Well, it happened. Apple reached a market capitalization of $1 trillion. It’s a big number. It’s only a milestone because of how counting works, though it’s a big milestone indeed.
The one thing investors can be sure of in the wake of this historic accomplishment is that whatever market strategy got Apple into the trillion-dollar club must be scrapped and replaced with whatever its smaller competitors are doing.
Or something like that…
Writing for Forbes, Ewan Spence is back in the market-share-griping game to read into the terrible results lurking within Apple’s record third quarter…
“New iPhone Success Threatened By Apple’s Dangerous Gamble”
As we’ll see momentarily, this “dangerous gamble” is exactly what led to Apple’s huge success. It’s something of a paradox that Apple’s trillion-dollar strategy is the very thing that supposedly threatens it.
Apple’s latest quarterly results show a company in good financial health making solid short-term returns … But the figures also hide a long-term problem for Apple that has not been addressed.
What is this long-term, glaring, blistering, unaddressed problem?
iPhone sales are stagnant .
But… the moneys, they’re huge! Seriously, if you said one number every second, it would take you a trillion seconds to count to Apple's new market cap.
A year on year increase from 41.03 million to 41.3 million units is barely an increase at all.
Yep, the math checks out. And the fact that revenue still rose significantly shows that Apple’s strategy — a focus on profit rather than sales — is working.
Last year’s champion was the iPhone 7 and iPhone 7 Plus, handsets that were regarded as iterative upgrades…
Clearly they weren’t regarded as too iterative because they were the top-selling phones in the world in their heyday.
… and simply marking time until the more advanced iPhone X appeared on the scene - a handset that was expected to trigger a super-cycle of sales.
The super-cycle was expected by analysts who managed to forget that a thousand-dollar device does not need to sell as many units to be more successful than a less-than-thousand-dollar device. Apple never promised a super-cycle; it’s the analysts’ problem if they can’t manage the math.
But anyway, the evidence has shown that the iPhone X far outpaced analysts’ recently pessimistic expectations. Even to do relatively well is a big accomplishment for a thousand-dollar device, and Spence seems blind to the fact that higher iPhone ASPs are leading to more money in Apple’s — and investors’ — pockets.
One year later Apple has cut back on parts ordering…
This literally happens every year, to the repeating soundtrack of the same pundit complaints, and it’s never a problem.
… the iPhone 8 and iPhone 8 Plus outsold the iPhone X…
Maybe it’s because… they’re cheaper?
… and the three new devices struggled to sneak past two tired devices in terms of unit sales.
But… they still actually beat last year’s models despite being more expensive. How is that underwhelming?
Spence is making the obtuse assumption that his metric of unit sales actually matters and bemoans the current iPhone lineup, all while paying zero attention to the measure of success sometimes known as money. And Apple has made a lot more of that because of the iPhone X.
Huawei has knocked Apple back into third place in terms of market share…
Why is market share the only thing Spence cares about? Market share means nothing unless a company can make more money than its competitors. Which Apple is doing.
But anyway, here’s some market share for ya. The iPhone has around 80% market share in the $600-plus smartphone market. That its global market share is so much lower means that a lot of cheap smartphones are being sold, and the iPhone isn’t even competing with those devices. In the markets where it does compete, Apple has a lot of market share and even greater profit share. So why are we complaining?
That Cupertino has managed to increase revenues per user will make many comfortable, its inability to significantly increase the growth of users is the key limiting factor.
It’s no secret that the smartphone market is saturated, so the best way to make more money is to make more money per user. Oh, math. Where would we be without you?
Probably having a lot more discussions like this one.
With no sign of a change in attitude, Tim Cook is gambling on more revenue per customer to push Apple over the trillion dollar mark.
This piece was published not long before AAPL hit $1 trillion, and yeah, there was no radical change in attitude to help the company along.
Obviously Ewan will never admit that it was profit rather than market share that got Apple to where it is, but these days you should never expect a pundit to realize that his way of looking at a market is bogus.
Ewan may think that market share is the big thing for Apple to worry about, but the chances of Apple’s trillion-dollar strategy coming back to bite it seem close to one in a trillion.