Apple isn't breaking a sweat over slipping iPad sales: iPhone sales are making up the difference.
In fact, it sold 74.5 million iPhones in the past quarter, some 12 million more than predicted. And that helped generate the largest profit in Apple corporate history: $18 billion on revenues of $74.6 billion.
Apple's cash pile is now $178 billion, which means that if it was in the right frame of mind, it could buy IBM ... although IBM actually isn’t all that appetizing.
Creating Buzz in China
During the same quarter a year ago, Apple made profits of $13.1 billion on revenues of $57.6 billion. The difference this year is China. In the past year, Apple has taken on homegrown breeds like Huawei and Lenovo to make big inroads in the Chinese smartphone market, even in places like Hong Kong and Taiwan.
In China, it reported $16.1 billion in revenues ,up 70 percent on the same quarter a year ago. A lot of that action was generated by the latest iPhone release. Apple CEO Tim Cook described the excitement around the iPhone 6 phenomenal, noting that it had attracted more Android phone users than any other Apple device to date. "It’s an incredible market. People love Apple products and we are going to do our best to serve that market, “he said during the conference call.
Apple has plans to open 40 company stores across China over the course of the year to keep up the momentum.
Loizos Heracleous, a professor of strategy at the Warwick Business School at the University of Warwick in Coventry, England, said Apple is soaring on the strength of design, innovation and efficiency.
Apple’s entry to China has been instrumental to revenue growth, and the upside potential in revenues from this market is very significant. At the same time, economies of scale and scope led to even greater efficiencies. Combined with a higher selling price for the iPhones, operating profits are up to nearly 40 per cent of revenues — unprecedented in consumer electronics,” he said in a statement.
He also said Apple's overall product portfolio is well balanced in terms of product life cycles and that any losses around iPads should be rebalanced later. There is also the potential from ApplePay and its other technologies:
The strategic implications of ApplePay have not been appreciated by most people. Not only is the revenue potential huge, with Apple’s offering already benefiting from the existing market penetration of its devices; margins are also very healthy and the service has synergies with the iPhone and the iWatch, helping to solidify Apple’s strategy of building and controlling a product and service ecosystem."
He underlines the fact that if iPhone has been instrumental in the quarter’s success, Apple is no one-trick pony.
Apple’s strategy displays related diversification. Those who argue that its success is down to a single product do not appreciate the considerable synergies across Apple’s products and services, nor the continued development and strengthening of Apple’s ecosystem."
It’s also worth noting that Macbooks sold well over the quarter: 5.5 million units in contrast to 4.8 million for the same quarter last year.