Apple Calendar Q4 2009 Highlights
- Quarterly revenues and profits are the highest in Apple’s history
- New accounting has added $US billions to iPhone revenues in previous quarters
- It leads the major PC brands –shallowest fall and fastest to recover
- Its iPhone business is now bigger than Macintosh on a rolling 4Q analysis
- The iPad fails to impress, despite huge positive coverage on the BBC news
- Its marketing approach is old-fashioned, relying on talking up feature and function and vertical integration
- Apple’s products continue to be aspirational
Apple announced its quarterly financial results recently, in which it showed a staggering 32% growth in quarterly revenues (calendar Q409 v Q408). In the wake of the massive publicity for its new iPad tablet PC I believe the importance of its success has been largely overlooked. In fact, had Apple not simultaneously made a major revision in its accounting practices – adding $US billions more historic revenues from its iPhone business – we might have been looking at 54% increase. Its $15.7 billion revenue and $3.4 billion net profits are both record highs for Apple. I thought it was a good time to look at Apple’s market performance in terms of its own sales by product type and against other leading PC brands.
Apple’s 25% Macintosh Revenue Growth Leads The PC Revival
The decline in Apple’s Macintosh PC business, like Acer’s, was shallower than other leading brands, but it did experience a number of quarters of negative growth (see Figure 1). It was the first to experience positive growth (9%) in Q3 2009 and has continued with a massive 25% improvement in Q4. Needless to say (as with all other players) this is an easy compare, since Q4 2008 saw an unprecedented –20% ‘market revision’ (stripping $6.6 billion off the PC revenues of major brands).
HP, Lenovo and Dell have yet to report calendar Q4 sales, but with Toshiba also showing positive growth (+9% when converted from Yen to $US), I believe that this part of the PC market will possibly show a growth of 3% over Q4 2008. Whatever the results turn out to be, I have no doubt that I will – once more – be increasing my PC market sizing and growth for 2009 and bringing forward my forecast for recovery in this segment of the market. The PC market is the biggest single component of the overall ITC market and its sharp return to growth is a sign that hardware sales are leading us out of the downturn – good news for all suppliers.
Apple’s iPhone Is Now Bigger Than Macintosh Business
Since its introduction in Q2 2007 Apple’s iPhone has been a massive success – so much so that annualised revenues to the end of Q4 2009 were $15.7 billion. I believe this has been the fastest ever ramp-up in a new business for any supplier in the ITC industry. Intriguingly the iPhone’s success appears not to have been at the expense of the iPod, which – though falling slightly in recent quarters (see Figure 2) – consistently returns around $8 billion to Apple in annualised revenues.
We saw above that Apple’s PC business has been affected by the downturn – less so perhaps because it generates less of its revenues from corporate sales. The iPhone business has not been affected – demonstrating a continued upwards curve, In fact, according to Apple’s latest financial statement, the iPhone now accounts for more in its annual revenues than its Macintosh business.
In documenting the downturn and recovery I was mildly surprised that Telecoms companies were suffering equally with IT suppliers. I believed that there were strong ‘cross the park’ services Telecoms companies could supply to help companies and consumers save money. In particular communications can be used for ‘dematerialisation’ and ‘travel avoidance’. Consequentially I’m intrigued to see that Apple has just made a significant upward revision of revenues from its iPhone business (see Figure 3). It appears to have undercounted the revenues by multi-billions. Making the revision of course reduces Apple’s year-on-year revenue growth – it also demonstrates historically better performance for the overall Telecom handset market. Thereby I’m less bemused than before.
What About The iPad?
There has been copious coverage of Apple’s new iPad, introduced last week. In the UK the company continues to have major endorsement from the state-funded BBC to help it. In news briefings more like ‘advertorials’ we heard celebrities such as Stephen Fry appear to talk up the new technology. We saw him again in the ghastly new Virtual Revolution series about the development of the Worldwide web – too many travel shots and blind politically correct positivism for me. I smiled broadly when all the client device icons used to illustrate the development of the World Wide Web were (surprise, surprise) little Macintoshes. Even if I’m a bit paranoid, the BBC is clearly drinking Apple’s coolade. Then again it’s not the only one. In a hundred years time ‘data archaeologists’ will get a very distorted picture of recent PC market shares if their only evidence was from Hollywood films. As always Apple remains the king of product placement and ‘influence’.
The new machine looks awkward from the information I can gather. While its large LED screen is both a touch screen and in colour, it is not clear to me whether you could read it passively, as you can with Amazon’s Kindle. It’s arguably too big to be a replacement for physical books, even if only ½” thick. Although its operating system is reported to come from the iPhone rather than the Macintosh, it appears to resemble a Tablet PC more than a dedicated ebook reader. Overall Tablet PCs remain niche products dependent on sales in relatively small numbers to specific vertical markets such as Health and for ‘ruggedised’ outdoor use.
The biggest challenge to the success of the new machine will be in the disturbance Apple brings to ebook distribution. Up until now there have been essentially two approaches from Adobe and Amazon; Apple will add a third. Confusion over standards in a small new market may reduce sales even if many potential consumers may have been waiting for Apple’s entry before trying out this technology. It’s highly likely that Apple will – as it does with the iPod and iTunes – only allow the ebooks it sells to be playable on the iPad. This is a form of vertical integration which will see its users forever tied to Apple hardware if they want to buy Apple downloads. I may end up eating my words, but at the moment I don’t expect the iPad to be an immediate success – apart from everything else Apple will take time to build a distribution model for ebooks (and the market is very different to its music download business).
Some Conclusions – Apple Continues To Out-Perform Other Similar Suppliers With An Old Fashioned Marketing Approach
Despite my concerns over its iPad, I am incredibly impressed with Apple’s financial results and the hitherto dramatic rise of the iPhone. Its PC business was affected by the economic downturn, even if it suffered from a shallower dip than other major brands. Its approach to the market is very old-fashioned as it builds vertically integrated products – not just iPods and iPads, until recently it also worked with a highly restricted number of Telecom partners. It’s a throwback to the 1980s to watch Steve Job’s lengthy product presentations, when most other ITC vendor marketing steers well clear of feature and function. Things would have been very different if business had been stronger than consumer ITC spending over the last year. Overall Apple’s products remain aspirational due to a massive amount of work in marketing, advertising and spreading the word through influencers.
Are you and Apple user? How impressed are you with its new iPad? Let me know by commenting on this post.
Filed under: Apple Tagged: | Adobe, Amazon, Apple, BBC, Dell, ebooks, HP, iPad, iPhone, iPod, Lenovo, Macintosh, Stephen Fry, Steve Jobs, Toshiba, vertical integration, Virtual Revolution
