iPods accounted for just 14.2% of Apple?s sales in Q4 2008
If someone were to tell investors two years ago that iPod sales would only contribute 14.2% of Apple?s total revenue and that the company's sales would significantly accelerate to a pace of 75% year-over-year, those investors would likely have presumed Apple shares would be trading at a significant premium to 2006 levels.
And yet here we are: Two years later, iPod sales only contributed 14.2% of Apple?s total fiscal Q4 2008 revenue which grew at a rate of 75% YoY. Yet, Apple?s stock is only $4.00 higher than it was in November 2006.
Investors, the media and the analysts have consistently overstated Apple?s dependence on the iPod for future revenue and earnings growth. In Q1 2008, the street, choosing to disregard iPhone and Mac revenue as being at the core of Apple?s primary driver of future revenue growth, only focused on how iPod unit sales grew at a meager pace of 5% YoY. Wall Street also seemed to disregard the fact that iPod revenue growth in Q1 was still 16.6% higher than it was in the same quarter the year before.
Even today, analysts and the media continue to question whether Apple could succeed in a recessionary environment due largely to the perceived uncertainty as to whether iPod sales can continue to grow in 2009. Several members of the media, including analysts and fund managers who don?t cover technology stocks, continue to refer to Apple as the ?iPod maker? or simply a ?gadget maker? indicating that Apple?s core business is derived from iPod sales. Nothing could be further from the truth as illustrated in the tables and charts below.
It is absolutely crucial that investors notice that while iPod sales as a percentage of Apple?s total revenue continues to decline (indicating that Apple is less dependent on the iPod for growth), overall revenue is accelerating at a significant pace due largely to blistering growth rates in Mac and iPhone sales -- Apple?s total revenue grew at a pace of 75% from 2007 to 2008 but grew at a pace of only 38% between 2006 and 2007. iPod revenue growth rate is accelerating, and yet, Apple still drew 86% of its sales from sources other than the iPod in Q4.
Mac and iPhone sales accounted for 70% or two-thirds of Apple?s total revenue last quarter (Q4) and that trend appears to be accelerating as we head into 2009. Even on a GAAP basis, the iPhone is slowly but surely overtaking the iPod as the second biggest contributor to GAAP-based revenue and earnings. In Q4, iPhone revenue on a GAAP-basis reached over $800 million while contributing $4.67 billion on a non-GAAP basis -- more than the iPod has ever contributed in revenue even in its best quarter ever.
By Q4 2009, iPhone revenue on a GAAP basis will be a larger contributor to overall revenue than will iPod revenue.
This means that even with the subscription method of accounting, iPhone revenue will still have a far bigger role than iPod sales in Apple?s earnings reports. What is even more striking about this analysis is that even though the iPod is starting to have a reduced role in Apple?s revenue growth, iPod revenue actually accelerated in 2008. The revenue growth rates of the iPod were better in 2008 year-over-year than they were in 2007 year-over-year.
It?s time for investors, analysts and the media to change their views on Apple as being a mere iPod maker and recognize that Apple is a serious blue-chip stock with a larger cash hoard than Microsoft. The bottom line is: Apple drew 86% of its revenue in Q4 from sources other than the iPod.
Disclosure: Long Apple. The information contained in this blog is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisors before acting on any thoughts expressed in this publication.
And yet here we are: Two years later, iPod sales only contributed 14.2% of Apple?s total fiscal Q4 2008 revenue which grew at a rate of 75% YoY. Yet, Apple?s stock is only $4.00 higher than it was in November 2006.
Investors, the media and the analysts have consistently overstated Apple?s dependence on the iPod for future revenue and earnings growth. In Q1 2008, the street, choosing to disregard iPhone and Mac revenue as being at the core of Apple?s primary driver of future revenue growth, only focused on how iPod unit sales grew at a meager pace of 5% YoY. Wall Street also seemed to disregard the fact that iPod revenue growth in Q1 was still 16.6% higher than it was in the same quarter the year before.
Even today, analysts and the media continue to question whether Apple could succeed in a recessionary environment due largely to the perceived uncertainty as to whether iPod sales can continue to grow in 2009. Several members of the media, including analysts and fund managers who don?t cover technology stocks, continue to refer to Apple as the ?iPod maker? or simply a ?gadget maker? indicating that Apple?s core business is derived from iPod sales. Nothing could be further from the truth as illustrated in the tables and charts below.
