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Apple makes hay while Samsung does not shine

While our long term position has always been that Apple is no longer innovative, and that it will slowly fall from grace, its Q3 figures show what can happen in a market where Apple’s most direct rival stumbles and Samsung still has not recovered the damage done by the faulty batteries in its S7. Even as its S8 has finally begun to overtake Apple in shipments, it still has not recovered the ground lost and Apple has taken every advantage.

This shows in Apple’s results where it achieved revenues of $45.4 billion, some $3 billion and 7% ahead of this time last year, and its gross margin, the thing that Apple CEO Tim Cook is so paranoid about protecting, has gone up, not down and net income for the quarter was a healthy $8.7 billion.

iPhone shipments were 41 million in the quarter compared to 40.4 million a year ago. However the iPhone has gone down considerably from the seasonally stronger Q2. The iPad bizarrely sold 1.4 million more devices than this time last year yielding almost $100 million more revenue than last year. We have to attribute this for the most part to operators selling more network attached tablets.

Research firm NPD confirms this with the Apple iPad taking 55% share of the US tablet market in June, up from 46% share a year ago. It remains the Rolls Royce of tablets taking a far higher share of high priced tablets, more like 80% of those.

Apple Tim Cook went straight for his services numbers reminding everyone that it was a record Services revenue of $7.27 billion, up another $245 million over the last quarter. At Apple iTunes and the App Store always seem to be on the rise quarter to quarter.

Like a broken record Cook talked about improvements coming in iOS, macOS, watchOS and tvOS coming this fall, things that are in some cases entering their tenth update.

While Samsung suffers from the same potential hiccups as Apple, trying to ship new devices at scale and have a brand new model every year – other smaller companies, especially from China, are the real threat, but equally they are threatened by Apple’s continued momentum.

IDC this week said that all of the top five smart phone manufacturers grew shipments in the quarter, and market leaders Samsung and Apple grew to 23.3% and 12% of shipments. Xiaomi edged out Vivo to take the number-five position, while Huawei was in third place and Oppo fourth. This is perhaps why Apple’s Chinese revenues were down to $8 billion this quarter from $10.7 billion this quarter and $8.8 billion this time last year. But IDC also pointed out that overall the market had fallen by just over 1%, so if you are not in the top 5 suppliers, you are losing ground.

Huawei said this week it plans minimal shipments increases this year to just 140 150 million phone units, but will make far more high end phones and its latest model the Mate 10 is designed to eat into Apple market share. The Mate 10 will launch just as Apple shows the iPhone 8.

The iPhone 8 is likely to grow shipments somewhat for Apple when it comes out in September, and Apple has survived yet another year without its lack of innovation affecting sales, but this was primarily down to Samsung’s failings.

Apple offered guidance for its Q4 of between $49 billion and $52 billion with a margin between 37.5% and 38%.

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