tech wars

Grumpy Wall Street Aside, Revenue-Rich Apple Sees a Lot to Smile About

Posted by Sheila Shayon on January 24, 2013 03:32 PM

Apple's flat profits and lower-than-expected iPhone sales dominated coverage of its Q1 2013 quarterly financial earnings call on Wednesday and sent it stock sliding, but the company cited several reasons why it sees a lot of opportunity ahead. 

Its revenues, after all, were reported at a record $54.5 billion — an 18% increase over the same quarter last year — with profits of $13.1 billion.

And despite news that Mac sales are down 21% year-over-year (with general PC shipments down 6% globally) CEO Tim Cook was quick to say the downturn was due in part to the success of the iPad — a "huge opportunity" for the company, he said.

“I’ve said for the past three years that I believe the tablet market will be larger than the PC market at some point," he said. "Our base philosophy is to never fear cannibalization. If we do, somebody else will just cannibalize it.” 

The marketplace shift positions rival tablet makers like Google and Samsung as greater competition for Apple than other PC manufacturers.

But Apple says it's seeing its brand expand in key emerging markets. Executives highlighted continued growth in China, despite concern by some analysts that its phones are priced beyond the reach of many in the growing middle class.

"If you look at Greater China … our revenues were $7.3 billion in the quarter,” said Cook. “That’s incredibly high. It’s up over 60 percent, year on year. And that’s comparing a quarter with 13 weeks to one with 14 weeks. So the underlying growth is higher than that.” 

Apple has increased retail stores in China to 11 from six, doubled its number of premium resellers to more than 400, and is selling the iPhone at 17,000 outlets —up from 7,000 a year earlier.

Other points of interest in Apple's call yesterday, as highlighted by allthingsd.com, include:

iPhone 4 — It's moving better than expected, while Cook said the iPhone 5 is selling at about the same proportion that the iPhone 4S did a year ago. Apple expects to catch up to iPhone 4 demand this quarter; the phones are essentially free for those willing to sign a two-year service contract.

iPhone 5 — Cook said he views the iPhone 5 as being the perfect size and price — that is, until Apple comes out with something bigger and/or cheaper. It could mean those attributes are part of their next move in the mobile phone market, or not: Former CEO Steve Jobs, after all, was a master of what allthingsD points out were "huge head fakes." 

Asked about competition from smartphones with larger screens, Cook called the iPhone 5′s 4-inch screen the most advanced screen in the industry. “No one comes close to matching the quality,” he said. “We don’t sacrifice the one-handed ease-of-use our customers love. We put a lot of thought into screen size and feel confident we picked the right one.” 

Meanwhile, support for the iPhone5-enabled LTE network will expand past two dozen countries next week, adding three dozen more including Italy, Denmark, Finland, Switzerland, the Philippines and several in the Mideast.

iMessage — The popular communications tool is exploding in popularity. CFO Peter Oppenheimer said Apple now handles more than two billion iMessages daily. “Our customers love our iMessage service,” he said. 

TV — Rumors abound that 2013 could be the year Apple's iHDTV finally hits the market. For now, Cook said only that the company sold more than 2 million Apple TVs for the quarter and said the product is “an intense area of interest.” “I tend to believe that there is a lot we can contribute in this space, and we continue to pull the string and see where it leads us,” he said. “I don’t want to be more specific.”  

Beyond Wall Street, Wednesday's call brought criticism from technology commentators who said they believe Apple isn't capitalizing enough on its immense following.

With mobile clearly the industry headliner, Apple is well-positioned to continue in a leaderboard position, Hadyn Shaughnessy wrote at Forbes.com. But “the company seems to be frozen in the headlights of all the good things it could do. It’s almost as if Apple’s leadership themselves do not believe the growth potential ahead.” 

Said Mashable's Lance Ulanoff: “I too am frustrated that Apple has spent more time in the last two years iterating than innovating.” Yet he noted: “Apple and Tim Cook are going to surprise us in 2013. Sure, we’ll see more iteration — that’s a natural part of the tech business. However, I think Apple has something big up its sleeve. We may not see it in the spring, but by June or July, we’ll be talking about Apple’s first major innovation in nearly three years.” 

BusinessInsider, citing the company's historically fickle behavior, noted it's also too early in Cook's tenure to predict Apple's true intentions. “Steve Jobs was notorious for doing the opposite of whatever he had previously declared stupid or insane—from iPods that play videos to iPads that are designed for reading—but Cook has not been CEO long enough to establish a similar pattern," it noted. "And in any event, given the attention its competitors pay to its every move and the importance the company places on surprising and delighting its customers, it’s never in Apple’s interest to reveal such plans early.” 

Meanwhile, the independent film "Jobs," starring Ashton Kutcher as the legendary CEO and Josh Gad as Steve Wozniak, is set to open in theaters on April 19. Below, a newly released look at first clip.


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