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How far off is prediction 9 really? What do sales matter when Apple takes more profits from their computer business than all those combined; Apple having a 30%

How far off is prediction 9 really? What do sales matter when Apple takes more profits from their computer business than all those combined; Apple having a 30% plus margin and other computer makers a 2-3%?

simonh 11y ago
Indeed. It seems likely that Apple could cut their margins and grab that 50% if they wanted to, but since that would reduce their overall profits why would they want to? It seems like Apple can at this point have pretty much whatever share of the market it chooses.
- alphadevx 11y ago
  It's interesting to me that Apple value profit over market share, unlike many of their rivals.
  - simonh 11y ago
    I'm not entirely certain whether their rivals actually value market share over profits as such. It's hard to run a company for long if it's not making money, regardless of what it's market share is. Market share matters for a lot of companies because economies of scale mean that your unit costs go down as volumes go up. This gives a natural advantage to market leaders, in addition to things like increased brand visibility. Market share is very important to pundits though, because it changes very rapidly and is often measurable throughout the year on a per-product basis, whereas company financials are less frequently reported and harder to tease out. A battle between products that readers can see in the shops and read reviews for is easier to create a narrative around than corporate financial performance. I think this is why sales numbers and market share are focused on so heavily in the media.
  - melling 11y ago
    Yeah, that's probably why engineers work for MBA's or sales guys. Most engineers have no concept of marketing, aspirational branding, or human psychology. Unfortunately, the one concept we have down is "make it up in volume."
- emn13 11y ago
  If so, that's a dangerous game apple is playing. It's hard to predict the future, and it's by no means certain that it can continue to compete with the likes of android - being so much smaller than android meaning that they're playing in a pool largely shaped by others. They're doing well now - but who knows for how long?
  - simonh 11y ago
    That's like claiming BMW is playing in a pool largely shaped by budget car makers like Hyundai. Apple may have only had ~5% of PC market share for 15 years, but it's owned roughly half the total global profit share for about a decade, and their PC market and profit share has been steadily increasing during most of that period. And they've been doing exactly the same thing in the mobile business for more than 5 years as well. One thing is certain. A guaranteed way for Apple to fail is if they start worrying about how other manufacturers are 'shaping' the market. It would kill them stone dead in a matter of a few years, tops.
deleted 11y ago
[deleted]
AndrewDucker 11y ago
I don't care what profits my phone-maker makes. I care that they produce a decent phone, and that they have enough market-share that there's a software ecosystem.
Tloewald 11y ago
More importantly, I'd suggest that if you include the iPad in laptops then the prediction is pretty much correct without further discussion.
- emn13 11y ago
  Even if you include the ipad, it's still not true. The top 3 sellers nowadays have about 50% of the PC marketshare, and they're still IBM(but now called lenovo), HP and Dell. That's around million units - well in excess of ipad sales (mac's don't really make a dent). If you took the top 5... And I don't think it's really reasonable to include tablets at all. The motivation is that they're a new, unforeseen development? But then you really should be including android tablets in those numbers too; and those happen to be sold primarily by other vendors. At the end of the day, it's clear that tablets aren't laptops, nor do they look like they really replace laptops (especially not the ipad - you could quibble about microsoft's offerings, but those haven't been too successful yet.) The heart of the prediction was that apple would come to dominate the laptop business. Clearly, it has not. It's still mostly windows-vendors. If you include tablets, apple does better, but there too it's a minority market share; android dominates.
  - Tloewald 11y ago
    Good point re android tablets (and add chromebooks). But you are way off in your figures. In 2014 tablets outsold laptops 1.5 to 1. Apple sold 12M iPads in q4 2014. And tablets replace laptops for many people. Most people just do Facebook, web, and email.
    - emn13 11y ago
      I meant to say 100 million but the number got dropped between keyboard and chair, sorry ;-). Best estimate is that there are around 200 million laptops a year sold (2014) based on a PC market of over 300 million and that laptops outsell desktops (worldwide). Looks to me like tablets sell roughly at the same rate, around 230 million units. (I think it's not easy to find comparable numbers so maybe my data is off). So given apples approximately 25%-33% market share of tablets that's just around 50-80 million ipads, which is still well below the top three in laptop sales (100 million).
emn13 11y ago
Whether sales or profits matter depend on your perspective. I think revenue is a better guide than either. Profit is really susceptible to distortion based on reporting. What exactly are you counting as costs? Do you include investments in the future? That's really a business choice, and it doesn't necessarily mean much. At the end of the day, it's only the shareholders that really care about that profit. As a customer, it doesn't really matter whether that money ends up at the company or its contractors - you're paying either way. As an investor, you (eventually) care about profit. If you're just trying to understand what the customers value enough to spend money on, revenue is a better guide.

