Apple Schools Wall Street
37 million iPhones flew off the shelves in the last three months of 2011, which represents Apple's first fiscal sales quarter. Burgeoning iPhone, iPad and Mac sales sent Apple revenues to new heights. But the question of where those products and other electronic gadgets are made put Apple under the New York Times' spotlight as the paper pondered the U.S.'s waning manufacturing abilities.
Jan 25, 2012 5:00 AM PT
Apple on Tuesday revealed exactly how explosive holiday sales were for its iPhone 4S. The latest version of the company's smartphone packed enough dynamite to double Apple's earnings in its first fiscal quarter of the year and blow the company right past its previous sales records.
The company reported a rise in net income to US$13.06 billion, or $13.87 per share, compared to a net income of $6 billion a year ago. Revenue was up 73 percent, going from $26.74 billion last year to $46.33 billion for Q1 2012.
In addition to its 37 million unit iPhone sales surge, Apple sold 15.43 million iPads, a 111 percent jump from the same period a year ago. Mac sales rose 26 percent with 5.2 million units sold. iPods were the only device to slip -- a 21 percent unit decline from last year.
The company's Wall Street antics followed its announcement last week that it's further investing in the education field with updated programs to help publish et-extbooks. Apple's already dipped its toes in the education market, but it's looking to dive in further, announcing updates to its line of education applications that help publishing partners create learning tools for the iPad.
Last Thursday's event unveiled iBooks 2, the upgraded version of its reading application for iOS. It gives e-textbook authors more creative opportunities in interaction and design.
About 1.5 million iPads are being used in classrooms or other educational settings, according to Apple, and more than 20,000 educational apps go along with that. For Apple, more classrooms with iPads certainly means more sales, but it also means exposing a new and tech-savvy generation to its products at an early age.
"Digital textbooks, as imagined by most people, have no future," Matt McInnis, CEO of Inkling told MacNewsWorld. "We won't replace textbooks with digital replicas of their print counterparts. That's akin to replacing a horse with a mechanic horse to improve transportation; we didn't need that at the turn of the century. Rather, we needed the car. And it had nothing to do with horses. Likewise, what replaces the textbook as a method of helping us learn will be far more sophisticated and powerful than a replica of a print book. After all, the very best device for book content is, arguably, a book!"
The future of e-textbooks will largely be driven by cost, especially in higher education. It's a market in which traditional rules of supply and demand are distorted, since the demand from students is usually relatively fixed. Where Apple could excel, then, is by providing an alternative to everything the market currently has to offer. The company will face competition from publishers and other players with years of expertise in the textbook market, but it's already building its base of education customers with the new iBooks system.
"We think anyone entering the market and upsetting the incumbent status quo is fantastic for us. Apple does not have a history of building software specific to any particular vertical market, and so we believe they'll continue to allow their developers to work in this area. If anything, we hope Apple helps us all by shaking things up," said McInnis.
Not Made in the USA
The words of Steve Jobs appeared in a New York Times feature recently that focused on the ability of the U.S. to compete in the global manufacturing market. Apple was cited as one of the country's most dynamic and profitable companies. Yet for all the products it sells, it produces a relatively small number of manufacturing jobs in the U.S. Asked by President Obama several months ago whether iPhones could be manufactured domestically, Jobs' answer was straightforward: It's not going to happen.
The article described one situation in which a last-minute change to the iPhone's screen necessitated an overhaul of the production facilities in which the device was to be built. Apple's Chinese manufacturing contractors reportedly sprang 8,000 workers into action literally overnight, rousing them from their on-site dormitories and retooling production lines. They were ready for the manufacture of the redesigned iPhone in a matter of days. Speaking anonymously, one Apple executive was quoted as saying that kind of speed and flexibility couldn't be matched in the U.S.
Domestic job creation is an issue for which Apple's taken heat for in the past, especially when reports of inhuman working conditions or suicides make it into headlines. The company seemed to bow to some of that pressure recently when it made public the majority of its supply chain, an unprecedented move for such a giant tech company and especially for the notoriously private Apple.
A report recently released by the Harvard Business School asserts that fiscal constraints and political gridlock really is stopping Apple and other companies from creating U.S. jobs and upping productivity within American borders.
"The report shows that the major problem is not underpaid and overworked workers abroad, but the inefficient business environment we have created in the U.S. through inattention and an inability to make pragmatic decisions to make things better," Michael E. Porter, economics professor at Harvard Business School, told MacNewsWorld.
#1 Semiconductor Buyer
No matter where Apple's products are being made, they're still flying off the shelves, and that's made Apple the world's top buyer of semiconductors. It took the top spot in sales for 2011, beating HP, the previous top buyer, and Samsung. Apple spent $17.3 billion on semiconductors mostly for its iPhones, iPads and MacBook Airs, a 35 percent jump from 2010.
HP spent $17.6 billion in 2010 but saw a sharp decline in PC shipments, as did most of the rest of the PC market.
The shift shows the growing need for semiconductors in the mobile and tablet marketplace. Android smartphones outsell the iPhone, but Apple makes up for it in its other markets, most notably its tablet, where it continues to be the industry leader.
"I don't think it's much of a surprise that Apple is the leader in terms of shipped consumption. When you take a look at the kind of share they have in PCs and with the MacBook Airs, they pretty much dominate the tablet market today and a fairly large chunk of smartphone base. We're only going to see those segments increase this year, and especially with their TV, they're going to continue to be up there," Patrick Wang, managing director of research for semiconductors at Evercore, told MacNewsWorld.