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Dear Tim

A

akadmon

Suspended
Original poster
Aug 30, 2006
2,006
2
New England
Dear Tim,

I've looked at three scenarios to see what makes most sense financially for Apple concerning the future of MP.

For this analysis, I've made the following assumptions:

1. Pent-up demand for MPs = 300000 units.
2. Average MP selling price = $3849.
3. No change in average MP price when/if new models are released.
4. Price of a high end iMac (alternative to MP) = $2949.
5. All those who don't not buy a new machine (iMac or PC) between now and the release of the new MP, buy the new MP when it's released.



Scenario 1 - Release a new Mac Pros 2-3 months from now, but make no advance announcement.

• If 10% of the buyers decide to buy a high end iMac and none leave the Mac platform, Apple's revenues are $1.128 billion
• If 20% of the buyers decide to buy a high end iMac and none leave the Mac platform, Apple's revenues are $1.101 billion
• If 10% of the buyers decide to buy a high end iMac and 10% leave the Mac platform, Apple's revenues are $1.012 billion
• If 20% of the buyers decide to buy a high end iMac and 10% leave the Mac platform, Apple's revenues are $0.985 .billion
• If 20% of the buyers decide to buy a high end iMac and 20% leave the Mac platform, Apple's revenues are $0.870 .billion


Scenario 2 - Announce the end of MP now.

• If 75% of the buyers decide to buy the current (2010) MP, 25% buy the iMac and and none leave the Mac platform, Apple's revenues are $1.087 billion
• If 50% of the buyers decide to buy the current (2010) MP, 50% buy the iMac and and none leave the Mac platform, Apple's revenues are $1.019 billion
• If 25% of the buyers decide to buy the current (2010) MP, 75% buy the iMac and and none leave the Mac platform, Apple's revenues are $0.952 billion
• If 10% of the buyers abandon the Mac platform and the rest splits evenly between the current MP and the iMac, Apple's revenues are $0.917 billion
• If 20% of the buyers abandon the Mac platform and the rest splits evenly between the current MP and the iMac, Apple's revenues are $0.815 billion


Scenario 3 - Announce new MPs are coming in 2-3 months , and discount the current MP by 15%.

• If everybody waits and no one buys an iMac or leaves the Mac platform, Apple's revenues are $1.155 billion
• If 10% of the buyers decide to buy the current (2010) MP, and no one buys an iMac or leaves the Mac platform, Apple's revenues are $1.137 billion
• if 20% of the buyers decide to buy the current (2010) MP, and no one buys an iMac or leaves the Mac platform, Apple's revenues are $1.120 billion


Based on the above, it is in Apple's financial interest to announce the new MP now, even if it won't be released for another 2-3 months. The extra revenue due to fewer defections to the PC platform and due to some folks choosing to buy a discounted 2010 MP vs. a high end iMac are on the order of $100 million. Now I know this isn't much in the grand scheme of things for Apple, but still… If I were a marketing strategist and made my company $100 million, I think I'd be up for a hefty bonus! So what do you say, Tim? Do we have a deal? If a new MP is in the works, but won't be ready for another 2-3 months, announce it now and discount the current MPs by a decent amount (~15%). You will stop just about all defections to the PC platform, and you will extract more revenue from selling discounted MPs than you will from selling high end iMacs.
 
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Thanks for the information. I will discuss it at the next exec meeting.



Regards,

Tim Cook
 
akadmon said:
Dear Tim,

I've looked at three scenarios to see what makes most sense financially for Apple concerning the future of MP.

For this analysis, I've made the following assumptions:

1. Pent-up demand for MPs = 300000 units.
2. Average MP selling price = $3849.
3. No change in average MP price when/if new models are released.
4. Price of a high end iMac (alternative to MP) = $2949.
5. All those who don't not buy a new machine (iMac or PC) between now and the release of the new MP, buy the new MP when it's released.
Click to expand...

You forgot to list all of the assumptions.

6. No one will notice if exclude 2010 Mac Pro sales from Scenario 1. Even 0.5% or 1% sold to the 300K over the next 2-3 months moves those numbers up.

7. Similarly, that again in Scenario 2 exclude sales of 2010 Mac Pro up until announce the end. For example, Apple could announce the end after their competitors have announced upgraded alternatives. The "now" isn't particularly necessary. Announce end 2-3 months from now or "now" and those numbers are about the same and likely higher.

8. That Scenario 2 and 1 &3 are fundamentally different. The latter have futures beyond the 300,000. Scenario 2 doesn't.
[ Apple isn't doing a "go"/"no go" on the Mac Pro to somehow 'manage' their quarterly returns. This is a long term multiple year investment.
Similarly, ignores the possibility that not selling 100K-300K Mac Pros might open opportunity to sell 1-3M of some other Mac model. ] Scenario 2 is primarily there to put a gap between 1 and 3 so don't notice the largest inserted assumption.


