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The PC Market May Be Dying, but Apple Is Still Minting Money in It

With the rise in popularity of mobile computing devices, the PC industry has seen sales collapse in recent years. Just last week, market research firm IDC reported that in the first quarter of 2013, the PC industry's unit sales slid 13.9% year-over-year.

Minyanville's own Michael Comeau has described the decline as the "toasterization" of the PC, where the PC has gone from being a source of interest in and of itself, to being, like a toaster, merely a means to and end, in this case a device that allows consumers to edit photos or access Facebook ( FB ) and Netflix ( NFLX ).

(See also: My Apple iMac Is Starting to Look Like a Toaster. )

PC giants like Hewlett-Packard ( HPQ ) and Dell ( DELL ) have taken especially big hits in this era, but Apple's ( AAPL ) iMacs and Macbooks continue to rake in robust profits, according to a report from industry analysis firm Asymco.

Source: Asymco

As seen from the charts, even though Apple's share of the PC market was smaller than the top 5 of Dell, HP, Lenovo (LNVGY), Acer (TPE:2353), and Asus (AKCPF) in the last quarter of 2012, it topped them all in terms of operating profit, thanks to its outsized margins.

(See also: Time Out! If You Didn't Know PC Sales Were Horrible, Then You Haven't Been Paying Attention .)

Of course, the key difference between Apple and its rivals in the PC market is that Apple computers come bundled with the company's own operating system, whereas original equipment manufacturers (OEM) like HP rely on Microsoft's (MSFT) Windows operating system.

So while Microsoft might still be profiting off licensing fees even as PC sales fall, OEMs that have engaged in a race to the bottom have seen net income slide thanks both to the unpopularity of Windows 8 and the larger secular decline of the industry.

Aysmco's Horace Dediu writes :

The real problem for the PC vendors is not that they have such low margins -- they've had low margins for decades. It's that the volumes which "made up for" low margins are disappearing. Apple is not immune to a gradual erosion of Mac volumes, but they have positioned themselves for growth with devices and content commerce and services. They have essentially "escaped" PCs and indeed caused the need to escape in the first place.

The problem is what could the others do? It seems all they can do is depend on Microsoft getting their strategy right.

For PC makers, the problem will only get worse: In a research note to investors, Deutsche Bank analyst Chris Whitmore said that he expects PC sales to drop another 8% this year, and 5% in 2014.

Whitmore also pointed out that the newly private Dell would lower margins in order to gain market share, which could result in further profit declines for HP and the other Windows PC makers as well.

As for Apple, even though it accounted for 45% of all PC operating profit in Q4 2012, Wall Street apparently still isn't satisfied: Apple's share price continues to hover near its 52-week low.

Ahead of its quarterly earnings results next week, Apple has also had its price target cut to $650 from $600 by Stifel and to $550 from $575 by Mizhuho.

(See also: AppleMight Be the Bigger Loser in the Apple-Samsung Breakup .)

Twitter: @sterlingwong

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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