The Ongoing Decline of the Desktop Mac

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Outside the diminutive circles of Mac enterprise IT, the end of the Xserve will hardly be noticed, but perhaps it should. Up until today, there were four categories of Mac desktop: iMac, Mac Pro, Mac mini, and Xserve. Now, there are only three. The question then becomes whether other desktop product lines might be in danger of discontinuation, or if Apple might move away from the space altogether.

2010: A Predominantly Mobile Year

Before introducing the iPad at the Apple event in January, Steve Jobs defined Apple as a “mobile devices company.” According to Jobs, Apple made more money on mobile devices (including iPods, iPhones, and MacBooks) than companies like Sony, Samsung, and Nokia did on their portable products. For the fiscal year ending in September, that trend continued.

Net sales for Apple were just over $65 billion, of which approximately $50 billion was divided among four portable product lines, with $6 billion going to Mac desktops. Since the iPad was only available for seven months in FY 2010, the Mac desktop will likely be last among Apple’s top hardware earners in 2011.

Notebook vs. Desktop Trends

That doesn’t mean the Mac desktop isn’t earning money. After a disastrous year in 2009, which saw a 23 percent decline in net sales, Mac desktop sales rebounded in 2010, up 18 percent. The problem is, Mac laptops were up 43 percent in net sales for 2010, and that was on top of a 9 percent increase in 2009.

Looking at Mac unit sales puts the net sales into perspective. While laptops started taking off in 2006, desktop sales have seen fluctuations, and even declines, though 2010 was a big rebound year. Nonetheless, Mac laptops represent a strong growth curve for Apple, which, as with the rest of the PC industry, has come at the expense of desktop sales.

Over the last 10 years, Mac notebooks and desktops have more or less switched positions in unit sales. In 2001, 7 out of 10 Macs sold were desktops. In 2009, the reverse was true. For 2010, strong iMac sales pushed the ratio back down to “only” two out of three Macs in favor of notebooks. With the introduction of the new MacBook Air, consumer dollars will swing even more towards the laptop, if analyst expectations prove accurate.

The State of the Desktop

The question then becomes: At what point do individual Mac desktop products reach a point of diminishing sales returns for Apple? The simple answer is that iMacs are safe in the short term. While Apple hasn’t broken out sales numbers for individual desktops since 2005, back then, the iMac accounted for about two-thirds of Mac desktop sales. Since then, comments in Apple conference calls reference only “strong sales” of the iMac, if desktops are mentioned at all, so the iMac’s role in the desktop picture has likely grown stronger still.

As for the Mac Pro and the Mac mini, a lot will depend on whether Apple continues to develop OS X Server. With the demise of the Xserve, Apple is showing it doesn’t really have that much interest in the enterprise back end. Exiting the server software business might make IT enthusiasts recoil, but Apple remains a consumer-focused business. It’s not going to happen next year, but Apple is clearly gearing itself towards a time when the “mobile device company” descriptor is entirely accurate.

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