Tuesday, May 21, 2013

The Numbers Behind Apple’s Sluggish Growth

From The Motley Fool, dated May 3, 2013

So Apple’s growth has been slowing down, but exactly by how much? and what about Samsung?

Apple’s (NASDAQ: AAPLgrowth has been slowing down but exactly by how much? According to its latest earnings release, the business still sells 420,562 iPhones, 218,843 iPads, 44,404 Macs and 63,295 iPods – all in a single day, every day, which is phenomenal to say the least. But the extraordinary growth figures -- which used to pump its stock price and hence its market cap – are now history. In fact, the quarterly revenue growth is nearing a high single-digit number. The music is certainly slowing down, but for its rival Samsung (OTCMKTS: SSNLF) the party isn’t over yet.
Two years ago, in Q2-2011, Apple reported growth of more than 80%; in its most recent quarter, Apple barely managed double digit growth as its revenue increased by just 11.27% to $43.6 billion.

During the quarter, Apple recorded an increase in revenue in all of its geographic operating segments with Asia Pacific (excluding China and Japan) posting the largest increase in sales while revenues in Americas, its biggest market, increased by only 6.6%; last year, this figure was 41%. Back then, Apple did not report China’s numbers separately as this market used to be a part of its Asia Pacific segment. In Q2-2012, the biggest change came from Asia Pacific region whose revenues increased by 114% or $5.4 billion. A year later, in Q3-2012, the Asia Pacific region, including Greater China, showed growth of just 12%. As is evident from the table below, Apple’s growth is seriously slowing down in all of its markets. 

In the previous quarter, none of the geographic regions could manage to put a $1 billion increase in the firm’s top line, not even Americas. The largest growth numbers have come from the European market whose revenues have gone up by $993 million.

In Q2-2013, iPhone’s sales increased by just 3% to $22.9 billion as the number of units sold showed a modest growth of 6.7%. On the other hand, iPad’s sales jumped by almost 40% to $8.7 billion as the number of tablets sold rose 65% to reach 19.5 million units.

On the other hand, nothing seems to be stopping the South Korean consumer electronics behemoth and Apple’s biggest rival Samsung. In its first quarter, according to Strategy Analytics, the business shipped 69.4 million smartphones representing an impressive increase of 56% from last year – that is 290 million more than Apple’s total quarterly shipments of iPhone, iPad, Mac and iPod combined.
Apple’s premium products have to compete with Samsung’s enormous portfolio of smartphones that dominate the emerging markets which makes it difficult for Apple to maintain its global market share. Samsung’s market share in the smartphone arena has now risen to record levels of 33% whereas Apple’s has shrunk from 22.8% in Q1-2012 to 17.9% in Q1-2013. In essence, every third smartphone on the planet now is made by Samsung. The business is now gearing up for the release of its flagship phone Galaxy S4 and if it could overcome the supply side issues it is facing then its investors might very well be in for another strong quarter.

However, the company’s revenue growth is also showing signs of weariness. In the first quarter of 2013, its total sales stood at $47.8 billion showing a growth of 16.8% as opposed to a growth of 22.4% in the same quarter last year.

In the last six months, Apple’s shares have plummeted by 30%. On the other hand, the shares of Samsung Electronics have risen by 14% in the corresponding period on the Korean stock exchange. It will be interesting to see where these two stocks go from here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.