Apple Quarterly Result: Saturation, Downfall Or Intended Outcome Before A Big Bang In 2013

Apple declined

Undoubtedly, Apple is one of the most valuable companies of the world and everyone is expecting much more from it. Yesterday, Apple announced its Q3 financial results for fiscal 2012 ended June 30 of this year. According to the report, it generated revenue of $35.0 billion with net profit of $8.8 billion ($9.32 per diluted share) in the quarter; up from $28.6 billion as revenue and net profit of $7.3 billion ($7.79 per diluted share) in the same quarter a year back. Likewise, the Gross margin for the Q3 of fiscal 2012 was 42.8%, up from 41.7% in the prior year. In Q3 of this year, international sales accounted for 62% to total revenue of the company.

Apple’s Q3 Earnings For Fiscal 2012 

While we are talking about Apple, shipments simultaneously poke to our mind. Apple sold 26.0 million iPhones in Q3 of the fiscal 2012, up 28% compare to the prior year. On the other side, it also sold 17.0 million iPads in Q3 2012, an outstanding 84% year-over-year growth, whereas, Macs showed 2% Y/Y growth and was sold 4.0 million units during Q3 of this year. On the contrary, Apple sold juts 6.8 million iPods in the last quarter, a 10% decline compare to the same quarter of the prior year.

After the release of Q3 performance, Apple’s CEO—Tim Cook—said, “We’re thrilled with record sales of 17 million iPads in the June quarter. We’ve also just updated the entire MacBook line and will be launching iOS 6 this Fall. We are also really looking forward to the amazing new products we’ve got in the pipeline.”

At the beginning of this year, Apple promulgated to pay dividends to its shareholders later this year. Yesterday, the company’s board of directors declared cash dividends of $2.65 per share which will be paid on August 16 of this year on the basis of business closing on August 13, 2012.

Anyway, it was the overall scenario of Apple’s latest performance of Q3. However, despite of such scoring numbers & figures, the performance is failing to entice me somehow. For the company like Apple revenue of $35 billion for the Quarter with 1 Billion profit – it’s meager. If you are talking about some other small tech companies, it matters the most, but for Apple, it just doesn’t justify especially when sitting on 96 billion cash-heap.

Drop In iPhone and iPod Shipments

Most important doohickey is here; the company sold just 26 million iPhones in Q3 of this year, which is quite low compare to the last two quarters. Sales of the iPhone in Q3 of fiscal 2013 was the least in the last fourth consecutive quarters. What’s it indicating? I accept, the advent of iPhone 5 (coming this fall) has somehow affected to the sale of iPhones in this quarter. But, the sales of iPad anyway managed to offset loss in the sales of iPhone. It should be known that iPad isn’t too much productive for the company in terms of revenue as iPhone is. At present, iPhone is accounting 46% of the total revenue. On the other side, the shipments of iPod also declined Y/Y in Q3 of the fiscal 2012, but I’m not worrying about its shipments because the device has now become secondary for the company’s business. Apparently, Macs shipments were also doldrums in the last quarter, showed just 2% Y/Y increment in the Q3 of the fiscal 2012 for the company. However, the company hasn’t done any innovations with its Mac OS in the last couple years. However, the company has divulged to to launch Mac OS X ‘Mountain Lion’ today.

Declining Of Apple’s Revenue, Growth And Profit Q/Q

Spontaneously, I have tried to identify how Apple’s different products were performed in the last couple of years. Here, it’s better to demonstrate all these with the help of graphs.

From the above graph, Apple’s revenue reached to maximal level in quarter ended December of the last year, but thereafter, you can easily see a continuous decline in its quarter-over-quarter revenue. Apple insanely grew in the last couple of years, but since quarter ended June of the last year, its growth rate is not so attractive. Since quarter ended December 2011, the growth of the company has continuously been decreasing and by the quarter ended June of this year, it reached to its minimal level in the couple of years. As per profit is concern, Q3 of the fiscal 2012 was not so impressive for the Apple. Since quarter ended December last year, the company’s profit has also uniformly been declining and it was  just $8.8 billion in the last quarter ended June of this year.

Shrinking Of Apple’s Revenue From iPhone

From the above graph, it’s clear that  iPhone has played vital role for making Apple as most valuable company in terms of market valuation. But, the revenue from iPhone has been shrinking since quarter ended December last year. Likewise, the revenue from the Mac devices has also been declining from the quarter ending December last year (only revenue from iPad is continuously increasing since December of the last year).

