iPhone Accounted for 39% of Apple Revenue in Q4 2008

[MacRumors]

During yesterday's conference call, Apple revealed that iPhone was responsible for 39% of the company's revenues in Q4 2008. Due to Apple's decision to report iPhone earnings as subscription revenue over 24 months, however, these numbers are not reflected in the $1.14 billion net profit and $7.9 billion in revenue reported yesterday. If they had been included, this would represent an additional $3.8 billion in revenue and an additional $1.3 billion in net income.

As noted by many, the size of this number is remarkable for a product that has been on the market for only 15 months. Steve Jobs highlighted the significance of the numbers by putting Apple's iPhone sales into perspective:

- Apple sold more iPhones than RIM sold Blackberries in Q4 2008
- In terms of revenue, Apple is now #3 amongst mobile phone vendors behind Nokia and Samsung and beating out Sony Ericsson which falls at #4.

When questioned about Apple's plans for the future in face of increasing iPhone competition, Jobs suggested that they would continue to aggressively price the iPhone and make ongoing improvements:

Article Link: iPhone Accounted for 39% of Apple Revenue in Q4 2008

[TheSlush]

More than I thought. The Mac people aren't going to like this!

[(L)]

Wow. I had no idea they were that popular -- I'm curious how many people got the 3G one even after buying the first one.

[shanmugam]

$25 billion on cash and save $20 on the firewire

run and hide ...

--disgruntled apple fanboy

[mainstreetmark]

I once had a single type of product account for 40% of my sales income, but then I only sold 2 of them.

[kavika411]

One Basket, meet Too Many Eggs. Too Many Eggs, meet One Basket.

[pismodude2]

No surprises here...

[SFgadgetman]

Can anyone explain what a price umbrella is?

[mkrishnan]

Originally Posted by TheSlush

More than I thought. The Mac people aren't going to like this!

I think you can look at this at least two different ways...

From the main MR article on the quarterly earnings report:

Apple shipped 2,611,000 Macintosh computers during the quarter, representing 21 percent unit growth and 17 percent revenue growth over the year-ago quarter. The Company sold 11,052,000 iPods during the quarter, representing eight percent unit growth and three percent revenue growth over the year-ago quarter. Quarterly iPhone units sold were 6,892,000 compared to 1,119,000 in the year-ago-quarter.

One way to look at this is to say that, as three "legs of the stool," the iPhone had explosive growth and the iPod had slightly better than saturation-market growth, while the Macs did somewhere in between -- the Mac revenue growth number would put Apple at pretty much best-in-class among computer OEMs for growth even without the iPhone sales. From this perspective, the Macs are doing fine, but there is the danger that, should iPhone sales ultimately tank, Apple will at some point have big year-over-year drops in gross and net revenue even if they continue to grow their Mac sales. But as long as that doesn't happen, it isn't such a big deal, and temporary fluctuations in overall revenues are thankfully smoothed significantly by amortizing the iPhone revenue over a period of time.

Another way to look at it is that, if Apple can sustain this pace of iPhone sales, that once a full year cycle of selling iPhones this fast and hard finishes, the iPhone will represent a huge portion of their revenues both in the sense of actual collections and on their quarterly earnings sheet. From that perspective, there is always the danger of market pressure for Apple to dump its resources into the high growth areas and starve off Mac development, although recently they've been showing at least some principled aversion to this.

In the long run, I'm really curious to see how this will play out. While there have been phones this popular before, I don't know that there have been many times like this when a single phone held one of the top three company market shares in the phone industry. That's the astonishing part. Just the one iPhone, that only comes in a couple of capacity and color variants, is going toe-to-toe with the entire lineups of Samsung and S-E. I bet that's going to generate even more pressure for Apple to expand the iPhone into a range of mobile devices... or else defend why they believe they can sustain such a large fraction of the market on just one form factor. I wonder what will happen with that.

[Rybold]

.
WHOA !!!! This means the profit increase of 26% does not include the iPhone! It's from Mac and iPod sales. The iPhone Billions are even more on top of that! WHOA !!!

[shanmugam]

if mobile devices (iPod, iPhone) really making apple rich why not create a netbook?

stripped down netbook for $500 will make profit and make halo effect more

- it is my opinion.

[We know if apple makes netbook, it will beat everyothers netbooks hands down]

[gnasher729]

Originally Posted by SFgadgetman

Can anyone explain what a price umbrella is?

If you sell a product at a price that is too high, it allows and encourages competitors to come up with competing products that may not be quite as good, but almost as good, and cheaper, and take away your sales. That is called a "price umbrella": Your competitors are protected by your own high price. But if the price is low enough, competitors won't even try to undercut you with a cheaper product.

[mac.life]

Originally Posted by SFgadgetman

Can anyone explain what a price umbrella is?

Can you say iPhone Nano!

Of course it's in development!!

Hope all those other electronics companies that have been pushing bad phones on us for years go under and get theirs....

[Rybold]

Originally Posted by shanmugam

if mobile devices (iPod, iPhone) really making apple rich why not create a netbook?
stripped down netbook for $500 will make profit and make halo effect more

- it is my opinion.

[We know if apple makes netbook, it will beat everyothers netbooks hands down]

Netbook aside (which I totally agree with), Hewlett Packard has commercials on TV right now that they have a new touch-screen PC. Looks like Apple is no going to be able to be a first-to-market for touch-screen PCs. Good Job, Steve! You should have introduced the touch-screen PC months ago!!!
- it is my opinion.

