Apple Mac Units Up, But At What Cost?

(MoneyWatch)  Apple has announced its 2009 Q3 results, and of course the iPhone continues its relentless drive toward dominating its market. And on the personal computer side, there was unit growth again. But the cost seems to be the continuation and escalation of the potential profit margin that the company can hope to get from the Mac, which raises the question of how long will computers remain a viable business for Apple, or will it become a purely consumer electronics business at some point in the future.

Back in June, I noted how Piper Jaffrey analyst Gene Munster predicted increased Mac sales because of price cuts. In his words, as quoted by AppleInsider:

"The big picture" is that "[we] believe the Street is underestimating the positive impact of Mac price cuts announced on June 8th," he wrote. "As such, we expect the June quarter to mark the trough for Mac unit growth rates through the balance of CY09 and we believe the Street is not fully appreciating the positive impact of these price cuts on unit growth."

Although I noted that there have been a number of times that his predictions have fallen flat, this one didn't, at least in terms of a quarterly lift to unit sales. According to Apple's earnings release, the company saw a four percent jump in unit sales year-over-year and a 17 percent jump from Q2. That's the good news. The bad news is that the price cuts have hit pretty hard. Here's an updated version of the chart I ran last month.

Total Macs

Quarter	Unit Sales	Per Unit Net Sales
Q3 09	2,603,000	$1,279
Q2 09	2,216,000	$1,329
Q1 09	2,524,000	$1,408
Q4 08	2,611,000	$1,386
Q3 08	2,496,000	$1,446
Q2 08	2,289,000	$1,526
Q1 08	2,319,000	$1,532

Let's look at this graphically to see what the impact of prices changes has been over seven quarters:

As I've mentioned before in this blog, per unit net sales are a critical number for Apple, or any other vendor, because they place the absolute cap on how much money the company can make through product sales. I'm not suggesting that Apple is close to dumping the Mac as a product. However, this is a company built around three principles:

1. The deification of Steve Jobs.
2. A maniacal devotion to the impact of visible design on users.
3. High margins that make points one and two possible.

Clearly there's a big chunk of change coming in on every Mac, but that is an eroding amount of money, and eventually, if the trend continues as it has virtually every quarter for almost two years (and possible longer -- I haven't worked it backwards further), things will get to a point that Apple will be unwilling to continue in an ever smaller profit potential. At that point, assuming that the company's run with the iPhone and whatever comes after stays strong, I think Apple will drop the product line, no matter how True Believers wail.

There won't be enough money per unit to justify the time and attention necessary, especially when the far cheaper-to-build iPhone averaged $324 a unit, including service revenue. The quarter's numbers also show a weakening of unit iPod sales, which makes sense as many consumers have bought iPhones instead. But this brings up another strength-as-weakness issue. Apple is becoming ever more dependent on the one product line, reversing in a way its hard-won diversification out of selling just Macs.

Image via stock.xchng user amab7, site standard license.