It is absolutely crucial that investors notice that while iPod sales as a percentage of Apple?s total revenue continues to decline (indicating that Apple is less dependent on the iPod for growth), overall revenue is accelerating at a significant pace due largely to blistering growth rates in Mac and iPhone sales -- Apple?s total revenue grew at a pace of 75% from 2007 to 2008 but grew at a pace of only 38% between 2006 and 2007. iPod revenue growth rate is accelerating, and yet, Apple still drew 86% of its sales from sources other than the iPod in Q4.
Mac and iPhone sales accounted for 70% or two-thirds of Apple?s total revenue last quarter (Q4) and that trend appears to be accelerating as we head into 2009. Even on a GAAP basis, the iPhone is slowly but surely overtaking the iPod as the second biggest contributor to GAAP-based revenue and earnings. In Q4, iPhone revenue on a GAAP-basis reached over $800 million while contributing $4.67 billion on a non-GAAP basis -- more than the iPod has ever contributed in revenue even in its best quarter ever.
By Q4 2009, iPhone revenue on a GAAP basis will be a larger contributor to overall revenue than will iPod revenue.
This means that even with the subscription method of accounting, iPhone revenue will still have a far bigger role than iPod sales in Apple?s earnings reports. What is even more striking about this analysis is that even though the iPod is starting to have a reduced role in Apple?s revenue growth, iPod revenue actually accelerated in 2008. The revenue growth rates of the iPod were better in 2008 year-over-year than they were in 2007 year-over-year.
It?s time for investors, analysts and the media to change their views on Apple as being a mere iPod maker and recognize that Apple is a serious blue-chip stock with a larger cash hoard than Microsoft. The bottom line is: Apple drew 86% of its revenue in Q4 from sources other than the iPod.
Disclosure: Long Apple. The information contained in this blog is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisors before acting on any thoughts expressed in this publication.
Comments
You guys did it again, nice breakdown on how Apple's revenue is allocated. Those analyst should take a look on this blog and learn since all they do is misleading investors. (most of them)
Kudos AppleInsider !!!
It?s time for investors, analysts and the media to change their views on Apple as being a mere iPod maker and recognize that Apple is a serious blue-chip stock with a larger cash hoard than Microsoft. The bottom line is: Apple drew 86% of its revenue in Q4 from sources other than the iPod.
Yeah, now they can look at it as being a mere iPhone manufacturer instead...
Yeah, now they can look at it as being a mere iPhone manufacturer instead...
I seem to recall Mac sales were pretty good too.
Now maybe the Apple Stores can stop catering to the tweens with their iPods that only need a simple restore and focus back on the Macs more.
IMO, the iPhone is a lot more than just an iPod that makes calls. Sure it has 95% in common with the iPod touch but there is something different to the demographic that would use an iPhone over a touch and that makes up for only a 5% difference.
And yet here we are: Two years later, iPod sales only contributed 14.2% of Apple?s total fiscal Q4 2008 revenue which grew at a rate of 75% YoY. Yet, Apple?s stock is only $4.00 higher than it was in November 2006.
Please. The stock market is in disarray. Fear reigns. Apple stock is only $4.00 great than it was in November 2006 because we are in a recession and there is fear of depression.
BTW, Apple's Price Earnings ratio is relatively high (high teens I believe). When the stock was near $200 the P/E ratio was in the high 30's which I believe to indicate a highly speculative stock.
Yeah, but the iPhone is just an iPod with a phone in it. Granted an advanced iPod now that we call Touch but it was born from the iPod world. So in a sense Apple's core product is still iPod based.
Yes - the iPhone is iPod based/originated but I think rightfully the iPhone is considered a phone with an iPod in it, innit?
Rather the iPhone is a PHONE! A PHONE. ONCE AGAIN! A PHONE with an iPod in it. The mobile phone market and the MP3 market are two totally different markets. The mobile phone market is a 2 billion units/yr. market while MP3 players are a 200 million unit/yr. market. Not everyone who is in the market for a mobile phone is also in the market for an MP3 player. Otherwise, we'd have a 2 billion unit/yr. MP3 market. Man. As Apple fans and investors, I thought most of you would have gotten this by now. Everywhere I go I see the same post. The point of this article is that Apple is less dependent on iPods than they were in the past (A GOOD THING) and that its business is far more balanced than it was 2 years ago where nearly all of Apple's revenue came from just two products. Now everything is contributing in a more balanced way.
