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After Amazing Earnings, is Apple Invincible?

By - Source: Tom's Guide US | B 67 comments

Apple is about to become the most powerful technology company. there is only one tech company with greater sales and there is no other tech company that is equally profitable.

Following Apple's executives in the most recent conference call left the impression that this scenario won't change anytime soon. How far can Apple go - and who can compete with it?

Apple's Fiscal Q3 (calendar Q2) numbers are truly stunning. $28.6 billion in sales. $7.31 billion net profit. $28 billion in cash reserves. A market cap of $358 billion. This is the same company that Michael Dell told in 1997 to close its doors and give its shareholders back their money. To put those numbers in perspective, Apple is now reporting higher sales than IBM (which reported $24.6 billion and profit of $2.9 billion) and there is only HP ($31.6 billion revenue, $1.8 billion profit) ahead of the company at this time. For the first time in its history, Apple is likely to report more than $100 billion in sales this year - about the same as Intel and Microsoft combined.

Growth Engine

Much has been written about the success of Apple. However, if we were to structure the rise of Apple 2.0, it really began with the iMac in 1998 and was amplified by the iPod and following music services in 2001, but was fueled tremendously by the launch of the iPhone in 2007 and most recently the iPad in 2010. Prior to the launch of the iPad, Apple reported sales of $13.5 billion and a profit of $3 billion for the first quarter of last year.

Within 12 months, Apple more than doubled its revenue and more than doubled its profit. Instead of 8.4 million iPhones in the second (calendar) quarter of last year, Apple sold 20.34 million iPhones in the second (calendar) quarter of this year. Sales of iPads climbed in the same time frame from 3.27 million to 9.25 million units. In comparison, Apple was also able to sell 3.47 million Macs in the 2010 quarter, but was only able to increase the number to 3.95 million in the second quarter of this year. Not surprisingly, iOS products (iPhone, iPod, iPad) are rapidly gaining Apple revenue share and climbed from about 57 percent in Q2 2010 to 73 percent in Q2 2011 (and those numbers do not include additional revenue from music and app services).

An Operating System Company?

When reading this numbers, I can't help but remember the words of the legendary technologist Alan Kay, apparently a friend of Steve Jobs, who responded to Apple's CEO when he was first shown the iPhone: "Make the screen at least 5x8 and you will rule the world." Given the traction the iPad has, Kay may not have been wrong, and given the frenzy among other companies to build a tablet, he was certainly right. However, it is easy to forget that that the iPhone and the iPad are, in the end, just nicely designed pieces of hardware. The driving force behind the success is not just hardware - it is software, and particularly iOS in this case.

Sure, Apple just announced a new version of Mac OS X with great fanfare to fuel interest in its traditional desktop and notebook computer systems, but iOS is the growth market today. According to Net Applications, iOS already holds a global market share of about 2.63 percent, which is almost half of Mac OS X' share of 5.37 per. It is not exactly Windows territory, but it is a massive achievement for just one company and we know that the share may be climbing even further. So, given the importance of iOS, do we see Apple turning into an operating system company, and not so much a hardware maker anymore? Such a step and focus would be highly unlikely and would not even fit Apple's business model. However, Apple is turning into an incredibly power platform company that has greater reach than any other IT company before it. The combination of its hardware and software expertise as well as its consumer perception have opened doors that others may not be seeing yet.

While PC companies are busy trying to catch up with the iPad and are copying the iPad just as they tried to copy the iPod and iPhone, Apple may already be preparing its next coup. If Apple's game is about the iOS platform, I would bet my money on an Apple HDTV device based on iOS and connected to the iPad and iPhone via the iCloud, followed by a much deeper integration of iOS and Mac OS X.

 

Is Apple Invincible?

Describing a tech company as invincible is silly. IBM was once thought to be invincible, Microsoft was thought to be invincible and Google was thought to be invincible (in advertising revenues) as well. They all were and still are vulnerable. Apple is a special case, but it is no exception, and lives and breathes through its dedication, innovation, patience and flawless execution. A good portion of Apple's success is also based on the paranoia of its competitors that every new Apple product will sweep the market and the only defense is to build a copycat.

The problem with this strategy is that Apple will always remain one step ahead of its rivals, as long as they rely on Apple for innovation and believe that picking up the crumbs Apple leaves behind is enough. Apple's competition for the iPod was harmless and it is rather harmless for the iPhone as well, if we consider a vendor-vendor comparison. There is no powerful rival for the iPad in sight yet. Apple may remain invincible as long as there is a company that is willing to take an innovative leap and take a substantial business risk with a radical new product.

