Most important what-if question regarding Apple

monkey barsby Jessica.Tam

When exceptional growth is not an exception
[Via asymco]

Apple’s last quarter’s sales growth was an impressive 83%. It was not as high as the 92% earnings rise because there was a higher mix of iPhones this quarter than in the past. The iPhone is the most profitable product in Apple’s portfolio so it impacts the gross margin significantly.

The iPhone is, in fact, a huge part of Apple’s business. In units it reached 5% global share and 14% US share. I’ll go over the overall industry data as soon as all the major reports are in, but already it has been estimated that Apple is the largest phone vendor by profit and sales.

In the following chart, you can see just how important the iPhone has become. Together with the iPad and iPod touch, iOS-powered devices make up about 65% of sales. That’s almost three times the value of OS X based products which make up 23% of sales. That also leaves just 12% of sales not directly affected by these two juggernaut platforms (though music and peripherals are clearly indirectly affected by Apple’s own platform products.)

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Quoting Asymco:

What if blockbusters are really something that can be built with repeatable consistency. What would that be worth?

What if Apple can keep doing this?

Apple has not only presented one disruptive idea – they have continued to introduce ones about every 3-4 years. The iMac changed the way PCs looked and worked. The iPod created an MP3 player for everyone, the iPhone changed the smartphone industry and the iPad created a novel new device.

These have all driven sales so greatly that year over year sales are almost up 100%. Can you name any other 40 tear old company with over 46,000 employees that has done this even once in a 4 year period, much lest 4 times?

In fact, as the data show in his figures, Apple has actually done something few companies have been able to do – it will sacrifice one extremely profitable, disruptive product to open way for another one. The share of total sales held by iPods 4 years ago has almost all been taken by iOS devices. It has seen a shift in the relative importance of its products from computers to iPods to iPhones, each shift doubling sales but with a focus on leveraging each bit rather than destroying them.

But, in the nice wat things work today, they do not have to destroy the village in order to save it. They still sell iPods and computers. In fact, their sales of only OS X devices has increased at a much faster rate than any other computer maker. They disrupted the netbook-laptop market with the iPad and Macbook Air.

Many are noticing that Microsoft’s main problem is not that it does not have great research. It is that is simply can not move away from Windows and Office. It cannot recreate itself to move into new areas. It suffers from the Innovator’s dilemma – moving into a totally new area requires it to let go of a perfectly profitable product.

Most companies hold on to a money-making product until it completely fails in the market place. By that time, they have generally ‘wasted’ all the profits – CEO salaries, etc. – and have nothing to bootstrap themselves into the next step. In fact, they often only start looking when it is already too late.

Apple is a 21st Century Company – one based on a degree of resilience and adaptability that will serve as a model for this century. It takes the profits it is making to leverage up to the next step WHILE the product is still extremely profitable.

Think of monkey bars. If you swing from one to the next, letting go with one hand and then grasping a new bar at just the right time, you can move through them very quickly with little extra energy.  If you wait until you start swinging backwards, it is really hard to get moving again. If you just hang there, moving one arm forward and then the other one forward, holding on bar by bar, you will often become too tired to make it across.