9. No one will notice that apparently 100% of the defections come in the 2-3 months, but the folks staying with the Mac platform come over an extended period of time. [ Surely you are not suggesting that 300K Mac Pros are going to be sold over the next 3-4 months? ]

Coupled with this is that the Mac ecosystem drop out rate is 0% in scenario 3 where as non zero in the others. Surprise, surprise, surprise, this results in higher numbers.

10. That no one will notice the negative impact of deeply discounting the "end of model year" price will have at the end of the next model year pricing cycle. If proactively condition buyers to stop buying toward the end of a year then even fewer will buy the product. It is a negative feedback loop that doesn't exist for any other Mac product.


Now I know this isn't much in the grand scheme of things for Apple, but still… If I were a marketing strategist and made my company $100 million, I think I'd be up for a hefty bonus!
Click to expand...

Chuckle. There is no strategy here. There is a short term tactical gimmick to sell discounted boxes.





You will stop just about all defections to the PC platform, and you will extract more revenue from selling discounted MPs than you will from selling high end iMacs.
Click to expand...

Even the commentary below says the defections will be non zero yet the Scenario 3 is pegged at zero.
 
I'm just glad to see that we Mac Pro enthusiasts are not the only ones who are disgusted at the long wait based on the amount of posts re: lack of new mac hardware in the news section today.
 
xgman said:
I'm just glad to see that we Mac Pro enthusiasts are not the only ones who are disgusted at the long wait based on the amount of posts re: lack of new mac hardware in the news section today.
Click to expand...

As I said before in I forget what thread (you were there too), I have no need for a Mac Pro though I would hate to see it go away. You cannot quit on professional workstations at least for the time being. Perhaps go to just two models?
 
xgman said:
I'm just glad to see that we Mac Pro enthusiasts are not the only ones who are disgusted at the long wait based on the amount of posts re: lack of new mac hardware in the news section today.
Click to expand...

Not sure what you mean here? Are you saying other Mac Product line users (i.e. iMacs, Mac Mini's, etc) are complaining about no new updates? I'm seeing some of that, but most are quieted quickly by other forum users pointing out that there aren't processors for any of the other Mac Products yet. Only the Mac Pro's have seen updated processors released recently. Ivy Bridge for all other product lines is still 3 weeks (for some) and 2 months (for others) away.
 
1. So we can get upset that Intel has been slow with it's Xeon's... Sandy Bridge ones at that.
2. You don't account for new customers to the platform brought on by a new MP model.
3. It's a complete dream for them to announce and discount the model until the new model. That is a joke.
4. Apple has some of the most tight supply chain and pipeline ever. When they announce a new product (which almost is available nearly immediately), the old model is almost completely gone in the retail channels. So the idea of discount to flush their supply's... they are already plenty good at that.
5. 100+ Million is nothing.

Their upcoming quarter revenue estimates is sitting around $40 Billion. So doing the math, $100 Million dollars (a lot to you and I) is made by apple every 5.4 HOURS. Think about that. So by going to all this trouble for a niche market, there will be adding an extra 5.4 hours of revenue.

I'm not saying that you guys haven't invested in emotionally and financially, but truth is, Apple will do what they want, when they want. But best of luck to you guys, I couldn't imagine some of the honest stress that this may be causing since some of your lively hoods are based of their MP system.
 
Frankly, I don't see any downside to a new MP. Even it it were a loss leader (which I don't think it would be) it would be worth it for a full product line and market segmentation.
 
Apple do not pre-announce new products - and they aren't going to change company policy that has served them so well for the past 15 years over a 100 million dollars when they have 100 billion in the bank.

The new mac pro is coming. It will be announced when it is done and ready for release.
 
paulrbeers said:
Not sure what you mean here? Are you saying other Mac Product line users (i.e. iMacs, Mac Mini's, etc) are complaining about no new updates? I'm seeing some of that, but most are quieted quickly by other forum users pointing out that there aren't processors for any of the other Mac Products yet. Only the Mac Pro's have seen updated processors released recently. Ivy Bridge for all other product lines is still 3 weeks (for some) and 2 months (for others) away.
Click to expand...

