Late yesterday, Apple announced its Q1 2013 (calendar Q4 2012) earnings — and you can forget whatever you might’ve heard about the iPhone or iPad’s dwindling popularity. Yet again, Apple has broken its own record and posted revenues of $ 54.5 billion — the greatest quarter of any company ever — driven entirely by sales of the iPhone and iPad.
Apple’s Q1 2013 profits came in at $ 13.81 billion, up 13.5% over the same period last year. 47.8 million iPhones were sold, up 39%. 22.9 million iPads were sold, up 64%. We don’t have exact figures for the iPad Mini, but it is apparently selling well. Macs were down 15%, but not to worry: Apple’s cash reserves now total $ 137 billion. All told, Apple’s stock price is up 20% from the same time last year ($ 509 vs. $ 423), while the rest of the market (S&P 500) is up just 13%. In terms of earnings — profits — Apple is up 35%, while the rest of the stock market is up just 2%. Perhaps most importantly, Apple’s revenues from China were up 67%, from $ 4 billion to $ 6.8 billion. (See: As China grows in purchasing power, the Western dominance of consumer electronics fades).
For all intents and purposes, Apple is rocking. No other tech company even comes close. And yet, following the earnings call, Apple’s stock prices actually fell 10%. No one knows exactly why, but the general consensus still seems to be that Apple is peaking, and will soon be on its way down. Despite posting record-breaking revenues and profits, analysts expected more. Whether they’re right to expect more is another question entirely — 20% growth, in a world economy that is still fairly stagnant, is really quite impressive.
During the earnings call, Tim Cook also took the chance to downplay the rumor that Apple had reduced the size of its iPhone order, which caused a large drop in stock price last week. He didn’t address the rumors that the next iPhone might come in a range of colors, or a low-cost Mini variant, though. The last couple of days have seen a new rumor, too, that there will be an iPhone Plus (or “iPhone Math,” depending on the Engrish proficiency of some translations).
Ultimately, the biggest risk for Apple is being passed by Samsung and other mobile device makers. Apple has already lost its technological advantage, and its lead in design and desirability is being steadily eroded. Apple’s biggest strength, and the reason for its status as the world’s most valuable company, is its massive profit margins — but in the face of Android’s massive growth, it’s unlikely that Apple can retain its position at the top of the smartphone and tablet market without changing its business model.
Apple has had a truly magnificent run since the introduction of the iPhone in 2007. Just take a look at the graph above; Apple’s quarterly revenues have grown from $ 7 billion to $ 54 billion in just six years, almost exclusively thanks to the iPhone and iPad. With growing pressure from Android and the commoditization of the mobile computing market, though, iDevices have probably reached their zenith — and thus Apple finds itself at a crossroads. It can either hold onto its fat profit margins, but relinquish market share – or it can drop its prices, introduce more models, and go toe-to-toe with the Android upstarts.
I don’t think anyone knows which way Apple will go, which is probably why analysts and traders are bearish on AAPL stock. The next iPad and iPhone releases will be very interesting indeed.