Apple's Mac Ends Up in Tablet Cannibal Pot, Too

Tablet cannibals have taken as big a bite out of Mac growth as they have out of personal computers in general, showing that Apple is not immune to the seismic shift it triggered with the iPad.

Tablet cannibals have taken as big a bite out of Mac growth as they have out of personal computers in general, showing that Apple is not immune to the seismic shift it triggered with the iPad.

During the 12 months preceding Sept. 30, 2013, the end of Apple's fiscal year, Mac sales contracted 10% compared to the same period a year earlier.

During the same stretch, PC shipments declined 11.5%, according to research firm IDC.

Not only have the declines between Macs and PCs been similar, so has the timespan of those losses. The Mac has been on a four-quarter contraction, while PCs overall have posted shortfalls for six.

The two haven't always been in sync.

In the second half of 2009 (see chart below), both Mac and PC shipments rose rapidly as the Great Recession faded and businesses and consumers re-opened their wallets to buy new machines. On the PC side the spree was prompted by Windows 7's debut and pent-up demand for replacement PCs after buyers had spurned its predecessor, Windows Vista.

But in 2010 and 2011, as Mac sales continued a torrid pace of growth -- above 23% for four straight quarters -- PC gains could not keep up. They began slumping, going negative in the first quarter of 2011 and never climbing above 5% that year. Meanwhile, double-digit Mac gains came to a halt only in the first quarter of 2012.

The Mac's greater stamina in sustained growth was in contrast to the fading fortunes of PCs, which analysts attributed to increasing defections to tablets, and then in late 2012, Windows 8's failure to rejuvenate the industry.

Under that thesis, tablets were the primary cause of slowing PC shipments, as dollars and time once spent on personal computers were diverted to tablets. That, in turn, led to even fewer PC purchases as consumers and some businesses realized that even if they still needed computers, they could greatly extend the time between replacing systems because older machines were still able to do the tasks demanded of them.

The numbers show that the Mac succumbed to noticeable cannibalization, too, just later than the PC.

While some might argue that Mac owners continued to buy new systems even as they acquired tablets, a more likely explanation is that Apple's ability to maintain growth was caused by a surge of new users. In 2011, for example, a year when PC shipments grew by less than 2%, the Mac's share of online users -- as tracked by metrics firm Net Applications -- increased by 22%, as some consumers switched from Windows PCs to Macs.

That influx of new Mac owners masked whatever sales declines would have shown up otherwise.

The Mac's eventual contraction, which started in the fourth quarter of 2012 and continued through the first three quarters of 2013, could also be used to refute the theory that Windows 8 was the prime cause of the PC industry's slump during that same period.

Some have blamed Windows 8 for the 2012-and-later decline, saying that customers avoided buying new machines because they'd heard the OS was confusing, relied on touch or had too few apps. While Windows 8 most certainly contributed to lower PC shipments, the fact that Macs also lost momentum at the same time, and without a similar OS headwind, is a sign that all personal computers have suffered more from a broader trend -- namely, the popularity of tablets -- than from a specific operating system's problems.

Cannibalization of Macs should not come as a surprise: Apple has acknowledged the tablet threat for more than a year. However, Apple was able to accept cannibalization -- something PC makers and Microsoft have had a harder time doing -- because it had the iPad to capture deserting dollars. In the last four quarters, Apple sold 71 million iPads, more than four times the number of Macs during the same time.

The Mac strayed into negative growth territory at the end of 2012, mimicking the downturn in the overall PC industry, which has been blamed on the seismic shift towards tablets. (Data: Apple, IDC.)

It's significant, for instance, that Apple CEO Tim Cook has publicly embraced cannibalization, but that Microsoft CEO Steve Ballmer has not.

"I see cannibalization as a huge opportunity for us," Cook said in January 2013. "Our base philosophy is to never fear cannibalization. If we do, somebody else will just cannibalize it. We know that iPad will cannibalize some Macs."

That doesn't mean Apple has to welcome future cannibalization. Like the PC industry in general, Mac sales may be destined for further contraction. Many analysts believe that annual global PC sales will drop to 300 million, where they will remain, perhaps for years. If the same happened to the Mac, sales would stabilize at between 15 and 16 million each year.

Or even lower: While Windows PCs will be able to count on corporations for continued sales, Macs rely mostly on consumers, who have spurned new systems more emphatically than businesses.

But Cook has said Apple has no intention of abandoning the Mac. "I don't think this [personal computer] market is a dead market or a bad market by any means," said Cook in April 2013. "I think it has a lot of life to it."

Perhaps. But a no-growth Mac division's influence within the company would be increasingly smaller as other product lines -- the iPhone and iPad -- continue to grow their sales. In the last four quarters for which Apple has reported revenue, the Mac accounted for less than 13% of the company's total, and in late 2012 the Mac's share was within a whisker of single digits, which would be an historic milestone.

If the Mac becomes a puny appendage, it could be at long-term risk or even become the target of investors who see little point in keeping it when its revenue is a figurative drop in the bucket.

Some experts have scoffed at any idea that the Mac's future is anything but bright, even as it cedes sales to tablets. "Looking at these devices as investments strengthens the case for a Mac," said Ben Bajarin of Creative Strategies last October, referring to the need for personal computers in the future, albeit fewer than before.

Yet, for all Cook's pledge to keep the Mac relevant, it may be Apple itself that accelerates the downturn of its personal computers if, as many expect, Apple enhances the iPad's productivity skill set with larger displays that infringe on notebook territory.

Apple doesn't have to panic, as many PC OEMs (original equipment manufacturers) seem to be doing -- casting about for ways to reinvigorate their wares with new form factors, some of them downright odd, and alternate operating systems, like the made-for-mobile Android -- because the Mac is such a small part of its bottom line.

But Apple, like every other computer maker, faces the same decision: Accept the below-or-near-zero-growth that seems inevitable for the foreseeable future, or get out of the business.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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This story, "Apple's Mac Ends Up in Tablet Cannibal Pot, Too" was originally published by Computerworld .

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