Shipments Of iPhone, iPad And Mac 

It’s clear from the above graph that the shipments of Apple’s iPhone have been declining since the quarter ended December last year, but iPad has somehow succeeded to keep its growth quarter-over-quarter. However, Macs shipments were also not so impressive in the last quarter.

Distributions Of Apple’s Overall Revenue

It’s well-known that iPhone is playing significant role in the Apple’s total revenue, followed by iPad and Mac, accounting 26% and 14% respectively.

Apple Failed To Meet Expectations In Q3, 2012

Apple’s market valuation has surpassed $600 billion this time and that’s why, people around the world are expecting too high from the company. According to analysts polled by Thomson Reuters, Apple was to report an earnings of $37.2 billion ($10.36 per share) in Q3 of the fiscal 2012, but it reported $35 billion ($9.32 per diluted share) for the quarter. Undoubtedly, Apple failed to meet the expectations.

Why iPhone’s Shipments Declined?

However, I have tried to identify some of the reasons. One of the main reasons was Apple’s number of announcements related to its big products (coming this fall). Apple’s iPad Mini, iPhone 5 and Macs lineups are yet to come this fall. That’s why; users preferred to wait for some times to own such products. But, the scenario is getting more intense day-over-day. At presents, number of high-end Smartphones in the market (such as Samsung Galaxy SIII, HTC One X, HTC Titan II, Motorola Atrix, Nokia Lumia 900 and more) and these are capable to entice majority of iPhone fanatics. I suspect, the scenario will be more intensified due to coming of some new entrants (Google and Amazon) into this segment. This is not the end; Apple will also have to face a fierce competition from Google Nexus 7 Tablet, Amazon’s Kindle Fire 2, Samsung Galaxy Note 10.1 Tab and more coming later this year.

Challenges From Google’s Acquisition Of Motorola Mobility

For some instances, if the shipments of iPhone have declined due to upcoming upgrades from Apple, then I don’t believe that it’s good bode for the company. It’s not prudent to grow on the cost of previous two quarters. Yes, it’s true, you might see a surge in the iPhone and iPad’s shipments later this year and we could also see an increment in the revenue next quarter. But, I’m not sure. Simple question, why Google has acquired Motorola Mobility? Of course, it will leverage over Motorola Mobility for carving hardware-software integrated ecosystem. Anyway, Google’s Nexus 7 Tablet has become a big threat for the company. Besides Google, Microsoft and other players are also more aggressive about their hardware this time.

Instability In Europe Was One Of The Reasons

In addition to this, I think, economical instability in the Europe is also somehow responsible for the decline of Apple quarter net profit and revenue. The game is whole about the emerging market. However, the demand of Apple’s iPhone is increasing in some emerging countries (like China, which is second largest market for Apple), but it’s difficult to make more profit from there. Folk of the emerging countries are quite price-sensitive, and they are less likely to get their hands on expensive devices. That’s why; they more prefer to own Android powered low-price media devices.

Until the end of the last year, Apple was really pioneer in the high-end Smartphone and Tablets. But this time, lineups of such high-end devices have been flourished in the market, which are no way vulnerable than Apple’s iPhone and iPad. The most important paraphernalia is here that vendors are offering these devices at the nominal prices, to which, user can afford very easily.

Tasks Ahead For Apple

Undoubtedly, there’s very tough competition ahead for Apple in the upcoming quarters. I think, Apple reached to its saturation level in quarter ended December last year, and the countdown has begun for the company. Indeed, it’s very difficult for Apple to generate more profit margin from its product as it harvested earlier till end of the December last year.

Apple Could Prove Itself 

But, there’s also a probability, Apple could outburst the market. It’s the tradition of Apple that it has always done some outstanding in its next products. We might expect some big things in iPhone 5 and iPad Mini. Apple has also focused on its Mac lineups. After being the CEO, Tim Cook has streamlined different divisions of the company. At present, Apple is focusing on its each divisions, from app development to retail stores. The company is going to invest huge in its market campaign. Due to its market campaign, Apple succeeded to make a strong impression of iPhone 4S into people’s mind. This time, Apple seems bullish towards its strategies, and somehow, it has succeeded to achieve its targets. We might expect better shipments of iPad, iPhone and Mac devices in the next quarter.

Images Credit: SplatF

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