Recession Takes a Bite Out of Mac Sales

Jim Woods co-wrote this article.

Everyone knows consumers have ratcheted down their spending, but how badly is the negative purchasing environment affecting consumer PC sales?

Very badly, according to our latest ChangeWave consumer survey. And despite the accolades greeting Apple’s (AAPL) recent earnings announcement, the ChangeWave survey shows the California manufacturer will be especially hard hit this quarter by the continued economic downturn.

The January 5-12 ChangeWave survey of PC buying among 3,476 consumers also looked at another trend bedeviling Apple – the increased demand for low-end Netbook computers.

Tightening PC Market

The survey revealed a post-holiday consumer PC market that has turned significantly weaker. Just 6% of respondents say they plan on buying a laptop in the next 90 days – 2-pts lower than in our November 2008 survey. At the same time, 5% say they’ll buy a desktop, down 1-pt from previously.

These numbers are both record lows for PC buying plans in a ChangeWave survey.

Demand for Netbooks Rises

Of course, there’s a winner. The tough spending environment has been a sales catalyst for low-cost, highly portable laptop computers with smaller screens – popularly known as Netbooks.

The survey found a rise in Netbook sales, with one-in-five laptop purchasers (19%) saying they bought a Netbook over the past 90 days, and 14% of future laptop purchasers planning on buying a Netbook in the next 90 days.

The beneficiaries are manufacturers who offer Netbooks – including Acer, ASUS, and more recently Dell (DELL), and Hewlett-Packard (HPQ), among others. But the trend toward Netbooks is not good news for Apple.

Taking a Bite Out of Macs

The short term outlook for Apple Mac sales looks rougher in our survey than the Street may expect. Only 27% of respondents who plan to buy a laptop in the next 90 days say it’ll be a Mac – down 6-pts since November to our weakest visibility reading for Apple laptops in nearly two years.

The weakness is only slightly mitigated by a 1-pt increase in Apple’s share of desktop purchases (28%) going forward.

When we looked back at sales over the holidays, Apple also showed weakness. For instance, among those who bought a computer in the past 90 days, 22% said they bought Apple laptops and 17% desktops – down 4-pts each from our previous survey.

But if our survey numbers are correct, then why did the Street react so favorably to Apple’s latest earnings announcement?

Cracks in the Apple

First, Apple’s latest earnings call focused exclusively on year over year Mac sales comparisons, which actually did show growth. But as RBC’s Mike Abramsky points out, their quarter over quarter comparisons were anything but stellar.

“According to Apple, they shipped 2.5 million Macs – down 3% quarter to quarter despite their refreshed Macbooks line,” said Abramsky. “Even scarier is the 22% quarter to quarter decline in Desktops, revealing sharply slowing consumer demand. Moreover, US growth year over year dropped from 26% to just 5%.”

“Granted, despite their quarter to quarter slowdown, Apple’s earnings appeared ‘less worse’ than many investors had feared,” said Abramsky. “However, Apple’s Mac growth estimates for all of 2009 are just 4%, compared to 38% in 2008.”

When you add in the 37% quarter-to-quarter decline in iPhone sales, it's no wonder Apple issued an exceptionally cautious outlook for the current quarter. Note that it was well below the Street’s already ratcheted down estimates.

There’s More...

In yet a further sign of trouble going forward, the ChangeWave survey shows future demand for the Mac OS X Leopard operating system (29%) has dropped 5-pts to its lowest level in more than a year. At the same time, demand for Microsoft (MSFT) Windows XP – the system typically used on Netbooks – rose slightly.

Adding to Apple’s woes – and those of the rest of the PC sector – overall electronics spending remains one of the weakest consumer categories this quarter. Only 15% of respondents say they’ll spend more on consumer electronics in the next 90 days compared to 41% who say less.

Apple Bottom Line

Sure, when you look long term, once the global economy comes out of recession, Apple will clearly be one of the strongest trees still standing in the forest.

But we’re not out of recession yet, and the extraordinarily price-sensitive and worsening PC market presents serious obstacles for Apple – compounded by the relatively strong demand for Netbooks.