Alright. I'm sick of everyone saying the iPhone is just an iPod with a phone in it. No no no.
Rather the iPhone is a PHONE! A PHONE. ONCE AGAIN! A PHONE with an iPod in it. The mobile phone market and the MP3 market are two totally different markets. The mobile phone market is a 2 billion units/yr. market while MP3 players are a 200 million unit/yr. market. Not everyone who is in the market for a mobile phone is also in the market for an MP3 player. Otherwise, we'd have a 2 billion unit/yr. MP3 market. Man. As Apple fans and investors, I thought most of you would have gotten this by now. Everywhere I go I see the same post. The point of this article is that Apple is less dependent on iPods than they were in the past (A GOOD THING) and that its business is far more balanced than it was 2 years ago where nearly all of Apple's revenue came from just two products. Now everything is contributing in a more balanced way.
How can you honestly say with a straight face that it is any more balanced? A huge portion (40%) of its profits are based off of 1 product, the iPhone. Another 21% + is still focused on the iPod (14.21% for sales, 7.12% from iTunes, and probably most of the 3.66% of the peripherals). And of course, you're focusing on one quarter's worth of data. Please look at the charts and note that 1st quarter has shown a huge upsweep in iPod sales, and the 4th quarter has historically been the weakest. Sorry, despite your spin, Apple is still mostly a two legged pony (and at best three legged, is that really much better than two?).
How can you honestly say with a straight face that it is any more balanced? A huge portion (40%) of its profits are based off of 1 product, the iPhone. Another 21% + is still focused on the iPod (14.21% for sales, 7.12% from iTunes, and probably most of the 3.66% of the peripherals). And of course, you're focusing on one quarter's worth of data. Please look at the charts and note that 1st quarter has shown a huge upsweep in iPod sales, and the 4th quarter has historically been the weakest. Sorry, despite your spin, Apple is still mostly a two legged pony (and at best three legged, is that really much better than two?).
Alright you obviously don't know what the hell you're talking about and I'm not going to get in a debate with someone who doesn't even know the basics of the business. First, iPod accessories are included in the iTunes revenue number. Secondly, iTunes is no longer used exclusively for iPods. Thirdly, perhaps you missed the part where there's a FREAKING DOWNTREND in iPod sales as a percentage of revenue! Yes. Perhaps in Q1 iPods make up a sizable portion of Apple's total revenue. But that trend is obviously to the downside. Q1 2009, will be no different. iPod sales will make up a much smaller percentage of overall revenue than it has in the past - probably under 30%. Also, I'm not spinning anything. The data is in front of everyone's eyes to analyze for themselves. If you want to overlook the downtrend in percentage of revenue, that's your problem, not mine. I'm just here to lay out the data. Take whatever stance you want. But don't just sit here and run your mouth on an issues you know very little about.
Rather the iPhone is a PHONE! A PHONE. ONCE AGAIN! A PHONE with an iPod in it. The mobile phone market and the MP3 market are two totally different markets. The mobile phone market is a 2 billion units/yr. market while MP3 players are a 200 million unit/yr. market. Not everyone who is in the market for a mobile phone is also in the market for an MP3 player. Otherwise, we'd have a 2 billion unit/yr. MP3 market. Man. As Apple fans and investors, I thought most of you would have gotten this by now. Everywhere I go I see the same post. The point of this article is that Apple is less dependent on iPods than they were in the past (A GOOD THING) and that its business is far more balanced than it was 2 years ago where nearly all of Apple's revenue came from just two products. Now everything is contributing in a more balanced way.
The cellphone market for 2007 was around 1.15 billion units, where did you pull your number from?
Alright. I'm sick of everyone saying the iPhone is just an iPod with a phone in it. No no no.
Rather the iPhone is a PHONE! A PHONE. ONCE AGAIN! A PHONE with an iPod in it.
That's just as wrong as the other, and being repetitious doesn't make you right. The Motorola ROKR was a phone with an iPod in it. How well did that do again?
