Some Thoughts on Apple's Q1 2014 Results

One of the richest companies in the world just got richer. Yesterday (January 28th), Apple released their Quarter 1 results, which bring simultaneously good and not so good news (that's just how these things work). I will just be briefly highlighting some things that stood out to me, as well as some thoughts on the numbers. 

  Figure 1

Figure 1

Some thoughts on Figure 1, which shows revenues by operating segment (geographic location):

  • Apple made more revenues in the Americas than all of Asia combined. In otherwords, there is enormous room for growth in Asian markets. Smartphones and tablets are becoming saturated in the U.S. but that is not yet the case for China. It remains questionable if demand for more premium tablets (read: iPad) exists in China yet. 
  Figure 2

Figure 2

Figure 2 shows the Average Revenue Per Product (ARPU) for the four most profitable products Apple makes, namely the iPhone, iPad, Mac, and iPod. Here's what I notice:

  • Mac ARPU is almost exactly 3 times that of the iPad. Obviously, the future of casual computing (reading email, browsing the web, watching video) is in tablets, but let's not discount the traditional computer just yet. 
  • iPad ARPU is $440, which means that the majority of iPad sales are the now ancient iPad 2 and/or the cheaper iPad mini's. When I say cheaper iPad mini's, I mean consumers are purchasing either the previous generation mini's or the cheapest (16GB) iPad mini with Retina displays. That's unfortunate, given that it's hard, and becomes increasingly harder, for developers to support older models of iPad's. Furthermore, it's not good for the users, since they have to live with a device that has such a small storage capacity. I expect the next generation of iOS devices will come at 32GB as the lowest storage capacity. 
  • Stating the obvious, the iPhone remains the most profitable device for Apple. Most consumers don't know this, but the $200 iPhone they are purchasing from the store is subsidized by their carrier. Good situation to be in for Apple.

That's all for now, but I will be going deeper into the financial statements of Apple in later posts.