Apple's Latest Weapon
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
"Being the richest man in the cemetery doesn't matter to me… Going to bed at night saying we've done something wonderful… that's what matters to me." - Co-founder and former CEO of Apple, Steve Jobs(February 24, 1955 - October 5, 2011), on the success of Bill Gates and Microsoft, as quoted in The Wall Street Journal (Summer 1993)
Apple (NASDAQ: AAPL) has been doing exceptionally well, and sales are still going strong despite what analysts had predicted will be a period of slow growth due to the passing of former CEO and co-founder Steve Jobs and increasing competition from rivals, namely Samsung (SSNLF.PK), Nokia (NOK) and Google (NASDAQ: GOOG). Selling over 37 million iPhones, nearly 15.5 million iPads and 5.2 million Macs, Apple is doing more than well.
The company was recently listed as the second fastest growing tech company in the world by Forbes in its Fast Tech 25 list, which is a 14 spot jump from last year's result thanks to its record quarterly figures. Forbes' Fast Tech 25, which is created by assessing over 5,000 publicly traded companies that have at least $150 million market share, honored the top 25 most profitable companies. Apple enjoyed a 63% growth rate from this time last year and managed to net about $142.4 billion in revenue and see three-year sales growth of 43%, which set it far apart from its rivals. In fact, its closest competitor, Cognizant Technology Solutions (CTSH) was 9th on the list, with a 33% year-to year growth, about half of Apple's growth rate.
Last week, the smartphone giant announced that it had beaten Samsung in sales in Japan. More than 24.2 million smartphones were shipped to Japan, 30% of which were Apple's iPhone-that's roughly 1 in 3 of every smartphone sold-clearly indicating it as the market leader. Samsung only had 8.3% market share, behind local makers Fujitsu (FJTSY.PK)-the current #1 smartphone maker in Japan, ahead of only Apple- Sharp (SHCAY.PK) and Sony (SNE).
With an end-of-quarter total cash of $97.6 billion, that's $16 billion more than the fourth quarter in 2011, Apple jumped to the 17th spot on the Fortune 500 Companies. With shifts in trends, more and more people becoming curious and moving to purchase an iPhone or iPad, the world in its entirety loves Apple (well, maybe not its rivals). A total of 1.5 million iPads are already being used in education right now, and the CFO of the company said that there is going to come a time when the tablet market become larger than the PC market. According to latest data from IDC, total sales of tablets already exceeded PCs in America last quarter.
The latest news clearly indicates that the smartphone market is currently dominated by Apple, but where else is Apple looking to tap into? The company truly isn't even reliant on one product, with revenue coming in from every direction, and loyal customers refusing to look elsewhere, but rather wait with eager anticipation for Apple's next release.
Moving onto Apple's greatest creation since the iPad, the iCloud, which was released about 8 months ago, the service allows users to sync all apps, emails, photos and more online, and make them accessible from anywhere at any time. It already has over 125 million users (25 million were registered in the past two months only). That's pretty impressive for something that has only been available for around 7 months, since first launching back in October of 2011. I remember when Apple announced it was tapping into cloud storage with the iCloud and everyone laughed at the idea, confident that Apple didn't have what it takes for the service to really take off. I'm sure Apple is more than happy to be able to prove them all wrong. The iCloud is growing at an extremely rapid pace and has no intention of slowing down any time soon.
The most popular feature is Apple's iTunes Music Match, this is a service that goes through all your music and replaces any random file with fully licensed, high-quality versions (as long as they exist in the iTunes library which has over 18 million tracks). These tracks will be stored in Apple's iCloud, so that you can put them on any of your other Apple devices without having to plug in any USBs or suffer slow sync times. Pretty impressive right? And music lovers are enjoying every minute of it. This feature is something that even Amazon and Google couldn't pull it off-they didn't have licenses from major record labels so their cloud based services only offered you the songs if you already owned them and you had to upload them yourself-a slow process that left many users frustrated. Apple on the other hand, takes literally minutes to work and could yield the company billions of dollars in the future. If only 30% of iTunes users use the Music Match feature, it could mean over $1.7 billion for Apple on an annual basis. That's huge!
Now let's look at exactly how fast the iCloud has been growing. A few months ago, Oppenheimer announced that the iCloud had 85 million users, then two months ago CEO Tim Cook announced that the iCloud had reached 100 million users-that's 15 million users signed on in 21 days. Incredible! And 2 months later, it reached 125 million. There's a definite relation between total number of Apple devices sold and the increase in iCloud service usage. Over 35.1 million iPhones and 11.8 million iPads sold at the end of the second quarter in 2012, anyone can see why the connection between device sales and iCloud use is applicable and relevant to determine how the service will perform in the future against the Dropbox and Google's Drive service.
The only real issue is that Apple already offers users 5 gigabytes for free before asking them to upgrade to paid iCloud service. So whether or not it will be making enough revenue from paid customers is unknown, but one thing for certain is that the company is enjoying the hype and free publicity that it's getting and no doubt offering this free service will pay off in the not so distant future if things continue to do so well.
All in all, Apple is continuing to succeed in its ventures, and while it does face competition from several rivals, they are hardly long-term serious threats for the smartphone and tablet giant. After expansions in China, which can only been seen as highly profitable moves, the company is looking to expand business in Brazil in the near future, where there is excellent potential for growth in the South American region.
Many hesitant investors are dreading that this growth is bound to end sooner rather than later and they don't want to be on board during a great collapse they are comparing to that of Cisco (NASDAQ: CSCO). Pretty poor comparison, as has been noted. Not only was Cisco's P/E 200 to 1 it was also marginally overpriced and part of the entire tech sector fall. Apple has continued to enjoy impressive growth rates despite other stock falling or going on hiatus.
After Jobs resigned last year, many investors lost confidence that the company could maintain its spot at the top. However, with the 4th quarter of 2011 exceeding everyone's expectations and an even more impressive first quarter revenue in 2012, investors who thought Bezos' Amazon could take Apple's place in the market any time soon or in the near future, for that matter, are no doubt regretting those words now because Apple has it in spades.
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