simonh 11y ago

Indeed. It seems likely that Apple could cut their margins and grab that 50% if they wanted to, but since that would reduce their overall profits why would they want to? It seems like Apple can at this point have pretty much whatever share of the market it chooses.

alphadevx 11y ago
It's interesting to me that Apple value profit over market share, unlike many of their rivals.
- simonh 11y ago
  I'm not entirely certain whether their rivals actually value market share over profits as such. It's hard to run a company for long if it's not making money, regardless of what it's market share is. Market share matters for a lot of companies because economies of scale mean that your unit costs go down as volumes go up. This gives a natural advantage to market leaders, in addition to things like increased brand visibility. Market share is very important to pundits though, because it changes very rapidly and is often measurable throughout the year on a per-product basis, whereas company financials are less frequently reported and harder to tease out. A battle between products that readers can see in the shops and read reviews for is easier to create a narrative around than corporate financial performance. I think this is why sales numbers and market share are focused on so heavily in the media.
- melling 11y ago
  Yeah, that's probably why engineers work for MBA's or sales guys. Most engineers have no concept of marketing, aspirational branding, or human psychology. Unfortunately, the one concept we have down is "make it up in volume."
emn13 11y ago
If so, that's a dangerous game apple is playing. It's hard to predict the future, and it's by no means certain that it can continue to compete with the likes of android - being so much smaller than android meaning that they're playing in a pool largely shaped by others. They're doing well now - but who knows for how long?
- simonh 11y ago
  That's like claiming BMW is playing in a pool largely shaped by budget car makers like Hyundai. Apple may have only had ~5% of PC market share for 15 years, but it's owned roughly half the total global profit share for about a decade, and their PC market and profit share has been steadily increasing during most of that period. And they've been doing exactly the same thing in the mobile business for more than 5 years as well. One thing is certain. A guaranteed way for Apple to fail is if they start worrying about how other manufacturers are 'shaping' the market. It would kill them stone dead in a matter of a few years, tops.

deleted 11y ago

[deleted]

AndrewDucker 11y ago

I don't care what profits my phone-maker makes. I care that they produce a decent phone, and that they have enough market-share that there's a software ecosystem.

Tloewald 11y ago

More importantly, I'd suggest that if you include the iPad in laptops then the prediction is pretty much correct without further discussion.

emn13 11y ago
Even if you include the ipad, it's still not true. The top 3 sellers nowadays have about 50% of the PC marketshare, and they're still IBM(but now called lenovo), HP and Dell. That's around million units - well in excess of ipad sales (mac's don't really make a dent). If you took the top 5... And I don't think it's really reasonable to include tablets at all. The motivation is that they're a new, unforeseen development? But then you really should be including android tablets in those numbers too; and those happen to be sold primarily by other vendors. At the end of the day, it's clear that tablets aren't laptops, nor do they look like they really replace laptops (especially not the ipad - you could quibble about microsoft's offerings, but those haven't been too successful yet.) The heart of the prediction was that apple would come to dominate the laptop business. Clearly, it has not. It's still mostly windows-vendors. If you include tablets, apple does better, but there too it's a minority market share; android dominates.
- Tloewald 11y ago
  Good point re android tablets (and add chromebooks). But you are way off in your figures. In 2014 tablets outsold laptops 1.5 to 1. Apple sold 12M iPads in q4 2014. And tablets replace laptops for many people. Most people just do Facebook, web, and email.
  - emn13 11y ago
    I meant to say 100 million but the number got dropped between keyboard and chair, sorry ;-). Best estimate is that there are around 200 million laptops a year sold (2014) based on a PC market of over 300 million and that laptops outsell desktops (worldwide). Looks to me like tablets sell roughly at the same rate, around 230 million units. (I think it's not easy to find comparable numbers so maybe my data is off). So given apples approximately 25%-33% market share of tablets that's just around 50-80 million ipads, which is still well below the top three in laptop sales (100 million).

emn13 11y ago

Whether sales or profits matter depend on your perspective. I think revenue is a better guide than either. Profit is really susceptible to distortion based on reporting. What exactly are you counting as costs? Do you include investments in the future? That's really a business choice, and it doesn't necessarily mean much. At the end of the day, it's only the shareholders that really care about that profit. As a customer, it doesn't really matter whether that money ends up at the company or its contractors - you're paying either way. As an investor, you (eventually) care about profit. If you're just trying to understand what the customers value enough to spend money on, revenue is a better guide.