Or, Apple's rivals can hope that Apple will shoot itself at least once in the foot.

Discuss
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Top Comments
  • 30 Hide
    eklipz330 , July 22, 2011 3:32 AM
    I HATE APPLE AND EVERYTHING ABOUT THEM

    like that soldier37?
  • 23 Hide
    cheemster , July 22, 2011 3:15 AM
    LOL, Apple and innovation, innovation stopped after the first iPhone.

    #Samsung Galaxy S2
  • 23 Hide
    Anonymous , July 22, 2011 3:29 AM
    I hate apples overpriced products
Other Comments
  • 23 Hide
    cheemster , July 22, 2011 3:15 AM
    LOL, Apple and innovation, innovation stopped after the first iPhone.

    #Samsung Galaxy S2
  • 23 Hide
    Anonymous , July 22, 2011 3:29 AM
    I hate apples overpriced products
  • 30 Hide
    eklipz330 , July 22, 2011 3:32 AM
    I HATE APPLE AND EVERYTHING ABOUT THEM

    like that soldier37?
  • -6 Hide
    dogman_1234 , July 22, 2011 3:34 AM
    Naw...Wal-Mart is over 400 bill.
  • 15 Hide
    Anonymous , July 22, 2011 3:39 AM
    hahaha. Apple HDTV. Surely will be twice as expensive than the once on the market today.
  • 5 Hide
    fyasko , July 22, 2011 3:44 AM
    what's sad is apple's competitors are too feeble to compete with them allowing apple to keep it's prices in the "elite" category. 1000$ for a MBP or 1000$ for a win7 pc with the same specs or better as a $3000 mac pro desktop? i love OSX but i don't want to spend over a thousand on something i can't upgrade cheaply and easily.
  • 13 Hide
    Anonymous , July 22, 2011 3:46 AM
    who were impressed with ipad? its just an ipod made bigger. LOL
  • 15 Hide
    memadmax , July 22, 2011 3:46 AM
    They said the same thing about IBM in the 70's, Microsoft in the 80's/90's, Hell even Apple was said to be invincible in the 90's... HP, Dell, AOL, they all ebb and flow with the times. Guess it's Apple's time on "gadgets". But until they create something that replaces ever desktop and every server in every two bit company that runs Microsoft/Wintel platform: NoT Invinvible.
  • 1 Hide
    deanjo , July 22, 2011 3:51 AM
    cheemsterLOL, Apple and innovation, innovation stopped after the first iPhone.#Samsung Galaxy S2


    Lol,you say innovation from apple has stopped but then you go on to list a iphone 3 wanna be knockoff.
  • 0 Hide
    DjEaZy , July 22, 2011 3:51 AM
    soldier37..and que the Apple/Iphone haters in 3 .. 2 .. 1 go-

    ... i hate the iPhone 4... it so good... but must resist... must wait til iPhone 5 is out... my contract then ends...
  • 13 Hide
    iubyont , July 22, 2011 3:55 AM
    It's more about increased profits per item sold. Costs have gone way, way down. Compare the costs of PC components and the price of laptops today to the costs and prices 4 years ago. Now compare the prices that Apple sold their laptops, iPods, and desktops. They're still the same price, even though costs have gone way down. It's all about the margins when it comes to Apple. People that buy Apple products can't comprehend that technology is suppose to become cheaper over time even though technology still improves.
  • -5 Hide
    Kamab , July 22, 2011 4:03 AM
    Apple is winning because of heavy integration and common appearance/feel between all their devices. Trendiness and appearance will always be important to the masses. And from what I've heard from my colleagues in the software engineering field, their big perk is not having windows and some cool features (track-pad, etc).
  • -5 Hide
    ralfthedog , July 22, 2011 4:19 AM
    I think that the primary advantage of OS-X is that it is BSD Unix with a very polished graphic shell. The Advantage to iOS is the trusted application library sold from a trusted store. Almost all of our front end computers are Mac while our servers are all Red Hat.

    I do not see Apple releasing an HDTV. I can see them beginning to push their set top box (Apple TV). If you have spent any time using it, you will think it much underrated.
  • 18 Hide
    animehair , July 22, 2011 4:30 AM
    I've never bought or been given an apple product in my entire life ... i refuse to pay more for something that is way less.
  • 14 Hide
    cyprod , July 22, 2011 4:39 AM
    Wolfgang, I'm sorry, but flawless execution the reason for Apples dominance? No. You say their downfall all hinges on them shooting themselves in the foot once. I think you've forgotten the last two years of Apple products. It comes down to a religious like devotion to their products.

