Apple has a secret weapon to continue growth

“Tim Cook sounded confident as he tried to reassure disappointed investors on an earnings call earlier this week. But analysts managed to put the revered Apple CEO on the defensive,” Sam Frizell reports for TIME Magazine. “‘2013 came around, we’ve got some new products, obviously, but nothing really from our new product category,’ Brian Marshall, analyst at ISI Group said to Cook on the call. ‘Do you care to comment on the innovation cycle of the company and the cadence there?’ ‘Are you still a growth company?’ challenged Ben Reitzes, an analyst at Barclays.”

“Cook and Apple’s management team have one thing to very confident of, even as investors and analysts become more comfortable putting difficult questions to them. And that one thing is: China,” Frizell reports. “China’s technology market is booming, and the country is making up an increasingly large slice of Apple’s revenue. Emerging markets now look like they’ll be the biggest new source of revenue for Apple. Sales in the Americas last quarter actually declined by 1% compared with the year-ago period. But the company’s sales in China increased by a full 29%. And with Apple’s sales in China hitting $8.8 billion last quarter, that part of the company’s sales are almost half its $20.1 billion Americas revenues.”

“Some analysts have roasted Cook for lack of innovation at Apple. Cook’s focus on China may be the best way to get his feet out of the fire,” Frizell reports. “The country’s population of 1.3 billion and its economy’s 7% growth rate makes it one of the most attractive markets for any company. Its growing middle class has shown a voracious appetite for electronic and consumer products from global companies.”

Read more in the full article here.

19 Comments

  1. Well, if Apple wants to really be a big hit in China, they should develop the “iLung” so those poor bastards can breath the polluted air they have.

    After that the “iEat” contaminant detector, so they can analyze their food for who knows what kind of crap that gets put into it.

    That country is one big test bed for every kind of cancer and genetic mutation known to man.

  2. No one sees any China growth for Apple except Tim Cook. Everyone else swears that Chinese consumers can’t afford Apple products. If everyone thinks that way, then it must be pretty obvious that’s how it is. Most analysts are leaning towards the iPhone having mediocre sales on China Mobile, so there must be some reason for it. I can’t tell for sure because I’m unable to see into the future as most people can. For me, the future is always uncertain but analysts possibly have a very clear picture of it. Maybe they’re just playing the odds, but I’m not sure.

    1. Analysts have a very clear picture of nothing. Cook explained that China Mobile has 4G LTE in only 16 cities out 300 or so planned Although that represents about 5% of planned cities, it is probably about 30% of CHL user base. I haven’t seen any analyst address that. I’ve seen talking heads companying that poor CHL sales hurt last quarter, even though the phone wasn’t re;ease until this quarter.

      Apple does have a problem with the US carriers. i noticed in todays Sunday adds, no iPhones in VZ adds or BBY adds. Guess Samesung and MOTO are subsidizing the adds and that is why Apple is not included.

      Apple needs to be more proactive in countering the negative publicity. Negative press in Forbes and NYT this weekend. Seems like never a day without a new law suit filed. Justice takes forever.

      Another problem for Apple which for me is a positive is their products when taken care of las and last. I have a late 2008 MBP. I ran out of drive space, so I replaced my 250 MB drive with a 1 TB hybrid drive for about $135 and I never have to buy another upgrade for my OS. This delays my replacement another 2 years. My iPod touch 3G still works perfectly as does my wife’s 4S which was a hand me down from an upgrading fellow worker.

      On the other hand, android users need to upgrade hardware to stay current except perhaps for some later generation models. I have had any security issues on Apple, but my HP PC was hijacked once to generate spam messages.

      Obviously, the PC markets and phone markets in the uS are saturated, so Apple has to grow by upgrading current uses and converting Android users. It is not an easy fix. To me their is some incremental potential in a new Apple TV with gaming capability and an iWatch. but these can hardly move the needle relative to iPad and iPhone. I think they have the resources to go head to head with NFLX in the rental market, but that again is very incremental. Perhaps payments processing has the biggest potential because it should be high margin. It could help drive the sales of iPads and other processing devices.

