The iPad was announced to a loud chorus of disapproval and disdain. It’s easy to forget the overwhelming scorn and insult poured on the product for months before and after sales start. Analyst forecasts were comical. At this time it looks like all 12 month iPad unit forecasts will have missed by more than 100% (mine included).
As data on iPad performance was published for the first quarter’s sales, the mood swung from ridicule to ridiculous.
I don’t write product reviews and I don’t pass judgement on individual products but I do own and test various products. For example I have the Android powered Samsung Galaxy 5 (GT-I5500) and the experience is, in my opinion, better than for recent Symbian phones but not as smooth as for Apple’s products.
But that’s not what this article is about.
It’s about
John Gruber puts things in perspective:
The key bit: “At the critical juncture […], when they should have gone for market share, they went for profits.” I think this encapsulates Jobs’s philosophy since taking over Apple in 1997. Take the high end of the market first, establish a brand and presence, then steadily start to expand.
I’ve long argued that Apple is in the phone business to win significant share (i.e. greater than the share they have had in the PC business). Since the phone market is vast (1.2 billion phones sold in the last four quarters) iPhone volumes must be as well.
So how has share evolved, and what can we expect? This is a graph of quarterly share for iPhone including a four period moving average:
The trend is clear to see. With seasonal variation due to the launch cycle, the share is likely to increase over 3% and keep going. How far can it go? That’s a strategic decision for Apple’s management. If we are to take Steve Jobs’ word that their plan is not to be a niche player in any market they target then I have to conclude that Apple is aiming above 10%.
The volume expansion in the US due to the end exclusivity is only the latest in a series of distribution deals that Apple has brought to bear: International expansion, dropping exclusivity in other countries and broadening the portfolio (including earlier models in current line-up) are all natural and obvious moves in a broader market push.
Pricing might be considered another lever that Apple could use, though that seems unnecessary today.
I conclude that growth in iPhone sales of 50% per year seems entirely possible for the next few years. Such growth would allow Apple to reach 10% of the world’s 3G subscribers by 2013. That would still be only 4% of all phones and 20% of smartphones.
Calling the iPhone this quarter was going to be a challenge. This was a transition quarter where an old lead model would be replaced with a new one. The launch of the iPhone 4 was going to affect the volumes, but nobody could predict how. We’ve had a few such quarters and they were volatile. The number of sales days varied and the distribution of the old product was much different. The problem was compounded by the leak of the prototype and the uncertainties of launch day logistics. My forecast had been 8.5 million units.
In the event, 8,398,000 iPhones were sold. This included 1.7 million iPhone 4s which means about 6.7 million 3GS phones sold. That’s quite remarkable given the end-of-cycle timing. 8.7 million 3GS were sold in Q2 which means the sell-in was down only about 2 million for the transition.
The even more remarkable story is the average selling price. It came in at $635.15. The iPhone has ranged from $437 to $674 ASP over the last three years (see chart). This figure places it near the top of the range, a great performance for the end of a product cycle quarter.
I estimate gross margin at 56%, a drop from the more typical 60% due to iPhone 4 launch. With revenues of $5.33 billion and cost of sales of $2.2 billion, Apple created operating profit of $3.13 billion–we’ll take a look at that number relative to other vendors later.
Growth year-on-year were 74% for revenues and 61% on units. For a transition quarter, these numbers are spectacular. For comparison, during 2009′s transition quarter (Q4) revenues grew at 5% and units 7%. Furthermore, according to Apple’s management, iPhone unit sales in the June quarter were running 90% above the year-ago period prior to the company draining thechannel ahead of the iPhone 4′s release. In the December and March quarters, unit sales were 100% or more above prior-year results. This means that 100% growth is sustainable though going forward I’m keeping forecast at 65% growth.
Seventy percent revenue growth cannot be seen as anything other than a sign of rude health.
MacDailyNews – Yankee Groups Howe sets the record straight on Apple iPhone and Android devices.
• No other manufacturer can claim nearly the loyalty of iPhone owners. RIM BlackBerry owners see a touch-screen device as the antithesis of their hard keyboards. However, even in this category, 23 percent of respondents plan to buy an Apple iPhone. We see similar results with all other mobile phone owners. In fact, 36 percent of Google-branded Android phone owners say they plan to buy an iPhone, surpassing the 32 percent of Google-branded phone owners who intend to buy another Android phone.
