Apple Rises After Earnings Release – A Bit Behind the Numbers And A Look Ahead

 

Apple rises on earnings increase, but behind the numbers lurk concerns about a maturing product line.

As of this writing, Apple closed up 5.14%, plus an additional 0.11% in after hours trading, following the release of Q3 earnings.

Apple seems to have exceeded analysts expectations with this release, but let’s see what they accomplished.  They had net profit of $6.9 billion on revenue of about $35.3 billion for the quarter.  That’s a lot money, right there.  But let’s take a look at some lurking issues.

Looking at trending results, we see that revenue dipped about 19% from the previous quarter, but this is expected given the seasonality in their business.  For Q3 2012, revenues also dipped, but they only dipped 11% as we see here:

Q2 2012 Revenue

Q3 2012   Revenue

% Change

Q2 2013   Revenue

Q3 2013   Revenue

% Change

$39.2

$35.0

(11)%

$43.6

$35.3

(19)%

In other words, there is greater fluctuation in the revenues from quarter-to-quarter.  Is this cause for concern if the gross amount of revenues is increasing?

Well, for one thing, the average contribution per unit of the iPhone declined about 6.9% from $624 in Q3 2012 to $581 in Q3 2013.  This may demonstrate that the product is maturing and users are upgrading less frequently, resulting in price compression.  In which case, Apple may be pushing volume over profitability for a maturing product whose turnover among customers seems to be showing signs of decline without drastic price incentives.  Experiencing a similar dynamic is Apple’s other flagship product, the iPad, which also declined over those periods from $538 per unit to$ 436 per unit and whose contribution to total revenue declined from 26.2% to 18.0%.

Here is the breakdown by product category:

Product

Q3 2012 Units

Q3 2012 Revenue per Unit

Q3 2012 % of Total Revenue Per Unit

Q3 2013 Units

Q3 2013 Revenue per Unit

Q3 2013 % of Total Revenue Per Unit

iPhone

26,028

$624.14

46.4%

31,241

$581.10

51.4%

iPad

17,042

$538.14

26.2%

14,617

$436.07

18.0%

Mac

4,020

$1227.11

14.1%

3,754

$1303.41

13.9%

iPod

6,751

$157.01

3.0%

4,569

$160.43

2.1%

Note: Units in thousands, dollars in millions.

We believe this shows that despite a good and profitable quarter on a standalone basis, the company will need to look ahead to a new flagship product to spark the kind of growth it experienced before Fall 2012.

Hoping the product line does not resemble the following. But, they’re Apple. Maybe the iWatch will be next.  Wilfred Brimley, work your SEO magic!!!!!

This entry was posted in Apple, Business Strategy, By the Numbers, Earnings Release and tagged , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

*