By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Motorola. Nokia. BlackBerry. The Novatel of the ‘90s. H.H. Scott. Fisher. Zenith. Admiral. These were high-flying consumer electronics and cellphone companies whose market shares fell precipitously and, in some cases, disappeared as the companies went out of business.
Will Apple join them?
That’s what I began to think when I looked through the details of Apple’s third-quarter 2013 financial report and found that for the nine months to date, unit and dollar growth in iPad and iPhone sales slowed a great deal.
For the nine-month period, iPad unit sales were up 28.6 percent to 57 million compared to the year-ago period, but dollar volume was up only 3.5 percent to $25.8 billion. In contrast, iPad sales for the full 2012 fiscal year (which ended Sept. 30, 2012) grew 80 percent in units to 58.3 million and 37.2 percent in dollars to $32.4 billion.
iPhone growth is also slowing. Nine-month unit sales grew only 18.7 percent to 116.5 million on dollar growth of 13.3 percent to $71.8 billion. In contrast, iPhone sales for the full 2012 fiscal year grew 73 percent in units to 125 million and 71 percent in dollars to $80.5 billion.
To no one’s surprise, iPod unit volume for the first three quarters of fiscal 2013 fell 23.3 percent in units to 22.9 million and 55.7 percent in dollars to $3.84 billion.
In units, the nine-month slowdown in iPad and iPhone growth is marked and indisputable. In dollars, the statistics might slightly inflate the slowing growth rates of the two products. That’s because in fiscal 2012, Apple’s financial reports bundled revenues from iPad and iPhone sales with revenues from the products’ respective accessories (Apple-branded accessory revenues combined with revenues from licensing deals with third-party brands). The reporting change, however, wouldn’t have changed dollar-growth rates by much given that for the first three quarters of the year, iPad and iPhone accessory revenues were only $4.4 billion compared to combined iPad/iPhone sales of $97.6 billion. Accessory revenues were up 12.8 percent in the nine-month period compared to the year-ago period.
Sales of iDevices and their accessories have a major impact on Apple’s bottom line, accounting for $105.8 billion of total $133.4 billion in nine-month revenues.
For the nine-month period, Apple’s total revenues were up 10.7 percent to $133.4 billion, but year-to-date net income fell 12 percent to $29.5 billion.
Despite the results, Apple sales are still rising, albeit more slowly than before. And the company is still extremely profitable.
The company has a long way to go before it becomes the next Motorola, Nokia or BlackBerry. But it has begun moving in that direction unless it can accelerate iPhone and iPad growth. The company might be able to stimulate iPhone growth with an expanded selection of models that hit different price tiers with features and performance levels that appeal to a wider variety of consumers.
Apple could also offer lower cost iPhones for cost-conscious foreign markets where phones are not as heavily subsidized as they are in the U.S. A distribution deal with China Mobile, China’s largest carrier, would also help.
Apple’s solution in the tablet market, as well as in the smartphone market, might also include a significant upgrade in performance levels to close or eliminate the performance gap with rival products.
A significant move into wearable electronics might also be needed to reignite growth rates.
Later this year, when Apple unveils new products, we’ll find out how far along they are in addressing their challenges.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.