Where Will 900,000 Mac Minis Go?
If you’re wondering just how many Mac Minis Apple is likely to sell this year go ahead and guess. Was your guess 900,000 units? If it wasn’t you now know why you aren’t forced to wear a three piece suit and mumble things along the lines of “external market pressures will both enhance and degrade the commonality of the burgeoning socio portability for independently developed computing modalities” or some such nonsense. In short you’re not the professional grade guesser known as an Analyst. But what the heck, those guys are smarter than country bumpkins like myself, so let us examine the question if selling 900,000 Mac Minis would actually be a good thing for Apple.
The first thing that 900,000 Mac Minis mean is that Apple has a monster hit. Sure 900k computers might not mean much to Dell but to Apple it would be huge. How huge? To put it in perspective Apple sold 3.2 million computers all of last year, selling nearly a million Mac Minis will represent a roughly 31% increase in number of units sold. Or it would if there wasn’t the annoying problem of cannibalization. Here I am not speaking of a little Pate de Foie Gras de Homo Sapiens Anasazi Indian style, no I’m talking about sales of the Mac Mini to people who would have bought a Mac anyway and now opt for the Mini instead of some other model.
Why would cannibalization be a problem? Well the margins, according to Peter Oppenheimer, are lower on the Mac Mini than all of Apple’s computers except for the eMac. Here it is tempting to think that, because of the similar margins, that there is really no financial harm to Apple if someone opts for a Mac Mini instead of an eMac. It is an easy conclusion to reach but it is important to remember that margins are calculated using a percentage. Apple’s general agreed upon profit for most computers is right around 25%. Percentages being what they are that means that every Mac Mini sold brings in less cash than any other Mac sold. In summary for every Mac Mini sold instead of any other Mac Apple will lose some amount of cash (well Apple will still make cash, just not as much). For ease of calculation let us assume every Mac was sold online Apple would lose anywhere from 50 to 700 hundred dollars per computer sold. Multiply that by 900,000 and it is not pocket change (well for some folks I guess it would be petty cash, if you’re one of those people give me a call).
Which brings us to the issue of just how likely cannibalization actually is. First off we have to take a look at what mix of computers Apple moved in ‘04. During fiscal ‘04 there was a pretty even division between desktop models and various ‘books. The laptops accounted for just over half of the computers sold by Apple with 1,665,000 of the G4 powered beauties placed in the hands of end users. It is a pretty safe bet to say that laptop sales won’t be barbequed by the Mac Mini. Sure the Mini is light and portable but you can’t really fire one up at Starbucks.
So if cannibalization is going to occur it will be, naturally, on the desktop side of things. Here we can count PowerMacs straight out. There just aren’t that many folks that are going to opt for a Mac Mini instead of the oversized perforated powerhouse. There may be a very small number of folks who simply have to have a headless machine but most folks who buy a PowerMac are convinced they need the inherent computing power. For example, it would be difficult to imagine someone using Final Cut Pro HD opting for a Mini or two instead of the top of the line PowerMac.
Well that leaves precisely two candidates for cannibalization: the vowel Macs. Yep the eMacs and the iMac are both possible targets. On the surface the eMac would seem to be the most likely victim of pot polish, after all it is natural to assume that people who want the cheapest Mac option will always go for the cheapest Mac option. That is to say that if you have to have a new Mac and want to spend the least amount of money possible you’ll go for the Mac Mini when in the past you would’ve opted for a eMac. That will be true for people just coming to the Mac side but for people already using Macs the choice isn’t a slam-dunk. A quick case study is in order: Take Mac user X (not his real name, his real is Stephen Seibold). User X has an aging iMac, the original bondi blue model. Deciding it is time to step up in computers he carefully weighs his options and finds that since his previous computer was all inclusive it only makes sense to by another all in one model. No cannibalization there. I actually know a few other people in the same situation and, without exception, all of them are opting for either an iMac or an eMac. So while the eMac sales may suffer we can generally say that it won’t suffer because previous low-end Mac buyers are snapping the things up.
Which only leaves the iMac as an option for massively cannibalized sales. I sincerely doubt this is going to happen, sure the monitor is more important than processing power for some people and I suppose this small segment of folks might opt for a Mac Mini and some really great monitor but it would be an insignificant amount. So where are the 900,000 Mac Minis going to go? That is hard to say. In a perfect world, well perfect for Apple, every Mac Mini sold would replace a PC but that isn’t likely to happen. I suspect a healthy number of Minis will go to folks who already own aging G3 and G4 towers but haven’t felt the need to upgrade. Some will go to schools and businesses that can just chuck the old PC box out of the window and reuse the monitor. But the majority might end up in the hands of people who never considered a Mac before and that would be very nice for Apple.
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I pretty much agree with you, but let me tell you my story:
I had never really considered a Mac, I really liked the look of OSX (desktop Unix. Yummm…..) but they were too expensive. (had I actually looked at the price, Eh,...No). Anyway visiting ARS and seeing news of the anticipated Xmac (to become the Mac mini) really got me interested. So I visited Apple, read articles ect and waited for SJ keynote.
Two days later I ordered my first Mac, a Mini? No, an ibook 12”. I have now decided to get my wife a Mac Mini but having looked I think I will get get better value by buying her an emac.
My point, the intro of the mini has led to 2 sales in my house niether of which is a mini but without that �330 computer in the range (and the exitement it generated) I would not have even looked.
