Apple's profits a moveable feast

Monday 30 July 2012 08.29
Financial analysts not impressed by Apple's latest quarterly results
Financial analysts not impressed by Apple's latest quarterly results

As OS X Mountain Lion - the eighth iteration of Apple's flagship desktop operating system - hits the App Store now would be a good time to put the company's third quarter results in context.

Any entity that can report revenue of $35 billion and $8.8 billion in profit between April and June would have a right to radiate a certain smugness yet financial analysts have been unimpressed by the figures (some forecasts had as predicted a further $4 billion in sales).

Such reactions seem to forget the need for lower pricing as the global economic slump continues and the relative failure of the a stagnant Chinese market. Make no mistake, the appetite for Apple products has not lessened but consumers are getting cannier about what to buy, where and when.

Once Apple's top-selling device, the iPod is on its way to being a niche product bought by anyone who doesn't want to buy a smart phone; bought mostly during the holiday season. Today you're more likely to see an iPod strapped to a jogger's arm than in a commuter's hand. Better screens and apps have eaten into that space to such an extent that the iPod has sunk into a predictable sales pattern of a spike in the first quarter followed by a consistent decline for the rest of the year. That spike is slowly starting to resemble a flat line.

This quarter Apple sold 6.75 million iPods (that's across a range of four products), down from 7.54 million in Q2 2011. The personal media player market is hardly a dead duck but the iTunes' dominance of the digital music sector ensures the iPod's dominant market position. If the iPod is tapering off, you can be sure the likes of Archos, Creative and Sony aren't looking at this as an opportunity.

Mac computers saw a modest increase of 2.3%, effectively a flat line. Given the hype surrounding the Macbook Air and the wave of ultrabooks that have followed it's not unfair to say this entire segment has underperformed and its unlikely Mac OS X Mountain Lion or the Macbook Pro with Retina display will be enough of a boon to change that.

There was a bit of an 'is that it' reaction to the iPhone 4S but that wasn't reflected in sales as they have increased consistently since the first quarter (October, November, December) and are up 28% on Q3 2011, selling 26.03 million units. A subsequent dip shouldn't be read as a lack of interest so much as anticipation for what the iPhone 5 will bring - an announcement is expected in September.

The only device to beat the Q2 seasonal slump was the iPad, the latest version of which was released in March. It was also the only product to change its place in the overall Apple range, overtaking iPods and Macs to make it the second most popular product - take note that's the top two positions in an almost trillion-dollar company occupied by products that didn't coexist two years ago.

The announcement was rounded out with news of Apple TV sales for fiscal 2012 reaching four million units, a respectable enough figure in the context of Mac sales and the devices 'hobby' status.

What does all this tell us? Well if iOS and its associated devices didn't exist there wouldn't be an awful lot to report about. The post-PC age has turned Apple from a resurgent to a dominant force in the mobile space. Most of its ideas now come from mobile (iOS, Retina display, App Store) and are filtered back to the desktop.

This is not to say that over-reliance on one or two products is unheard of - Microsoft's top two sellers are still Office and Windows - there are enough budget smartphones and tablets out there to put pressure on both the iPhone and iPad. Should we be concerned that Apple is running out of game changers?

The one device observers have been waiting for to answer this is Apple's foray into TV sets. Steve Jobs' parting gift to Technology hasn't even been announced yet but if anything is to provide a glimpse of life beyond mobile this would be it.

The analysts may not be impressed but there is some shiny yet to come from Cupertino to keep the doubters quiet. For now, the iPhone 5 waits.

Niall Kitson is editor of TechCentral.ie www.techcentral.ie