When you add in the company’s leadership problems, it's clear Apple is currently vulnerable.

Last fall we noted, “...our results for the next 90 days show Apple has a considerable visibility problem – representing the real Achilles' heel for the company.”

Even more so for the next 90 days.

Comments

[Oh Blah Dee...:]

RE: "... it's no wonder Apple issued an exceptionally cautious outlook for the current quarter ..."

Actually, Apple's forecast for its 2009 Q2, the quarter ending March 2009, was NOT as low as Wall Street expected. Because Apple's current quarter outlook was NOT as cautious as Wall Street expected, I believe this is one reason why Apple stock is doing BETTER this quarter.

Feb 05 06:29 AM

[awcabot:]

....Last fall we noted, “...our results for the next 90 days show Apple has a considerable visibility problem – representing the real Achilles' heel for the company.”....

Well, given that the company (again) surpassed Wall Street's expectations last fall, Apple's Achilles' heel was much tougher than Mr. Carton predicted. I would like to know his EPS estimates record before I give him much credence.

Feb 05 06:37 AM

[gspet:]

Financial articles are supposed to enlightened the readership, provide insight that perhaps isn't widely known. This article regurgitates the reasons why Apple stock has gone from $200 to $90. Do you believe $90 is too high, that it will continue south from here? Or are you merely restating the obvious, without making any predictions on stock price, because it's the easy thing to do?

As an aside, a person buying a netbook would never have considered a Mac in any economic environment because they're "too expensive." The odds of Apple losing a current customer to a netbook are close to zero. Losing a potential "switcher?" Also close to zero.

Feb 05 07:03 AM

[Ara:]

Look let's be honest, this guy has no clue like the rest of us. He is merely guessing and was wrong (by a good margin) on apple's last earnings. No one can expect those types of numbers again this year, but in relation to everyone else whose revenues are dropping 50%+, apple wont, they are much stronger and in a better position.. They should look at putting some of that $30 bill of cash to work and acquire a company on the cheap

Feb 05 07:46 AM

[heWeGoAgain:]

this is just too easy... first, look at the the long term trend of chart 1 representing all computer purchases (i.e its going DOWN). next, look at the the long term of chart 2 representing "mac" computer purchases (i.e. it is going UP).

and those netbooks... dell, hpaq, and msft seemed to be making real good money on those??? apple may get in the netbook business, but they have not interest in taking a loss doing it.

Feb 05 08:38 AM

[purduefan:]

I believe that Apple will come out with some sort of netbook, but that it will be in the form of a small tablet PC. But even if they don't, the iPhone serves many of the purposes of a netbook, and although iPhone sales might be been down in the last quarter compared to the previous one, that was to be expected since the previous quarter's sales were extremely high due to the new iPhone 3G being introduced. The fact is that Apple's market share in phones is increasing dramatically each month, selling the iPhone at Wal-Mart is going to have a bigger impact than anyone realizes, app store sales keep increasing, and Apple will be coming out with newer and better versions of the iPhone in the next few months that will keep them far ahead of the competition. So even if laptop/desktop sales do decline in the near term, it will be more than made up for by the increase in iPhone profits. Lastly, Apple should be refreshing their desktop line soon (and maybe a new Apple TV?), so those will all be contributing factors to increased sales.

I can't believe the number of "Apple shorts" and people who want the company to fail. It reminds me of the way people were talking about Microsoft 10 years ago. Anyone with half a brain would realize that Apple should be a $150+ stock, even in this economic environment.

Feb 05 08:46 AM

[User 351407:]

A little lesson in research is offered by this article. Mr. Carlton and Mr. Woods have authored an article based on the interpretation of data presented by a third party, ChangeWave, that essentially predicted the same thing last quarter and of course they were wrong. At this point the analysts have be so wrong on Apple for so long the best they can hope for
is for the law of averages to smile upon them and the coin which has landed on heads to indeed land on tails for a change. Moreover, based on a reading of the article, it appears that they work for ChangeWave and yet they fail to implicitly state their relationship nor do they offer any review of their past predictions. So what can you take from this?

