Apple posted another blowout quarter, with record profits and astonishing numbers on iPhone and iPad sales, well above even the loftiest of estimates. To visualize the numbers, I’ve plotted all of Apple’s product segments by revenue for each quarter since 1Q 2004, when iPod sales were just starting to rev up.
See any similarities? Here’s what they look like side-by-side; This is actually a continuous chart, with the exact same data as the first chart. The difference is, the left half is blown up 5x larger to show detail, and to compare *relative* growth from 2004-2008 with the same from 2008-2012
So while the numbers Apple posted are incredible, looking at their history shows us it’s not far from what they were doing exactly 4 years ago on the back of the iPod. But in 2008, revenue was approaching $10 billion a quarter; in 2012, it’s approaching 50! That’s an increase in revenue of 400% in 4 years, which most analyists will tell you is going to be impossible to sustain. But I say, not so fast!
How could Apple possibly sustain these kinds of numbers going forward?
The Proof is in the iPod
After 8 years, the iPod is now seeing decreasing revenue year-over-year, but that can fairly safely be attributed to cannibalization by iPhone sales. If it weren’t for the iPhone replacing iPods, we’d likely still be seeing increased revenue from the iPod as well. Without a similar product to cannibalize the iPhone, it’s not out of the question to think Apple could continue the trend the iPod was on before the iPhone was released, but the iPhone. In addition, iPods didn’t have the same kind of upgrade cycle that iPhones do. With users tied to 2-year contracts, many opt to upgrade to the latest phone every 2 years. The same can’t be said for iPods, where there wasn’t a definite upgrade cycle for most people.
iPhone 5, iPad 3
When the iPhone 4S was released, everyone in the media seemed to think it was a dud. Apparently, consumers weren’t listening. If Apple can post these kinds of record numbers with a moderately-upgraded iPhone, who knows what will happen when they unleash a full-on redesigned iPhone 5, which is almost guaranteed to have 4G, an even better camera than the 4S’s already impressive lens, and.. well, who knows what the next surprise will be. Nobody saw Siri coming until days before the 4S was released. There may be similar updates waiting for us in the 5. Also, iPad 3.
Apple has only just begun to penetrate many foreign markets, where 3G coverage lags behind the United States. In China, the iPhone is only available on one carrier: China Unicom, with 192 million subscribers. That leaves China Mobile (638m subscribers) and China Telecom (120m) for Apple to expand to. (Indeed, according to Bloomberg, Apple recently received approval of specifications for a device that would run on China Telecom’s network). Of China’s 950 million subscribers, only 11.5% are on 3G networks. On the only carrier where the iPhone is available, China Unicom, there were only 33 million 3G subscribers; yet Apple sold 5.6 million iPhones during the first 9 months of 2011 – all before the 4S was available. Now consider Apple’s reach in the US, via Verizon, AT&T and Sprint, is to 238m subscribers (pdf), leaving about 60m on carriers that don’t offer the iPhone. Compare that to China, where there are 758 million subscribers on carriers where the iPhone isn’t offered. Even if you consider many of those people can’t afford the high-cost of the iPhone, you have to admit that’s a huge potential market; especially if Apple releases a cheaper iPhone in the future to address that market directly.
One More Thing?
With Steve Jobs gone, we may never hear “Oh, and there’s one more thing…” again, sadly; But that doesn’t mean Apple doesn’t have more tricks up their sleeve. There’s wild speculation the Apple TV box will soon be migrated into a full-featured flat-panel Apple TV set. Steve himself even let the cat out of the bag that they have *something* in the works for changing the way we watch TV. If Apple can shake up the broadcast/TV industry the way they’ve shaken up Music, mp3 players, Cell Phones, and now Tablets (well, to be fair, there wasn’t much to shake before the iPad), they could have an additional revenue stream to add to their quarterly reports to bost profits even more.
I’m not saying I think Apple will continue to post the kind of year-over-year increases in revenue that they posted yesterday every quarter; but I do think all those analysts who have said time & time again that Apple’s time has come and gone, you may be in for a few more surprises over the next few years – at least. While most of this is speculation, one thing is for certain: Apple’s going to be around for a while.Disclaimer: I am long on Apple, if you couldn’t tell.