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By Oren Laurent
President, Banc De Binary
Apple’s story is the corporate realisation of the American dream. When university dropouts, Wozniak and Jobs, partnered up in the 70s to sell hundreds of machines to a local computer store, it was an impressive feat. In 1998, after Apple had become a recognised brand, Microsoft’s Bill Gates stated in an interview that he “couldn’t imagine a situation in which Apple would ever be bigger and more profitable than Microsoft.” How he must be cringing now.
Long gone are the days when Apple was the underdog in Silicon Valley. Many anticipated that the data in the firm’s quarterly earnings report last week would be positive: the stock price was up 9% in premarketing trading. But to say that this positive sentiment was correct would be a thorough understatement of reality. Not only is Apple now the most profitable company in the world, but the latest report reveals that it has broken record after record. Even CEO Tim Cook seemed surprised by the numbers that are “shattering our high expectations.”
Here are the facts. Apple enjoyed a total revenue of $74.6 bln in the last quarter of 2014, around three times the revenue reported by Microsoft. The profit was $18 bln. That’s more than any company has ever made in history, and is significantly higher than the previous record of $16.2 bln held by Gazprom. An incredible 74.5 mln in iPhone sales accounts for over two thirds of the company’s revenue. It’s a sales figure so spectacular that it outshines entire industries. To give a little perspective, compare it to the 60 mln televisions and 54 tablets sold worldwide last quarter. Or in real-time terms, if you have spent just one minute reading this column so far, Apple has sold 600 iPhones in the same period.
Business analysts and high-tech rivals studying the firm’s success point to Steve Jobs’ mission from the get-go to offer consumers a product as perfect in design as in functionality, a model of integrated software and hardware. Although Apple smartphones are overpriced compared to the competition, consumers have proved willing to pay up. Equally noteworthy is that Apple has always positioned itself as a market trendsetter and not a follower. So, while Microsoft nurtured its dominance in computers and sought to protect its Windows franchise, Apple innovated and adapted. Even as the iPod was turning high profits, Jobs predicted that future phones would function as music players.
The question now is whether the world’s most profitable company can keep breaking its own records. It is hard to imagine that the same pace of growth can continue, and a number of investors have expressed concern that the iPhone’s very popularity will hinder Apple’s continued innovation, now that the firm has become so dependent on the one product line.
Yes, a time may come when this tech giant can’t grow any bigger, but judging from present trends, that won’t happen any time soon. The company’s existing ethos and corporate flexibility should enable it to maneuver successfully into the future. It is already promoting the Apple Watch, due to go on sale in April, and is presumably working behind the scenes on future product launches. At the same time, the smartphone industry is thriving. Apple’s recent success was helped by making inroads into the mammoth Chinese market after securing a deal with China Mobile. It almost doubled its market share in the country from 9% in Q3 to 17% in Q4, leaving plenty of room still for future growth.
To talk about Apple is to talk about a firm which has risen from the basements of America and dreamt the unimaginable. It has proven that the limitations of others do not limit it. And as long as Apple continues to inspire its customers and create products of desire, it will retain its power to dazzle investors too.
