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Apple continues its march to global domination

Apple Store

© Flickr/CC-licence/Andy

It would appear that I’m in a minority of one, having got so disillusioned with the iPhone hype that I made my next upgrade a Windows Phone. 74.5 million iPhone sales in the last quarter, record revenues and profits that would make many a Nation State green with envy, would suggest that the world is still very much in love with the Apple colossus.

Yes, Apple has once again exceeded market expectations with $74.6bn of revenues in its first quarter, up a staggering 30 per cent year-on-year, and an equally eye-popping $18bn net profit, up 37 per cent. The world’s media is awash this morning with comparisons, trying to put these numbers into context. Needless to say, they are huge numbers, and the envy of every single other private company, bar none.

It even has $20bn sitting in the bank, with total assets worth $262bn – and going back to crazy comparisons, that asset figure is more than the UK government spends each year on healthcare and education (£171bn). That though, was it’s holiday quarter. Next quarter it is projecting lower revenues of “just” $52bn to $55bn.

Its home market continues to dominate revenues, accounting for 41 per cent of the total, with Europe in second spot with 23 per cent. However, China is increasing its share, which rose 70 per cent year-on-year and now accounts for 22 per cent of the total. Taking China, Japan and the rest of Asia together amounts to 36 per cent of revenues.

According to research firm Canalys, the popularity of the iPhone 6 and 6 Plus in China has resulted in Apple taking first place in the country’s smartphone market for the first time (by units shipped).

“This is an amazing result, given that the average selling price of Apple’s handsets is nearly double those of its nearest competitors,” said the company in a press announcement. “While Chinese smart phone vendors are quickly gaining ground internationally, Apple has turned the tables on them in their home market. The company is finally riding the large screen and LTE trends in China, along with a clampdown on grey exports of its products out of Hong Kong.”

In terms of products, unsurprisingly it’s the iPhone that dominates, and Apple’s decision to move towards an Asia-friendly larger screen design appears to have paid off. Its 74m iPhone sales in the quarter accounted for 69 per cent of the company’s total revenue, averaging $687 per iPhone. This total was up 46 per cent year-on-year, and 90 per cent on the previous non-iPhone 6 quarter.

Apple’s iPad range fared less well, as generally expected, most likely due to longer periods between device replacement. It sold 21.4m iPads in the quarter, which was down 18 per cent year-on-year although up 74 per cent on the previous quarter. Of some concern is that the average selling price for iPads is falling, whereas it’s rising for iPhones. If you want to see more evidence of this, Jan Dawson has some excellent visuals and analysis on his Beyond Devices blog.

“We’d like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high,” said Tim Cook, Apple CEO. “The execution by our teams to achieve these results was simply phenomenal.”

Quality versus quantity

Indeed it was phenomenal, but at what expense? Whilst we applaud Apple for a stellar financial performance, and there can be no denying the incredible popularity of its devices, there does appear to be a cost – and that’s software quality. I know I’m not the only one who continues to experience problems with OS X and iOS (disclaimer: I’m a long-term Apple fan and wouldn’t be without my iMac, MacBook Pro and iPad).

Michael Tsai has collected comments from a vast number of software developers, many of whom are current or former Apple employees, bemoaning the lack of quality control in Apple’s recent software releases. Common themes emerge from the discussion: whilst hardware quality is incredible, software suffers from marketing pressures and expectations; and the drive to sign up new customers means that it need not fear upsetting its loyal, long-term users. There was a time when Apple was synonymous with “it just works”, back when Windows was constantly falling down. But now, Apple has itself seeded the notion that “it might just fail”. For those new Apple users coming from a Windows background, a spinning beach ball and the occasional need to reboot is nothing new, it’s par for the course.

But in the end does this really matter? My own experience switching to Windows Phone (Lumia 930) is that it’s very good hardware (although the processor runs incredibly hot at times) with a lovely user interface, but I’ve simply replaced one set of gripes with another. The reality is that we appear to be accepting 80 per cent reliability, at best, with our connected devices. And whilst the market-leading company continues to post record financial results, why should they change?

Meanwhile, Apple’s Tim Cook confirmed that the Apple Watch will begin shipping in April, for upwards of $350. He also revealed that on November 22, Apple shipped its one billionth iOS device: “It was a space-gray 64GB iPhone 6 Plus, which we've saved here at Apple.” However, his announcement that “2015 will be the year of Apple Pay” could stretch even Apple’s considerable ability to muscle in on new markets.

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