It's Nothing Personal, It's Just Business
In the latest podcast episode of ATP Marco Arment made the tongue-in-cheek assessment that it looks like Tim Cook, who is outspoken on his love for iPads, hates the Mac Pro. This is due to the fact that the Mac Pro hasn’t seen an update in about three years whereas the iPad continues to get hardware updates galore. Tim has also said that he does most of his work on an iPad and he believes it has a bright future.
While I know that for the most part Marco was cracking a joke. It does raise an interesting comparison of two products. Neither one of these products is growing at a very fast clip. In fact, the iPad has actually been shrinking. And yet, the iPad continues to receive update after update whereas the Mac Pro sits idly by and forgotten.
The internal discussion that goes on in a corporation on where to invest your resources is pretty non-emotional. Contrary to what most customers think, the fact that a few people really, really, want something doesn’t matter unless there are a really, really lot of them. I’ve been in many capital expenditure meetings where marketing and engineering groups making impassioned pleas for money to invest in new features or upgrades ran into the buzzsaw of the financial model. There’s a universally accepted understanding by all in business that the numbers have to make sense.
And it’s not so much that the financial model is negative. It very well could be quite positive on an ROI level. However, the corporation will reduce everything down to a score that gets compared to every other group asking for money. Only the most favorable scores get approved. This maximizes financial return. Getting capital for your ideas on new features and improvements is a very competitive race. One that generally works to the advantage of the corporation because it elevates everyone’s work.
But with one of the greatest cash hordes ever known to man Apple is not what I would call “capital constrained” in terms of money. But that doesn’t mean that they aren't bottle-necked with resource scarcity. Even worse than lack of money, they probably have a real lack of engineering and manpower to spare. So Apple still needs to go through the same project ranking exercise everyone else does. Maybe more so. If you’re low on money, you could always get a loan. Low on people? Good luck. Apple is reduced to expending their precious man hours on the most deserving of proposals like a ship wrecked sailor rationing the last of his bread.
Everyone requesting resources for a product update will start by putting together a five year model or so detailing future sales revenue, cost of manufacturing, and expenses. All these numbers eventually get discounted back to a single lump sum present value of future profit. This is the all important number which gets ranked and where the Mac Pro would probably fall into trouble.
The iPad financial model, even if you assume no growth, has so much more volume than a Mac Pro model, that it would be difficult for the Mac Pro to ever outrank any iPad proposal. Even though the Mac Pro costs many times more than an iPad at the unit level, the advantage is washed away in the deluge of iPad volume.
Sometimes sales groups can get around this cold hearted ranking by making the case that product A is necessary to sell product B. So a company would be willing to invest in a low-margin product in order to sell more of another high-margin item. It becomes a package deal. But what else at Apple requires Mac Pros? If anything, you could make the case that you’d sell more iMacs or MacBook Pros if you just let the Mac Pro die. If Mac Pros wither away are you going to sell any less iPhones?
Further, I think the people at Apple truly believe that the iPad is the future of computing. So any iPad financial models very well probably show healthy growth curves in the future. I doubt the Mac Pro can make any similar case.
So does Tim Cook hate the Mac Pro? I doubt it. Like everyone else I was amazed when I first laid eyes on that little engineering masterpiece. Like a Dodge Viper or Chevrolet Corvette ZR1 it was a great testament to engineering prowess even if didn’t make a lot of financial sense. Even though on paper it probably doesn’t have a compelling case I hope that Apple can see it as more of a halo product that is used to polish their image.
Does the Mac Pro stand on its own two feet and demand investment? No. Does it deserve special status as a “halo item” that can further make the case that Apple is an engineering power house? Maybe. But Apple isn’t showing any signs of that with two years of overdue updates.
Does the Mac Pro stand on its own two feet and demand investment? No. Does it deserve special status as a “halo item” that can further make the case that Apple is an engineering power house? Maybe. But Apple isn’t showing any signs of that with two years of overdue updates.
The internal discussion that goes on in a corporation on where to invest your resources is pretty non-emotional. Contrary to what most customers think, the fact that a few people really, really, want something doesn’t matter unless there are a really, really lot of them. I’ve been in many capital expenditure meetings where marketing and engineering groups making impassioned pleas for money to invest in new features or upgrades ran into the buzzsaw of the financial model. There’s a universally accepted understanding by all in business that the numbers have to make sense.
And it’s not so much that the financial model is negative. It very well could be quite positive on an ROI level. However, the corporation will reduce everything down to a score that gets compared to every other group asking for money. Only the most favorable scores get approved. This maximizes financial return. Getting capital for your ideas on new features and improvements is a very competitive race. One that generally works to the advantage of the corporation because it elevates everyone’s work.
But with one of the greatest cash hordes ever known to man Apple is not what I would call “capital constrained” in terms of money. But that doesn’t mean that they aren't bottle-necked with resource scarcity. Even worse than lack of money, they probably have a real lack of engineering and manpower to spare. So Apple still needs to go through the same project ranking exercise everyone else does. Maybe more so. If you’re low on money, you could always get a loan. Low on people? Good luck. Apple is reduced to expending their precious man hours on the most deserving of proposals like a ship wrecked sailor rationing the last of his bread.
Everyone requesting resources for a product update will start by putting together a five year model or so detailing future sales revenue, cost of manufacturing, and expenses. All these numbers eventually get discounted back to a single lump sum present value of future profit. This is the all important number which gets ranked and where the Mac Pro would probably fall into trouble.
The iPad financial model, even if you assume no growth, has so much more volume than a Mac Pro model, that it would be difficult for the Mac Pro to ever outrank any iPad proposal. Even though the Mac Pro costs many times more than an iPad at the unit level, the advantage is washed away in the deluge of iPad volume.
Sometimes sales groups can get around this cold hearted ranking by making the case that product A is necessary to sell product B. So a company would be willing to invest in a low-margin product in order to sell more of another high-margin item. It becomes a package deal. But what else at Apple requires Mac Pros? If anything, you could make the case that you’d sell more iMacs or MacBook Pros if you just let the Mac Pro die. If Mac Pros wither away are you going to sell any less iPhones?
Further, I think the people at Apple truly believe that the iPad is the future of computing. So any iPad financial models very well probably show healthy growth curves in the future. I doubt the Mac Pro can make any similar case.
So does Tim Cook hate the Mac Pro? I doubt it. Like everyone else I was amazed when I first laid eyes on that little engineering masterpiece. Like a Dodge Viper or Chevrolet Corvette ZR1 it was a great testament to engineering prowess even if didn’t make a lot of financial sense. Even though on paper it probably doesn’t have a compelling case I hope that Apple can see it as more of a halo product that is used to polish their image.
Does the Mac Pro stand on its own two feet and demand investment? No. Does it deserve special status as a “halo item” that can further make the case that Apple is an engineering power house? Maybe. But Apple isn’t showing any signs of that with two years of overdue updates.
Does the Mac Pro stand on its own two feet and demand investment? No. Does it deserve special status as a “halo item” that can further make the case that Apple is an engineering power house? Maybe. But Apple isn’t showing any signs of that with two years of overdue updates.
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