As the third quarter came to end, Apple (AAPL) began to tally its earnings. Historically, the third quarter has been marked by slow growth and decreased earnings for Apple, presumably because the company generally releases its new iPhone(s) in the late fall. This strategy curtails mobile phone sales during the summer, as everyone awaits Apple's newest release. This quarter, however, Apple defied such a trend and crushed expected earnings.
To start, Apple reported $37.4 billion in revenue, which was largely propelled by strong iPhone sales (whereas iPad sales lagged). One factor that helped grow iPhone revenues was increased foreign demand in BRIC markets: Brazil, Russia, India, and China. This is a stark contrast to domestic American growth, which remained mostly stagnant.
While CEO Tim Cook has good reason to be pleased with his company's earnings, not all sales results were impressive. The report showed that iPad sales have decreased year-over-year. There are several possible reasons for this contraction. Tablets in general are not as portable as smartphones, and not as versatile as laptops. For many consumers, it is easier to have an iPhone and a small laptop than it is to carry around a limited hybrid device. Another reason for lackluster sales is that iPads do not have similar life cycles. For example, the majority of smartphone users replace their phones after two years; whereas tablets are handled with care, and used by consumers for longer time periods.
To offset this trend, Apple has announced several new strategies that will help bolster its bottom line. In regards to the iPad, Apple is targeting more enterprise solutions. In fact, Apple recently announced a partnership with IBM to begin working on the development of centralized business applications. Additionally, Apple has announced that it will target the education vertical to sell more iPads to schools (where it already has an 80% market share). Once implemented, both of these strategies should help bolster iPad sales.
Another upcoming Apple event includes the announcement, and subsequent release, of both the iPhone 6 and iWatch. The iPhone 6 is highly anticipated, as Apple is expected to announce two models (with different screen sizes). One model will be similar to the iPhone 5s in size and shape. However, the other model will include a screen up to an inch larger. This divergence from common Apple practices is meant to specifically address consumer demand for bigger screens, most of which can be found on Android phones.
Alongside the announcement of the new iPhone lineup is the expected Apple iWatch. Major players like Samsung, Motorola (MSI), and LG have all announced, or begun selling, versions of smart watches. Thus, this release will come as no surprise; Apple is expected to publicly confirm its iWatch production later this year (see why Apple will easily outsell Samsung’s smart watch here).
With rising future anticipation, and solid third quarter earnings, Apple's future is bright. The company has shown that even amongst criticisms, due to lack of innovation, it can still successfully sell products of interest. Apple is operating in full swing, and critics may just witness the release of revolutionary products later this year.