Investors may have cringed at Apple’s revenue numbers in its Q1 2013 earnings call, but CEO Tim Cook took pains to point out that there is still a lot of room for growth when it comes to Apple product sales and profits.
There are a number of different ways Apple could continue to expand iPhone and iPad growth: introducing lower-priced options for emerging markets, bringing major changes to its product lines, or focusing on expanding to new geographic regions. For now, Apple seems to be focusing on the latter.
Although Apple has deeply embedded itself among U.S. mobile consumers, its presence abroad has been more slow going. And as with the past few quarters, that appears to be changing, particularly in China. “In terms of geographic distribution, we saw highest growth in China, and it was into the triple digits,” Cook said. Given that China is the world’s largest smartphone market, that’s the place you want it to happen and one of the few markets in the world that can keep the Apple growth machine humming.
Apple has had a difficult time in some emerging markets because of the iPhone’s high up-front cost. Other smartphone manufacturers like Samsung and Nokia have been aiming lower-end devices at these segments, but Apple’s only option is to flog its spendy iPhones. In China at least, buyers don’t seem to be put off by, something to which Cook was keen to draw attention. “It’s interesting to see how China is growing in importance for Apple so much so that they broke out their revenue [in its earnings release],” Gartner analyst Carolina Milanesi told Wired.
Uncharacteristically, Cook also drew attention to recent rumors circulating that iPhone demand could be waning due to reduced orders for iPhone 5 parts, gossip that fueled drops in Apple’s stock prices last week. Apple typically does not comment on rumors or reports.
“There have been lots of rumors about order cuts and so forth. Let me take a moment to make a comment on this,” Cook said in response to a question asking about the iPhone’s reported “deterioration in demand.” “I would suggest it’s good to question the accuracy of any kind of rumor about build plans… Even if a particular data point were factual, it would be impossible to accurately interpret what the data point meant for our overall business because the supply chain is very complex.”
And what about all those pesky other handsets available in a rainbow of screen sizes? Are those affecting iPhone sales, or will Apple ever expand to other screen sizes? Cook took a decidedly Steve Jobs (and Apple) approach, saying, “We put a lot of thinking into screen size and believe we picked the right one.” For years 3.5-inches was the right size, but in 2012 and 2013, the 4-inch display of the iPhone 5 is now Apple’s perfect phone size. It’s large enough to provide the user with a greater amount of information on screen (and make watching videos more pleasant), but not so large that it affects your ability to operate it with one hand.
As far as the iPad is concerned, the Windows-dominated PC space continues to be the area Apple hopes its slate will infiltrate. Although Cook openly acknowledged the iPad mini is likely cannibalized some iPad sales, and the iPad some Mac sales, he said that the Mac market is far smaller than that of Windows, and it’s out of Microsoft and its partners where the iPad will continue to take a chunk in the coming years.
“It is clear [the iPad] is already cannibalizing [Windows] some,” Cook said. “There’s a tremendous amount (of) opportunity there. I’ve said for two or three years now that the tablet market will be larger than the PC market at some point. You can see by the growth in tablets and pressure on PCs that those lines are beginning to converge.”
Now, if Cook can just get the line on his stock chart to move in the right direction.
CEO Tim Cook Hints at Apple's Future Growth in Q1 Earnings Call
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CEO Tim Cook Hints at Apple's Future Growth in Q1 Earnings Call
