Apple surprised to the upside (though it really shouldn’t be a surprise) with their quarter results today. Here is a quick overview of what they reported for fiscal 1Q12:
- Revenue: $46.3bn (+64% q/q +73% y/y) v. consensus of $38.9bn and company guidance of $37.0bn.
- Gross margin: 44.7% for the quarter (up 440 bps q/q) v. consensus of 40.8%.
- Operating margin: 37.4% (up 660 bps q/q) v. consensus of 32.5%.
- Earnings Per Share: $13.87 v. consensus of $10.08 and company guidance of $9.30.
- Mac sales: 5.20M (+6% q/q +26% y/y) v. consensus of 5.16M. This figure includes 1.48M (+16% q/q +21% y/y) desktops and 3.72M (+3% q/q +28% y/y) portables.
- iPhone sales: 37.04M (+117% q/q +128% y/y) v. consensus of 30.2M
- iPad sales: 15.4M(+39% q/q +110% y/y) v. consensus of 13.9M
- iPod sales: 15.4M (+133% q/q) v. consensus of 13.6M
There has already been much written on the results so I’ll just add my thoughts (in bold) to the commentary below:
from Wired: “the sales success [of iPhones] defies critics who grumbled the iPhone 4S wasn’t a sufficiently wowing update to woo consumers into upgrades. Does it? Or does it possibly suggest there were many individuals planning to adopt smartphones/iPhones during the holiday season (a natural period of adoption for a new technology) and they therefore bought the newest one available to them. Or could it suggest (and I think it does suggest) many iPhone owners upgraded to iPhone 4S because they were at the point in their contract where they qualified for a new subsidized phone. I’d like to see how many iPhones 4S were sold to new customers, and how many were ultimately subsidized replacement products. More on this below.
from engadget: “Tim Cook: the tablet will be bigger than the PC one day.” I still have a hard time buying this. Statements like this remind me of 2 years ago – just replace netbooks with iPads and change 1Q12 to 4Q09. CEA’s worldwide computer estimate for 2015 is almost 450M which includes desktops, notebooks/laptops, and netbooks. This number is exclusive of any tablet sales. In order for tablets to growth from 50+ million in 2011 to 450 million in 2015, tablets would need a CAGR of about 73 percent over that period. But tablet growth is already slowing (partly because the base is getting bigger). In Apple’s 2Q11, iPad sales grew 183 percent on a year-over-year basis. In the following quarter year-over-year growth was 166 percent and in the most recently completed quarter grow was just 110 percent on a year-over-year basis. Now Cook didn’t give a date – as the old adage goes, “if you give a rate (forecast) don’t give a date…” If tablets will one day be larger than PCs, either PC sales must decline rapidly or it will need to happen in some period outside of 2015 because I doubt a CAGR of 70+ percent can mathematically be maintained for the next 4 years.
from BusinessInsider: “Tim Cook: I Looked At The iPad Sales Data Closely, And I Saw No Impact From The Kindle Fire”
from CNNMoney: “The iPad also outpaced expectations. Apple’s CEO Tim Cook said on the conference call that he didn’t see “any effect, plus or minus” from Amazon’s Kindle Fire. He said he believes that’s because Amazon’s (AMZN,Fortune 500) low-end e-reader/tablet is in a different category than the iPad…The real iPad competitor, Cook said, is the PC. Tablet sales outpaced desktop PC sales during the quarter according to industry research firm IDC, Cook noted.” Tim is arguing the two devices have unique demand curves. I don’t doubt that. Difficult to believe they don’t overlap at all though. Surely they must. A lower priced alternative that delivers roughly the same user utility results in the end-user capturing more consumer surplus which they would seek to do in most cases. I don’t doubt the user utility from the Kindle Fire isn’t sufficient for all users, but it certainly could be for some. I’ve heard reports that the Kindle Fire was attracting an older audience at least early on. Perhaps the market segments that way. That could definitely be an audience that could more easily capture “enough” utility with a lower-priced device. They might also be more price sensitive.