[daveL]

Arn, the revenue was $7.9 B, not $6.22 B, which was for the year ago period.

[Super Geek]

Originally Posted by Rybold

Netbook aside (which I totally agree with), Hewlett Packard has commercials on TV right now that they have a new touch-screen PC. Looks like Apple is no going to be able to be a first-to-market for touch-screen PCs. Good Job, Steve! You should have introduced the touch-screen PC months ago!!!
- it is my opinion.

Apple is not about being first at doing something it's about being the first to do it right.

Have you ever used an HP touchscreen PC, I have, they're horrendous, vista is not a touch based UI, neither is OS X, hence no touch screen.

When full OS X gets Cocoa touch and Apple develops a gesture and touch based UI (i'm thinking 10.7, but maybe it will be such a jump they'll call it OS XI) then you'll see touchscreen macs.

[imgonephishin]

Originally Posted by Rybold

Netbook aside (which I totally agree with), Hewlett Packard has commercials on TV right now that they have a new touch-screen PC. Looks like Apple is no going to be able to be a first-to-market for touch-screen PCs. Good Job, Steve! You should have introduced the touch-screen PC months ago!!!
- it is my opinion.

Patience, young grasshopper.

Apple’s never worried about being the first to rush a product to market. That philosophy is akin to the morons who scream “FIRST!!!11!!” at the top of most forum boards. Instead, they try to be the first to implement that functionality well. They certainly weren’t first to the MP3 game and we all see how poorly that turned out. And man, smartphones, email and mobile browsing had been around for years before the iPhone so that product flopped. My point is, Apple takes a product category and does it better than anyone else, even if that means they’re not first.

[Xian Zhu Xuande]

Originally Posted by Rybold

Netbook aside (which I totally agree with), Hewlett Packard has commercials on TV right now that they have a new touch-screen PC. Looks like Apple is no going to be able to be a first-to-market for touch-screen PCs. Good Job, Steve! You should have introduced the touch-screen PC months ago!!!
- it is my opinion.

Touch screen PC? They've been on the market for quite a while now... I was experimenting with one from HP at Best Buy more than a year ago. Being first to market isn't important. Being first to market and doing it right is. The touch-screen PCs I've worked with were not a pleasure to use.

[velocityg4]

Originally Posted by shanmugam

$25 billion on cash and save $20 on the firewire

run and hide ...

--disgruntled apple fanboy

Given that you can buy standalone PCI firewire cards for $6 I would say Apple is probably saving $3-4 by not including firewire in the Macbook.

That is surprising though that the iPhone is 39%. I guess they have no reason to add 3G to the laptops.

[Pants Dragon]

Originally Posted by kavika411

One Basket, meet Too Many Eggs. Too Many Eggs, meet One Basket.

I don't think you understand the distinction between putting all your eggs in one basket and making a ****ton of money from one product. It's not like they've invested the future of the company in the iPhone.(Though that would probably work anyway) Are you suggesting that making a wildly successful product is a BAD thing?

[CrackedButter]

Interesting that Apple are willing to compete on price and be prepared to drop their prices in order to gain marketshare but aren't willing to do the same with the mac side of the business. Their growth could be bigger if they lowered prices instead of raising them.

[lowbatteries]

I wonder what the halo effect of this is going to be. I bought my first Mac because I loved my iPod Video so much, how many of these iPhone users will buy a Mac when it comes time to replace their current machines?

I would also like to see the numbers on how many iPod touch users are out there. The iPods have a nice, but limited UI. It's impressive, but having a iPhone or Touch with all of their awesome GUI goodness surely will make everyone want to try the full-fledged OS X.

Originally Posted by CrackedButter

Interesting that Apple are willing to compete on price and be prepared to drop their prices in order to gain marketshare but aren't willing to do the same with the mac side of the business. Their growth could be bigger if they lowered prices instead of raising them.

I think this is mainly because AT&T (and other mobile companies) are picking up the slack. Apple wouldn't sell them that cheap directly to consumers. I think he should have said "we will continue to force the wireless providers to price them competitively".

[zacman]

Originally Posted by Super Geek

Have you ever used an HP touchscreen PC, I have, they're horrendous, vista is not a touch based UI

I disagree. Together with OneNote 2007 it's just fantastic. I just love the handwriting recognizer and the ability to actually search audio files thanks to the built-in voice recognition system in Vista.

[editguy]

Originally Posted by Pants Dragon

Are you suggesting that making a wildly successful product is a BAD thing?

It is if they get so focused on the iPhone that they ignore everything else. At some point the iPhone will reach it's saturation market. Not everyone that wants a phone will want an iPhone. And phone buyers seem to like to change phone, and phone designs, often before they get totally bored with it. So having diversification in the products they offer will lead to long term profitability.

[filmguy15]

Originally Posted by zacman

I disagree. Together with OneNote 2007 it's just fantastic. I just love the handwriting recognizer and the ability to actually search audio files thanks to the built-in voice recognition system in Vista.

To me, all that stuff seems like a novelty. Cool to use for the first time, but brings no real value to the computing world, and certainly won't change the way we use computers.

I have never understood this outcry for a Mac Tablet. Sure it would be "cool" to have a giant touchscreen, but when it comes to day to day use, I feel like it would get old fast. Maybe I'm wrong, who knows...