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February 14, 2013

Apple Has No Fear of the Declining PC Market

By Jacqueline Lee, Contributing Writer

You need to know two things about Apple CEO Tim Cook. He’s not afraid of the declining PC market and he’s also not afraid of cannibals.

“I think cannibalization is a huge opportunity for us,” Cook said on a recent Apple (News - Alert) earnings call. “Our base philosophy is to never fear cannibalization.”

Now, before you visualize Tim Cook as a brightly painted, grass-skirt-clad, desert island headhunter, you should know that he’s not talking about humans-eating-humans cannibalization. He’s talking about Apple products. They’re the ones eating their own kind.

Mobile device sales have surpassed PC sales market-wide. Apple sold 1.1 million fewer Macs in 2012 than it did the previous year. Cook blames component suppliers. He also acknowledges that iMacs came to stores later in the quarter than he would have wanted.

Image via Shutterstock

A big part of the decline in Mac sales resulted from customers who converted from MacBook to iPad. In effect, says Cook, the iPad is eating into the sales of its brethren—hence the cannibalization.

Apple has responded by cutting the price of its MacBook Pro with Retina Display. The 13-inch 128GB MacBook Pro with Retina Display has dropped from $1,699 to $1,499. The same computer with 256GB of storage and a 2.6GHz processor now costs $1,699.

The 15-inch MacBook will still be $2,199, but it’s getting some new innards such as 2.4GHz and 2.7GHz processors and 16GB of memory.

Part of the price drops result from drops in the prices of components such as flash storage and RAM (News - Alert). Creative Strategies principal analyst Ben Bajarin says that Apple has no problem passing the savings onto consumers.

“When prices of components come down, they are willing to lower prices when they can,” Bajarin told ABC News. "We don't expect Apple to make the cheapest products on the market, but they are committed to being affordable in the market.”

Bajarin also says that Apple isn’t worried about their Mac sales. “I don't think they looked at their last Mac quarter and started freaking out. The PC business is in decline; they know no one is going to turn that around.”

So if its Mac sales are going to decline regardless, Apple may as well capitalize on it in terms of iPad sales. As Cook says, why fear cannibalization?

“If we do, somebody else will just cannibalize it,” Cook said. “We know iPad has cannibalized some Macs, and that doesn't worry us.”

Edited by Brooke Neuman
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