What next for Apple?
Yesterday’s results revealed both good and bad news for Apple. On the good side they reported $43.6 billion in revenue, compared to last year when they reported $39.2 billion for Q2. iPhone sales were up 7% year on year, with iPad sales up a huge 65%- this is the key part of the Q2 story.
On the negative side, profits were down to $9.5 billion compared to $11.6 billion in Q2 2012. That’s quite a big drop, especially when you look at revenue increasing in the quarter. But what seems to be at play here is the success of the iPad mini. Apple say that the mini makes up the majority of all iPad sales and its margin is far lower than the larger iPad. Apple at present seem to be ok about letting their margins dip while share grows. Apple dominates the “tablet” (iPad) market and they have done this by adding the new mini to grab the smaller device market before a competitor can undermine their position. If we look back, the same happened in the iPod market in the 00s when Apple added the iPod mini, followed by the iPod nano. The smaller form appealed to consumers and it became the biggest selling model.
Good news
The good news is the iPad figure. The continuing dominance of the iPad means that Apple’s is still the default tablet. As home customers and increasingly corporate buyers move away from PCs, the iPad is becoming the device of choice. This combined with the figures for iCloud, where Apple now have 300m accounts, means that iOS is a unique environment. iTunes accounted for $2.4 billion in revenue this quarter from sales of music, apps, films and books etc.
The Mac too is holding its own, especially in turbulent times. Overall PC sales are down about 14% (according to IDC), so Apple’s relatively flat sales are a good result for the quarter. This is especially true when you consider that the iMac was not in full supply until well into the quarter, with supply problems since its December release.
Bad news
The problem for Apple may lie in what comes next. Cook mentioned that new products were coming in the autumn and this may signal a quiet quarter on the hardware front. Apple’s attention seems to now be on WWDC and software announcements, with iOS 7 and OS X 10.9 expected to be key parts of the June event.
iPhone sales will fall away in Q3 just as they always have in the past, in anticipation of the next model being announced. Customers have become very savvy at this and most people will tell you that buying an iPhone in the summer is a bad idea (unless you are being offered a good deal for the soon-to-be-replaced handset).
iPad sales will also be mixed. Speculation about the next model may drive sales down and yet the start of the education buying season, with students returning to school and university, may help balance the figures. However we still expect this to be the lowest quarter of the year for iPad and iPhone, Apple’s two strongest product categories.
Exceptions
Cook referred to new product announcements in the Autumn but there is still the possibility of a new Mac Pro being announced at WWDC. This is the logical place for such a statement. Apple has shied away from hardware at WWDC in recent years, but the Mac Pro is an inexcusable gap in the Apple Mac lineup.
There may also be some refreshing of processors in the laptop lines, possibly to boost the education season. This could wait until the Autumn, but that way all categories may be refreshed in one go, something that Apple may avoid in an attempt to spread out the good news. It’s is also worth noting that any refresh of Macs always happen after any back to education sales offers. This may mean any changes come late in the quarter.
Outlook
Overall we expect Q3 to be about strategy- the next version of iOS and OS X setting the pace for the year. Apple have already indicated that revenue will be between $33.5 and $35.5 billion with a gross margin of 36-37%, lower than in Q2. In Q3 of last year sales were at $35 billion and so ben Apple expect a flat year over year set of results.
However this does all lead us to Q4 and more importantly Q1 2014, where new products come on stream. Q1 is Apple’s Christmas quarter and is always a blow-out set of results and we see no reason why this will not continue. Indeed Cook referred to a new product segment in the conference call and that means one thing- a new leg on the Apple table. Apart from a revised iPhone and iPad, and updated Macs and iPods, it looks certain that they will enter a new market before the end of the calendar year. If investors are looking for signs of growth for the end of 2013 and into 2014, Cook presented them with a perfect hint to what’s next for Apple.
On the negative side, profits were down to $9.5 billion compared to $11.6 billion in Q2 2012. That’s quite a big drop, especially when you look at revenue increasing in the quarter. But what seems to be at play here is the success of the iPad mini. Apple say that the mini makes up the majority of all iPad sales and its margin is far lower than the larger iPad. Apple at present seem to be ok about letting their margins dip while share grows. Apple dominates the “tablet” (iPad) market and they have done this by adding the new mini to grab the smaller device market before a competitor can undermine their position. If we look back, the same happened in the iPod market in the 00s when Apple added the iPod mini, followed by the iPod nano. The smaller form appealed to consumers and it became the biggest selling model.
Good news
The good news is the iPad figure. The continuing dominance of the iPad means that Apple’s is still the default tablet. As home customers and increasingly corporate buyers move away from PCs, the iPad is becoming the device of choice. This combined with the figures for iCloud, where Apple now have 300m accounts, means that iOS is a unique environment. iTunes accounted for $2.4 billion in revenue this quarter from sales of music, apps, films and books etc.
The Mac too is holding its own, especially in turbulent times. Overall PC sales are down about 14% (according to IDC), so Apple’s relatively flat sales are a good result for the quarter. This is especially true when you consider that the iMac was not in full supply until well into the quarter, with supply problems since its December release.
Bad news
The problem for Apple may lie in what comes next. Cook mentioned that new products were coming in the autumn and this may signal a quiet quarter on the hardware front. Apple’s attention seems to now be on WWDC and software announcements, with iOS 7 and OS X 10.9 expected to be key parts of the June event.
iPhone sales will fall away in Q3 just as they always have in the past, in anticipation of the next model being announced. Customers have become very savvy at this and most people will tell you that buying an iPhone in the summer is a bad idea (unless you are being offered a good deal for the soon-to-be-replaced handset).
iPad sales will also be mixed. Speculation about the next model may drive sales down and yet the start of the education buying season, with students returning to school and university, may help balance the figures. However we still expect this to be the lowest quarter of the year for iPad and iPhone, Apple’s two strongest product categories.
Exceptions
Cook referred to new product announcements in the Autumn but there is still the possibility of a new Mac Pro being announced at WWDC. This is the logical place for such a statement. Apple has shied away from hardware at WWDC in recent years, but the Mac Pro is an inexcusable gap in the Apple Mac lineup.
There may also be some refreshing of processors in the laptop lines, possibly to boost the education season. This could wait until the Autumn, but that way all categories may be refreshed in one go, something that Apple may avoid in an attempt to spread out the good news. It’s is also worth noting that any refresh of Macs always happen after any back to education sales offers. This may mean any changes come late in the quarter.
Outlook
Overall we expect Q3 to be about strategy- the next version of iOS and OS X setting the pace for the year. Apple have already indicated that revenue will be between $33.5 and $35.5 billion with a gross margin of 36-37%, lower than in Q2. In Q3 of last year sales were at $35 billion and so ben Apple expect a flat year over year set of results.
However this does all lead us to Q4 and more importantly Q1 2014, where new products come on stream. Q1 is Apple’s Christmas quarter and is always a blow-out set of results and we see no reason why this will not continue. Indeed Cook referred to a new product segment in the conference call and that means one thing- a new leg on the Apple table. Apart from a revised iPhone and iPad, and updated Macs and iPods, it looks certain that they will enter a new market before the end of the calendar year. If investors are looking for signs of growth for the end of 2013 and into 2014, Cook presented them with a perfect hint to what’s next for Apple.
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