Despite record Mac sales, 70% of Apple's revenue comes from iOS

With 11 million iPads and nearly 5 million Macs sold, Apple posted record revenue and profits for the September quarter. We break down the numbers.

<a href='http://meincmagazine.com/apple/news/2011/10/despite-record-mac-sales-70-of-apples-revenue-comes-from-ios.ars'>Read the whole story</a>

 

[Entegy]

So iOS props up the other divisions. Fine by me. I like my Mac mini as a home server.

 

[MCGreen]

Where does revenue from iTunes fit in?

 

[NuVector]

Where does revenue from iTunes fit in?

It's part of "other."

There are companies out there that would be happy to have just the revenue that Apple gets from "other." But iTunes isn't a big money maker for Apple.

 

[hobgoblin]

heh, the sawtoothed ipod graph is very telling.

Starts around new years, drops flat a quarter or two later and stays flat until the next announcement and holiday season...

 

[RichardJames13]

When wil the iPad overtake the iPhone? Looks like some time in 2012.

 

[9600man]

The one thing everyone seems to ignore in the iOS vs Mac comparison is that people who use Macs are Mac users, and the people who 'use' iOS are PC and Mac users. The iPhone/iPad are peripheral devices. So the argument that the tab market is going to eclipse the PC market is half the story; especially when Windows and Adroid will inevitably divide the market into proper comparable segments. Once Windows 8 kicks off, what are the chances Apple will continue to dominate the market the same way? Who's to say that the tab market won't fracture like the PC market: Mac users use Mac; PC users use Windows; Mac users use iOS; PC users use Windows/Android.

I'm giving it 5 years before we start to see the beginning of Apple is DOOMED thread in the BF again.

 

[andgarden]

iPod shows how precarious the tech business can be. Seems like Apple created the mainstream MP3 player market and will turn the lights off when it ceases to be discrete. How often does that happen?

 

[craigdolphin]

If you don;t refresh the ipod hardware....why would people buy it? I was going to buy an ipod touch 5.....but they decided to paint the old ipod topuch 4 white and call that good. So, no sale.

 

[EpsilonVector]

I know that part of the reason for low Mac income is that the PC market is saturated, but I'm sure they would've done better if they had at least some laptops that are worth buying. Ever since they killed off the 15" MacBook they have either tiny 11" and 13" computers for a big but kinda affordable price, or reasonable 15" computers for outrageous price. What the hell?! It's like they don't want people buying their laptops.

 

[killing_time]

Where does revenue from iTunes fit in?

http://www.splatf.com/2011/10/apple-4q11-charts/

link courtesy of daring fireball that breaks it down further.
funny enough, iTunes now makes more money than iPods.

 

[achiavg]

I know that part of the reason for low Mac income is that the PC market is saturated, but I'm sure they would've done better if they had at least some laptops that are worth buying. Ever since they killed off the 15" MacBook they have either tiny 11" and 13" computers for a big but kinda affordable price, or reasonable 15" computers for outrageous price. What the hell?! It's like they don't want people buying their laptops.

I couldn't agree more.The price for the 15 inch Macbook pro is ridiculously high.

 

[amfuzzy]

As an investor I would keep an eye on the fact that 70% of their revenue comes from a very fickle and the fastest changing market that Apple products fit into. I will say that while their growth in that market has been fantastic it won't hold for years to come. They have tremendous pressure to significantly refresh the iOS market before others eat a larger portion of that business. If Microsoft or Android were able to produce products that allowed for that iOS market to fracture even more, Apple revenues would be in serious trouble. What Apple is sorely missing is a recuring revenue stream or annuity stream of revenue, much like IBM, Microsoft and other Enterprise software companies have with their Enterprise customers. Without this Apple is doomed to have the same problems as they have had in the past, this time however it will take longer due to the iOS prodcuts leadership and marketplace position.

 

[lamarcheb]

The path is clear: Apple to sell an iOS-based desktop called iCram.

 

[Elv13]

Where is iTune store in these numbers. Apple "sold" a billion apps and hundreds of million of songs/movie/tv show. Given they have a 30% cut on apps and the % of paid apps is subtential, how can this not show in earning?

 

[killing_time]

As an investor I would keep an eye on the fact that 70% of their revenue comes from a very fickle and the fastest changing market that Apple products fit into.

and the other 30% of computers aren't fickle?

actually what tech company isn't in a fickle market?

 

[foresmac108]

Where does revenue from iTunes fit in?

