Well, you can run out of superlatives eventually. Apple has done it again. For the second quarter in a row it has enjoyed its highest profits ever.
Sales in its Q1 hit $15.7 billion, 32 per cent up on the same quarter a year ago, and profits surged 50 per cent on last year to $3.4 billion.
Steve Jobs knows how to do presentations. He has wowed his public enough times to know how to make an impact. But on this occasion, Jobs didn’t really need to say much. He remarked on how Apple has now become a $50bn company, that’s if you annualize its quarterly turnover. But frankly, the press had already worked out the remarkable significance of the company’s results.
Sales of the iPhone were 100 per cent up on a year ago, hitting 8.7 million units. It even sold 3.4 million Macs, almost 50 per cent up on the same quarter a year ago.
To put these sales in context, back in Q1 2007, during the time when the Western world was booming and there was hardly any talk of a recession, Mac sales were 1.6 million.
iPod sales are now slumping, but is that a surprise? It is hard to see how sales of this device could continue to rise. After all, Apple must be approaching some kind of market saturation level. It seems much of the iPod business now relates to selling replacement models or upgrades.
Of course, all eyes now turn to the next big Apple announcement, the much talked about tablet. Speculation is running wild.
What is especially interesting about the Apple performance is how it compares with Google and Microsoft. Google’s revenue hit $6.67 billion in its latest quarter and profits were $1.97 billion. Google is still growing fast, but not even it can keep pace with the growth at Apple.
Both companies have massive reserves of cash. But Apple has the most, around $40 billion as opposed to Google’s $24 billion. So they both have plenty of scope for growth via acquisition.
Microsoft has not yet released its profits results for the latest quarter, but a year ago its profits came in at $4.17 billion, which was 11 per cent down on the year before.
In terms of market capitalisation, Microsoft currently stands at around $260 billion, while both Apple and Google are running neck and neck – around $184 billion.
Microsoft is still by far the bigger of the three companies. But if the trend we have seen over the last few years continues for another couple of years, then we could seen either Apple or Google, or both, overtaking even the mighty Microsoft.
Analysts reckon business people are increasingly using iPhone or BlackBerry instead of laptops. The new Apple tablet computer could give Apple even more dominance over the world of PCs on the move.
Apple is also supported by a host of peripheral companies with their Apple products. So that’s speakers for the iPod, for example, and apps for the iPhone.
Apple’s weakness lies in its reliance on Steve Jobs, and in its continued ability to innovate. Google, on the other hand, is benefiting from the world of free. By positioning itself to benefit from Linux, it has effectively enlisted the support of an army of programmers working for nothing. Linux is an evolving product. It is improving all the time, and as it improves, Apple and Microsoft will find it represents ever tougher competition.But Google’s market share may be built on less solid foundations than Apple’s. Just as Google came from nowhere, you can imagine some future competitor following a similar course. The rise of Google created massive problems for Yahoo. The big fear at Google must be that someone may do to it, what it did to Yahoo.
© Investment & Business News 2013