Apple's latest earnings illustrate how the company is continuing to transform from a personal computer company to an all-out mobile juggernaut. Like it or not, Apple is going all mobile.
The company sold more than five and a half times as many iPads as it did Macs last quarter. On Wednesday's earning call with investors, CEO Tim Cook made special mention of today's 19-year anniversary of the first Macintosh that was introduced in 1984. "We've come a long way since 1984, but we rely on the same spirit and drive that brought the original Mac and other revolutionary products like the iPod, the iPhone and the iPad into the world," he said.
"We've now sold over half a billion iOS devices, including a staggering 10 per second in the last quarter alone," added Cook. Indeed, most of Apple's growth has come from the iPhone and iPad of late while Mac and iPod sales continue to decline.
Apple sold 47.8 million iPhones, up from 37 million in the year-ago quarter, and 22.9 million iPads, up from 15.4 million in the all-important holiday quarter a year ago. Mac sales fell from 5.2 million to 4.1 million and iPod sales slipped from 15.4 million to 12.7 million in the quarter. Apple closed the quarter with a cumulative 40 billion app downloads and noted that it's now sending more than 2 billion iMessages every day.
"I see cannibalization as a huge opportunity for us," Cook said. "Our base philosophy is to never fear cannibalization. If we do, somebody else will just cannibalize it so we never fear it." He added that the iPhone has cannibalized some of the iPod and Mac businesses, but he still sees a much greater play with the iPad. "On iPad in particular, we have the mother of all opportunities here," he said, reiterating his long-held belief that the tablet market will eventually eclipse the PC market altogether. "You can see by the growth in tablets and the pressure on PCs that those lines are beginning to converge," said Cook.
While the Cupertino giant is traditionally thought of as a magnet for consumers, iPads and iPhones are also leading the company into new markets in enterprise, government and education. BlackBerry-maker Research In Motion's decade-long stronghold on the business and enterprise sectors is rapidly eroding as Apple and Google make gains.
"iPhone continues to be embraced by government agencies and business across the globe," said Apple CFO Peter Oppenheimer. "Many U.S. government agencies are issuing iPhones by the thousands as part of their new mobile strategies." He pointed to NASA, the National Oceanic Atmospheric Association, Immigration and Customs Enforcement and the Transportation Security Administration as some recent example. Companies like Nieman Marcus, Skanska and Volvo are also replacing existing smartphone deployments or adding first-time smartphone users with large iPhone orders, added Oppenheimer.
Meanwhile, financial institutions such as Barclays, Nomura Securities and Bank of Beijing recently deployed iPads across their workforce to improve customer service. "In particular, Barclays' rollout of over 8,000 iPads has generated tremendous employee engagement and feedback, making it the most successful IT deployment in Barclays' history," said Oppenheimer.
State legislatures in Virginia, Texas and West Virginia are now using iPads while local governments in Sweden recently deployed 10,000 iPads to improve workflow, and 5,000 iPads were purchased by the government in the Netherlands for the Dutch tax authority and court system.
Despite the growth in iPhone and iPad sales and record profit and revenue, Apple's stock is down more than 11 percent. The company reported a net profit of $13.1 billion on quarterly revenue of $54.5 billion. Gross margins dipped from 44.7 percent to 38.6 percent and international sales accounted for 61 percent of all revenue in the quarter.
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Matt Kapko has been writing about mobile since 2006, before it became cool. Based in Long Beach, CA, he has covered mobile entertainment, digital media, marketing, and advertising for several business media outlets. A former editor and reporter for RCR Wireless News, paidContent, and iMedia Connection, Matt is a regular freelance reporter for ClickZ. You can follow Matt on Twitter at @MattKapko or drop him a line at firstname.lastname@example.org.
March 19, 2014