Charlie Wolf: Why Apple’s Mac sales have fallen back to earth

November 19, 2013, 3:51 PM UTC

Chart: Needham & Co.

FORTUNE — Needham’s Charlie Wolf has been following Apple (AAPL) long enough to still care what’s happening to the Mac,* and on Tuesday he took a crack at explaining why the company’s most venerable product line (it turns 30 in January) seems to have, as he puts it, “fallen back to earth.”

Beginning in 2005, and for 26 quarters in a row, Mac sales outgrew the industry — nearly coinciding with a 7.5-year stretch in which Apple’s share of the worldwide PC market increased from 2.1% to 5.3% (152%) and its revenue share rose from 3.2% to 11.9% (272%).

That streak ended abruptly in January, when Apple couldn’t deliver the newest iMacs in sufficient quantities to meet demand. Mac sales fell 22.1% in a quarter in which the broader market fell 6.6%.

Wolf is less concerned with that one-time event — which Tim Cook admitted was a screw-up and which appears in the attached chart as a sharp V at calendar Q4 2012 — as he is with what happened for several quarters before and after.

The Mac is still outpacing the industry, but just barely and only because its sales are falling more slowly than everybody else’s.

Why PC sales growth has collapsed is no mystery. The market is largely saturated and most of the money for new purchases is being funneled into smartphones and tablets.

Harder to explain is why the Mac, which used to outgrow the industry by 20% to 30%, is now shrinking at nearly the same rate.

Wolf confesses that he has no “ready explanation,” but he does offer a couple of theories:

  • Fading halo effect. The big spikes in the attached chart represent the full force of the so-called halo effect by which the Mac benefitted from Windows users coming into Apple Stores to buy first the iPod, then the iPhone and iPad. “While the halo effect opened the door,” Wolf writes, “we believe the superiority of Macs in ease of use, design and in free post-sale support in the Apple Stores blew the door off.”  That’s changing now, he suggests. “It’s possible that the halo effect has lost some of its luster in the sense that the emergence of the iPad has impacted Mac sales more than PC sales… Customers who visited an Apple Store to buy a Mac might have been swayed to buy an iPad instead.”
  • Growing price differential. “Over the past 11 years,” Wolf writes, “the average price of a Mac has fallen at an 0.7% annual rate, reflecting Apple’s strategy of enhancing its Macintosh family with upgrades, such as faster processors and superior screens, while maintaining the same price points… In comparison, the average price of a PC has fallen at a 4.9% annual rate. Over the 11-year period, then, the ratio of the average price of a Mac to the price of a PC has increased from 1.42 to 2.12… It stands to reason that as the price of an item increases, consumers will buy less of it.”
Source: Asymco. Click to enlarge.

*For the record, the Mac generated $21.5 billion in revenue for Apple in fiscal 2013, 13% of the company’s total sales and more than the total revenue of 368 of the companies in the Fortune 500.

According to Asymco‘s Horace Dediu, whom Wolf quotes, the Mac’s share of PC profits was 45% in March, almost equal to the profit share of all Windows PC companies combined.