Juxtaposition and Duality were in session at today's Apple Earnings Call.
On the one hand, there was the onslaught of "crap your pants" ungodly numbers and pattern recognition moments that frame so beautifully why Apple stands alone, not just in computers or mobile phones, or even High-Tech, but in Industry at Large.
- 71% gain in Revenue from the prior year's quarter ($26.7B v. $15.7B)
- 78% gain in Profits from the prior year's quarter ($6B v. $3.4B)
- $8.7 billion increase in Cash/Cash Equivalents from the prior quarter ($59.7B v $51B)
- 95% increase in sales at Apple Retail ($3.85B v. $1.97B), with average store sales up 69% year-over-year ($12M v. $7.1M), and visitor counts up 49% (75.7M v. 50.9M)
- 160M cumulative iOS devices sold, a now dominant platform that didn't even exist a couple of years ago
To appreciate the "Why" and "How" side of this equation, consider this slice from Apple COO, Tim Cook. Talking about how the different product groups within Apple not only like each other, but actually talk to each other, leveraging ideas and best practices across product groups Cook noted that, "If the Mac group and iPad group were separate companies, what would the Mac group build to compete with the iPad?
Probably, a MacBook Air," adding that Apple is not spending one minute worrying about the cannibalization of the Mac by iPad, the cannibalization of which they acknowledged is 'probable.'
Why the non-chalance? Because the flip-side of cannibalization is a halo effect across products, something that I blogged about two years ago HERE. Case in point, if iPad cannibalizes Mac, it's because Post-PC is accelerating, which Apple is incredibly well-positioned in.
At the same time, the learning curve that Apple has mastered within mobile, media and tablet devices is feeding back into PC design, resulting in Instant-On, App Stores and sleek new form factors -- all of which explains why Apple is growing 8X Faster than its peers in the PC industry (24% v. 3%, according to IDC), and has outpaced industry growth for 19 straight quarters running.
Quipped Cook, "If this is cannibalization, it feels pretty good." Damn straight, inasmuch as Apple has positioned themselves in a way that they have at lot less to lose in a legacy segment, and a lot more to gain in the hottest market segments of the decade ahead.
But here's the thing. Culturally-speaking, Apple is the antithesis of the business unit (BU) oriented corporation (think: Yahoo), where separate units are politically-charged, functionally silo'd fiefdoms, such that sibling units are viewed minimally as clueless annoyances, and more typically, as competition -- for resources, rank and recognition.
This seemingly obvious human capital innovation is every bit part and parcel of the Apple Magic, in the same bucket as multi-touch, iTunes, iOS and Retina Displays.
Steve wasn't there, but the Force was with Us
But this event, while a total celebration of the fact that you can indeed go home again and make good (in the case of Jobs), was nonetheless a bit melancholy.
Of course, the 800 pound elephant in the room was whether Steve Jobs most recent health sabbatical is to be his final swan song.
Sadly, my gut is that the answer is yes. I say this based upon a few things. One, is Steve Jobs own words in yesterday's announcement that, "I love Apple so much and hope to be back as soon as I can," words which are decidedly different, more reflective and more resigned than the definitive pledge last time he needed to take care of his health.
If you know Jobs, you know that there is little wishy-washy in the way he communicates the definition of the situation, as he sees it.
Two, was Cook's own repeated words of admiration for Jobs during the call, almost eulogizing the man ("...the culture of innovation that Steve has driven in the company is such that excellence has become a habit).
Three is the way that Cook handled the call, less sounding like a COO and more like The Guy. It just felt different that past calls.
Probably not a coincidence either is the fact that not a single analyst question addressed the topic of Steve's health. Either they know or the ground rules for the call were that it was off-topic.
Either way, circling in my head was the Stars Wars moment (see above video) when Obi Wan knew that Luke Skywalker was ready, that the Force was ready to be released, and that triumph was in sight.
With iPhone on Verizon imminent, and iPad 2 just around the bend, the Force is definitely working on Apple's behalf, and if Jobs were to time the moment, this would be the time.
Put in business terms was Cook's (well-founded) proclamation that "We're in some great markets, some fast moving markets, we have the best products we've ever done, and an incredible product pipeline. We feel very confident."
Therein, lies the duality of the situation. As the Sun sets, it also rises.
Final Thoughts and Bits of Pattern Recognition
- iPhone is unstoppable: Apple sold 16.24 million iPhones in the quarter, representing 86 percent unit growth over the year-ago quarter (8.7M units), which is relative to 70% industrywide sector growth. Their biggest gate on growth is production, NOT demand, and all of their historical data suggests that when they open up a second carrier, not only does ASP hold (currently, it's $625), but market share takes off. They are clearly expecting gonzo adoption by Verizon's 93M strong customer base, and with CDMA activated and iPhone 5 around the corner, it's clear this train is not slowing down one bit. Extreme confidence conveyed here.
- iPod touch is now 50% of iPod device sales: Apple sold 19.45 million iPods during the quarter, representing a 7% percent unit decline from the year-ago quarter. However, 50% of those units were iPod touches (growing 27% year-over-year), suggesting that Apple is rapidly converting the media player CATEGORY into smart programmable devices, in the same way that iPhone turned single-purpose mobile phones into programmable smart phones.
- iPad is a monster hit: The company sold 7.33 million iPads during the quarter at a $600 ASP (vs. 4M units the previous quarter), and if anything, the presence of competing tablets, only will accelerate their momentum, as Cook noted the level of vaporware and market-needs-mismatch that the "competition" presents today, and will present for at least the next 2-3 quarters.
- Apple is absolutely killing it in China: The Great China region, as they call it, includes Mainland China, Hong Kong and Taiwan, and here they did $2.6B last quarter. This is up 4X from the prior year's same quarter (they did $3B for the prior ENTIRE year). In fact, their four China stores are the top traffic and top revenue producing stores companywide. In general, International is outpacing US performance, with Asia-Pac leading the way.
- Enterprise Halo Effect: The one-two punch of iPhone and iPad has at the very least gotten Apple on Approved Device lists across corporate America, with over 80% of the Fortune 100 companies either deploying or testing the device. Given the level of care, feeding and customization that the Enterprise typically expects, and Apple's traditional focus on delivering a homogeneous solution, I still see this segment as more opportunistic than strategic for the company.
- There was zero mention of Apple TV in the call: Read into it what you will.
- Holy Sh-it! Apple's Halo Effect
- Apple's segmentation strategy, and the folly of conventional wisdom
- Integration versus Fragmentation: Making Sense of Apple's Q4, 2010 Earnings Call