    The iphone 4. Well, I think my office mate summed it up best. My office got shut down, we were taking phone interviews while we waited to collect our severance, and I was taking a phone interview on my cellphone, and he looks at me in horror saying "With the reception problems we have, why on earth would you take an interview on your cell phone?" And I just looked at him and said "What reception problems?". He owns an iphone 4. At the time I had some free phone with contract from at&t. Apparently Apple producing a cell phone that can't receive phone calls isn't a mis-step?

    OSX 10.6. The operating system that if you had guest accounts enabled, then did an upgrade to it, it would delete your primary account. Yeah. Flawless execution.

    The ipad 1, a portable media consumption device that can't be taken outside, because the screen is unreadable in the sun and because it's a giant aluminum box with a glass screen, if exposed to direct sunlight on a hot day, say roughly 70 degrees F, would overheat, activate the thermal protection circuits and refuse to boot....because there was no cooling.

    Explain to me how this is a record of flawless execution? What this is, is an extremely forgiving user base.
  • 2 Hide
    the1kingbob , July 22, 2011 4:39 AM
    I think the question here is can apple keep the sales going. They sold a lot of ipads and iphones 4 on verizon. Can apple keep convincing consumers to buy expensive toys during this hard economy? I don't doubt apple will be around a long time give there reserves. I think the iphone 4s/5 will do great, after that i don't think it will.
  • 14 Hide
    stoogie , July 22, 2011 4:51 AM
    Success of Apple in 1 sentence, Sell Stuff 80-110% overpriced, use False Marketing, Stimulate Religion into people's brains, take advantage of the 99% of Idiots who are Apple Customers. The world we live in is full of idiots!
  • 10 Hide
    winner4455 , July 22, 2011 5:02 AM
    They're not invincible. Just nuke em!
  • 11 Hide
    legacy7955 , July 22, 2011 5:31 AM
    Apple will be around for some time because the world is absolutely loaded with gullible, and dim witted people. The "herd" loves them. Monkey see, monkey doo...doo!
  • -8 Hide
    ralfthedog , July 22, 2011 5:56 AM
    cyprodWolfgang, I'm sorry, but flawless execution the reason for Apples dominance? No. You say their downfall all hinges on them shooting themselves in the foot once. I think you've forgotten the last two years of Apple products. It comes down to a religious like devotion to their products.The iphone 4. Well, I think my office mate summed it up best. My office got shut down, we were taking phone interviews while we waited to collect our severance, and I was taking a phone interview on my cellphone, and he looks at me in horror saying "With the reception problems we have, why on earth would you take an interview on your cell phone?" And I just looked at him and said "What reception problems?". He owns an iphone 4. At the time I had some free phone with contract from at&t. Apparently Apple producing a cell phone that can't receive phone calls isn't a mis-step?OSX 10.6. The operating system that if you had guest accounts enabled, then did an upgrade to it, it would delete your primary account. Yeah. Flawless execution.The ipad 1, a portable media consumption device that can't be taken outside, because the screen is unreadable in the sun and because it's a giant aluminum box with a glass screen, if exposed to direct sunlight on a hot day, say roughly 70 degrees F, would overheat, activate the thermal protection circuits and refuse to boot....because there was no cooling.Explain to me how this is a record of flawless execution? What this is, is an extremely forgiving user base.


    1. The iPhone 4 gets very good reception depending on your relation to a cell phone tower (better than most Android, even if you hold it the wrong way). I quite often need to loan my iP4 to people who I work with because they can't get signal. (Again, while the iP4 does get better reception with the same signal strength, it was mostly because of location.)

    2. I have no problem reading my screen in direct sunlight. It does not shut down at 70F. I did have it shut down when the temperature was 110, however, it was not just in direct sunlight, it was in a car with the windows rolled up. After I brought it outside and let it cool off, it ran fine. (I was worried I had damaged the battery, however, I have had no loss of battery life. Sometimes You get lucky.)

    My company has mostly dumped our Windows computers because we have found, Macs have far fewer problems with software and hardware. We have had far better results using iPhones than other products and we have found the iPad to be one of the most useful products we have. At this point, the only non Apple products we use are our Linux servers. We do have some people who choose to use Microsoft Word on the mac, however, Open Office is our preferred solution.

    People tend to exaggerate problems with Apple devices and ignore those on other platforms. If one in 10,000 people have an issue with Apple, it makes headline news on all networks.
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