Apple breaks that out separately in its earnings summary. Since it includes music, app, and iBook revenue, I split it three ways with iPhone, iPad, and iPod. That's not necessarily accurate, but we don't have data to really do it justice. It's just under 6% of the total revenue, so it adds 2% to each segment in my analysis. There are arguments that I could think of that should make more go to one segment or another, but I don't think moving a point here or there truly affects the overall analysis.

 

[foresmac108]

I know that part of the reason for low Mac income is that the PC market is saturated, but I'm sure they would've done better if they had at least some laptops that are worth buying. Ever since they killed off the 15" MacBook they have either tiny 11" and 13" computers for a big but kinda affordable price, or reasonable 15" computers for outrageous price. What the hell?! It's like they don't want people buying their laptops.

FWIW, there never was a 15" MacBook.

 

[Perry Clease]

When wil the iPad overtake the iPhone? Looks like some time in 2012.

That indicator may be due to people holding off on buying an iPhone. Next quarter the iPhone will probably be back up.

 

[unbound]

If true, depending on tablets and China is a really risky move. If any country is going to adopt cheap knockoffs (like Android) it's China. Apple products are premium devices, and China is all about value.
If Amazon can put out a $200 tablet in the USA and have it wildly accepted, what makes you think that there won't be a similar alternative that dominates over there.

 

[Marlor_AU]

If true, depending on tablets and China is a really risky move. If any country is going to adopt cheap knockoffs (like Android) it's China. Apple products are premium devices, and China is all about value.

Urban Chinese consumers are very fashion-conscious. Apple is very much "in" at the moment in China, so they won't have a problem selling their products among the middle-class.

 

[EpsilonVector]

FWIW, there never was a 15" MacBook.

Huh... Could've swore there used to be a worth buying MacBook in the past.

 

[Eldorito]

I know that part of the reason for low Mac income is that the PC market is saturated, but I'm sure they would've done better if they had at least some laptops that are worth buying. Ever since they killed off the 15" MacBook they have either tiny 11" and 13" computers for a big but kinda affordable price, or reasonable 15" computers for outrageous price. What the hell?! It's like they don't want people buying their laptops.

Apple is seeing more growth than anyone else in the sector and are third in US sales at 12.9%. Their mac division also makes greater profit than HP's consumer hardware division despite less sales (HP being the largest seller of PCs in the US). I imagine Apple is hoping for sales globally like in the US in the long run, with the global uptake of iDevices helping push purchases of laptops and desktops like it has in the US (Apple only had 4% in the US just 5 years ago)

It's also important not to confuse "I don't want to pay for a mac laptop" with "no one wants to pay for a mac laptop". Yes, they could probably garner greater market share but instead they've been convincing more and more people to pay a premium for what is perceived to be a premium product which is a much more sensible business move. Their options to get that market share are to sell a crap product at a lower price, devaluing the brand, or sell the same product at a cheaper price, killing profits. People also associate cost with a premium product, if it's selling at the same price then a lot of people will assume it's just as good as what's around it. I'm generally wary of super cheap laptops as a result of this, I generally assume there's something wrong with them until a lot of evidence comes to the contrary.

 

[auhim]

I know that part of the reason for low Mac income is that the PC market is saturated, but I'm sure they would've done better if they had at least some laptops that are worth buying. Ever since they killed off the 15" MacBook they have either tiny 11" and 13" computers for a big but kinda affordable price, or reasonable 15" computers for outrageous price. What the hell?! It's like they don't want people buying their laptops.

Apple is seeing more growth than anyone else in the sector and are third in US sales at 12.9%. Their mac division also makes greater profit than HP's consumer hardware division despite less sales (HP being the largest seller of PCs in the US). I imagine Apple is hoping for sales globally like in the US in the long run, with the global uptake of iDevices helping push purchases of laptops and desktops like it has in the US (Apple only had 4% in the US just 5 years ago)

It's also important not to confuse "I don't want to pay for a mac laptop" with "no one wants to pay for a mac laptop". Yes, they could probably garner greater market share but instead they've been convincing more and more people to pay a premium for what is perceived to be a premium product which is a much more sensible business move. Their options to get that market share are to sell a crap product at a lower price, devaluing the brand, or sell the same product at a cheaper price, killing profits. People also associate cost with a premium product, if it's selling at the same price then a lot of people will assume it's just as good as what's around it. I'm generally wary of super cheap laptops as a result of this, I generally assume there's something wrong with them until a lot of evidence comes to the contrary.

These numbers are old, so read these taking into account the fact that (as you said) Apple is also growing faster than everyone else in terms of computer revenue: http://www.businessinsider.com/chart-of ... ors-2010-3

Apple is absolutely crushing the entire computer industry in terms of profit. Steve was right when he said Apple shouldn't and wouldn't compete with the rest of the computer industry in their race to the bottom.

