Apple Talks Business
By Lori Castle, Editor in Chief
When someone from Apple says: “Hey, do you have a second?” That could be an expensive piece of time in their world considering the fact that “800 apps per second” are downloaded from the iTunes store.
This is just one significant figure that came out of the Apple earnings call on April 23 as the company talked results and strategy with much more than usual references to the mobile enterprise.
CEO Tim Cook actually called some of the company’s numbers “unimaginable even to us just a few years ago.” Peter Oppenheimer, SVP and CFO ran through the data.
Select financials: Q2 2013 vs. Q2 2012
- $43.6B in revenue, +11%
- 37.4M iPhones, +7%
- 19.5M iPads, +65%
- $2.4B iTunes revenue, + 28%
- 850,000 iOS apps total; of which 350,000 are for iPad
- 45B cumulative app downloads
- 800 apps downloaded per second in Q2 2013
- 300M people in the cloud (since launch 18 months ago)
- 82% of North American tablet web traffic from iPad in March 2013
Was this enough for the Street? Not really. As Cook put it, “Despite producing results that met or beat our guidance as we have done consistently, we know they didn't meet everyone's expectations, and though we’ve achieved incredible scale and financial success, we acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high level we experienced in 2012.”
But, he pointed out, that Apple’s first half of the year revenue growth is “like adding the total first half revenue of five Fortune 500 companies.” In fact, these numbers beat the GNP of—many more than five—small countries.
Apple doesn’t compare itself to the proverbial “oranges,” but is challenged to actually compare Apple to Apple. Cook said, “Our fiscal 2012 results were incredibly strong and that’s making comparison very difficult this year. Last year, our business benefited from both high growth and demand for products and a corresponding growth in channel inventories along with a richer mix of higher gross margin products, a more favorable foreign currency environment, and historically low costs.”
Apple introduced the iPhone 5
last September and the 4th generation
iPad and mini in October, and there has been hearsay that the next best thing from the company would arrive this spring.
Cook pretty much put those rumors rest and started new ones saying, “Our teams are hard at work on some amazing new hardware, software and services that we can’t wait to introduce this fall and throughout 2014…one of our areas for growth are potential new categories, and we’re very excited about those.”
One analyst pushed for more specifics, but Cook or Oppenheimer did not give.
Cook’s only elaboration was a bit of rhetoric. “Apple has many distinct and unique advantages as the only company in the industry with world-class skills in hardware, software, and services. We have the strongest ecosystem in the industry with App Stores in 155 countries, iTunes music stores in 119 countries, hundreds of millions of iCloud users around the world, and most importantly, the highest loyalty and customer satisfaction rates in the business…we have a tremendous culture of innovation with a relentless focus on making the world’s best products that change people’s lives…and we’ve got a lot more surprises in the works.”
What’s notable above, is a repeated inclusion of “services” in the Apple business model, something that also seems to be an industry trend (many vendors claim to offer a full solution beyond the device now), and speaks directly to the enterprise. This is something that Cook is doing more of, and a market for which his predecessor
had contempt. .
Cook and Oppenheimer both emphasized Apple’s share in the corporate space. Cook cited Good Technology data that says that “iOS accounted for 77% of all their activations by their corporate customers.” That would exclude BlackBerry, but includes “all the other guys,” he said, adding, “As a matter of fact... iPad now is being used in 95% of the Fortune 500 and what’s even more impressive probably is on the global 500 companies, we’re now in 89%.”
Oppenheimer provided specific examples of Apple deployments to back this up, “Cisco’s BYOD program across 80 countries has resulted in a 50% increase in the number of iPhones connecting to its corporate network in the past year.”
“GlaxoSmithKline developed more than 50 in-house iOS apps to support the thousands of iPhones and iPads connecting to its corporate network. Other companies such as AXA, Nordstrom’s, Eaton Corporation and Takeda Pharmaceuticals are supporting thousands of iPhones, and are continually adding new in-house apps to better serve customers and help employees work more efficiently.”
The same goes for tablets according to Oppenheimer. “We are delighted by the number of companies that are choosing iPad for their most important business tasks as well as the rapid adoption of iPad in emerging countries around the world.”
There Really is “An App for That”
Apple’s 2008 ad slogan, “there’s an app for that” was foretelling and the number keeps growing. Canalys research estimates the sales from the App Store “accounted for 74% of all app sales worldwide in the March quarter.”
But getting back to business, it’s not just public apps that are driving Apple’s share. Cook said, “I’ve seen more and more people developing more and more custom apps for their businesses on iOS to be used on iPad and we’re very, very bullish on it.”
Oppenheimer added, “Businesses around the world continue to scale iPhone across their workforces. Globally, nearly 30,000 companies are developing and distributing iOS apps for corporate use by their employees.”
Corporate security always a mobile issue, Oppenheimer pointed out, “Thanks to careful App Store curation for the quality of apps, the iOS platform offers a much more secure environment. Recent research by McAfee Labs found that 97% of identified mobile malware was on the Android platform.”
Not to mention, Apple has 350,000 apps optimized for iPad, “versus a few hundred for our competition” according to Cook.
Cook On the Competition
A quick knock to Android there, Cook referred to the competition earlier as “the other guys” but has a strong view of the landscape and Apple’s place in it.
“The smartphone market has always been competitive. The names of competitors have changed. In the beginning, RIM was sort of the very strongest player, because the smartphone really got going into the enterprise area. Today, our tough competitor from a hardware point of view would be Samsung, married to Google on the operating system side.”
He went on to say, “But we feel that we have the best products by far. And we are continuing to invest in innovative products and feel really, really confident about our product pipeline in both hardware, software and also our services. We have the best ecosystem by far, and we’re just going to keep augmenting it…I feel very good about our competitive position.”
He also mentioned the disadvantage competitors have, presumably Android, due to fragmentation, whereas Apple can update iOS to a substantial number of customers and devices at once.
When it comes to the changing (growing) size of smartphones Cook thinks the competition falls short there as well. He believes the iPhone 5 has “the absolute best display in the industry” and while some may value large screen size, he implied that other factors were more important citing resolution, color quality, white balance, brightness, reflectivity, screen longevity, power consumption, portability and compatibility with apps.
“Our competitors had made some significant tradeoffs in many of these areas in order to ship a larger display, we would not ship a larger display iPhone while these tradeoffs exist,” he said.
Cook also cited “incredible usage” as a “phenomenal difference showing the strength of the ecosystem.”