Tuesday, 28 April 2015 12:29

Apple outperforms in Q2 2015 results with super strong everything Featured


Apple’s results record Q2 sales of the iPhone 6 and 6 Plus as Apple converts Android users with the best ‘barriers to exit’.

With Apple selling 61.7 million iPhones, 12.623 million iPads, 4.563 million Macs with billions of revenue more from services and other products, Apple’s powerhouse engine of growth and sales isn’t slowing down, it is speeding up!

Apple’s second quarter ended on 28 March 2015, and sees Apple having posted quarterly revenue of $58 billion and quarterly net profit of $13.6 billion, or $2.33 per diluted share. These results compare to revenue of $45.6 billion and net profit of $10.2 billion, or $1.66 per diluted share, in the year-ago quarter.

Gross margin was 40.8% compared to 39.3% in the year-ago quarter. International sales accounted for 69% of the quarter’s revenue.

Although Apple has created its own ‘walled garden’ of apps and accessories, one which it continuously opens up to more players and more developer and end-user freedoms year after year, it has created a thriving ecosystem that people want to be part of and play in.

For developers, let alone Apple itself, it is one they want to and do profit from.

Warwick Business School’s Professor of Strategy, Loizos Heracleous noted Apple’s propensity to create ‘barriers to exit’ for customers that allow Apple to sustain premium pricing, with hardware, software, apps, accessories and a third party ecosystem of such quality that people are switching from Android in droves.

Loizos Heracleous said: "Apple has shown once again that it has staying power. Even though the iPhone 6 and 6 Plus have been instrumental in Apple’s revenue and profit growth, it would be a mistake to assume that the iPhone is the company’s only advantage. Revenues from the App Store and Mac are important contributors to its performance.

“More importantly, however, Apple can sustain premium pricing for the iPhone and other offerings because of its ecosystem of products and services that, apart from having positive and synergistic effects on the user experience, also create barriers to exit for customers.

“Apple’s immense operational efficiency - for example it has one of the highest stock turnovers, and one of the lowest Selling, General and Administrative Expenses (SG&A) costs in the industry - leads to extremely healthy margins. Apple has a 40.8 per cent gross margin and a 23.4 per cent net margin.

"In the three and a half years that Tim Cook has been CEO, he has very effectively sustained the trajectory of high performance that Steve Jobs forged. If the Apple Watch is a success - and early indications are very positive - it will be the first groundbreaking product released during Cook’s tenure as CEO, and it will prove that Apple can still redefine industries.

"Apple’s forays into emerging markets have begun to bear fruit as iPhone sales in China are surpassing those in the US plus international sales account for 69 per cent of total sales in the most recent quarter.

“The decline in iPad sales is more than made up for by higher iPhone sales, and the introduction of the Apple Watch represents significant potential for the company. Apple’s plans to return $200 billion to shareholders through share buybacks and dividends represents a departure from previous company policy and is another plus for investors."

During the earnings call, which you can listen to for the next two weeks after this article’s publication, we heard Tim Cook and his executives make bullish statements about the future.

This includes Cook describing the quarter as “Our strongest March quarter results ever”, and said: “We saw higher rate of switchers to iPhone than we have seen in previous cycles. We are extremely excited about that. We see a reasonable percentage of first-time buyers, particularly in emerging markets.”

Over the last six months, which is the last two quarters, Apple has sold “135 million iPhones, 34 million iPads, 10 million Macs”.

Over 1000 HealthKit enabled apps are in the App Store, ResearchKit has enrolled over 60,000 iPhone users, the new MacBook is “the future of the notebook” while the App Store has surpassed $5 billion in quarterly revenue.

Apple Watch has over 3500 apps in the App Store with response having been ‘overwhelmingly positive’ as ‘demand is greater than supply’.

iPad sales set quarterly records in Japan and China despite being more muted elsewhere, but strong Mac sales fly in the face of IDC’s estimate of a 7% decline in PC shipments per quarter.

The iPhone grew at 2.5x the smartphone market, a remarkable growth rate, but even more headroom is available with only 20% of the iPhone install base having upgraded to the iPhone 6 or 6 Plus.

There are many other comments but Apple says it is ‘super confident’ in its pipeline for products and services.

So, rather than Apple losing its lustre or its appeal to consumers as some analysts and pundits have predicted over the past couple of years, Apple’s results truthfully tell a very, very different story, clearly growing from strength to strength.

You can hear it all for yourself at Apple’s Q2 2015 result conference call.

If you’re an Apple hater or a doubter, listen, learn and hope that Google, Android smartphone makers or virtually any other company could be anywhere near as successful!


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Alex Zaharov-Reutt

One of Australia’s best-known technology journalists and consumer tech experts, Alex has appeared in his capacity as technology expert on all of Australia’s free-to-air and pay TV networks on all the major news and current affairs programs, on commercial and public radio, and technology, lifestyle and reality TV shows. Visit Alex at Twitter here.



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