Apple CFO Peter Oppenheimer predicted in January that Apple will generate the same amount of revenue this past quarter—the company releases its financials today—as it did a year ago. Analysts agree with him. Apple generated more revenue than ever in the the first fiscal quarter of 2014, which includes the 2013 holiday season. But it’s entirely possible that fiscal 2014 (which runs through September) will be the first time since Steve Jobs returned to Apple and turned the company around that revenue will not grow from one fiscal year to the next.
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It is, literally, the end of an era—financially, the biggest bull run of any technology company in history, from $13.931 billion in revenue in 2005 to $170.910 billion in 2013. In 2011 Apple was briefly the most valuable public company in the world.That valuation was a bet by the markets that Apple would continue to grow, and it has—until now.
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What’s interesting here isn’t that Apple has plateaued—the markets already knocked $45 billion off of Apple’s valuation when the company announced its revenue projections for this past quarter three months ago—but why.
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iPhones, steady as she goes
The first place to look would be how many iPhones Apple is selling, since they represented 56% of Apple’s revenue in the first quarter of this fiscal year. But iPhone sales are expected to be flat, as sales through China’s biggest mobile carrier, China Mobile, fail to do much to the overall iPhone story.
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The iPhone story is straightforward: people buy iPhones and, subject to the whims of mobile carriers, upgrade them on a regular basis. It’s a fantastic business for Apple to be in, selling devices that cost on average $637 each and are re-purchased by consumers every two years or so, like clockwork.
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It’s also important to note that Apple predicts it will miss out on $8 billion in revenue across all of 2014 because the company is now giving away its operating system (OS X) and productivity software (iLife, iWork.)
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The iPad as a failed opportunity for growth
Some analysts are predicting that Apple will sell fewer iPads this past quarter than it did a year ago. For a mature product with a predictable pool of buyers—cars, vacuum cleaners, iPhones—this wouldn’t mean much. But considering the iPad is the most recent device Apple invented, defining an entire category and inspiring dozens of copycats, it’s bad news—and not the first time we’ve heard it.
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If iPhones are doing what we expect iPhones to do—continuing to be consumed regularly by a market that seems at this point to be more or less saturated—then the story of Apple’s revenue plateau is the story of missed opportunities in the one device that many expected to be Apple’s next big growth opportunity—the iPad.
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The iPad isn’t insignificant. It’s about 20% of Apple’s revenue. But it could be more. The iPad was supposed to replace the PC, after all. Indeed, that could be its problem.
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