Year 2004: Apple had $7 Billion revenues and $172 Million Net Income. Apple was ranked 301 in Fortune 500 list. Year 2011: Apple has $87 Billion revenues and $20 Billion Net Income. Apple is ranked 35 in Fortune 500 list. During a short-span of just 7 years, Apple revenues have grown 12-fold, Net Income has grown 116-times, and Fortune rank improved from 301 to 35. Though Apple has been growing its revenues steadily over the last 7 years, they had remarkable revenue growth over the last 12 months.
This article provides a deep dive analysis into Apple’s recent growth so as to understand the reasons behind it and to provide learning for other companies. For the purposes of the analysis below, FY ends March (See Note at the bottom). So, FY10 represents the 12-months period from April’09 to March’10. Similarly, FY11 represents the 12-months period from April’10 to March’11. An analysis with FY ending March also helps because the analysis can be done with latest reported numbers of different companies.
As per 2011 Fortune 500 list, the top 5 Technology companies (Hardware, Software, Services, or their combinations) in the World are HP, IBM, Apple, Microsoft, and Dell with Fortune rankings of 11, 18, 35, 38, and 41 respectively. For FY11, HP, IBM, Apple, Microsoft, and Dell had revenues of $128, $102, $87, $69, and $62 Billion respectively. During FY10, Apple had $51 Billion revenues. During FY11, Apple registered phenomenal YoY growth of 71% to take revenues to $87 Billion. Apple added $36 Billion incremental revenues – 4-times more than its nearest competitor. Apple crossed Microsoft and Dell to the 3rd largest technology company. Not only did Apple register a strong growth in Revenues, but also even stronger growth in Profits. Apple Net Income grew by 81% YoY to reach $20 Billion in FY11.
Apple is currently trailing behind IBM and HP by $15 Billion and $41 Billion respectively in total revenues. As per Analyst estimates, Apple will cross IBM in TTM (Trailing Twelve Months) revenues over next 3 quarters to gain the Number 2 spot. Over the next 3 years, Apple is estimated to even cross HP to become the Number 1 Company in the Technology Industry.
Apple derives 63% of its revenues from Americas and Europe and about 22% from Asia Pacific and Japan. During FY11, Asia Pacific has shown nearly 3-times faster growth than Americas and Europe. Apple revenues from Asia Pacific grew at 162% YoY from $5 Billion in FY10 to $14 Billion in FY11.
Apple Revenues from its 3 core products-lines – iPhone, iPad, and iPod – in FY11 were $57 Billion (66% of company Total revenues). iPhone Sales grew at 98% YoY from $19 Billion in FY10 to $37 Billion in FY11. iPad Sales grew from zero to $12 Billion in the first 12 months.
Clearly, Apple had a phenomenal growth over last 12 months when the global economy has just started to come out of recession. Here are 5 lessons that Tech companies should take from Apple.
1. Think “World-class”. Apple is one of the World’s most admired companies for Innovation. Apple has a maniacal focus on perfection and strives for excellence in user experience. Not only do they create beautiful & artistic products, but also they try to bring world-class experience in whatever they do. Apple tries to create the best buying experience in the world through their Apple Retail stores. Apple has plans to build the best office campus in the world in the city of Cupertino, which looks like a space shuttle and will house over 12,000 employees by 2015.
2. Think “total user experience”. One of the key reasons for Apple success is that they own both Hardware and Software. They control the complete user experience. They are not dependent on their partners for any technical breakthroughs. They innovate at their own pace.
3. Think “beyond Enterprise”. Apple is focused on Consumer market than the Enterprise Market. Apple has sold 200 Million iOS devices to date. 25 Million iPads have been sold in the first 14 months. Because of the pull-factor towards its products, Apple has delivered World’s best growth numbers despite recession. Apple showed the world that Volume and Margin games can be played together. As the global economic activity shifts East, Apple is taking full advantage as seen from 162% YoY growth of Asia Pacific revenues.
4. Think “Sustainable Competitive Advantage”. Apple has built a strong competitive advantage for themselves with products like iOS and iTunes. iOS is one of the World’s most advanced Mobile Operating System (used in iPhone and iPad) with 44% of the market share. Google’s Android is its closest competitor. Just as iTunes virtually locks-in the customers, App store virtually locks-in the developer community. Apple has 225 Million iTunes accounts (with credit card details). Apple paid $2.5 Billion to developers building apps for the App store.
5. Think “New Business Models”. Tech companies need to start preparing for the “Post-PC” era, where Mobility and Cloud will be the key themes. Sun Microsystems used to say “Network is the Computer”. Apple goes even further and says “Your Data is the Computer”. That is why iCloud demotes the PC to be just a device like iPhone or iPad and moves the digital hub online. Apple developed Ecosystems with Telecom Carriers and Music companies. Apple has sold over 15 billion songs via iTunes. In less than 3 years, 14 Billion apps have been downloaded from the Apple App Store. These have further contributed to Apple revenues.
And one more thing. Think Different.
Note – Every company has their Financial Year (FY) ending during different months of a year. Microsoft FY ends June. Apple FY ends September. IBM FY ends December. HP FY ends October. Dell FY ends January. In order to do a like-to-like comparison, the Quarterly data for individual companies was taken and then aggregated to arrive at FY ending March data. For Dell and HP, Feb-Apr quarter is compared to Jan-Mar quarter of others.