 

[BadSuperblock]

People keep saying the Mac is "low" but that's only because iOS is at the edge of a hot trend. Take away iOS and does the Mac look that bad? Mac sales are up 26% while the PC market is essentially flatlined, and it says Apple sold more Macs than ever. There's nothing here that says Macs are "down" or "on the way out." There is no shortage of PC makers who wish they could be seeing the sales growth of the Mac shown here.

The one thing everyone seems to ignore in the iOS vs Mac comparison is that people who use Macs are Mac users, and the people who 'use' iOS are PC and Mac users.

That's not what the numbers are saying. The spectacular growth for Macs alone means that PC users are becoming Mac users. There's no other place to sell all those additional new Macs to. An unchanging user base consisting only of entrenched fans cannot generate significant growth.

 

[9600man]

If true, depending on tablets and China is a really risky move. If any country is going to adopt cheap knockoffs (like Android) it's China. Apple products are premium devices, and China is all about value.
If Amazon can put out a $200 tablet in the USA and have it wildly accepted, what makes you think that there won't be a similar alternative that dominates over there.

Part of the reason is as people are getting richer in China, there is more incentive to buy the branded premium products. It's like a badge saying, 'i'm rich and I can afford the original! now lets go karaoke and have black label scotch with green tea!*'




*I was born and raised here in HK. Even then I don't get why the chinese love their Black Label (and Chivas) - both not the best whiskey in the world, but the marketing here has convinced the Chinese that Chivas is the best whiskey - mixed with green tea. Well the black label is mixed with green tea. That just stresses the point that the Chinese love the brands and will spend whatever it takes to afford one. Granted once they do own it, they put their own chinese twist on it; but that's expected for any country/culture.

 

[Demani]

"EpsilonVector: Um... What 15" MacBook are you talking about? There has never been a 15" MB, just a 15" MBP. And at its least expensive opening price it was $1700, and the current opening price is $1800.

All in all it is pretty impressive that Apple has managed to sustain this and may be doing this for at least a few years more. Beleaguered indeed. And damn the global recession.

 

[grimlog]

Who is this grinning Anirudh Koul guy? I've seen that picture several times lately.

 

[killing_time]

If true, depending on tablets and China is a really risky move. If any country is going to adopt cheap knockoffs (like Android) it's China. Apple products are premium devices, and China is all about value.
If Amazon can put out a $200 tablet in the USA and have it wildly accepted, what makes you think that there won't be a similar alternative that dominates over there.

Part of the reason is as people are getting richer in China, there is more incentive to buy the branded premium products. It's like a badge saying, 'i'm rich and I can afford the original!

that attitude is true of any people, original poster made a tremendously crude statement.

 

[chris0101]

As an investor I would keep an eye on the fact that 70% of their revenue comes from a very fickle and the fastest changing market that Apple products fit into. I will say that while their growth in that market has been fantastic it won't hold for years to come. They have tremendous pressure to significantly refresh the iOS market before others eat a larger portion of that business.

That's very true. But by nature, growth markets tend to be inherently volatile and unpredictable. It's closely tied into why they are such high growth markets.

If Microsoft or Android were able to produce products that allowed for that iOS market to fracture even more, Apple revenues would be in serious trouble. What Apple is sorely missing is a recuring revenue stream or annuity stream of revenue, much like IBM, Microsoft and other Enterprise software companies have with their Enterprise customers. Without this Apple is doomed to have the same problems as they have had in the past, this time however it will take longer due to the iOS prodcuts leadership and marketplace position.

I suspect that given the nature of the market, if Apple were to have a reversal of fortune, it would happen much quicker than anyone would suspect - perhaps sales would drop catastrophically in a matter of months. I'm not saying that such a thing will happen, but that it could happen.

Apple itself is dependent on constantly refreshing old products, and releasing new categories of products to entice people. Eventually, it's inevitable that there will be fewer innovations in the world of consumer electronics and their reach will be truly global (ex: anyone who can afford an Apple device and who wishes to buy one can). Then they will, like all companies do, mature.


They say that the reason why Steve Jobs left Apple with such a large reserve of cash just sitting there was due to fear. Although I disagree with Steve Jobs on many things, I cannot deny that he had an extraordinarily prescient vision and probably the best executed business strategy in the history of the technology business. He had the vision to see that if such reversal of fortune were to take place, that Apple would have a large sum of cash at hand, which increases the probability that Apple could survive any downfalls and return strong, particularly in a world without Jobs at the helm.