I’m sure the mini will lead to increased sales for Apple, I’m just not sure they will all actually be minis!
I agree with vortigern. I have never owned a Mac and the excitement of the mini got my attention too. But when I started putting a system together I ended up getting a 12” powerbook instead since it was a better value to me.
I think the mini, like the ipod, will just serve as another catalyst for Apple sales overall.
I think 900,000 is being conservative. That’s less than 100K a month, worldwide. And there are plenty of people who want to buy their spouse/grandparent/etc a machine to email, videoconference, and web surf.
I do think it will cannibalize PowerMac sales a little and iMac sales a lot. Apple’s monitors are severely overpriced, and why pay for a G5 when it’s no better than a G4? (Speed-wise, it really isn’t!) Anyway, 1.4GHz of G4 is more than enough processing power for a lot of the people currently using PowerMacs, and offers similar performace to an iMac at lower price. Slap a cheap LCD on it and you’ve got a nice little machine.
I think the 2 earlier comments indicate a trend in computer shopping. How many people do you know that bought the bargain basement Dell, HP, Apple, etc.. WITH-OUT upgrading anything? I bet very Few. I have a feeling that most people see the low end model then decide to add on, no matter what computer they buy. I see the Mac Mini filling 3 slots: a second Mac (for the kids, for the kitchen, a trans-portable one for work and home…) or a second computer for someone getting tired of Windows who is open to playing with a new OS but who doesn’t want to get rid of their Windows machine quite yet (or maybe does
), or a 1st Comp for someone who doesn’t have a computer yet but has family members with Macs for “tech” support (Granparents, etc). I believe that most others will look at a Mac Mini and upgrade to a different machine.
I’m a typical adult professional, affluent Mac user, with a tricked-out G5 system with dual Cinema Display, and a couple of Powerbooks. Yes… we do exist, and in pretty large numbers. That said, I’ve so far bought three Mac mini systems, mainly just because I could, and to explore uses I would have never explored with any otehr Mac… print server, home media center Mac… one dedicated to radio and TV, with a RadioShark and EyeTV 200. I doubt that I’m the only example of this type of buyer.
Hey Powerjack,
you read the part about giving me a call didn’t you?:)
I’m an adult professional - affluence is relative - I would like to have Powerjack’s setup, but am limited to what I need to get the job done.
I have an aging Quicksilver 867. My daughters have faster machines in their college endevours.
I have had no need to upgrade, but the Mac Mini is intriguing due to the low cost.
At this price point, the Mac Mini is what would be considered in the Music Industry as a “throw pillow” ... I have an inexpensive Mackie Mixer in my music studio that has been described in the same manner due to the ability to use it to inexpensively fill a role.
This is what I feel is the value of the Mac Mini.
We have the ability to have an inexpensive device used wherever necessary, and also with the potential to cluster computing resources when necessary. Apple does not promote this, but it seems as though there are a lot of us thinking of this potential.
I can’t wait to see what this leads to when creative third-parties engage with synergy beyond Apple’s initial marketing strategies.
I agree that there won’t be a lot of cannibalisation but I think your article suffers from the same flaw Bill Palmer’s recent opinions do: Market Funnelling. It’s easy to divide the market into segments and then analyse their behaviours about the assumptions you’ve made about them (prior all-in-one Mac users will probably want another all-in-one, cheap PC buyers will not have USB keyboards/mice, etc.), and when you pile generalisation upon generalisation you fool yourself into thinking that you have learned something. I myself am a longtime Mac user, and I have usually bought all-in-ones, and I’m getting the Mac mini next, no question about it. Why? Because bottom line: I can save over 33% on the cost of entry into a G4 DV editing platform with a SuperDrive and enough RAM and hard drive over a similarly equipped eMac. I have a monitor because my father is a PC user that like to hand down his older PCs to his sons and nephews and nieces. I have not seen a single analyst consider that fact that people ‘inherit’ things like monitors, and you don’t have to be a PC user to end up with one. All sorts of stuff like this goes on. I know a lot of people with spare monitors of one kind or another, and often not one that they specifically bought as part of their previous PC system. People get monitors from work when there’s an equipment purge. All sorts of stuff like this happens. Also, I have not seen anyone mention the fact that the quality of the monitor for DV editing is essentially irrelevant. You *cannot* rely on any computer monitor, no matter how good, to judge the brightness/contrast and colour grading of your Final Cut Pro project. It will look totally different on an NTSC monitor anyway, so you *must* constantly preview your project on a good television anyway (usually using your camera as the interposing digital-to-analog converter). Since this is the reality of DV editing anyway, it really doesn’t matter how old the monitor is that I will plug into the mini so long as it works. This is the problem with general ‘market analysis’. It is normally done by people who don’t live in the trenches of these market segments and compound the problem by slotting people into usage categories as if there were a chinese wall between them and as if every single person doesn’t have a brother and a sister and a cousin and a friend in the other category who’ll sell them a monitor for $25 or just say take it, I don’t need it. In the real world, the Mac mini seem to be setting fire to all of these connections (and that isn’t cannibalisation), but we won’t know it from these analyses, we’ll only know it from the numbers, once they’re in.
Chris, Chris, stop throwing around numbers, everyone knows you can make numbers mean anything you want to. I can write the same story using numbers and make it sound entirely different. As was said in an earlier post, “we won’t know it from these analyses, we’ll only know it from the numbers, once they’re in.” That is the real truth. Anything else is just pure speculation.
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