1%.

Analysts previously estimated that Mac market share eroded sharply in January and February, after a long period grabbing market share from Windows PCs. That led me to wonder (spurred on by discussions with expert Apple watchers a few weeks ago): Is the era of the Mac drawing to a close? Is Apple (which changed its name from "Apple Computer" to just plain "Apple" two years ago) becoming a vendor of consumer electronics, music, and video, with a small sideline in high-end computers for power geeks?

That seemed like a strong possibility a few weeks ago, now it's less so. It'll be something to watch over the course of the next year.

Apple's defenders say that short-term Mac sales declines won't necessarily hurt the Mac business in the long term -- NBD analyst Stephen Baker, for example, said that Mac users will delay purchases during hard times, but they won't switch to Windows. When the economy recovers, so will Mac sales.

Apple CEO Tim Cook had this to say about the company's shrinking market share: “Yes we do care about market share, but cycles come and cycles go, and what we care about is making the best computers in the world, not making the most. We believe that if we do that over the long term, that we will gain share.”

The rest of the news from Apple was great: Profits were $1.21 billion up 15%. Revenue was up 7.7% to $8.16 billion. Gross margins increased to 36.4%, from 32.9%.

Growth was driven largely by iPhone sales growth of 123%, to 3.79 million units. iPod sales rose 3% to 11 million units. Steve Jobs is returning at the end of June.

Also, in what's becoming a tradition at Apple's quarterly earnings call, analysts grilled the company on its netbook plans. Macworld's Jason Snell explains why Cook's dismissal of the netbook means it's getting closer:

If you follow Apple regularly, you’ll know that the company often runs down its competitors in a category before introducing its own game-changing product in that category. Cook’s past statements lead me to believe that Apple is indeed planning its own answer to the netbook—and his statements during Wednesday’s conference call did nothing to dissuade me from that opinion.

He also has a pretty good description of what we can expect to see from Apple: "[S]ome sort of small device—not necessarily a netbook, but something bigger than an iPod touch and smaller than a MacBook."

I'll add a few more criteria to this hypothetical device: It would be primarily designed for consuming content, rather than content creation. You would be able to use it to browse the Web, watch movies, read e-books listen to music, and play casual games, but not create PowerPoints, or draft your company business plan, or write the Great American Novel. You can already do all these things pretty well on the iPhone and iPod Touch; they'd work even better if the screen was bigger, in the 7-10" range or so (well, except for listening to music, of course -- screen size doesn't matter for that). I'd like to see the pricing under $1,000. Networking connection should be the user's choice of either a cell phone data network or Wi-Fi, same as users now have a choice between the iPhone cell phone and the iPod Touch, which is basically the same device minus the cell phone bits.

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