[vlovich123]

I think you're making some key important reasoning mistakes. First, look at it as a percentage of annual revenue (numbers from ChatGPT so may be off somewhere):

2001 (ipod initial launch at end of year): 4.1B/5.36B, 76% Mac, <1% iPod

2002: 4.3B/5.74B 74% Mac, 2.5% iPod

2003: 4.9B/6.21B 79% Mac, 20% iPod

2004 (Windows support added late 2003): 5.3B/8.28B 64% Mac, 21.7% iPod

2005: 6.2B/13.93B 38% Mac, 44.5% iPod

2006: 7.4B 38% Mac, 40% iPod

2007 (iPhone launch - should cannibalize ipod): 10.3B/24.6B 42% Mac, 33% iPod

2008: 14.2B/37.49B 38% Mac, 24% iPod

2009: 16.4B/42.91B 38% Mac, 18% iPod

2010: 17.2B/65.2B 26% Mac, 12.7% iPod

When I say it's "insignificant" I don't mean to say that Apple could have cancelled it and it wouldn't have mattered. Mac still remains a meaningful pillar of their product lineup even though it only contributes ~10% of revenues.

What you have to do is consider that Apple leadership views it as an ecosystem. Mac by itself isn't a lucrative or really important business. However, it's importance is that it makes sure that a customer in their ecosystem always has an Apple product they can buy when they need something. Importantly, if they have an iPhone they're more likely to buy a Mac and if they have a Mac they're more likely to buy an iPhone (& now Watch, AirPods etc). The refresh rates for these are also different enough that you're likely to remain stuck there by default once you get into the ecosystem because it's just an easier experience.

What I'm saying is that the strategic focus and resources was not really on Mac because Apple leadership did not see growth there by itself unless it was as an attachment to the iPod. You can see in the % numbers where iPod took over Mac as contributing a huge portion of % to their bottom line as soon as they made it generally available and that Mac sales themselves only started going up like crazy once iPod became generally available to everyone. Similarly, once the iPhone comes out we see it crazily cannibalizing iPod sales. At that point strategically the iPod barely got any attention. They didn't cancel it until 2022 because it was still bringing in significant revenue streams (+ a form factor Apple didn't have a replacement for until they got the Watch). Additionally, the overall laptop market has been shrinking even as Apple has been growing which is why their marketshare in laptops is so large even though it's comparatively such a small product for them.

So while the revenue from Mac was important from a "keep working on this" perspective & "ecosystem play", the vast majority of resources, focus, and energy were definitely thrown at iPod & then iPhone because of how much bigger the opportunity was and that even for Mac iPod and iPhone were the flywheel engines driving growth in those spaces.

If you're taking "insignificant" as the cancellation point for Mac, I think it would be that they succeed in their pitch that the Vision lineup is a Mac replacement. If they manage to succeed in that product line, Mac won't be much longer for this world.

[bschmidt1]

He shows real data, you use ChatGPT, modify the timeline plus admit the numbers are off - yet you say he's making the mistakes?

High level: You're trying to make the case that iPhones were immediately more successful than the conventional market leaders like Razr and Blackberry when that's not the case by far - it wasn't true for several years.

When someone shows that's wrong with numbers (e.g. 130 million Razrs sold in 2 years vs iPhone's 6 million in 2 years) you say something like "yeah but they were new to the space!" But that's totally peripheral, and counter to your original claim.

You'll never convince those of us who were 18-24 years old when iPhone released what happened. You obviously don't have a clue, probably were a child or out of the country at the time because you're using ChatGPT to pull up (false) info we all know intuitively.

Other awful takes:

> Macbook sales were insignificant

False.

> Mac by itself isn't a lucrative or really important business.

Lol. Saying $10 billion a year is not lucrative is crazy. Saying that 30%+ market share on the laptop market is not important is crazy.

> Once the iPhone comes out we see it crazily cannibalizing iPod sales. At that point strategically the iPod barely got any attention.

Nobody ever compared iPhone to iPod - we were talking about feature phones of the day like Razr, Blackberry, Nokia, etc.

