back to article Apple's strong iPhone sales crush Wall Street moneymen's tepid expectations

Despite not introducing any significant new products during the second quarter of its fiscal 2014 ended in March, Apple has announced unexpectedly healthy revenues and profits for the quarter, with the all-important earnings per share numbers crushing analysts' expectations. Apple historical revenue and profit chart Apple's …

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  1. Don Jefe

    The 'Inventors Dilema' is a motherfucker of a thing to deal with. Per unit margins skyrocket the longer you can run manufacturing without serious retooling, but you risk pulling a RIM if you wait too long to change. You'd be a fool to change much if your products were still selling like this. This isn't even a dilema. Just don't dick with it and everybody makes scads of cash.

    The end will come, I expect that's why they don't do much with their cash surplus, but that end won't be this year. They've got a good product and it's brainless easy to buy from them. Throughout March we looked at all the different phone options for our staff and family mobile standard and went with Apple and ease of purchase was so easy. One phone call and 183 iPhones land in the hands of my staff the next morning. No jackass Salesdroids coming to visit, no up sell pressure no nothing. Just a straight purchase and I can go back to work and everybody is happy.

    It's easier to buy the phones than to buy aftermarket cases for them. It took a week for the Lifeproof people to get their act together and that was only the result my phoning them up and saying the next time they call or email it better be to tell me the cases had arrived. Accessory sales are dumb easy to deal with, phones not so much, but Apple makes it easy. The lack of hassle is far more valuable to me than any cost or technology differences with other products. Make it easy to buy, people who have things to do will buy. It's easy.

    1. SuccessCase

      Of course eventually their end will come. The question is when. I think later rather than sooner. Here's why.

      Apple are notable precisely for not falling victim to the Inventors dilemma. They have a history of being prepared to cannibalise their own markets and existing revenue streams. So, for example:

      They switched entirely from PowerPC to Intel and didn't try to maintain a PowerPC line for the sake of backwards compatibility.

      They launched the iPhone which cannibalised the iPod. They launched the iPad which they knew, if successful, would undercut MacBook sales (and has).

      They released the MacBook Air at a lower price point than the MacBook Pro, knowing it was a superior solution for the majority of existing MacBook Pro users.

      With hindsight it seems obvious they should have done these things because with hindsight it is obvious their strategy has lead them from strength to strength. However contrast with Microsoft to see how the innovators dilemma can have a real effect. Microsoft were not prepared to cannibalise Windows and now have a commercially under performing tablet/Windows frankenstein OS. They were not prepared to cannibalise Office so are hanging on to an outmoded business model where their feature advantage and user base is steadily being eroded. For the sake of avoiding disruption they have clung to the OOXML file format, which utilises highly normalised data (which doesn't work well for collaborative working because the data involves relationships criss crossing the whole of the document file and isn't isolated to a unit the user currently happens to be working in). And they are being undercut by ever more capable free offerings from Google and Apple, which, in both cases support collaboration (and have highly denormalised file formats). Sure they don't yet have feature parity, but especially where Apple iWork is concerned, the general structure of the UI is far simpler, easy to follow and more effective. Collaborative capability, and Web based access by any users go a long way to overturn Office dominance and many of the advanced features are becoming less and less relevant in this modern socially networked world where work is increasingly done in small collaborative chunks (often utilising focussed vertical apps on mobile devices rather than generalised Mallet to crack and egg solutions like Office), and utilisation of long Office documents is breaking down.

      In truth a business Apple can be usefully compared with is Disney. Walt Disney instilled a set of principles in the company and most notably, instilled a quality ethic and the expectation they should drive for excellence. Those principles have stood the test of time (that's the thing about principles, they tend to be timeless, so do). Sure following Disney's death, it is no longer the company it was when he was alive. But the principles he instilled have helped it endure nevertheless. I think the world has yet to wake up to the fact inventiveness isn't required for those principles to be effective and stand the company in good stead. Because Apple are a secretive product company, the general public and analysts alike can't see where the next hit is coming from. But if you have a company occupying the space Apple occupy and hold on to ensuring principles, success will follow.

      Pure inventiveness is the wrong measure. Invention has always stood on the shoulders of the giants who have come before anyway. Execute on principles organised around regard for user needs and priorities. Work hard to do that and sure as eggs are eggs,innovative products will follow. To corrupt a phrase, innovation is after all 1% inspiration, 99% perspiration.

