Company Profile - Apple - Q4 2012

05 No v 2012

Unite d State s

Co nsume r Ele ctro nics

Apple

Domestic Company Profiles

Company Overview
Leading des igner and manufac turer of c ons umer elec tronic s devic es , pers onal c omputers and c omputer s oftware. The c ompany's bes t-known c ons umer
elec tronic s produc ts inc lude the iPod, iPhone and iPad, as well as Mac intos h c omputers . Beginning to move into s upplementary s oftware-as -a-s ervic e (SaaS)
s ec tors through the launc h of Apple iCloud, iTunes , App Store and Apple TV platforms .
Recent Developments
Quarterly s ales volumes of iPhones and iPads c ontinue to lead the indus try. In the quarter ended June 25 2011 (Q3 FY2011), Apple s old 20.34mn iPhones and
9.25mn iPads , y-o-y inc reas es of 142% and 183% res pec tively. The c ompany als o s old 3.95mn Mac s (up by 14% y-o-y) and 7.54mn iPods (down by 20% y-o-y).
Continued robus t growth in Mac s ales was notable in a period when s ales of mas s market pers onal c omputers were generally in dec line. iPod s ales ,
meanwhile, are affec ted by the multimedia c apabilities of iPhones and iPads , as well as tablets and s martphones from other vendors .
The iPhone 4 was launc hed in s elec ted markets through s elec ted c arriers around the world in June 2010. The fifth-generation iPhone is widely expec ted to be
launc hed in Oc tober 2011, although at the time of writing, Apple had neither c onfirmed the exis tenc e of the devic e or a timetable for its launc h.
The firs t-generation Wi-Fi-only iPad was launc hed in April 2010 and a 3G vers ion followed quic kly. A s ec ond-generation model, iPad 2, was launc hed in Marc h
2011 and it is widely expec ted that iPad 3 will debut early in 2012 (Apple has yet to c onfirm plans for iPad 3 and no launc h date been s et at the time of
writing). Rival Amazon.c om is expec ted to launc h an Android-bas ed tablet/e-reader devic e in Q411. It would not be s urpris ing if Apple were to dis rupt the
effec t of that launc h by bringing forward the introduc tion of iPad 3.
As with the iPhone, the firs t iPads were initially only available from a s ingle c arrier partner in eac h c ountry around the world. However, in 2011 Apple launc hed
a CDMA vers ion of the iPhone for us e on the Verizon Wireles s network in the US, breaking AT&T's exc lus ivity. Similarly, iPhone 5 is expec ted to be launc hed in
partners hip with Sprint Nextel, the US' third larges t mobile network operator. Thes e moves will help Apple s ignific antly grow its iPhone and iPad s ales , while
enc ouraging greater us age of its iTunes and App Store digital media s tores .
Apple founder and CEO Steve Jobs res igned in late Augus t 2011 due to c ontinued ill health. The move had been expec ted for s ome time and although Apple's
s hare pric e took a s hort s harp hit as a res ult, the ins tallation of Tim Cook as Jobs ' s uc c es s or was well rec eived. Jobs ' death in early Oc tober 2011 had a
s hort term negative impac t on the c ompany's s hare pric e. However, the c ompany's produc t pipeline has been fixed and s o we s ee little impac t in the near
term. Apple's s hare pric e more than doubled in the firs t eight months of the year and the c ompany has amas s ed more than US$73bn, whic h it c an us e to
make s trategic bus ines s and tec hnology ac quis itions vital to c ontinued growth. The c ompany has als o launc hed an as s ault on the wireles s tec hnology
patents market, firs tly by buying thous ands of patents formerly owned by Nortel Networks and s ec ondly by launc hing a s eries of devas tating legal c hallenges
to many of its c ompetitors in the pers onal c omputing and s martphone markets . The latter has already prevented key tablet and s martphone rival Sams ung
from s elling hotly-awaited new produc ts in c ertain high profile markets . Other patent dis putes have found in favour of Apple agains t vendors s uc h as HTC
and it is expec ted that this defens ive manoeuvre will help Apple remain a market leader for s ome time.
Future Plans
Apple is notorious ly s ec retive regarding its future plans . The iPhone 4S arrived in Q411 and that iPad 3 will debut in early-2012 unles s , it is fas t-trac ked to fend
off potential c ompetition from Amazon's new Kindle tablet. New CEO, Tim Cook, is a long-time protg of Jobs and with Apple produc t development plans
running to two or three years in advanc e, it s eems likely that there will be little c hange in produc t and bus ines s s trategy for the fores eeable future.
Prior to Jobs ' departure, rumours abounded that Apple was looking to res us c itate its Apple TV hardware and s oftware platform and the termination of a
video rental s ervic e through iTunes in Q411 s ugges ts that the c ompany will make another attempt to c rac k the c ons umer TV market, pos s ibly through an
Apple-branded s mart TV s et with an Apple TV/iTunes applic ation at the heart of the embedded elec tronic programme guide.
There are als o reports that a 'nano' vers ion of the popular iPhone c ould be introduc ed s oon. Following the introduc tion of iPod nano, this would be a budget
vers ion of the s tandard iPhone, mos t likely with reduc ed func tionality and fewer features . Lower pric ing would als o expos e Apple to the medium and lower
ends of the hands et market for the firs t time as iPhones have traditionally been marketed as luxury high-end devic es with c ommens urately high pric e tags .
However, as has been s een at other s martphone vendors , the introduc tion of low- and mid-range s martphones has affec ted c us tomers ' expec tations of
pric ing for high-end models , c aus ing s ales of thos e devic es to fall s harply and thus hitting revenue. Apple has previous ly s hown little des ire to be a true mas s
market vendor, s o the pos s ible introduc tion of an iPhone nano will be c arefully s c rutinis ed.
Apple's ques t in 2011 to buy potentially us eful wireles s patents developed by others or to c laim owners hip of more generic devic e des ign and func tionality
patents through the c ourts s ugges t an aggres s ive defens ive approac h to future bus ines s . The c ompany is partic ularly s ens itive to c omparis ons of its
proprietary operating s ys tem (OS) with Android, the ups tart open s ourc e OS developed by Google. Its purs uit of Sams ung through the c ourts over the des ign
of that vendor's Galaxy-branded tablet c omputers and s martphones hint of further ac tion agains t other vendors in the future and may even ultimately end up
targeting Android.

