Sunday, June 23, 2013

Apple's Long And Winding Road

There's no question Apple faces big challenges in the months ahead. Apple's reported revenue of $98.115 billion in the first six months of the current fiscal year represents a year-over-year revenue growth rate of 14.73%, well off the 66.35% revenue growth rate in the first six months of the prior fiscal year. 

Additionally, Apple's revenue growth reliance on the iPhone and iPad lines is creating challenges in light of the success of the Pad mini and the corresponding drop in average selling prices for the line. In this article I will explore the factors that have compromised Apple's recent rates of growth and the opportunities available to the company as it continues on a long and winding road of recovery. 

Apple's Current Revenue Mix
Over the first six months of the current fiscal year nearly 75% of Apple's reported revenue was sourced from the iPhone and iPad lines. The chart below illustrate the high concentration of revenue in Apple's two most popular device lines. 
It's interesting to note Apple's recently recast iTunes/Software/Services revenue segment now delivers more recognized revenue than the iPod device line and the Accessories revenue segment combined. The Macintosh line represented 11.2% of revenue in the first six months of the current fiscal year versus 14.8% of revenue in fiscal year FY2012 that ended in September. 

The chart below illustrates the rates of revenue growth for each of Apple's revenue segments for the six-month period ended in March. 

In the first two quarters of the current fiscal year, iPad revenue rose 29.18% on a 55.47% rise in units sales to 42.337 million units. The iTunes/Software/Services segment was Apple's second-fastest growing segment with a 26.01% growth rate to $7.801 billion. 

Negative revenue growth delivered by both the iPod and Mac lines in the first half of FY2013 contributed to the rising revenue dependency on the iPhone and iPad lines for aggregate revenue growth for the company.