Most of your paragraphs are pure conjecture.

[qwytw]

> He shows real data, you use ChatGPT

To be fair using only Q4 figures was a mistake, since iPod sales were always the highest in Q1 because of the holiday season (not as noticeable for Macs).

> ChatGPT to pull up (false) info we all know intuitively.

I summed some of those years from Apple's Quarterly reports (annoyingly they didn't seem to report by segment FY sales...) and they are more or less similar:

2006 : Mac : $7,375 (49.01%) iPod+iPhone : $7,676 (50.99%)

2007 : Mac : $10,314 (55.02%) iPod+iPhone : $8,428 (44.98%)

2008 : Mac : $14,276 (56.48%) iPod+iPhone : $10,997 (43.52%)

2009 : Mac : $13,824 (43.93%) iPod+iPhone : $17,657 (56.07%)

[vlovich123]

I don’t think identity is relevant but since you’ve made it an issue, I was in fact an intern at Apple working on the first iPhone when it launched and continued working on mobile phones for a long time after (eg worked fully time on WebOS with a bunch of iPhone veterans since a large contingent of them started it). You may want to be careful about the blind assumptions you’re making and degrading into ad hominem attacks is beneath the standards for this site.

As for the ChatGPT dig, for what it’s worth I spot checked various numbers that they were consistent with other sources and Apple’s official Q4 numbers. If you can point out specific issues I’d be happy to correct. I called it out simply in case someone wanted to triple check the numbers. But again, please refrain from baseless attacks and point out actual errors in the facts presented if any.

I pointed out that Apple on initial launch was the #2 provider outselling ALL windows mobile manufacturers including Nokia. They were widely recognized as completely reinventing the smartphone market even at the time which you can tell because Google had an “oh shit” moment with Android to competent rethink the OS to build it around multitouch. I don’t know what else to tell you. This is based on reporting and direct anecdotal conversations I have had with Google and Apple coworkers that related that history to me contemporaneously.

The successful Razr version was released a year before and Motorola was a very mature cell phone company that basically introduced phones worldwide right away similar to how Apple does phones today and was not a smartphone. It’s also important to remember that was actually the first “Apple” phone since it was integrated into the iTunes experience (ie if your wanted iPod + cell phone). So if anything, a feature phone at the same price point as Apple a year prior selling like hotcakes only proves that it was clear iPhone was a big deal.

> Lol. Saying $10 billion a year is not lucrative is crazy

It is crazy but that’s less than 3% of 2023 revenue (in 2023 it’s still about 10% at 30B but down 27% from 2022).

It’s a strategic product to build the Apple ecosystem but tactically it’s not where they make their money and sales and focus is. That’s why you see them still making Apple TV’s for a fraction of Mac revenue (watch + AirPods + tv + HomePod is $9B and the majority there is going to be watch and AirPods).

Also if you actually follow the space you’d know the reason that Apple has a significant portion of the laptop market is because the market itself has stagnated and shrunk because smartphones and tablets have eaten it. In the same time period since 2007 that Mac revenue have taken to double Apple's overall revenues have 10x. I gave context from before in 2001 to show that Mac sales were stagnating and not at all a way that Apple would survive and once they knew how big iPod was they knew their future was not Mac. This by the way is straight from the horses mouth - Steve Jobs was one of presenters for interns that year.

As for the strategic hypotheses, keep saying it’s conjecture all you want but please be aware I’ve had conversations with people who were within the company including some senior leaders. So while it may be wrong I suspect my conjectures may have a slightly larger chance of being correct than someone who remembers the iPhone as some “also ran” phone that no one could predict was going to be that big and forgetting all the lines at stores even it launched and so the constant non stop press it had for years even post launch.

I’ll reiterate - if you have issues with my facts or conjecture, please actually point out specifically which facts are wrong or provide news articles or analysis contradicting what I’ve stated. Your recollection of how big a moment iPhone was in popular perception and in the tech industry is wrong or you weren’t paying proper attention or were in the wrong community that was on the periphery of everything happening.

