Apple has shown aggressive growth but needs a spectacular device to buck a downward trend

Apple has announced its financial report for the third quarter of 2017. Apple reported a strong quarterly revenue of $45.4 billion, with a seven percent growth compared to the same quarter last year. Revenue based on services were at an all time high, but the announcement comes at a time when the growth in the global smartphone market is slowing down. This means that Apple will have to find ways to grow in emerging economies, such as China and India.

Image: Reuters

Image: Reuters

While answering a question on Apple's plans for India, Tim Cook said, "I see a lot of similarities to where China was several years ago. And so I'm very, very bullish and very, very optimistic about India." This is in line with statements made by Cook during the earnings call following the announcement of the results of the previous quarter, when Cook had said "We're very optimistic about our future in this remarkable country with its very large, young, and tech-savvy population, fast-growing economy, and improving 4G network infrastructure."

The announcement comes at a time when Apple's market share in China saw a dip, and revenues from China fell for the fifth consecutive quarter. Apple responded by immediately taking steps to comply with government regulations in China, to tackle the increase in competition and dropping revenues. However, the overall revenues of the company increased this quarter. The increase in revenues were particularly driven by sales of the iPhone, which is not surprising considering that iOS devices ushered in a new era of profitability for the company.

In 2001, Apple reported a net loss of income of $25 million. The iPod was launched in 2001, and in 2002, Apple reported $65 million in revenues. From there, the sales of the company for iOS products kept increasing every year till 2015. During the period, Apple saw an upward trend in cash reserves as well as net income.

Sales of the iPod peaked in 2008, after seeing dramatic increases in units shipped in 2005 and 2006. Since 2008 however, iPod sales have been dwindling, and Apple stopped reporting numbers iPod units shipped from 2015. Recently, Apple silently pulled the iPod Nano and the iPod Shuffle from the lineup, leaving the iPod touch as the last remaining product in the iconic iPod lineup. The iPhone saw an increase in sales every year till 2015 since its debut ten years ago. iPad shipments peaked in 2013 and have been falling ever since. Finally, Mac shipments show an upward trend over the years, but saw drops in sales in 2013 and 2016.

When compared all at once, it is very clear what the star device in Apple's hardware offerings is. In the year of its launch the iPod sold 381,000 units, but the iPhone sold a stellar 1,389,000 units. The most iPhones sold in a single year was 231,218,000 in 2015. That is more than the number of iPods sold between 2007 and 2010, which was at the height of its popularity. However, in 2016, Apple saw a year-on-year drop in iPhone sales.

2016 is the year when both net income and device sales saw a downturn. Japan was the only region that saw an increase in sales from 2015 to 2016. There were mild slowdowns in sales in the Asia-Pacific region and Europe, but the sharpest drops were seen in the Americas and China. In 2015, sales in China surpassed that of Europe, but then took a nosedive in 2016. Apple started separately reporting unit sales in China from 2011.

In terms of expenses, Apple has been aggressively increasing the amount it spends on research and development. Since 2000, Apple has spent a staggering $274 billion in research and development. Both administrative costs and research and development costs have increased steadily year on year. The figures below are in millions.

For the fourth quarter of 2017, Apple is expecting to earn between $49 billion and $52 billion in revenues, which is in line with expectations from analysts. Apple generally posts strong fourth quarter results because that is the time period when the latest devices are launched by Apple. The expectations are high from Apple, for the release of a spectacular iPhone to mark the tenth anniversary of the launch of the original iPhone. The device is expected to be the most expensive iPhone yet.


Published Date: Aug 02, 2017 04:32 pm | Updated Date: Aug 02, 2017 04:32 pm