By Tim Higgins 

While excitement for Apple Inc.'s new iPhones has helped boost the company's share price to record highs, a nearly 40-year-old workhorse with stagnating sales in recent years is notching impressive growth: the Mac.

Sales of the computer line rose 29% in the past quarter to a record $9 billion. Apple has seen huge interest in many of its products, from iPads to headphones, as students and workers stay home because of the coronavirus pandemic.

On Tuesday, the Mac lineup got its biggest jolt in years during a virtual event streamed online and filmed at the company's Cupertino, Calif., headquarters. Apple introduced a new M1 microchip that's supposed to give devices faster performance, better battery life and, maybe, bigger profits.

The new chip will go first into a new, super-thin MacBook Air laptop, starting at $999, a 13-inch MacBook Pro, starting at $1,299, and the Mac Mini computer, starting at $699.

Among the accolades listed during the Apple presentation, the company said the new chip would allow the MacBook Air to be 3.5 times faster than the previous generation and run silently because it wouldn't need a fan to keep it cool.

"Advancements of this magnitude only come from making bold changes," Chief Executive Tim Cook said Tuesday. "The M1 chip is by far the most powerful chip that we have ever created."

It marked the third virtual event held since September without a live, in-auditorium audience because of efforts to fight the coronavirus.

The success of the Mac lineup garnered new excitement from investors, such as Daniel Morgan, a senior portfolio manager who focuses on technology at Synovus Trust Co., which counts Apple among its largest holdings.

"A product that was once considered a dinosaur in the Apple product lineup has gained new traction after the pandemic hit with the work-from-home movement," Mr. Morgan said. After years of flat sales, "the Mac has become an important growth driver."

The arrival of the new devices will mark a breakup in Apple's 15-year relationship with Intel Corp., which Apple co-founder Steve Jobs tapped in 2005 to improve performance in Apple computers, then the company's primary business. It is also the latest example of tech companies developing their own computing power.

Chief Executive Tim Cook announced the shift in June, saying the company would begin jettisoning Intel processors over the course of two years beginning by year-end. The chips are based on Arm Holdings technology, designed to improve battery life, speed and security, the company said at the time.

The change is in line with Mr. Cook's broader effort to bring more in-house designed components, following similar steps taken with the iPhone that allow the company to cut costs and bring special features to its products, such as image processing through machine-learning algorithms on the smartphones.

Custom Apple chips should allow the company to save $150 to $200 per computer, Mark Vena, an analyst for Moor Insights & Strategy, said. That savings could help fund more features in the new computers or boost profitability, he said.

The starting prices of both the MacBook Air and Pro remained the same as the previous versions while the Mac Mini was $100 cheaper.

Apple has sought to help software developers prepare for the switch, because the new computers will have a different central processing unit, which speaks a different language than existing Macs.

Software chief Craig Federighi has said the company would continue to support and release new versions of its operating software for Intel-based Macs for years to come. During the presentation, Apple described apps that would allow software to run on both the Apple Silicon and Intel processors and said the Mac's new operating system would allow iPhone apps to run on the computers, which holds the promise of a more seamless working environment between Apple devices.

The company's shift to its own chip design comes as the Mac business has seen renewed life in the past nine months. Megan Behringer, an academic in Tennessee, said she purchased a new MacBook Pro recently because she enjoys seamlessly moving from one device to another to do her work.

She said she was attracted to the laptop, in part, because of the Apple ecosystem that lets her easily move among different devices. "Being able to drop a protocol or a journal article onto my iPad and then walk into the lab with it, or image something in the lab with the iPhone/iPad and then drop it on to the MacBook to analyze it, is incredibly convenient," said Ms. Behringer, an assistant professor at Vanderbilt University.

The Mac's success, however, isn't just among returning customers. Mr. Cook told analysts in July that almost 50% of the customers were new. In China, it was three out of four buyers.

Apple completed its most recent fiscal year in September with Mac revenue rising 11% to $28.6 billion. Analysts surveyed by FactSet, on average, predict sales would rise 4.5% this year.

Apple turned to Intel in 2005 to help bolster its computers against more powerful rivals. Helped by popular designs such as the MacBook in 2006 and the halo effect of the iPhone, its share of global computers sales rose to 7.3% in 2017 before slipping to 6.6% in 2019, according to IDC. In recent years, the MacBook has been plagued with complaints about its so-called butterfly keyboard -- which were addressed in the past year.

The new growth comes as Apple has focused on growing its services business to augment falling iPhone sales. Investors are betting that the arrival in recent weeks of the iPhone 12, with the ability to connect to faster 5G cellular networks, will spark new interest in the device and possibly rival past records.

But in the quarter that ended in September, sales of the old iPhones fell 21% compared with a year earlier, worse than analysts had expected. Yet Apple beat Wall Street's overall sales expectations, in part, because of robust Mac sales.

In an interview, Chief Financial Officer Luca Maestri said he believed the Mac lineup could continue to see upbeat results in the new fiscal year. "The demand continues to be very strong," he said.

Write to Tim Higgins at Tim.Higgins@WSJ.com

 

(END) Dow Jones Newswires

November 10, 2020 14:26 ET (19:26 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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