I'm sorry, it seems to me that there is some BS going on here. I think Apple has some leverage with Intel. The Intel argument only goes so far and Apple could help matters greatly by a pre-announce at this late stage at least with regard to the MP. Anyway, the whining here can extend right to Intel as well. I realize everyone is tired of hearing about this but if we don't keep making noise, Apple may possibly choose another path. Trust me, I'm as sick of posting about this as many are of reading about this.

https://forums.macrumors.com/threads/1354223/
 
The next gen Mac Mini will replace the Mac Pro imo. I don't think we'll see another refresh of the Mac Pro, because it will be discontinued when the refresh happens soon.
 
aurichie said:
The next gen Mac Mini will replace the Mac Pro imo. I don't think we'll see another refresh of the Mac Pro, because it will be discontinued when the refresh happens soon.
Click to expand...

I fail to see how a Mini which requires taking the thing apart just to stick in another HD will replace the Pro.
 
I don't know why everyone is so concerned with an announcement.

If they're going to be discontinued, they'll be discontinued. Otherwise there will be new ones. It doesn't matter when/where they announce it.

If you're willing to leave the Apple platform and buy all new copies of your software because you can't wait a month or two for an announcement for a processor platform that isn't shipping in volume yet... well... I'd say you have issues.
 
xgman said:
Trust me, I'm as sick of posting about this as many are of reading about this.

https://forums.macrumors.com/threads/1354223/
Click to expand...

So then stop posting about it. Apple owes you no explanation. The 2010 Ma Pro came out 3 months after Intel released updated processors, and we are barely a month out from Intel's announcement of Sandy Bridge ES's.

Frankly if you aren't happy Apple hasn't already updated/announced the Mac Pros then go to to HP or someone else. Although, I should point out that HP has only announced their Z400 workstations, and haven't started shipping them with no official release date other than "April"....
 
paulrbeers said:
So then stop posting about it. Apple owes you no explanation. The 2010 Ma Pro came out 3 months after Intel released updated processors, and we are barely a month out from Intel's announcement of Sandy Bridge ES's.

Frankly if you aren't happy Apple hasn't already updated/announced the Mac Pros then go to to HP or someone else. Although, I should point out that HP has only announced their Z400 workstations, and haven't started shipping them with no official release date other than "April"....
Click to expand...

Thanks for the advice, but I think I will still complain.
 
What I don't understand is why they're still using the Nehalem processors. Surely if Westmere came out in 2010, and no suitable new processors come along in the 2 years following - it would make sense to discontinue the Nehalem processors in 2011 and reduce the price of the Westmere processors.

Maybe add USB 3 etc just to avoid the current scenario where people don't even know if there will be another Mac Pro release. The Mac Pro is starting to look like the iPod Classic - it's still for sale but it seems Apple has given up bothering with it.

Am I missing something?
 
bilbo--baggins said:
What I don't understand is why they're still using the Nehalem processors. Surely if Westmere came out in 2010, and no suitable new processors come along in the 2 years following - it would make sense to discontinue the Nehalem processors in 2011 and reduce the price of the Westmere processors.

Maybe add USB 3 etc just to avoid the current scenario where people don't even know if there will be another Mac Pro release. The Mac Pro is starting to look like the iPod Classic - it's still for sale but it seems Apple has given up bothering with it.

Am I missing something?
Click to expand...

Westmere was a minor upgrade of Nehalem, and it some cases it's more economical/a better idea to use Nehalem processors.

Using Westmeres across the board would just inflate prices for no real gain.
 
bilbo--baggins said:
What I don't understand is why they're still using the Nehalem processors.
Click to expand...

Because Intel shipped an incomplete 3600 series line up in 2010. Whether Intel was distracted on creating the new Xeon E3 line up or just thought the market for 3600 series CPU would just dry up and disappear I'm not sure.

In the first half of 2010 there was only the 3680. There are now 3 entries.

http://ark.intel.com/products/series/48311

but it isn't a well rounded line up. It is kind of hard to ship a "good" , "better", and "best" line up of Mac Pros when there is only an Westmere update for "best" .


There never has been a logical follow-on to the 3520 and 3540 (used respectively as the first two entries in the single package 2009 line up ) inside the 3600 series. There has been Westmere tweaks 3670 (Q3 '10) and 3690 ( Q4 '11), but none of those are equivalents to the 3520/40. To compensate Intel did speed tweaks to the 3500 series and Apple just rolled with those.

Another post claimed Apple surely had influence over Intel. Likely not. Otherwise the 3600 series would have never been kneecapped like it was. The E5 1600 is the only real complete follow on to the 3500 series that spans the range of price points that the Mac Pro single package has used.
If Intel really wasn't distracted with the Xeon E3 and thought they could flush the 3600 line down the drain perhaps Apple pulled them aside and pointed out the deep error in their thinking. [ Intel seems to have gone in the opposite direction with the "bridge to nowhere" E5 2400 series ... which I really don't see the major differentiate point of. They are different but overlap so much with E3's and E5 1600's that seem like effort better spent on getting the more mainstream E5 series out on time.... not 6-8 months late. ]





The Mac Pro is starting to look like the iPod Classic - it's still for sale but it seems Apple has given up bothering with it.
Click to expand...

