Why does Apple need a 4-inch iPhone? After all, hasn’t the trend in recent years been bigger screens? The word Phablet means a mobile device that straddles smartphones and tablets. If the trend is bigger, why is Apple going smaller?
It’s all in the numbers and just a quick analysis of Apple’s product line reveals some staggering numbers that the nattering nabobs of negativity should consider before dumping AAPL or even repeating the much repeated meme that Apple is doomed. It’s not. And the numbers tell the tale.
20-percent Of 700-million
Apple wasn’t the first tech company to make a music player. The iPod was the first one that people wanted to use. Apple wasn’t the first tech company to make a smartphone. The iPhone was the first one that people wanted to use.
Yes, the trend in recent years has been toward smartphones with larger screens, and Apple’s iPhone 6, 6 Plus, 6s and 6s Plus have fueled the company’s growth and profits like no products before. The only 4-inch iPhone left is the three-modle-year-old iPhone 5s, antiquated by today’s standards. So, why would Apple design, build, and ship the widely expected 5-inch iPhone SE model?
Numbers. Some estimate that 25-percent of all current iPhone users still have 4-inch displays. If the company has 700-million active iPhone users, then 25-percent means there’s a market of 100-million or more customers who would prefer an updated but smaller iPhone, hence the coming-to-an-Apple-Store-near-you iPhone SE with faster CPU, better camera, and more modern features, plus the low end price tag (which helps to prop up the prices Apple charges for larger phones) which may help brand aspiring customers in other markets.
See? It’s numbers. And the numbers are big.
The Book Of Numbers
The story of Apple’s numbers can be stunning. Yes, the the most recent financials show the iPhone commands more than 65-percent of the company’s revenue, but it’s not as if the rest of Apple’s product line is anemic. All are profitable. At less than 10-percent of total Apple revenue, both Mac and iPad command more than half of all the profits from their respective product segments.
Lets ignore the massive profits from Mac and iPad and focus only on the company’s rapidly growing Services section; think iTunes, App Stores, Apple Music, and everything else that isn’t hardware. Apple’s Services division would fit into the Fortune Top 150. So would the Mac. So would the iPad.
Apples boasts more than 1-billion installed and active devices. One. Billion.
Here’s another interesting set of numbers. Hard numbers are hard to come by as neither Apple nor Microsoft report details on iPad Pro vs. the Surface, but researchers are certain that Apple sold more iPad Pros last quarter than Microsoft sold Surface-anything.
That stands in contrast to one research company which pointed out that detachable tablet growth– epitomized by Microsoft’s Surface line, a touchscreen device with a detachable keyboard– is growing at more than 160-percent this past year, while traditional tablets– as epitomized by the iPad line– have gone through multiple years of falling sales. What those same researchers fail to point out is that improving sales percentages look good in a bar chart, but real revenue and profits look better when counting the money at the end of the day.
Other numbers are almost too big to believe. Apple has more than $220-billion in cash, but also tens of billions in debt because the company refuses to repatriate billions in profits from overseas sales, thanks to the crazy tax code in the U.S. Apple actually has to go into debt to finance operations while money piles up in overseas banks.
Getting Bigger Numbers
Every aspect of Apple’s various businesses have numbers the likes of which are not easily compared to any competitor; some governments maybe. But even Apple suffers from the big number syndrome.
The iPhone’s contribution to Apple’s revenue and profits is so substantial, and total revenue and profits are so huge, that the company has a growth problem. For many critics, Watch is considered a failure, but an average selling price of $450 times 1.5-million Watch units sold, on average, per month, nets an annual business of more than $8-billion. Any technology company would love that kind of one year increase from a new product, but that annual revenue rate looks anemic when compared to the iPhone.
What of Apple Car? I fear the same numerical issues. Toyota’s Camry and Honda’s Accord sell around 250,000 units per year in the U.S, with an average selling price estimated at $27,000 each. Combined revenue reaches $13-billion, so Apple would need to sell 100,000 Apple Cars at $75,000 each just to reach the same revenue as Watch.
Apple’s big numbers distort the company’s value and position within the multiple business and market segments where it thrives. Apple’s numbers are huge everywhere and that makes it difficult for the company to launch a successful new product line, where success is compared with the outsized iPhone numbers.