      1. Don Jefe

        Invention and innovation are the applied result of progress (progress being movement. Not necessarily forward or inherently positive, just movement) so it will of course be built on top of the accomplishments of others.

        Incremebtal development of ideas (rather, lack there of) is also why I don't generally take blank slate' jobs. If a client has no idea of how they want to accomplish something then it's probable that they don't need whatever it is because they obviously haven't actually looked around enough to know what others are doing that works. There are not many better ways to infuriate a soon to be ex, client than pop down to the tractor store and charge them $80k for the $700 pintle and hook they didn't even know existed a day previously.

        It is exceedingly rare for something completely new and truly unprecedented to be created. That's because need is what drives invention and innovation and if there's no need there's rarely a reason to make something (that's the definition of useless). If you go about it backwards you just end up with a stupidly expensive useless thing looking for a problem to solve. Graphene is a good example of that.

        The classic 'Inventors Dilema' and canibalizing your existing products are related only insofar that you've got nothing to canibalize if you haven't invented/bought/borrowed/stolen something to part out.

        It's that last bit that I've been curious to see how Apple dealt with it. Prior to the iStuff, Apple has never been exactly popular or well received. Not too terribly long ago the quickest way to get rid of undesirable staff at software companies was to put them in charge of the Apple/Mac commercial sales closet and you didnt even have to be rough about it. Give them a promotion and tie their salary to sales and they're gone in 8 weeks or less. But that job is not quite as bad anymore.

        Now that they're actually accepted products 'traditional' business will have to creep in or they'll be steamrolled. You can already see the corner they're working into. I'm extremely interested to see how they ultimately respond.

        But I don't like the Disney quote. Its backwards, or at least incomplete. If you're sweating that much you're doing something terribly wrong. Business success is directly proportional to how easily you can create your product and get it to market and how easy your product makes something for your customers. How can one make things easier for others if one can't make things easier on oneself?

        1. Dave 126 Silver badge

          >Apple are notable precisely for not falling victim to the Inventors dilemma. They have a history of being prepared to cannibalise their own markets and existing revenue streams

          Compare and contrast with Sony, who had all the ingredients to make an 'iPod' before the iPod, but didn't .... and even the first few generations of Sony HDD 'jukeboxes' were tied to the awful 'Sonicstage' software and only played ATRAC files. Perhaps Sony's publishingt wing had something to say? Similarly, the MiniDisc was good, but it didn't allow 2nd generation digital copies, and the DataMD arrived late in the game. Had Sony make a 1GB MiniDiscHD (normal MDs were around 100MB for a quid per disc, making them very cheap compared to ZIP disks or flash memory at the time) player with wider codec support and the PC connection, it would have been very competitive against the 1st and 2nd gen iPod.

      2. Charlie Clark Silver badge
        Thumb Down

        Re. Microsoft and Disney

        For the sake of avoiding disruption they have clung to the OOXML file format, which utilises highly normalised data…

        WTF? I can assure that OOXML is not particularly highly normalised but the file format is not really relevant when you are working within the application. Microsoft rushed the format out and because it got ECMA stamped on it, is kind of stuck with it. It's a shit format in most cases but not because of it's NF which basically bizarre: viz. SharedStrings allows duplication and embedded styling.

        Disney has, like many companies, crises. The fact that it's still going is down to no small part to Pixar and buying Marvel: it spent a good while actively discouraging innovation within Disney and Eisner was an idiot.

        Retroactively justifying Apple's successes is dangerous because it is selective and ignores the failures. Under Steve Jobs Apple managed the difficult transition of OSes and expanded extremely successfully into consumer electronics. The ship hasn't sunk under Cook: sales and profits are up and the devices are available around the world but where are the new products? Why is the I-Pad losing market share where the competition is still so weak?

        1. johnnymotel

          Why is the I-Pad losing market share where the competition is still so weak?

          I think Mr Cook answered this one when he talked about the embedded market. I assume he was talking about Amazon Kindle and others like that. He said that Apple has no desire to enter a market like that. I am thinking that if the analysts segmented the tablet market properly, Apple would have a huge share in the top end segment.

