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All signs from Apple’s jaw-dropping quarter point to even greater times ahead, says analysts. Even businesses are riding this wave. Eighty percent of the Fortune 100 are either deploying or piloting the iPhone, boasted Apple COO Tim Cook during the quarterly earnings call, and 50 percent are doing the same with the iPad.
“It’s incredible,” Cook says.
This week, Apple posted rosy third-quarter earnings highlighted by a 78 percent jump in profit to $3.25 billion from $1.8 billion a year ago. Revenue grew 61 percent to $15.7 billion, up from $9.7 billion last year. “Apple’s earnings growth was pretty darn impressive,” says Gartner analyst Van Baker.
Apple’s quarter was driven on four fronts: Apple’s new iPad, Macs, iPhones as well as solid international sales.
Apple’s iPad has leapt out of the gate: Consumers gobbled up 3 million units in the first 80 days since its launch in April. It’s an entirely new product category with a sea of potential ahead of it. “Our guts tell us that this market is very large, and we believe that iPad is really defining it,” noted Apple’s Cook.
Part of the iPad’s success is that it taps into the emerging e-reader market. Amazon recently validated e-readers by pointing out that e-book sales are beating hard-cover book sales. In only a few weeks since its debut, the iPad captured 16 percent of the e-reader market, surpassing more established players like the Sony Reader (10 percent) and seizing second place behind the Amazon Kindle (62 percent), according to ChangeWave Research.
What does this mean for consumers? “Media tablets like the iPad are going to drive the price of e-book readers down,” says Gartner’s Baker. “We’ll see a $99-ish price point this year.”
One of the big surprises in Apple’s earnings report was the record-setting sales of Macs. Apple sold 3.47 million Macs during the quarter, a 33 percent growth from the year prior, beating the 22 percent PC industry growth rate.
Wasn’t the iPad supposed to cannibalize the Mac market? Apple said it’s still too early to tell, although Baker doesn’t think the iPad will cannibalize the Mac down the road. Rather, iPad sales will come at the expense of netbooks, which Apple doesn’t play in. “It’s not likely to impact Apple too much,” he says. “We don’t think it will hit the mainstream notebook market at all.”
Of course, another hot Apple product is the iPhone. Apple sold 8.4 million units in the quarter, 61 percent more than the same quarter a year ago. The iPhone has been selling like hotcakes every quarter, but rough conditions this quarter make the number of units sold even more impressive.
Apple’s new iPhone 4 was on sale for only three days before the quarter ended, which means many of the iPhones sold were iPhone 3G or 3GS models. Due to the leaked prototypes of the iPhone 4 during the previous quarter, many people no doubt put off purchasing an iPhone. Which, again, makes the iPhone sales numbers astounding. (Apple also says early iPhone 4 demand has already outstripped supply.)
It’s unlikely the iPhone 4’s antenna issue will hurt sales this coming quarter, say analysts. ChangeWave surveyed 4,028 consumers and found that 16.4 percent plan on buying a smartphone in the next 90 days-which is a “tsunami” of demand in the next quarter, says Paul Carton, vice president of research at ChangeWave. More than half of these buyers said they will choose an iPhone.
Another sign of big things to come: Apple reported that 52 percent of the quarter’s revenue came from outside the United States. “In Asia Pacific, Macs grew 73 percent year over year,” Cook says. “In China, we grew 144 percent. Korea, 184 percent. In Hong Kong we almost doubled.” iPhones lead the smartphone market in mobile-loving Japan.
But Apple is only starting to push into these regions. Apple plans to open a retail store in Hong Kong and recently opened up its second store in China. All tallied, Apple plans to open 25 stores in China and Hong Kong by the end of next year.
“Up until the last few years, Apple has always been [focused] on North America and Western Europe, so that leaves a lot of the planet for them to expand into,” says Baker. “There’s lots of runway for Apple to continue to grow their revenue.”