Review & Outlook

Our take on the investing, financial, & economic themes of the day

Don’t forget about Apple’s other product: computers

9 October, 2014 by Matthew O'Brien, Ph.D. in Commentary
apple computers


All the hype about Apple’s latest iPhone and its new watch, and before that the iPad, has overshadowed the product category that got Apple started, which of course is the Macintosh computer.  Although Mac desktops and laptops have been consistently popular in the US, their relatively high price tag has always kept Apple from appearing among the top PC providers worldwide — until now.  Apple Insider reports that IDC data shows the strong growth of Mac sales have pushed Apple into the top five for global PC sales.

Apple mac

Source: IDC, Apple Insider

Even as total PC shipments have decreased by 1.7 percent, according to IDC, all five of the top global producers, including Apple, saw increases compared to last year.  Apple’s success has been driven by three primary factors.  First, its products set the standard for high-quality functionality.  Second, its products create an “ecosystem” effect that draws customers in and keeps them loyal to a family of integrated devices.  Third, Apple has created a luxury brand image that makes their products something of a status symbol.  These three factors combine to allow the company to charge premium prices and maintain high profit margins.  We continue to like the company’s stock (it’s one of our clients’ core technology holdings), which to date is up over 27 percent.

Today activist investor Carl Icahn is agitating for Apple to buy back more of its stock.  Icahn argues that Apple is worth $203 per share, virtually double its current trading price of $102. If Apple takes his advice, the stock may get a further boost.  More important over the long-term, however, are the prospects of Apple’s new products, such as ApplePay, which will be the first big test for a mobile payments system that has the scale and brand heft really to catch on.