Apple yesterday made me happy and proud to be an Apple fan, both as a consumer and as an investor ! Coincidentally, I was during they day wearing black my Apple-branded sweat-shirt !
They yesterday evening reported their FY07 Q2 earnings and that was mind-blowing : net margin now stands at an amazing 15% of sales ($770M out of $5.26bn sales).
Top line growth is still very solid with a good 21% ! iPods and other music-related sales represented 44% of sales, Apple was very right to delete the "Computer" mention from its original name "Apple Computer Inc".
Back in november '06, I reiterated my $100 target within 6 months, so here we are now : in after hours Apple stock jumped to $102, increasing the market cap to $90bn.
Simply said, the Apple model is a gorgeous one ! By providing truly unique, differentiated, beautiful, user-friendly devices, both in computers and MP3 payers, they have created a very strong profit-generating business. And with the soon-to-be-launched iPhone (confirmed for end June in the US, great news), the model will not decelerate.
Any secrets behind that ? My take is the following, they are 3 things and only 3 :
- Apple invoices a slight premium for significantly better products, better in design, better in user friendliness, better in overall consumer experience (this also includes the brand experience). This works consumer-wise, who can be foolish enough not to accept to pay a slight premium for much better products ?
- Apple now have a tight control of costs, both in manufacturing (subcontracted to Foxconn) and in overheads (driven down but the 3rd point below). Again, as I have put it many times, Steve Jobs is not only a marketing and design visionary but is unrivaled when it comes to buy components. This has always been one of his strong point for the last 3 decades.
- Apple is very focused ! Apple doesn't offer a tremendous range of products : they have only 3 variations in each one of their product line Macbook, MacBook Pro, iMac and iMac Pro and 2 variations only in each iPod mini, iPod nano and iPod product lines (plus the color variations). Make the calculation, this is 20 products only ! But each one is extremely well thought in all aspects.
Those 3 pillars of high profitabilty can apply to almost every business domain. Just think about it ! As a manufacturer, no need to sell hundreds or thousands of different products, just remain focus to sell a few very well thought ones at an "adequate" premium, and control your cost structure...
By the way, another example, I read some time ago that Ford was selling Aston Martin (that I consider one of the most iconic car brand in the world) because it was now very profitable and enjoying a fast growth. How many models this brand carry : just 5 ! Aston Martin was sold for roughly €800M about a month ago. I'm convinced the new buyer have a tremendous potential ahead and should triple unit sales in the coming 10 years (to about 20,000 cars vs 7000 in 2006).
Apple got an excellent overall image. Best design and quality. No doubt! Steve Jobs succeed in overturning the Apple declined. (we may offer him the Airbus chair). He focused on Design and Quality products as another successful company ... Google. And a groovy image for both of them. Smart!
On the other side you have Microsoft... but also successful (for the least).or their counterpart McDonald for the food industry.
Agree for Apple but not for Aston Martin... bad design and poor quality.
Posted by: ConanRay | April 26, 2007 at 02:08 PM
I'm very impressive by the rebirth of apple... I didn't understand their development 10 years ago but the Steve is really a genius...
For Aston i'm a fan of the last one, the Aston Martin V8, small, class... and expensive !
Posted by: footrix47 | April 26, 2007 at 05:30 PM
If you're not subject to vertigo, check the graph at the bottom of this page http://tinyurl.com/2g6569
Posted by: chmike | April 27, 2007 at 10:10 AM
This graph is very fun... 5 years ago I read a book of Andy Grove, the Intel chairman from 1979 to 1997. He explain in his book "Only the Paranoid Survive" , sometimes you have an inflection point in your industry. This point is strategic for you survival.
Compare the graph on this page with the Apple & Dell graph
http://www.intel.com/pressroom/kits/bios/grove/paranoid.htm
And you do you anticipate an inflection point for e-commerce ?
Posted by: footrix47 | April 27, 2007 at 06:14 PM
very interesting, but I don't agree with you
Idetrorce
Posted by: Idetrorce | December 15, 2007 at 12:29 PM
happy and proud to be an Apple fan, both as a consumer and as an investor ! Coincidentally, I was during they day wearing black my Apple-branded sweat-shirt !
They yesterday evening reported their FY07 Q2 earnings and that was mind-blowing : net margin now stands at an amazing 15% of sales
Posted by: homemade detox | November 03, 2010 at 07:58 PM