Overall the company posted revenues of $7.9bn, up 27% over the year. Net profit came in at $1.14bn which is growth of 26%.
Within the total figure, Mac sales disappointed the market with volume growth of 21% to 2.61m. iPod sales were closer to expectations at 11.05m, a rise of 8% by volume over the year. Revenue growth was 17% and 3% respectively.
But the iPhone stormed in with shipments of 6.892m in the quarter, beating the volumes from the entire iPhone’s life in a single quarter. Sales from iPhone (and a small amount of Apple TV) were $4.6bn, although revenues taken are lower because Apple uses subscription accounting for the iPhone, spreading the revenue over an assumed 24 month life.
The company turned in $9.1bn of cash during the fiscal year and is now sitting on $25bn in cash.
In spite of this success Apple gave a very cautious outlook for the next quarter, describing October as a “foggy” month, with low visibility. Steve Jobs, CEO, in a rare appearance on an earnings call said “who knows what the future will be given the worldwide economic slowdown”. However, he also said that Apple is “comfortable with its cash position” and sees the slowdown as an opportunity for companies with cash.
Analysis: It’s easy to dislike Apple for being the smuggest company in the world, but you have to respect performance like this. Nonetheless Apple is already showing signs that economic conditions are having an effect.
Analysts had been expecting higher growth of Macs, based on performance in the previous few quarters. But the growth was higher than the overall PC market and – importantly – 50% of Macs sold went to people who had never owned a Mac before. This means the band of Apple Faithful is growing strongly at this level, even if this is the area most likely to be hit by the recession.
With these iPhone numbers Apple has moved into 3rd place by revenue behind Nokia and Samsung. It achieved this by having an average sale price (ASP) of $660 (compare with RIM’s $230). It gleefully pointed out that it also overtook RIM on volumes. In doing this, Apple has benefited hugely from its existing channels, something RIM does not have to the same extent.
It’s clear that devices priced at this level are not for the mass market, and Apple pointed out that it needs to be careful “not to leave a price umbrella” that others can exploit. This presumably means that we can expect both price reductions on existing products as economies of scale bring costs down, and new products at lower price points – the iPhone nano. This would allow Apple to address the much higher volumes that exist in the mid-range of the market. No details or timescales were given.
However, this is exactly where Nokia has put its 5800 and where others will be quick to follow. Expect some serious fighting from Q1 next year.
So, what can we expect in the coming few quarters?
There is growing evidence that mobile telephony is becoming seen as an essential good, like rice and potatoes. This is increasingly true for broadband and, although it is much younger, mobile broadband. Essential goods suffer less in a recession.
There is also evidence that people continue to spend on feel-good items in a recession, at least for a while. Fashion stores in the UK are still doing ok, where other stores are suffering. As my friends over at UKHotviews pointed out a couple of days ago, sexy gadgets are feel-good items.
When you get a device that combines both of these virtues – and the iPhone is the defining example right now – it really should be more recession-proof than most things.
Taking this together with Apple’s continued international expansion of iPhone distribution, I expect a very strong calendar Q4 for the iPhone.
But the signs are that things will get tougher from then on:
- The mobile phone market traditionally slows down some in Q1
- Q1 is when Nokia’s 5800 hits major markets
- I anticipate Nokia will launch an N-Series touch device before long – a big brother to the 5800
- With the touch screen as part of S60 v5, Nokia is now in a position to launch a large number of touch devices across a variety of price points
- I would also expect other vendors to launch sexy touch devices in the mid-range before long
When the iPhone launched it was clear that Apple had opened a new form-factor segment, and had done the mobile phone industry a large favour by doing that. No-one yet knows how big this segment is, nor how to define it, so the longer term prospects are hard to assess.
Apple gave some clues in the investors’ call that the iPhone could be its first mobile internet device (MID), which suggests that there could also be room to take the iPhone further UP the range. But if it positions strongly on this, it may be harder to take the iPhone down the range.
By contrast, other vendors have started putting touch interfaces and accelerometers into otherwise traditional phones to give them a more tactile user interface (Sony Ericsson C902, G700, Samsung Soul, Nokia 8800 Arte). One operator I spoke to even reckoned that touch-screen devices will make up 70% of their portfolio in 12 months time.
If this works out, then the prospects for iPhone nano should be healthy.
But it’s not a given. Many people are still critical of the iPhone as a phone, and anecdotal evidece suggests that many iPhone users also carry their old mobile phone and use it for their voice calls.
There’s little evidence yet that a tactile UI adds a lot of value to traditional phones and it remains to be seen whether it is a valid direction. We should expect lots of experimentation and plenty of fierce competition in this area over the coming year before we really know the answer.