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Apple: Three Years After Steve Jobs

Posted on Tuesday, Nov 4th 2014

Tim Cook continues to put his stamp on Apple. His recent efforts for Apple have helped the stock reach record highs. In his own words, Apple recorded the “biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus” and is getting ready for the holiday quarter with its “strongest product lineup ever.”

Apple’s Financials
Apple’s (Nasdaq: AAPL) fourth quarter revenues grew 12% over the year to $42.1 billion, in line with the Street’s estimate. EPS of $1.42 was also significantly ahead of the market’s forecast of $1.31 per share.

During the quarter, Apple’s iPhone sales grew 12% over the year to 39.3 million units, ahead of the Street’s estimates of 38 million units. The phones generated $23.7 million in revenues, reporting a 20% increase over the year. iPad sales during the period fell 7% to 12.32 million units, falling short of the Street’s 13 million estimate and reported a 10% decline in revenues to $5.32 billion.

Analysts believe that iPhones are cannibalizing sales of iPads, but Apple is not too worried as they are convinced that once a user gets addicted to one Apple device, they will shift to another one soon. I don’t agree with this analysis. With iPhone 6+, Apple should expect a serious cannibalization of the iPad business.

Mac sales improved 25% to 5.52 million units and revenues from the computer sales increased 20% to $6.63 billion. iPod sales fell 10% to 2.64 million units and revenues declined 7% to $410 million. iTunes revenues improved 3% to $4.61 billion and revenues from accessories increased 12% to $1.49 billion.

Apple ended the year with revenues growing 7% over the year to $182.8 billion and an EPS of $6.45.

For the current quarter, Apple forecast revenues of $63.5 billion-$66.5 billion, compared to the Street’s estimates of $63.67 billion. Gross margin is projected to be between 37.5%-38.5%.

Apple’s Product Lineup
Apple is gearing up for the holiday quarter with significant new product releases. They recently released iPhone 6 and 6 Plus to rave reviews. The thin 6.9 mm iPhone 6 features a bigger 4.7 inch screen, 1344×750-pixel display, easy handling, A8 processor, upto 128 GB in storage, Touch ID capability and is NFC capable. The 6 Plus phone has a 5.5-inch screen, 1920×1,080-pixel display and besides the features of iPhone 6 also has additional features like optical image stabilization in the camera and the ability to run more apps in the horizontal-landscape mode and split-screen effects similar to an iPad. During the weekend of their launch, the two phones had surpassed sales of more than 10 million units.

Apple also released new operating systems, the iOS 8.1 for mobile devices and OS X Yosemite for the Mac. The biggest feature in the new Operating Systems is their interoperability that will let users switch between devices seamlessly and will be able to work on the same project on multiple Apple devices.

Recently, Apple’s biggest launch was that of Apple Pay, a mobile payment system made available for the iPhones. Apple Pay lets consumers pay for their products at retail stores with the swipe of their phone instead of their credit card. Before the launch, Apple had mentioned the strong support the service was getting from banks and retailers. The company had six banks supporting it along with retailers like Bloomingdales, Panera, Sephora, Groupon, Subway, Disney, Target, McDonald’s, Whole Foods, Macy’s, and Walgreens. However, the service has not been accepted yet by all big retailers.

Rite Aid and CVS, for instance have not yet agreed to Apple Pay as they continue to evaluate their options. While these retailers have not confirmed their reasons, analysts believe that they are delaying the decision in favor of competitor, CurrentC. CurrentC is a mobile payment system developed by a consortium of merchants who are working together to eliminate credit card networks and free the payment system of the cost of transactions charged to the merchants. The system, which will be available next year, will also track consumer purchase history, offer discounts, and provide information on customer loyalty to the merchants. Apple Pay, on the other hand, works with the credit card companies and keeps transaction details secure. Apple earns revenues by charging 0.15% for the transactions conducted through their system and comes out of the 2% the merchant pays to the banks.

But the consumers seem to like Apple Pay. Within 72 hours of its release, Apple Pay saw more than 1 million credit cards being activated.

Apple’s stock is trading at record high levels of $109.40 with a market capitalization of $641.61 billion.

This segment is a part in the series : Apple

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