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Singular horsepower

Apple's new, new things overshadowed by old thing

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Robert Cyran
Apple's new, new things have been overshadowed by an old thing. The drumbeat for innovation banged on for years till watch and payments technology finally appeared a couple of months ago. In the meantime, it was iPhones that spurred better than expected revenue in the company's fiscal fourth quarter. Apple's one-trick pony will do until the herd picks up speed.

It is hard to overstate Apple's reliance on the iPhone. In addition to being its largest seller, it is also highly profitable - far more so than iPads, for example. When iPhone sales climb, margins tend to rise as well. The devices, the first of which was unveiled in 2007, accounted for 56 per cent of Apple's $42 billion of sales in the three months ended September 27. Its gross margin climbed to 38 per cent.
 
The company sold 39 million iPhones, as customers clamoured for the latest, enlarged iterations of the handset, which went on sale in September. Apple revenue gained 12 per cent, but for the iPhone the increase was 21 per cent.

What's more, the next couple of quarters should be better than many are expecting right now. Apple reckons it would have sold many more in its fourth quarter had it been able to produce enough. Hefty investment by the company and its suppliers will ramp up manufacturing in time for the important holiday period.

Fans and investors nevertheless have come to expect the next big thing from Apple, not just improvements on existing gadgets. Boss Tim Cook is starting to deliver. Apple Pay promises to change the way consumers shop. Its watch threatens to compete in the developing market for wearable devices. More is on the way, too. Apple is spending four per cent of its revenue on R&D, a figure last reached in 2006 when sales were far smaller.

For now, though, the iPhone should be enough to carry the company until Apple can generate additional horsepower.

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First Published: Oct 21 2014 | 9:32 PM IST

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