Apple's iMac on the road to irrelevance

The computer that saved company's bacon in '98 peaked a year ago

Sales of Apple's iMac, the computer often credited with saving the company, have peaked and by the end of 2014 will account for approximately 2% of the firm's revenues, analysts now predict.

The iMac, an all-in-one computer with roots in the original 1984 Macintosh, was introduced in 1998 as a gumdrop-shaped machine sporting a CRT (cathode ray tube) display. Its hallmarks were an AWOL floppy drive -- the first Mac to dump the then-standard component -- and translucent plastic cases that came in a bevy of eye-squinting colors. Six years later, Apple reshaped the machine to fit the logic board, drives and other components behind an LCD screen, a form it still retains.

Apple's return to computer industry significance is often traced to the original iMac, the first system introduced by then-interim CEO Steve Jobs after his return to the firm he had co-founded two decades earlier.

But even with that pedigree, the iMac has long been outpaced by Apple's laptops. In the last four quarters, for example, Apple's laptops outsold desktops by nearly three to one, with a similar revenue disparity.

Poor desktop sales were caused in part by the long stretch between product refreshes: Apple revamped the line in May 2011, then waited until late October 2012 to release the next update, an interval 72% longer than average. But the iMac immediately stumbled, as the new models did not go on sale until Nov. 30 because of supply issues.

Those supply issues will have a dramatic impact on iMac sales this quarter and next, according to a pair of Wall Street analysts who model future quarters.

Brian White, of Topeka Capital Markets, for instance, forecasts that desktop sales this quarter will be just over one million machines, or 31% fewer than during the same quarter last year. Nearly all of Apple's desktop sales are iMacs; the other two desktop lines, the Mac Mini and Mac Pro, sell in comparatively tiny volumes.

Meanwhile, Brian Marshall, of ISI, predicted equally bad news, saying that desktop sales will be down 29% this quarter.

Clearly, the lack of available iMacs in the fourth quarter, traditionally the best for desktop sales, has eliminated the usual "pop" from the holidays and a recent refresh.

And things are not going to get better.

White's estimates for 2013 peg desktop sales at under a million for two of the coming year's four quarters, down 20% and 2% for the first and second quarters, respectively. For fiscal year 2013, which runs from Oct 1., 2012, to Sept. 30, 2013, White figures that Apple's desktop sales will be 14% lower than in the previous year.

Marshall's take is the same: In the first quarter of 2013, desktop sales will be down 20%, and sales during the calendar year will be off 14%.

By the end of 2013, each analyst estimates, Apple's laptops will outsell its desktops by four to one.

Naturally, revenue follows. Desktops will contribute just 2.5% of Apple's total this quarter, 2.7% in the 2013 fiscal year, and 2.4% the year after that, according to White. That's down significantly from 2010, when desktops accounted for 9.5% of all Apple revenue, and even off fiscal 2012, when sales were 3.9% of total revenue.

Charting White's and Marshall's estimates show that after the fourth-quarter 2011 peak of 1.5 million, Apple's desktop line-up will essentially flatten at an average of under one million per quarter for the next two years.

Meanwhile, Apple notebook sales are forecast to increase by 11% this quarter, and post double-digit gains in 2013 and 2014. In other words, sans MacBooks, Apple would essentially be out of the computer business.

1Mac desktop sales
Analysts' estimates show that Mac desktop sales will flatten in the next two years. (Data: Apple, Topeka Capital Markets, ISI.)
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