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Apple is als o moving into the c loud c omputing market by launc hing a c omprehens ive s uite of c loud s torage and c loud c omputing s ervic es under the iCloud
brand. Es s entially, this will res ult in the c ompany bringing a s uite of previous ly dis parate s ervic es - s uc h as Mobile Me - into a s ingle pac kage. iCloud will allow
us ers to s tore data s uc h as mus ic and video for remote download to multiple devic es s uc h as iPhones , iPods , iPads and Apple Mac s . It c an als o ac t as a
data s ync hing c entre for email, c ontac ts , c alendars , bookmarks , notes , etc .
Performance
In July 2011 Apple announc ed financ ial res ults for its fis c al 2011 third quarter, ended June 25 2011. The c ompany pos ted rec ord quarterly revenue of
US$28.57bn and rec ord quarterly net profit of US$7.31bn. Thes e res ults c ompare to revenue of US$15.70bn and net quarterly profit of US$3.25bn one year
earlier. Gros s margin was 41.7% c ompared to 39.1% a year earlier. International s ales ac c ounted for 62% of revenue in the quarter. During the fourth quarter
of fis c al 2011, ending late September, Apple expec ts revenue of approximately 25bn.
Presence
Apple is a US multinational with its headquarters in Cupertino, California, and around 35,000 global employees .
Sectors
In the third quarter of its fis c al 2011, Apple reported that it s old 3.95mn Mac intos h c omputers , up around 14% y-o-y. Meanwhile, Apple s old around 20.34mn
iPhones in the quarter, up from 8.40mn one year earlier and ahead of analys t expec tations , due to hot s ales of its iPhone 4 and inc reas ed expos ure to the US
and Chines e markets .
Apple's iPod has been fading as a s tandalone bus ines s due to c ompetition from c onverged devic es , but the c ompany s till managed to s ell 7.54mn iPods
during the quarter. iPad s ales totalled 9.25mn in the quarter, up from jus t 3.27mn a year earlier.

This mate rial is pro te cte d by inte rnatio nal co pyright laws, and use o f this is subje ct to o ur Te rms & Co nditio ns.
2015 Busine ss Mo nito r Inte rnatio nal Ltd