Apple released its latest quarterly earnings report last week, which has proved to be fascinating and quite frightening reading. That’s Apple the computer-maker, right? Well not really. It is now Apple the phone-maker.
Stick the numbers in Excel, and out pops the information that in the last quarter, Apple sold 37 million iPhones generating a healthy $24bn. Yup, that’s $24bn in the last 12 weeks, or a turnover of a couple of billion dollars a week. Just in phones. In fact, iPhones made up 53% of Apple’s turnover in the last quarter, whereas Macs were a paltry 14%. So that is now 86% of Apple’s business which is not actually in what you normally think of as computers. Even the iPad contributed to 20% of the turnover, and that hadn’t even been invented a couple of years ago. To produce $9bn in three months with a product that wasn’t even available a short time ago is little short of staggering.
Add all this stuff together and Apple managed to produce a turnover of a little over $46bn (the “little” still being $333 million, just to maintain some perspective). But even better than this, they produced a net profit of $13bn. Let’s pause to consider that figure for a moment. It means that Apple is now $13bn richer than it was 3 months ago. The fact that it now sells more phones and iPads than computers doesn’t seem to be doing it any harm from any angle: gross margin has actually increased from 38.5% a year ago to 44.7%. So you’d have to think that phones and iPads make bigger margins than computers.
These would just be numbers (I suppose they are just numbers) were it not for a few interesting considerations. The first of these is that despite this gargantuan wealth and success, Apple isn’t planning, to the best of my knowledge, to hand any of it over to its shareholders in the form of a dividend. Apple has never paid one. It sits like an ogre in a cave, gloating over its treasure. What really, is the point of securing another $13bn? I suppose conservatively, Apple will amass a further $40bn over the next 12 months. What do you suppose it is going to do with it? The Apple slogan used to be “Knowledge is power”. I’m inclined to think that the unspoken slogan now is “Obscene wealth is power”. After a while, isn’t it all just a bit meaningless?
The second interesting consideration is that gross margin. At 44%, it compares somewhat favourably with the 7%-8% retail margin that Apple accords those selling its products. That’s right; when you show up and hand over $500 for an iPad after half an hour’s discussion with a knowledgeable sales person, the shop will keep about $35. It’s barely worth them talking to you. And the worst of it is, that you will go back and hassle them again, because there will be some area of your Mac, or your iPhone, or your iPad that you don’t understand and you will need a bit of professional guidance. They will try and tell you what you want to know and won’t charge you for the information in the interests of good customer relations. The shop can’t afford to hire morons, because low-IQ people would not make good employees, given the complications of the technology, so it finds itself paying competent people substandard wages for the greater glory of Apple. The shop can’t afford to pay their staff any more, Apple having given them a very small piece of their pie.
Retailers would be better off selling plates, or jeans or something less complicated where you could get cheaper less intelligent staff and still make a living margin. But Apple doesn’t really care what happens to its old retailers. For a start, the phones are sold by any electronic goods box-moving company, or by one of the phone operators. The iPads can be sold by supermarkets. Even the Macs can be sold by supermarkets. And hey, if some consumers really need some technological guidance, then Apple just opens an AppleStore and sends whatever retailers it had in the area to the wall.
Then you also have to wonder how much Apple is paying the people who actually make their machines – mainly in China (of course). After all, if your gross margin as a manufacturer is 44%, you must be putting some serious pressure on your suppliers. And if you are selling 30 million units in 3 months, then you’d have to think that you’d have plenty of pressure to wield. If Apple doesn’t want any of its resellers to make a decent return, why would you think it would feel differently about its suppliers?
Why even talk about Apple at all? Probably because it has always cultivated a cosy, cuddly, anti-establishment image. Remember that iconic ad that launched the Mac? Well the truth is that Apple now is Big Brother. It’s a corporate behemoth and it acts like a corporate behemoth. It uses its weight to impose itself in whatever business transaction it undertakes. It’s an amazing marketing success story – you can’t help admiring it – and the shares still seem hugely undervalued. But friendly, Apple is not. Maybe this is why the smiling Mac face logos have all disappeared from their systems and the systems are now all called after big cats: panthers, leopards, tigers, lions : killers all.