A. What is the relationship with ChangeWave .
B. What is the past performance of the earlier surveys?
C. How/where was this survey conducted? How are the results verified?

Feb 05 08:47 AM

[iJah420:]

The SKY IS FALLING!!!!!!!

Just one more attempt to manipulate the stock.

Please for the love of PETE!!!

Please, take a closer look @ MSFT and tell me what your crystal ball has to say Mr. Carton.... Pathetic!!! AND! to ponder that you actually get PAID!!! to write such misconstrued drivel. You call yourself an ANAL IST!!!

Yea! MY @#$ and Your Face.

Feb 05 08:56 AM

[Stuff and N...:]

I stopped reading after the first point - that fewer people are planning to buy a new computer now than were in November - because, SURPRISE, in November, people are planning on buying stuff for CHRISTMAS. A quick look at the graph shows that the dropoff from Nov 07 to Jan 08 was actually greater than the drop from last November until now.

It's tough to tell the difference between incompetence and deliberate attempts to mislead. Heaven knows there's enough of both on Wall Street right about now.

Feb 05 09:13 AM

[lovethelang...:]

I have all the netbook I need with the iPhone in my pocket. Apple got a nice chunk o' change from the *two* that I bought just before Christmas, not to mention the other five people in my group at work who've also bought them. Now we're buying apps (more $$$ for Apple), and when the new iMacs come out I'll probably get one and dump my Windows machine. Yes, I'm entering the Reality Distortion Field ... and loving it. Disclosure: I'm long AAPL, and will stay that way for some time to come, because this company builds great stuff and is the cash-printing machine it deserves to be. Maybe while the SEC is investigating the SJ health disclosures they can also shed some light in those dark, dirty corners where the AAPL shorts spew their misinformation. Throw 'em in the cage w/Madoff and the rest.

Feb 05 09:19 AM

[typopolice:]

what would we all do without Captain Obvious at the helm?

wow...apple sales slowing somewhat in a severe recession...

wow..apple will recover when the economy recovers....strongest trees...lol..

and more iphone gloom and doom...lol..goal 10 million....goal exceeded by 30%...for 2008....in a recession....no mention of that though...

Feb 05 09:41 AM

[AdamC:]

Why don't you send him a note and ask him to publish the result of the survey with the figures given by Apple during their last conference call to prove the accuracy of the survey. You will have a hard time getting a reply from him.
I tried and he hasn't reply and didn't even post my request comment.

Feb 05 10:06 AM

[Timeline St...:]

It's expected that there would be a slowdown in this quarter. First, the holiday quarter is difficult to follow, and second, the desktop line needs a refresh.

That being said, are you aware that Apple has other businesses by which i generates a lot of revenue and profit. This iPhone - have you heard of it? Well, in January, it was responsible for 1 of every 208 page views on the entire internet. That's right, after 19 months of existence, it garnered a 0.48% web share. And the iPod Touch? Like an iPhone but without the contract. Another 0.11% web share.

The App Store has more than 18,000 apps, more than 600 million downloads thus far, more than 5 million per day.

And this little content delivery store called iTunes is doing a pretty good business.

Apple will roll with the punches. As parts of its business soften, it will adjust.

And I haven't even mentioned new products. Holy cow, are there going to be some good ones.

So, I wipe my a%% with your survey.

Feb 05 10:14 AM

[purduefan:]

That's the thing about the idiot analysts that really amazes me............they always evaluate Apple as if they will never have any new products coming out, and that their entire future is dependent on only the products that they are currently selling! How many times has Apple surprised us with something new that was really innovative? That's why Apple's stock should be at a premium to everyone else's............thei... innovation is unmatched in the industry and the gap is actually widening between them and other companies.

Feb 05 10:20 AM

[Ara:]

Also correct me if im wrong but changewave does not include any overseas data right? HUGE portion of apples growth last year was overseas on the revenue side...

Feb 05 10:28 AM

[Ted Cranmor...:]

Please include 'revenue share' numbers beside the 'unit share numbers'. The netbook have had a much larger impact on units that revenue. Only by including both can you make a statement worth considering. To provide value, please provide depth.

