iPhone 6 boosts Apple profit to $18bn
Apple has released its first quarterly earnings report for the year and to say the results are impressive would be an understatement. The once niche player is now the second most profitable company in the world after the Industrial and Commercial bank of China, according to Yahoo Finance, and has broken all global records for a privately held company with this most recently completed quarter’s profits.
Apple’s $18bn quarterly profit
In Q1 2015, which, confusingly, ended in December 2014, Apple made $18 billion (£11.8 billion) in profit alone – total revenue was $74.6 billion (£49 billion). This is an extraordinary number, outstripping the previous profit record, held by oil company ExxonMobil, by almost $3 billion. To put this in context, it’s greater than the GDP of some European nations.
According to CEO Tim Cook, revenues and profit are up 30% and 38% respectively year-on-year. “Due to our very large capital return activities, earnings per share were up even more at 48% to $3.06, also an all-time quarterly record … [and] would have been even stronger, absent fierce foreign exchange volatility,” he said, according to a transcript from Seeking Alpha.
Cook also claimed the company has seen the highest switch rate from Android phones to iPhones in the past three years.
iPhone sales vs iPad sales
The iPhone, particularly the newly-launched iPhone 6, was the star of the show during the earnings report. Cook said the iPhone 6 was “the most popular iPhone last quarter”, selling 74.5 million units, although there’s variation by geography between it and the bigger iPhone 6 Plus in terms of popularity. While he didn’t delve into figures, the iPhone 5s and iPhone 5c were also said to be doing well.
The story isn’t quite the same for the iPad, however, with year-on-year sales continuing to decline. In Q1 2014, Apple sold 26 million units, as opposed to 21.4 million units in the most recent quarter.
As in Q3 2014, Apple blamed this decrease on an extremely high level of satisfaction among existing iPad owners.
“When I look at the customer sat on iPad, it’s literally off the charts, in some cases a 100%, which is unheard in surveys to get these kind of customer sat ratings,” said Cook.
Nevertheless, 50% of iPads purchased in the UK are bought by first-time owners – a figure that rises to 70% in China – leading Cook to claim there’s no sign of a saturated market.
Apple’s desctop and laptop unit also did well, with the company selling 700,000 more Macs this quarter compared to a year ago, representing a 14% growth in sales volume.
“Thanks for the popularity of our stunning new iMac with Retina 5K display, Mac ASPs increased by $58 sequentially, driving all time record revenue for Mac of 6.9 billion,” said Luca Maestri, Apple’s CFO.
“These results are truly remarkable, given the contraction in the global PC market which IDC estimates declined by 3% in the quarter. We have now gained market share for 34 of the last 35 quarters,” he added.
Apple’s magic recipe
While Apple’s actual results blew analyst predictions out of the water, even market expectations had been high. The secret to the company’s success, according to Loizos Heracleous, a professor of Strategy at Warwick Business School, is a mixture of pleasing design, incremental and periodically radical innovation, and efficiency.
“Apple’s strategy displays related diversification. Those who argue that its success is down to a single product do not appreciate the considerable synergies across Apple’s products and services, nor the continued development and strengthening of Apple’s ecosystem,” he said.
Additionally, which Apple is often criticised for having a closed ecosystem, PC Pro would argue this is one of its strengths. The company is sells its own hardware and software as a combined, single unit. This means that, while it has to compete against Microsoft and the myriad Android devices on the market in particular, it doesn’t have to compete against any other iOS devices. It also encourages users to continue to buy within the ecosystem – the Apple Watch, when it launches, will, ultimately, be an accessory to the iPhone.
Apple Watch and iPhone 7
All four quarterly reports for the rest of the year will be interesting as we’re expecting several new product launches over the course of 2015, including the Apple Watch in April, which Heracleous expects to have a significant, positive impact on the business, the iPhone 7/iPhone 6s in September, and some new iPads and Macs in the mean time. While we may not see the same record profits we have this quarter, and while the unexpected can always happen, we’d be surprised if Apple’s coffers don’t continue to grow for the foreseeable future.