 

[John Springer]

What Apple is sorely missing is a recuring revenue stream or annuity stream of revenue, much like IBM, Microsoft and other Enterprise software companies have with their Enterprise customers. .

Apple is not in the enterprise services business. They build products. They innovate. Apple's future success depends on their ability to continue to come up with great products that people really really want to buy. It may not be a "recurring revenue stream" but it isn't boring either.

 

[soonermatt]

Tablets are money but China isn't the main cash cow. Look domestically where clipboards are used and figure out how to phase them out here.

 

[hypercommunist]

Where does revenue from iTunes fit in?

http://www.splatf.com/2011/10/apple-4q11-charts/

link courtesy of daring fireball that breaks it down further.
funny enough, iTunes now makes more money than iPods.

Daring Fireball's graphs show 6% of Apple's *revenues* are from iTunes, while 4% are from iPod. However, I'm pretty sure the profit margins on iTunes are small - at least in the past, they said they ran that part of business just above break-even.

 

[MrDoug]

hmm the news i heard seemed very different...

Apple misses Q3 earnings, stock gets crushed - CBS News
http://www.cbsnews.com/stories/2011/10/ ... 2157.shtml

SHOCK: Apple Misses Earnings After iPhone Sales Come In Lighter Than Expected
http://www.businessinsider.com/apple-earnings-2011-10

Apple Misses Big on Earnings, Revenue; Shares Tumble
http://www.cnbc.com/id/44908357

 

[Mcunix]

The path is clear: Apple to sell an iOS-based desktop called iCram.

How about just iCrap?

 

[Ushio]

As an investor I would keep an eye on the fact that 70% of their revenue comes from a very fickle and the fastest changing market that Apple products fit into. I will say that while their growth in that market has been fantastic it won't hold for years to come. They have tremendous pressure to significantly refresh the iOS market before others eat a larger portion of that business. If Microsoft or Android were able to produce products that allowed for that iOS market to fracture even more, Apple revenues would be in serious trouble. What Apple is sorely missing is a recuring revenue stream or annuity stream of revenue, much like IBM, Microsoft and other Enterprise software companies have with their Enterprise customers. Without this Apple is doomed to have the same problems as they have had in the past, this time however it will take longer due to the iOS prodcuts leadership and marketplace position.

While I wish you were right, people said that about ipod's in the beginning too.

 

[gimfred]

What fracture? I'd thought that in most cases, if an app runs on iOS it runs on all idevices. A number of the cases that I know of where they specify a particular product it often doesn't make sense to run that app on the other devices. Such as ipad apps not running on iphone. Are they not as rare as I've been lead to believe?

 

[arcite]

heh, the sawtoothed ipod graph is very telling.

Starts around new years, drops flat a quarter or two later and stays flat until the next announcement and holiday season...

iPod is a hell of a stocking stuffer.

 

[arcite]

They say that the reason why Steve Jobs left Apple with such a large reserve of cash just sitting there was due to fear. Although I disagree with Steve Jobs on many things, I cannot deny that he had an extraordinarily prescient vision and probably the best executed business strategy in the history of the technology business. He had the vision to see that if such reversal of fortune were to take place, that Apple would have a large sum of cash at hand, which increases the probability that Apple could survive any downfalls and return strong, particularly in a world without Jobs at the helm.

I think after he came back to Apple in the nineties, he had to make TOUGH decisions as Apple was hemorrhaging resources all over the place. With such a cash cushion, Apple is able to lead the market no matter what the economic conditions. Amazing feat for a corporation in these economic times.

 

[SeanJW]

hmm the news i heard seemed very different...

Apple misses Q3 earnings, stock gets crushed - CBS News
http://www.cbsnews.com/stories/2011/10/ ... 2157.shtml

SHOCK: Apple Misses Earnings After iPhone Sales Come In Lighter Than Expected
http://www.businessinsider.com/apple-earnings-2011-10

Apple Misses Big on Earnings, Revenue; Shares Tumble
http://www.cnbc.com/id/44908357

The only projection they missed was the WAGs of Wall St analysts who've not managed to predict Apple's quarterly results for the last decade. Usually the analysts guess too low, this time they guessed too high. Apple slightly exceeded their own estimates, as they usually do as its normal for a company to be conservative about their projections so it doesn't look bad if they don't meet it.

Unfortunately, a lot of people base their investment strategies on the analysts, so when Apple performs lower than them, there's a brief flurry of panic selling. Apple share price is always extremely volatile around announcements because they keep things close to the chest, and so everyone's wild guesses drive things all over the place.

Same thing happens in product announcements. Wait a few days and see what happens.