Apple's role reversal: 'Mature' Mac outpaces iPad in revenue

The Mac laptop and desktop business takes over as Apple's second-biggest revenue generator, as iPad sales struggle.

Ben Fox Rubin Former senior reporter
Ben Fox Rubin was a senior reporter for CNET News in Manhattan, reporting on Amazon, e-commerce and mobile payments. He previously worked as a reporter for The Wall Street Journal and got his start at newspapers in New York, Connecticut and Massachusetts.
Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Ben Fox Rubin
Shara Tibken
3 min read

The desktop computer rises again. CNET

The iPad tablet was supposed to signal the demise of the PC. Well, Apple's Mac line is having the last laugh.

For the first time in more than three years, the Mac laptop and desktop segment has taken over as the second-biggest revenue generator for Apple, outpacing the iPad tablet line, which saw its third consecutive quarter of declining sales.

That change came in Apple's latest quarterly earnings report, released Monday, in which the company said the Mac line posted revenue of $6.6 billion, up 18 percent from a year earlier, ahead of iPad sales of $5.3 billion, down 14 percent. Overall, the Cupertino, Calif., electronics giant reported fiscal fourth-quarter revenue and earnings that topped Wall Street expectations, thanks in part to stronger-than-expected iPhone sales.

CEO Tim Cook said Monday that Apple posted all-time high quarterly Mac sales, adding that the company hit its highest quarterly computer market share since 1995. "It was just an absolutely blow-away quarter," Cook said of Mac sales. "It was absolutely stunning."

Apple saw particular strength in MacBook Air and MacBook Pro laptops, with strong growth in emerging markets and "great demand" in the back-to-school season, according to Chief Financial Officer Luca Maestri.

The performance gives pause to the notion of the "post-PC world," one in which smartphones and tablets would cannibalize sales of the traditional laptop or desktop computer, at least when it comes to Apple. While the iPad saw fantastic growth over its first three years since debuting in 2010, its momentum has completely halted over the past year.

The gains in the Mac line were particularly notable because worldwide personal computer sales are still declining. Market researcher IDC said earlier this month that worldwide PC shipments for the latest quarter dropped 1.7 percent from a year ago. There has been a silver lining for PCs lately, though, with the sales not sinking as much as market researchers expected. That shows PCs continue to have appeal with consumers and businesses despite years of predictions that the device would eventually be replaced by smartphones and tablets.

The iPad, which hit the market in April 2010, first overtook the Mac in revenue in the June 2011 quarter. In the following years, the iPad solidly remained the second-biggest moneymaker for Apple, behind the iPhone smartphone. However, iPad sales have slipped this year, with the Mac segment coming closer and closer to beating its revenue.

In a call with analysts Monday, Cook said he believes some people came in to an Apple retail store, looked at an iPad and a Mac, and chose the Mac instead, so there could be some level of cannibalization. However, he said it was important to look at iPad sales more broadly than each individual quarter, saying overall iPad sales have been strong. About the recent decline in sales, he said: "To me I view it as a speed bump, not a huge issue. That said, we want to grow," a defense he has used in the past to characterize the slowdown in sales.

The company is trying to boost tablet sales with the iPad Air 2 and iPad Mini 3, two new models it introduced last week. Apple last week also unveiled a new iMac desktop with a high-resolution "Retina 5K" display.

Apple has attributed the weak iPad sales to a couple of factors -- softer demand and an issue with the number of devices held in channel inventory (which means it's either sitting in stores or on trucks).

In reality, Apple likely has been hurt by a few factors that could continue to plague iPad sales. It's easy for people to pass older tablets to relatives or friends when they upgrade. People also don't have the two-year upgrade incentive that smartphones get from wireless carriers, and Apple hasn't made big enough changes to the iPad to compel even their most ardent fans to immediately buy the newest model. In addition, most people who crave a tablet likely already have one, and Apple is going up against dozens of new, inexpensive devices that run Google's rival Android mobile operating system.

Cook said Monday the tablet computer is still so new that he doesn't know what the replacement cycle is for the device, saying he's optimistic about the iPad's future. "I know there's a popular view that the market is saturated, but we don't see that," he said.