Feb 05 10:33 AM

[realitybytes:]

Google this Woods guy, read his past opinions on Apple's future, remember that over and over again Apple's numbers came out and blew all the idiot analysts opinions away. Always seemingly right after the pronouncement of impending doom for Apple and then put him and his ChangeWave research on the ever growing longer list of idiot analysts without any clue about anything they're talking about.
Isn't there a supermarket holding a shopping cart attendant position open for you?

Feb 05 10:34 AM

[mollytjm:]

this article is very skewed and has inferences drawn that aren't logical. Apple is about to release more innovative stuff and is capturing market share every day. they're cash rich, debt free and highly rated and the most innovative company on the planet...and, they still have the most profitable retail space per square foot in the country...quite a feat in an economy like this!
i know it's hard to gauge profits and make nice charts about something like the apps and itunes store and future profit from iPhone contracts, but to put up a headline like Apple is in trouble is just wrong and possibly worse.

Feb 05 10:37 AM

[Petoveritas:]

I agree with Oh Blah.

Also, "the 37% quarter-to-quarter decline in iPhone sales" how are you not expecting this to be a large decline? The iPhone 3G was launched in July (Q3)... a QoQ comparision is a horrible indicator to look at because different quarters produce different results. Q3 had a special event associated with it. You need to look at the YoY to see the improvement.


On Feb 05 06:29 AM Oh Blah Dee Blah Dah wrote:

> RE: "... it's no wonder Apple issued an exceptionally cautious outlook
> for the current quarter ..."
>
> Actually, Apple's forecast for its 2009 Q2, the quarter ending March
> 2009, was NOT as low as Wall Street expected. Because Apple's current
> quarter outlook was NOT as cautious as Wall Street expected, I believe
> this is one reason why Apple stock is doing BETTER this quarter.

Feb 05 11:16 AM

[Channon:]

"But if our survey numbers are correct, then why did the Street react so favorably to Apple’s latest earnings announcement?"

Perhaps it is the convergence of cash on the balance sheet and market cap?

Feb 05 11:19 AM

[dandyapple:]

Just another Apple Basher. Of course Mac Sales are down. There are new IMacs on the way. I predict Apple will have a low-cost "Notebook" with a built in 3G Broadband Modem coupled with an AT&T data plan. It will sell for $599 and will be introduced this Summer. Apple stock is no longer the darling of the short sellers. Without Steve Jobs health rumors and lies to jump start a short attack, the real investors are coming back. This company is adding 3 Billion Dollars to their cash hoard every quarter. Profit is the name of the game. Most of the bashers are afraid the IPhone will run their Blackberrys out of business!

Feb 05 11:47 AM

[brewer:]

You could not be any more wrong. Where to start? You think it's fine to compare QoQ? On what planet? Fall is Back to School, you might have heard about that, it's when students buy computers. YoY is the apples to apples comparison, and it's WAY UP in this DEPRESSION. Truly unbelievable!

What drivel! Please, can SA get one of the other commenters to write an article that actually make some sense and is not 100% FUD? I could do a far better survey, BTW.

Feb 05 05:20 PM

[who:]

Recession will take out bite from every business. How to compete in this recession is the key. Margin's will erode otherwise loose business. Sure, there die hard Apple fans and will buy apple only. To increase business Apple needs to compete with the cross overs with other pc makers.
I consider myself as cross over from windows based to apple laptop, but costs of similar specs is 50% (+$500) more for an apple. Pretty steep in the current environment, hence my reluctance .

The iphone costs similar if not cheaper then other smartphones, hence a no brainer if you want an easy to use internet smartphone. So i got one. yes, does a great job of replacing my netbook, which does a great job of replacing my laptop.

Feb 06 12:46 AM

[scottg:]

Wait a minute. So 27% say they plan to buy an Apple Laptop? And 14% plan on buying a Netbook? Is that a Netbook from just one computer maker, or all of them combined?

14% is not all that great. I'll take Apple's 27%...

The netbook wave will come and go. There's no way to make enough money unless you're a company in China or Taiwan.

Feb 10 12:48 AM