[bschmidt1]

> I was in fact an intern at Apple working on the first iPhone when it launched

> I’ve had conversations with people who were within the company including some senior leaders

There we go, why didn't you just say that in a disclaimer up front? At one point I cursed the Apple influencers and was mainly referring to you :D

You had a very different experience than the mainstream since you worked at Apple when it launched.

> This by the way is straight from the horses mouth - Steve Jobs was one of presenters for interns that year.

Sounds like you were doing keg stands in the Apple Koolaid while most of us were still pirating Windows Vista off LimeWire and changing discs at red lights! You haven't lived unless you had a 6-disc changer (in your trunk for some reason).

[Wytwwww]

Didn't Vista fit on a single disc? You might be thinking about floppies...

[bschmidt1]

Music. CDs. Google "6-disc changer"

For Vista in this era it was mostly boot from USB stick because it was too big for CD and DVD was bougie

[qwytw]

Yeah picking Q4 in my previous comment wasn't fair (Apple didn't seem to release FY revenue by segment which is a bit annoying and iPod sales were generally much higher in Q1

No argument about what happened after the iPhone (specifically 3G + App Store) came out, but I'm not sure I fully agree with:

> What I'm saying is that the strategic focus and resources was not really on Mac because Apple leadership did not see growth there by itself unless it was as an attachment to the iPod.

By 2007 iPod's market share was ~72% in the US. The MP3 player market was pretty saturated and there was very little growth left (especially with increasing competition from (feature)phones). On the other hand Apple only had < 5% of the PC market (in the US) by 2006 so there was a lot of space to grow especially in the laptop market if if they started released more competitive products (by ditching PowerPC).

If we look at iPod + iPhone revenue around those years

2007 :

Mac: $10,314 (42.94%)

iPod+iPhone : $8,428 (35.09%)

2008 :

Mac: $14,276 (43.92%)

iPod+iPhone: $10,997 (33.82%)

Mac sales were actually growing faster even if we combine iPhone and iPod sales (which probably meant that a lot of people switched to other phones/mp3 players instead of buying an iPhone at least initially)

I think that's mainly related to the the PowerPC to Intel transition. It's not clear if the iPod really had a huge impact on Mac sales since Mac's market share started growing much faster when iPod had already peaked. Then after iPhone sales started accelerating Mac sales growth rates began declining which would imply that handheld and PC segments aren't necessarily related that much.

If Apple hadn't released the iPhone, Mac probably would have done just fine on its own and iPod sales would have remained stagnant or declined significantly (e.g. worldwide they weren't doing that well compared to Sony Ericsson's phone sales in 2006-2007, who IIRC leaned heavily into MP3/media in those in those years). It was pretty obvious that phones/smartphones were the future regardless of what Apple did (the transition would have just been quite a bit slower without them).

Of course (compared to you) I really have no clue what the internal sentiment inside Apple was a at the time so I'm just commenting on the market as a whole.

[vlovich123]

My point about iPod sales was that Mac was fairly stagnant before and after in gross revenue. Once iPods were made compatible with windows, you see Mac sales start to grow again. The strategic story was that iPod was your gateway drug into the Apple ecosystem - whether they knew it would be that way I don’t know. I suspect it took them by surprise and they weren’t sure at first if Windows support was needed or growth would continue on its own.

As for iPod saturation, I don’t know if that’s actually true and I’m too lazy to look up the numbers as to when it happened. I’ll point out two things area important when thinking about things - you have market share and market size. You don’t have saturation until you have stopped growing. Owning a constant 70% of a market that’s growing consistently each year is not saturation - was the portable music market stagnant by 2007? Maybe. But you can’t tell that just from market share. According to ChatGPT growth started slowing down in 2008 but that’s already post Razr and iPhone when it became an obvious calculus of do I want and old tech iPod or a general purpose computer and cell phone in my pocket. Nanos and shuffles kept selling well because the cell phones didn’t have an appropriate answer for a very very long time (too much growth elsewhere to bother with that use case).

