Apple (AAPL) announced a refresh to the iMac on Tuesday this week. The announcement mostly reflected a hardware refresh, 9th generation Intel Core CPUs and AMD Vega GPUs. This could partially explain why AMD jumped 12% on Tuesday besides Google’s announcement of Stadia, as Apple is one of AMD’s biggest graphics customers, and the added pricing of Vega GPUs in iMacs could immediately impact sales/earnings in the current fiscal year.
Meanwhile, Apple stock fell by a percentage point in yesterday's trading session following the announcement of iMac. Not a whole lot to rally around, as the update wasn’t really as spectacular for a $25B business category. Apple continues to drum-up excitement on operating results tied to non-PC categories, mostly sales of software and services, and updates to iPhone.
Various tech outlets responded favorably to the announcement, as refreshing the product line-up was long overdue. Apple’s Mac segment sales have mostly remained flat, and any efforts to keep themselves relevant in the PC segment whether it involves hardware upgrades or new OS features would be welcomed at this point. Mac sales for FY’18 and FY’17 were $25.484B and $25.85B reflecting a flat couple years. At this point, some added hardware upgrades could bring in some more customers, or it might prevent sales from declining in the segment any further.
Over the past couple years, the iMac’s design has remained the same, and with the exception of 5K Retina Displays there hasn’t been anything new with the exception of hardware refresh, and Mac OS versions. Like usual, the iMac’s pricing remains on the expensive side with prices starting from $1,300 and $1,800 for the 21.5-inch and 27-inch version respectively.
With the pricing remaining elevated in comparison to the types of Windows gaming PCs that can be purchased, iMac tends to remain at a disadvantage. There’s a lot of Windows PCs that have beefier components at this price point. Though this has always been the case, Apple tends to differentiate the iMac with its unique form factor (2-in-1 PC) and OS ecosystem, which tends to appeal to pre-existing Apple customers who own either an iPhone or some other Apple device.
This differentiation has carved a niche for Apple, but it hasn’t made the iMac a clear winner in comparison to various PCs from Hewlett-Packard, Dell, Lenovo and ASUS. Over the past couple-years, the Microsoft ecosystem in the high-end has sounded a lot more impressive, as they have VR-enabled PCs at those price points with a host of third-party developer kits and ecosystem support for both consumer apps and high-end gaming as well. Hence, the more conventional PC makers tend to piggyback off of the Windows ecosystem and peripheral devices that come with it (like VR headsets), which speaks to the appeal of the Oculus and HTC Vive.
Certainly VR isn’t cheap, but neither is the Apple iMac. For two-years of anticipation, Apple could have done something more to advance its desktop platform. It spells of missed opportunity to advance their own PC platform further, and with so many rumors in the past couple years with regards to Apple’s iMac and MacBook developments and how it’s secondary to mobile, it’s unlikely that things will change.
Then again, Apple makes a lot of cash due to the iPhone and not Macs. If updates from Apple were this incremental with each iPhone update, shareholders would be in a lot of trouble. Thankfully, it’s not a PC-dependent business.
The recent iMac update doesn’t produce much in the way of new customers or sales growth, but it really doesn’t have to. PCs are a mature category, and it’s not disappearing anytime soon. The lack of excitement on yesterday's trading session mostly reflects the lack of impact the iMac update could have on sales and earnings.
This is an area where Apple could try to be more deliberate with growing its business, but even if it doesn’t, it’s not like it will affect shareholders by much.