According to Piper Jaffrey analyst Gene Munster, Wall Street doesn't appreciate the sales boosting power that price cuts on Apple's notebooks will have on Mac unit sales. But it may be that investors have become wary of Munster's predictions, as they are often significantly off the mark. And, in this case, there is additional evidence suggesting against the sudden appearance of increased price elasticity.
First, to Munster's prediction:he upped his estimates of unit movements:
"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."
He may be right, but there are plenty of times that the quasi-official Apple bull has been way off the mark. Back in September 2008, right near the end of Apple's Q4,
The actual results: 2.6 million Macs, 11.2 million iPods, and 6.9 million iPhones. Now we'll move to March of this year. Munster predicted that Mac sales had bottomed out and would rebound in March, at least in the U.S. building off data from NPD Group, he said that February sales would be down 12 percent or so year-over-year. Then NPD released its data showing a 16 percent drop. By April, Mac unit sales were down about 1.2 percent -- a strong improvement, but hardly bottoming out.
- from 2.5 million to 2.8 million Macs
- from 10.8 million to 11 million iPods
- from 4.1 million to 5 million iPhones
Next, right before the Apple World Wide Developers Conference, Munster said that it could be a slight disappointment for a few reasons, including the following:
What happened? There was a new line of iPhones, the low end handset went to $99, and Snow Leopard was going for the lowest price for an OS upgrade that people can remember, while adding more 64-bit support and actually significantly shrinking the code size.
- No new line of iPhones would be announced until mid-July.
- A low-end iPhone would only drop to $149, not $99.
- There would be no "wow factor" over Mac OS X Snow Leopard.
In other words, just because Gene Munster says it's so isn't a good reason to place a bet. But ultimately this is a negative variation on a rhetorical appeal to authority. So let's look at the idea of a price drop being a big sales stimulus. It's essentially a guess that Macs have far more price elasticity than those on the Street generally think. However, there's evidence to the contrary. We've seen that net sales per unit have been slipping at Apple. Look at this table:
Average net sales (the amount that Apple sees) per Mac unit slipped 12.9 percent from Q2 of FY2008 to Q2 of FY2009. That was accompanied by a 3.2 percent drop in product unit sales. I supposed you could argue that, given the economy, it might be that the drop would have been worse without the lower average money per unit, but that sounds like the hand waving of a devoted fan. So color me dubious as to whether the price cuts will significantly help boost Mac sales.
||Per Unit Net Sales
NPD Mac US sales graph via Fortune.