Will a Retina iMac Pay Off for Apple Inc.?

Apple may be getting closer to launching Retina iMacs, even though that might not translate into revenue upside. It's still the right call.

Jun 8, 2014 at 4:30PM


Current iMac lineup. Source: Apple.

Apple's (NASDAQ:AAPL) broader transition to super high-resolution displays inches closer to completion. Apple started the shift in 2010 with the iPhone 4, and then kicked things off on the Mac front with the Retina MacBook Pro in 2012.

However, there was a key difference in those product launches. In smartphones, the subsidized price did not change so the effective cost to consumers to upgrade was $0. But with the Retina MacBook Pros, there was a $400 premium that consumers were paying to get those sharp Retina displays. That's much more to ask when the value proposition may not be as clear.

At the time, the difference in component costs was estimated at just $65 to $92, so most of the premium was going straight to gross margin. It only took a couple of months for Apple to aggressively cut prices, presumably because adoption had been tepid. Indeed, Mac average selling prices, hardly flinched after Retina displays were introduced, and are lower today.

Mac Asp

Source: SEC filings. Calendar quarters shown.

This is why references to Retina iMacs that were recently uncovered in the forthcoming OS X Yosemite may not be a particularly promising revenue opportunity for Apple. Rumors of Retina iMacs have been around for at least two years, but there have been technical limitations with powering so many pixels. A 27-inch Retina iMac has nearly three times as many pixels as the Retina MacBook Pro.

The good news is that Intel (NASDAQ:INTC) has made incredible progress over the past 2 years with its integrated graphics. That's relevant because Apple has started using integrated Iris Pro graphics in the low-end iMac, and it likely wants to expand the use of Iris Pro going forward. Apple has been a big pusher of integrated graphics, pressuring Intel to really beef up its graphics prowess.

Sure, NVIDIA's discrete graphics should have no problem handling all those pixels, but it's quite likely that Apple's road map puts a heavy emphasis on integrated graphics. As Intel continues to drive integrated graphics performance, a Retina iMac inches closer to reality.

It's times like these when actions speak louder than words. Apple always talks about its focus on making great products that comprise a broader ecosystem. Even if there's not much revenue upside from iMacs (depending on where it prices the all-in-one desktops), upgrading them to Retina displays strengthens the product lineup and maintains the momentum that Apple has in growing its share of the global PC market.

Most companies that are singularly focused on the bottom line might not actually make investments that don't promise financial gains. Apple keeps its eye on the bigger product picture, which is partially how it may have solved the Innovator's Dilemma.

Leaked: Apple's next smart device (warning, it may shock you)
Beyond a possible Retina iMac, what else is Apple working on? Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Evan Niu, CFA owns shares of Apple. Evan Niu, CFA has the following options: long January 2015 $460 calls on Apple and short January 2015 $480 calls on Apple. The Motley Fool recommends Apple, Intel, and Nvidia. The Motley Fool owns shares of Apple and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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