Tim Cook Reveals Apple's Plan for World Domination
Apple is not satisfied to rule its own walled garden -- it wants the whole world to be its ecosystem. That's the message Tim Cook seemed to deliver during its earnings conference call, at any rate. In many respects, the Apple juggernaut appears to be on the move again -- boffo iPhone sales, steady business at the App Store, profits rolling in. There's just one niggling problem: the iPad slump.
Strong iPhone and Mac sales droves Apple to achieve record revenue for the June quarter -- quarterly revenue of US$37.4 billion and quarterly net profit of $7.7 billion, which is $1.28 per share and about a 12.3 percent rise in profits. Interestingly, Apple managed to bump up its profit margin, too: Gross margin was 39.4 percent compared to 36.9 percent in the year-ago quarter.
In addition to crediting a record 35.2 million iPhone sales for the period ending June 30 -- despite heavy rumors of a larger-screened iPhone 6 arriving in September -- Apple CEO Tim Cook called out the iTunes and the App Store ecosystem, loosely pointing out that its growth reflects how well customers interact with their Apple devices.
"It was another strong performance for the App Store and the other services contributing to the thriving Apple ecosystem. In fact, for the first nine months of this fiscal year, the line item that we call 'iTunes Software and Services' has been the fastest-growing part of our business," Cook revealed.
"iTunes billings grew 25 percent year over year in the June quarter and reached an all-time quarterly high thanks to the very strong results from the App Store," he said.
As for the Mac, Apple sold 4.4 million Macs at a year-over-year growth rate of 18 percent, despite an overall slowdown in the PC market.
"Demand has been very strong for our portables, in particular, and we had a great response to our new higher-performance, lower priced MacBook Air," Cook noted.
Apple has achieved PC market share growth in 32 of the last 33 quarters, noted recently appointed Chief Financial Officer Luca Maestri. Basically, as fewer people buy PCs, customers continue to buy Macs.
Meanwhile, Whither the iPad?
The dark spot on the day for Apple was the vaunted iPad, the hero of Apple's "Your Verse" marketing campaign: The company sold 13.2 million iPads, down from 14.6 million a year ago. Cook tried to get ahead of the news here, noting on the call, "iPad sales met our expectations, but we realize they didn't meet many of yours."
Cook indicated there wer some inventory issues with the iPad, as well as softness in the U.S. and European markets, and he reiterated that customer usage was important to Apple, which of course, relates back to the success of the iTunes ecosystem as an indicator of relevance to customers.
Plus, it turns out that approximately 50 percent of Apple's iPad sales are still going to someone who is a first time tablet buyer.
"I get excited when I see that our retail share, according to the NPD in the month of June, was 59 percent of units and over 70 percent in terms of dollars," Cook said.
In response to analyst questions about the decline in iPad sales, Cook gushed about Apple's recent deal with IBM, noting that Apple believes it will be able to open up an important new sales channel for the iPad through IBM's global enterprise reach.
In fact, Cook believes "the opportunity is huge," and noted that the tablet market still has a lot of growth potential.
"I just think we have to do some more things to get the business side of it moving in a faster trajectory, and I think we're now on to something that can really do that," Cook said.
Apple's guidance for the next quarter, which ends with September, is particularly interesting. If Apple has a big lineup of new products coming -- including two rumored models of the iPhone 6 that are connected to a rumor that Apple is requesting around 70-80 million units from its suppliers -- does the guidance imply that the iPhone 6 rollout might come late in September rather than earlier?
Hard to say. Apple expects its fiscal Q4 to generate between $37 billion and $40 billion. The guidance could take into account the rise in knowledge over Apple's product rhythms and likelihood of an impending iPhone 6. That could cause some potential customers to hold off on their next smartphone upgrade until it's released, which of course could result in fewer-than-normal iPhone sales in July and August.
And What About World Domination?
Clearly we expect our savvy readers to recognize a little hyperbole, but the point remains: In the conference call with investors, after mentioning recent releases like CarPlay, HealthKit and HomeKit, as well as the enterprise deal with IBM, Cook uttered a carefully crafted sentence that encapsulated the entire Apple vision.
"We're extending iOS in even more dimensions as customers around the world make iPhones and iPads an essential part of their lives at home, at school, at work, and on the go. We're putting a huge effort into delivering the best experience for our customers wherever they use iOS. That includes a safe and intuitive user interface while driving -- called CarPlay -- which is being integrated by 29 major car brands including Audi, BMW, Ford, General Motors, Honda, Hyundai, Mercedes, Toyota, and Volvo -- and after-market systems like Pioneer and Alpine," Cook said.
"We've created a new tool for developers called HealthKit, which lets health and fitness apps work together and empowers customers to choose what health data they share. We're taking the first steps in this area in collaboration with the Mayo clinic, whose new apps can automatically receive data from a blood pressure app, for example, and share it with a physician -- or a nutrition app can inform fitness apps how many calories are being consumed each day. Our own health app will provide an easy to read dashboard of all health and fitness data," he explained.
"We're enabling new ways to control light and doors and thermostats and other connected devices around the house using Siri with the HomeKit feature of iOS 8. And in the Enterprise, we are including new security, productivity, and device management features in iOS 8. We forged a relationship with IBM to deliver a new class of mobile business solutions to enterprise customers around the world," he said.
And then the nugget: "From the pocket to the car, to the workplace, home and gym, we have a very large vision of what iOS can be, and we're incredibly excited about our plans."
There you have it. iOS everywhere. Enterprise, home, car, gym... it's already in bed with millions of customers around the world each night. Sure sounds like Apple is going for world domination. Just saying.