The iPhone is more than a phone, and it's more than an iPod. But what it is to different people is, well, different. Considering how similar an iPhone is to an iPod Touch, it's obvious that you can take the phone-part of the iPhone out, and the thing doesn't collapse into uselessness. Personally, the iPod features of my iPhone are about 95% of what I use it for. My assistant, on the other hand, hardly uses the iPod aspect of the thing. To her, it's a phone and a software platform.
It's all three, in fact, merged elegantly.
That's just as wrong as the other, and being repetitious doesn't make you right. The Motorola ROKR was a phone with an iPod in it. How well did that do again?
The iPhone is more than a phone, and it's more than an iPod. But what it is to different people is, well, different. Considering how similar an iPhone is to an iPod Touch, it's obvious that you can take the phone-part of the iPhone out, and the thing doesn't collapse into uselessness. Personally, the iPod features of my iPhone are about 95% of what I use it for. My assistant, on the other hand, hardly uses the iPod aspect of the thing. To her, it's a phone and a software platform.
It's all three, in fact, merged elegantly.
You're all missing the point. Arguing whether the iPhone is an iPod or not is completely irrelevant. The point is that it's driving demand for Macs, just as the iPod has been doing the past few years, and that MACS are the biggest source of income for Apple.
My contract with my current cell provider is up on Dec. 5th. I'm buying an iPhone because I can use it BOTH as a phone and an iPod. So what does that make it then? Neither? Both? if you try to argue that it's one or the other, you obviously don't have anything better to do like work, or spend time with your wife or kids.
This also shows that the so-called "analysts" are just full of it, they don't understand Apple's business model so should shut the F**k up.
Rather the iPhone is a PHONE! A PHONE. ONCE AGAIN! A PHONE with an iPod in it. The mobile phone market and the MP3 market are two totally different markets.
The iPhone, like all smartphones, isn't a phone. Or an mp3 player. Or an internet device. It's a converged device that mixes all of these features. It's both a phone and a mp3 player and does each task equally well.
This blurring of markets is why Apple developed a phone in the first place. It's market share of the mp3 market looked very good when you only compared it against other audio-only devices. However, once you add music-orientated phones to the equation, the iPod's position doesn't look anywhere near as dominant.
Perhaps not everyone who buys a music-orientated phone uses it for a music but certainly a lot do. Apple, Nokia and Sony Ericsson headphones are by far the most prevalent in the UK. Even before the iPhone, people did use their phone for music and did use their phone for taking photos.
You're all missing the point. Arguing whether the iPhone is an iPod or not is completely irrelevant. The point is that it's driving demand for Macs, just as the iPod has been doing the past few years, and that MACS are the biggest source of income for Apple.
My contract with my current cell provider is up on Dec. 5th. I'm buying an iPhone because I can use it BOTH as a phone and an iPod. So what does that make it then? Neither? Both? if you try to argue that it's one or the other, you obviously don't have anything better to do like work, or spend time with your wife or kids.
This also shows that the so-called "analysts" are just full of it, they don't understand Apple's business model so should shut the F**k up.
The iPhone, like all smartphones, isn't a phone. Or an mp3 player. Or an internet device. It's a converged device that mixes all of these features. It's both a phone and a mp3 player and does each task equally well.
This blurring of markets is why Apple developed a phone in the first place. It's market share of the mp3 market looked very good when you only compared it against other audio-only devices. However, once you add music-orientated phones to the equation, the iPod's position doesn't look anywhere near as dominant.
Perhaps not everyone who buys a music-orientated phone uses it for a music but certainly a lot do. Apple, Nokia and Sony Ericsson headphones are by far the most prevalent in the UK. Even before the iPhone, people did use their phone for music and did use their phone for taking photos.
A converged device - you made the point exactly. My wife and I are like Bowser. Our Verizon contract was up on Oct. 16 and the next morning we picked up our new iPhones from the local Apple Store. From three devices in my pockets (phone, iPod and PDA) - I'm finally down to one. We're synced up completely through my wife's iMac, my new unibody MacBook and our Airport Extreme wireless LAN. This is less to brag than to illustrate the evolving digital lifestyle that is at the center of Apple's business strategy. I don't know if we're ahead of the curve, but the great majority of our civilization will be taking this lifestyle for granted in the next few years.
Anyone who doesn't fully comprehend what Apple is about needs to read the Executive Overview in the MD&A sections of the company's 10-Ks and 10-Qs. Example:
http://www.sec.gov/Archives/edgar/da...56421/d10q.htm