          My iPad has all but replaced a MacBook Pro. I use it to participate on conference calls, I use Quip to stay in touch with work colleagues scattered around the world. I use it for emails, browsing, research etc. Of course it gets some Netflix and Candy Crush downtime....

    2. JDX Gold badge

      Excellent and sensible discussions in an Apple thread!

      >>They've got a good product and it's brainless easy to buy from them.

      Sums it up perfectly. The iPhone and especially the iPad remain excellent products at the top end of the market. I think they don't really have an edge in phones any more except in marketing, but the iPad is just so slick.

      And no I'm not a fanboi... I only own an iPad for work use and I use a cheap Nokia phone... but these seem rather objective facts for the massive majority who don't need to customise their device. Obviously Reg readership has a disproportionate number of people who DO want more control.

      1. Charlie Clark Silver badge

        The iPhone and especially the iPad remain excellent products at the top end of the market. I think they don't really have an edge in phones any more except in marketing, but the iPad is just so slick.

        If that's the case, then why are I-Phone sales so strong and I-Pad ones weakening?

        1. Philippe

          Simple.

          They've added the biggest Chinese operator with 750Millions subscribers to their list of reseller which boosted the iPhone sales.

          There has been no new iPad launched this quarter and most of the people who wants one or need one already have one, and won't change it every 2 years like they'd do with a phone.

  2. Anonymous Coward
    Anonymous Coward

    Stupid people.

    Apple qualified it with 'new customers'.

    That means those new networks did most of the sales and I think Cook qualifying with 'new' may means iPhone sales are actually well down elsewhere.

    The iPad is 20% down. No surprise there. Its all Air.

  3. Scoular

    Apple is selling goods and services people want, at prices they are prepared to pay.

    A classic way to conduct a profitable business. Microsoft should take note of that rather than trying to force customers it adopt its chosen model even if it hurts.

    As the first post notes Apple does face a when to upgrade problem as many manufacturers have in the past, and got wrong on occasion. There is an additional problem in that the products they sell basically do what customers actually need and have for a while so most of the new 'features' do not amount to much for most users. Middle age has settled upon their product range and essentially those of its competitors.

  4. GaryDMN

    There is clearly a double standard

    It's funny how stock analysts and the press comment on new products from Apple, while Google can do no wrong. Google has announced products so long ago, that they are starting to seem like urban myths, since there is no launch date, years later.

    1. Don Jefe

      Re: There is clearly a double standard

      Google can 'do no wrong' because, as you note, it's hard to judge a product if none exists...

      Furthermore, it's really, really tough for most people to see past the all the zeros most Apple headlines have when Google 'gives everything away for free'. It's rather clever to hide your privacy fueled shenanigans behind the cover of someone else's financial news.

  5. Anonymous Coward
    Anonymous Coward

    Returning money to shareholders

    smacks of a Share Price Support operation.

    1. Charlie Clark Silver badge

      Re: Returning money to shareholders

      No, share buybacks are more tax efficient in many countries than dividends.

  6. Aristotles slow and dimwitted horse Silver badge

    There is no title.

    "We're eagerly looking forward to introducing more new products and services that only Apple could bring to market."

    ROFL.

    1. This post has been deleted by its author

  7. Charlie Clark Silver badge

    Silly article

    Rather than crowing about how the analysts got it wrong the article could have spent more time on the drop in sales of the I-Pad. As Don Jefe points out, the I-Phone is a cash cow with great margins selling in more countries. But what's gone wrong the with I-Pad?

    1. jai

      Re: Silly article

      some interesting ideas on the ipad slow growth from last weekend:

      http://daringfireball.net/linked/2014/04/21/gassee-ipad

      http://www.mondaynote.com/2014/04/20/the-ipad-is-a-tease/

      Posit: slow iPad sales are worse news for the PC market: implies phones can take the greater share of PC use cases.

  8. David Lawton

    I think the iPad sales are down because we don't change them as often as we do our phones. I'm typing this on my iPad 2 from 2011 and I still have no plan to change it, it's still quick , holds lots of charge and does what I need.

    1. Charlie Clark Silver badge

      I'm inclined not to agree (here in Germany tablets are being bundled with internet access plans) with you but whatever the reason it's not really good news for Apple's growth-based business model.

  9. Eddy Ito

    Simple maths

    EPS = E divided by S. The share buyback program makes S smaller which makes EPS larger for any given E.

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