Apple Earnings – A Sign of Business Evolved or Cannibalism?
Apple announced record Mac sales and huge third-quarter earnings. Are we seeing a return to Apple's glory days?
Apple has posted a 73 per cent jump in profit for its third fiscal quarter, which ended June 30. This is partly fueled by a record number of Macs being sold – 1.76 million were shipped during that time period. That rocketed up 33 per cent from the same quarter in 2006.
But that's not the only Apple product to fly off the shelves this quarter. It seems that when iPhone hit stores, some 270,000 units found greasy fingers to smudge their pristine glass covers. Apple, however, says the impact of iPhone sales is practically mute this quarter because it plans to account for sales as subscription revenue over two years.
What did this mean to Apple stock? Its shares curved upward by eight per cent in extended trading yesterday.
To see exactly how healthy Apple is these days, look at more numbers from the quarter. Apple announced profits of $818 million, which translates to 92 cents a share. That is a sharp upturn in profits from last year's quarter, which came in at $472 million (54 cents a share).
Those numbers show Apple has come a long way from the days when its outlook was gloomy. The company has been able to adapt its emphasis on slick usability and complete, well thought-out products that aren't rushed to market as a reaction to outside forces.
Apple has demonstrated it's still a trendsetter.
Evolution or Cannibalism?
A report on Gizmodo today compared the iPhone sales to the drop in iPod sales from a quarter earlier.
iPhones sales accounted for about $148.5 million. iPod sales dropped last quarter to roughly $130 million. The numbers matched quite closely and it's tempting to see a correlation.
Could it be that iPhone sales cannibalized iPod sales? Probably not.
As Gizmodo and source (Om Malik, GigaOM) have corrected – and any business student knows – quarter to quarter comparisons aren't the best way judge sales performance.
This is especially true in seasonal industries and high-tech toys almost always experience a decline in the summer. A fair comparison is the same quarter in the last year. This shows an even more sobering result – that the iPod is in even greater decline overall.
It seems Apple is evolving with iPhone, rather than cannibalizing its own business. Apple has shown it's ready to adapt quickly to market changes.
When capacity-heavy MP3 players started to show signs of market weakness, Apple ramped up Nano and Shuffle to stay in business and fend off competition from Sansa and other encroaching flash players.
No thought on Apple's return to glory would be complete without a look at lifelong competitor Microsoft. What does all this say about the poor Microsoft Zune? At least in the portable media player market, despite reporting its millionth Zune sale, Microsoft is eating Apple's dust.