The transition to Intel was in 2006. I’m skeptical that’s a motivating reason for a lot of switchers and the numbers show more growth correlation with iPod windows support and iPhone which makes sense for the attachment theory whereas I don’t see in the numbers that making a big dent. It’s important to remember that consumers don’t make decisions on what CPU is in a machine; even technical people wouldn’t make that decision since even in the tech community today it’s framed as windows vs Linux vs Mac and not Intel vs AMD unless you are building a PC from parts (and Apple isn’t in that segment).

I’m not sure why you say iPod has peaked at the time of Windows transition which was in 2004. 2007 which is when growth had started slowing is when the iPhone kept up the growth. I agree that phones being the future was going to be obvious and the Razr was likely their first dip of a toe to estimate how big the market for an iPhone would be since they had a deal with Motorola for iTunes support.

As for Apple’s computer market share, the reason it’s so high is that the overall market is stagnant but Apple is managing to eke out growth here and there. Same as with smartphones where Apple has 30% of market share but 98% of the profit; they are much more streamlined than their competitors. Expect to see their market share grow one cell phones stagnate although the story there is more complicated since they play in a wider range of economic households whereas Mac products are (as they’ve always been) in more higher end segments (since the lower end would be dominated by chromebooks or no laptop). I see no indication of Mac growth stopping pre or post iPhone - it only started more recently which makes sense it would take so long because Apple is not immune to the reality in that space even though they’ve defied it for so long (and as for many companies COVID spiked sales since kids needed to do school remotely so the recent stagnation could just have been a temporary anomaly and reversion to pre pandemic numbers).

It’s genuinely hard to say what would have happened if Apple had not released the iPhone. Certainly Apple had stabilized as a company by 2001. But Mac sales had stagnated in the years prior to iPod and without iPhone as another engine it’s unclear what would have happened to Mac sales after that especially as the overall laptop and computer segments started collapsing (but this happened much much later after the smartphone revolution). Their music business may have helped a bit but a huge part of growth there itself was due to iPhone as well. These are reinforcing effects that are really hard to tease out. It’s likely it would have kept going since it was financially more stable but it would likely be at least a 10x smaller company.

Thank you for engaging factually and thoughtfully with the analysis.

[qwytw]

> Owning a constant 70% of a market that’s growing consistently each year is not saturation - was the portable music market stagnant by 2007?

iPod sales grew by 18% in 2006 and 17% in 2007. It was 140% 2006 and 373% in 2005. So yeah they weren't technically really stagnant just slowed down significantly. Even if we look at combined iPod and iPhone sales they grew slower than Nokia and Sony phone in the same period (Motorola had peaked in 2006). That didn't change until the 3G came out in 2008 and "high-end feature phone" market collapsed by 2009.

> It’s important to remember that consumers don’t make decisions on what CPU is in a machine

Yes but IIRC G5 had pretty awful performance per watt and Apple never put it into any laptops. They were stuck with G4 which wasn't really competitive with x86 by 2006.

> 2007 which is when growth had started slowing is when the iPhone kept up the growth.

It didn't initially though, not until mid 2008 if we compare to how fast Mac sales grew in the same period. Between 2006 and 2009 Apple's laptop sales increased by almost 3x or so. While even if we add up iPod + iPhone sales they "only" grew by 2x. Especially 2007 to 2008 was relatively pretty bad since iPod + iPhone sales only went up by 1.3x. Macbooks were the fastest growing product/segment between mid 2006 and mid 2008.

To be fair I'm mostly nitpicking at this point since I do agree with your longterm analysis more or less, but since Mac sales grew at the fastest during the period when iPod sales were relatively stagnant and iPhone sales were still relatively very low (2007 to mid 2008 before the 3G, the original iPhone wasn't a particularly good smartphone it had a large multitouch screen and that's about it..) it's not that obvious to me that iPod/iPhone sales were driving Mac sales that much.

Of course that specific period was pretty unique. Laptop market was growing very fast and Apple finally was offering devices which were incredibly competitive with other laptops at the time. It doesn't change the big picture too much (most growth was coming from iPod sales before that and iPhone/iPad afterwards)