Only to the extend that the HDD makers have also not shipped any suitable components to make the design change worthwhile. ( there are other more deeply rooted differences though).

Few, if any, HDD markers are trying to make extra thin, higher capacity, 1.8" HDDs anymore. The limited storage capacity of 1.8" drives makes that easy prey for competitive Flash storage alternatives. Especially when factor in the benefits of mobile devices that are going to be bounced around alot while in use. HDD's need to get to 2.5" size (or double platter 1.8") to put large compensating distance between them and Flash storage constraints. All the more so since more energy efficient 2.5" drives have come online that are suitable to be embedded.


The Xeon E5 1600 has almost the opposite factor. AMD isn't pushing that hard to force Intel to ship early or complete line up.
 
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xgman said:
I'm sorry, it seems to me that there is some BS going on here. I think Apple has some leverage with Intel. The Intel argument only goes so far and Apple could help matters greatly by a pre-announce at this late stage at least with regard to the MP. Anyway, the whining here can extend right to Intel as well. I realize everyone is tired of hearing about this but if we don't keep making noise, Apple may possibly choose another path. Trust me, I'm as sick of posting about this as many are of reading about this.

https://forums.macrumors.com/threads/1354223/
Click to expand...

Frankly, I don't see much leverage available over Intel at present, since there would need to be a meaningful alternative from AMD.

goMac said:
I don't know why everyone is so concerned with an announcement.

If they're going to be discontinued, they'll be discontinued. Otherwise there will be new ones. It doesn't matter when/where they announce it.
Click to expand...

The angst is with trying to do business planning while knowing that you're flying blind.

If you're willing to leave the Apple platform and buy all new copies of your software because you can't wait a month or two for an announcement for a processor platform that isn't shipping in volume yet... well... I'd say you have issues.
Click to expand...

Can you provide a 100% guarantee that the future will become clear in 30-60 days? Or 90 days? Or even 120 days? No, I didn't think so...and that's the point: businesses hate uncertainty.


deconstruct60 said:
...
Another post claimed Apple surely had influence over Intel. Likely not. Otherwise the 3600 series would have never been kneecapped like it was. The E5 1600 is the only real complete follow on to the 3500 series that spans the range of price points that the Mac Pro single package has used.
If Intel really wasn't distracted with the Xeon E3 and thought they could flush the 3600 line down the drain perhaps Apple pulled them aside and pointed out the deep error in their thinking. [ Intel seems to have gone in the opposite direction with the "bridge to nowhere" E5 2400 series ... which I really don't see the major differentiate point of. They are different but overlap so much with E3's and E5 1600's that seem like effort better spent on getting the more mainstream E5 series out on time.... not 6-8 months late. ]
Click to expand...

There's a lot of odd stuff going on with Intel that I'm not quite sure how to interpret...the overlaps in particular.

{iPod Classic}

Few, if any, HDD markers are trying to make extra thin, higher capacity, 1.8" HDDs anymore. The limited storage capacity of 1.8" drives makes that easy prey for competitive Flash storage alternatives. Especially when factor in the benefits of mobile devices that are going to be bounced around alot while in use. HDD's need to get to 2.5" size (or double platter 1.8") to put large compensating distance between them and Flash storage constraints. All the more so since more energy efficient 2.5" drives have come online that are suitable to be embedded.
Click to expand...

The only reason IMO that the 1.8" existed at all was because solid state CF cards were expensive at the time...but that era was already being passed by by the time of the iPod mini. Today, we're watching as 2.5" HDDs are starting to get cannibalized by SSDs.

... AMD isn't pushing that hard to force Intel to ship early or complete line up.
Click to expand...

And the economy for the past few years has also slowed demand, so Intel's "customer pull" for new technology has retreated as well.


-hh
 
-hh said:
The angst is with trying to do business planning while knowing that you're flying blind.
Click to expand...

If you're planning your business around Apple's release schedule around Intel's release schedule, you need to rethink how you plan your business.

What happens if the Sandy Bridge Xeons end up being defective and Apple cancels production for six months? Does your business crash and burn because you're trying to plan around insanely difficult to plan around hardware release schedules?

If the Mac Pros are canceled, does that change your business plans? Does it make the current Mac Pros available for purchase catch fire and implode? What? I really don't get it.

There are many factors beyond Apple that make planning your business around release schedules bad. Just ask anyone who bought a 500 mhz G4.
 
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