Additionally, I think consumers are taking a more holistic approach to computing. While some devices – like smartphones and televisions – have pretty well defined upgrade cycles, I think traditional upgrade cycles for computing devices are waning. Consumers are beginning to think about computing more generally such that they are spending some set dollar amount on computing every 12-18 months. They are inclined to buy what is new (and consequently what they don’t have) or perhaps replace a computing device they have but just not on a well-defined upgrade cycle. I think this can explain the rise (and fall) of netbooks and can help explain the rise of tablets. As new computing devices, consumers are adding tablets to their computing mix but the introduction of new devices could change that.
wired: “In all, Apple’s iOS device portfolio is booming. The company surpassed over 315 million worldwide iOS device sales to date.” Apple has sold roughly 183.074M iPhones, 55.247M iPads, and roughly 76.5M iPod Touches. No doubt, the influence is amazing. They sold 62M devices – about 20 percent – in just the last 3 months. But rather than look at aggregate sales, it is perhaps more interesting to look at household ownership rates and active device counts. Of the 315+ million devices sold, not all of these are active devices.
There are probably a few ways to think about the number of active iOS devices. Apple has sold 140 iPhones in the last eight quarters. Subtracting out the number of iPhones sold during the previous eight quarters (roughly 39M) might give us an estimate of how many unique iPhone users are out there (taking into account upgrades). We know that the average smartphone lasts about 18 months. Looking at just the last 18 months, Apple has sold about 123M iPhones. This might be a good estimate for active iPhones. Since the average smartphone-owning household owns 1.8 smartphones we might estimate 68.6M households with iOS devices. The first estimate gives us about 101.8M individual users and maybe 56.6M households.
Both estimates assume there isn’t a significant number of households with iPod touches or iPads that don’t also have an iPhone which may or may not be a reasonable assumption. The average tablet-owning household owns 1.2 tablets at last check suggesting there are roughly 46M households owning an iPad. The recent Pew stats suggest about 22M tablet owning households in the US so that could mean up to half of tablet owning households are now outside of the US. Though the average number of tablets per tablet-owning household could be up as well. A deeper dive into the financials of AT&T, Verizon, and now Sprint might shed additional light.
from AllThingsD: “Cook said the company sold 1.4 million Apple TV units in the December quarter, as compared to 2.8 million devices for the entire prior fiscal year.“We still classify this as a hobby,” he said. “However, we continue to add things to it.” Pretty impressive foothold suggests some 4M devices in use and puts them on par or perhaps even surpassing Roku.
from the Q&A at MacRumors: “Q: Thoughts on iCloud? A: It’s not a product. It’s a strategy for the next decade.” My general feel is that most cloud services today are still early for mass market. Inclusive of iCloud the mass market appeal (and subsequent adoption) is a few years out so definitely a strategy for the next decade. It is important to note that I see this as a hardware strategy (Apple’s roots) not a service strategy.
from CNN Money: “Apple also said that 600,000 people have already downloaded Apple’s new textbook creation app for the iPad, which was introduced last week.” You can get 600K people to do anything. More importantly, are these individuals that will add value to an eTextbook market or are we going to see that space quickly cluttered? Certainly Apple will see to maintain it. There is much to think about here. I think college is the right market to target – not K-12. I know very few teachers who would want their students to have iPads while in the classroom. I know I don’t want my sons to have iPads while in class if they have access to the other apps.
from Daring Fireball/John Gruber: “Apple sold more iPhones in calendar 2011 than in 2007, 2008, 2009, and 2010 combined; 55 percent of all smartphones sold by Verizon last quarter were iPhones.” We are in the fat part of the adoption curve.
from the Q&A at MacRumors: “In education and K-12 we sold twice the number of iPads as Macs. Education traditionally adopts technology slowly, so that’s surprising.” Or could this be a sign that the iPad/tablet market is maturing and hence late adopters are moving in. The adoption cycle for all devices is being compressed. The rise is quicker, but so is the flattening of the s-curve.
Tidbits:
More iPhones sold in the quarter than babies born according to The Next Web.
The quarterly earnings were the fourth highest for any company in any industry at any point in history.
