financial/investor
03/17/2004, 7:20pm, EST
Wednesday, March 17th
Money: iPod buzz is hiding problems at Apple
MONEY Magazine's article titled "Why iPod can't save Apple" says the buzz on the digital music player and "swank" storefronts are masking an ebbing bottom line, noting reduced CPU sales (resulting a shrinking marketshare), decreased profits (in part due to the lower-margin iPod and little-to-no profit at the iTunes Music Store), failure of the iPod to drive CPU sales, failure of the retail stores to increase marketshare, hidden retail store costs, no operational income, and little value in the stock. [subscription required to view entire article; highlights posted below]
- "Apple sold just over 3 million computers in its last fiscal year, which ended in September -- 900,000 less than it sold in fiscal 1996, the year before Jobs returned...Meanwhile, Apple's share of the worldwide personal-computer market has shrunk to 2 percent from 3.2 percent five years ago."
- "While Apple's sales of $6.2 billion last fiscal year were nearly unchanged from 1999, profits plummeted 90 percent to $69 million, from $601 million four years ago...Jobs' mass-appeal strategy has crimped the company's historically high profit margins. Apple's net profit margin is just 1 percent. That's down from 10 percent four years ago."
- "Out of the hundreds of people who were waiting outside Apple's SoHo store in the cold to buy an iPod, I could find only one whose positive experience with the music player led him to buy an Apple computer."
- "Tom Santos, one of the plaintiffs, estimates that Apple's stores would have lost as much as $80 million in 2003 had they been paying the same prices for inventory as the resellers paid."
- "And Apple's earnings would have been worse had it not been for $4.8 billion the company has in cash and short-term securities. In fact, the cash hoard made more money last year than Apple's operations -- which lost $1 million while the computer maker booked a $69 million gain on interest income."
- "Even when you factor in Apple's $13 a share in cash and almost no debt, the company's stock, at a recent $23, trades at 20 times estimated 2004 earnings. Dell's shares, on the other hand, go for 26 times projected 2004 earnings -- but its business is three times as profitable as Apple's."
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Oh and let's forget about that cheap lead-item iPod. I mean, they aren't the MOST EXPENSIVE MP3 player on the market (wonder what the margins are like on those). BTW, aren't there companies out there that JUST sell MP3 players? I guess they must be REALLY bad investments...
This is BS...
Apple Computer going out of business for the past 30 years.
AS they said in Eposiode 1 This is Batha Poodoo
For the love of God, why don't more people buy macs?
I fix pcs and macs all day long and I am amazed people put up with pcs at all.
I know macs are great, why doesn't the rest of the world?
Anyway, I'm buying a new G5 when they come out (23rd I hope hope hope!), so maybe that will boost sales a little. Also, a coworker of mine, another PC technician, is also switching sometime this summer!
Now that I've found them, I want to use Apple computers for the rest of my life. Don't die on me, Apple!
I believe one of the only ways Apple can rectify this problem is to market its operating system to businesses, not consumers. Point out the networking support, easy set up and use, security features (but NEVER lack of viruses; it might encourage attacks on OS X), and all that good stuff. Show how everything just works on a Mac. Apple needs to run two businesses at once: the creative, digital hub and at the same time the boring, business stuff, ensuring that IT guys and their bosses see Macs and their potential.
The final thing Steve himself can do is to convince just one major corporation or organization (GE, World Bank, etc.) to switch. He can use the same charm he used on the record label CEOs on this one company's CEO, showing off the Mac. Then make a huge deal out of the productivity gains, the money saved, etc. Apple has to get themselves seen as not only a creative player but a powerful business player as well. Only then can Apple truly break out of its 2%.
Oh yeah, about the article. I read the whole thing and noticed that they have this shocker title but then they don't actually say much about Apple's future, just that the facts don't look so good right now. They've learned never, ever, to predict the end of Apple anymore, because after 30 years of trying, they haven't yet gotten it right. It doesn't look good for them. Apple, I think, will keep chugging along, but unless they take serious action in the business sector, everything will remain the same.
BUT... a good point IS brought up in this... why IS apple's marketshare so low???
Us Mac users know Mac's are great... why doesn't anyone else??
Seems like that's something Apple should focus on ;)