Back in October we explained “Analysts Just Can’t Get Apple Right, It’s Too Innovative” in the aftermath of a strange couple of days which saw Apple, as part of its quarterly finances, report astonishing growth in net income of 54% year-on-year, a 39% rise in revenues over the same period previously (which itself leads to another amazing stat: Radical improvements in profit margin, achieved during growth) and iPhone sales up 21% year-on-year. It was this last figure that disappointed the city analysts, however, as they’d been expecting (read as “plain guessing”) Apple to sell more iPhones…and the resulting Wall Street backlash wiped huge amounts off Apple’s stock value.
As we noted:
Apple is one of the world’s biggest companies. Its tech dominance and influence is global in reach. When firms get to this size, the harsh statistics of large numbers, the effects of scale and other tricky market forces mean it’s generally hard to deliver large percentage growth on sales or profits. Yet Apple manages to do both, as well as boosting sales of its key iPhone product, quarter after quarter. You’d expect the Street would be pleased by this.
Apple’s growth figures should, by the experience of most companies this size, have been virtually impossible. They were also achieved even as millions of consumers held off buying iPhones as a delayed new edition was due. And yet they still disappointed financial watchers.
Speaking yesterday, CEO Tim Cook agreed with us. When asked directly about the millions of iPhones shipped and “When do we run into the law of large numbers?” Cook was candid:
37 million is a big number. It was a decent quarter. It was 37 million — more than we’d ever done before. We were pretty happy with that, but let me give you the way I look at the numbers. As I see it, that 37 million for last quarter represented 24% of the smartphone market. There’s 3 out of 4 people buying something else. 9 out of 10 phone buyers are buying something else.
In Cook’s mind, despite the fact that Apple sold so many of its flagship devices (and recent stats have confirmed its rank at the top of smartphone sellers, with Android slipping) there’s still huge upside because so many other consumers buy other devices. Meaning that despite its extraordinary financial might already, Cook sees the simple logic in a bigger market for Apple to address. Screw the law of large numbers, just look at the problem coolly.