When Tim Cook came out and announced that Apple had brought in revenues of $54billion in Q1 of 2013, breaking their own record revenue intake, you may think that share prices would have skyrocketed as excited stakeholders rushed to the stock-exchange to be part of this magnificent wonder-company. However, unusually the stock price actually decreased by 10% the following day.
So why might this happen? Well this is the greatest quarter of any company ever, driven almost entirely by the sales of iPhones and iPads. iPhone sales are up 39% with approximately 47.8 million handsets sold whilst 22.9million iPads were sold, up 64%. I could not find any exact figures on the sales of iPad mini’s, but they also seem to be selling well. Despite Mac sales being down 15%, I doubt the Tim Cook will be worried with quarterly net profits up 13.5% from the same period last year to around $13.8 billion, leaving Apple’s cash revenue at around $137 billion - to put that into perspective, thats drastically more cash than the US government.
Stock prices despite the slump are still up 20% from the same period last year even though the rest of the market have only recorded a 13% increase. The same goes for there profits with the rest of the market only increasing by 2%, an embarrassing amount in comparison to Apple’s profits. Probably most important however, is the increase in revenue from China, up 67% to $6.8 billion.
Even with all this news of increased profits, increased sales, increased margins…the stock price has still decreased by 12.36%. People can only speculate the real reason for this but the general consensus seems to be that Apple is beginning to peak and will soon start to move into decline. Personally I’d say it’s Apple fans becoming so accustomed to success that they expected even more! If a football fan goes into a game expecting an easy victory, and it ends up to be a narrow 2-1 victory, even though their team had won they may still be disappointed and that’s the way I think some shareholders are viewing the success of Apple.
It hasn’t been a flawless year however, they have already lost their technological advantage over the mobile phone market and their lead in desirability is slowly but surely being eroded away by competitors such as Samsung and others. Apple’s biggest strength over the past 7 or so years has been its massive profit margins. This business model may need some attention however as Android is becoming increasingly successful at an alarming rate.
The way I look at it, Apple have a few options; they could either drop prices, reduce profit margins and introduce more models and go toe-to-toe with Android or they could hold onto the profit margins and risk losing their market share. Personally I feel that they should hold onto those margins. Part of the appeal of an iPhone is being able to show it off; “I can afford an iPhone and you can’t.” Although they are very common nowadays, owning one still makes you feel that you’re part of an exclusive group. This is down partially to the high prices, and also to the fact that they only have a small number of models, only 6 or 7 over the same number of years, in comparison to Android running on close to 100 models. I believe that the decrease in stock prices is due to greedy shareholders expecting too much from a company that is already the most successful business in the world ever.
If anyone at Apple is reading this, I will happily accept a free iPhone for being on your side….