      If Apple just holds steady in terms of cash flow, it stock cloud be self liquidating in 5 years.

      1. pridon,
        Spot on comments. I still have an iPod 2g and 3g and they work great. Apple products last so long and end up making a large percent of what is functioning. Many other brands become trash after 2-3 years. People don’t think….. well….. I guess that about covers it. LOL

    2. RBF,
      “WTF??? “Everyone else swears that Chinese consumers can’t afford Apple products. If everyone thinks that way, then it must be pretty obvious that’s how it is. Most analysts are leaning towards the iPhone having mediocre sales on China Mobile, so there must be some reason for it. ”
      —- Are you having a really bad day or are you that lacking in intelligence???? Anal…..ysts say it so it must be true?????
      Then you added….
      “Most analysts are leaning towards the iPhone having mediocre sales on China Mobile, so there must be some reason for it..”

      —— My estimate of your intelligence has just hit rock bottom. Either you are a poorly paid Samsung hit troll or you just do not care to do ANY research. Hey, I know an anal..yst who has a bridge for sale in Brooklyn. I hear its a bargain. Want in????? LOL

      1. @eldernorm — Well said.

        An amazing number of people seem to think that China, India and other such locations are some kind of poverty stricken “third world” developing nations. I think such impressions are based on information that is about thirty years old. China, for example, has shifted A LOT… way closer to the US than it was a few decades ago. There is way more buying power in those countries than most people – and, it seems, most so-called analysts – seem to realize.

    3. If enough people say that the earth is flat then it must be. They know something that the rest of us don’t, right?

      Are you aware of the nouveaux riche in China? They really want to flaunt their wealth and the only way to show how successful they are is to pull out a phone that few others have because it has not been available easily for very long. Of course you think Samsung/Android because you are that kind of person but you are wrong. Try going over there and do business with the higher levels of import/export businesses. See what phones the use and covet.

    4. The problem in China is actually fairly obvious, let’s take the CoolPad Halo F1. Specs 5″, 1.7Ghz, 720, 2Gb, 13mp.
      Those specs decent – not groundbreaking – but it’s priced sub $150.. no contract, just the hard wear.
      Persuading consumers to pay $300-400 extra for iOS is going to be a hard sell.
      The issue Apple has going forward is that this, and I understand that Lenovo launching similar, will be available in the US and Europe at a 70% discount to the 5S.

  3. How much longer will we have to put up with “great products in the pipeline” Tim Cook? The days are growing fewer but the end can’t come soon enough. In fact, with every passing day, it gets more and more unlikely that anyone will be able to pilot the company back into the lane it once occupied alone. We all should begin to get used to Apple the ordinary instead of Apple the extraordinary. The negligent, fat and happy board of directors ought to be sued for every cent for their malfeasance of ignoring the glaring limitations of Tim Cook. When shareholders finally force their hand, it will be too late. It’s too late already.

    1. Jay, I hear that samsung has done away with shiny screens and gone back to matte plastic. I am sure you will be heading over there shortly.

      It seems that all you do is just rant against Tim Cook. No facts, no figures, no reason, just rant. I think you are rating lower than RBF above.
      Just saying,

  4. As a person who visits China about 4 times a year…let me say there is lots of money in China.

    A mall near the hotel where I stay in Shenzhen has a Cartier, Mont Blanc, Ferragamo-something, Louis Vuitton, Erminegildo-Zenga, Dior, Prada, and many other exclusive stores. When was the last time you shopped at one of those brand stores. Apple stores fit in quite nicely and will continue to multiple in those areas.

    The cities not far from the East coast are major manufacturing areas…not poor farmland. Most people’s vision of China is rice paddies. Yes there are lots of areas like that too, but in them are few cellphone towers and very little money. Those areas are perfect for Android.

  5. Seig Heil Sam Frizell!

    You do know that is Apple had a secret weapon it would be secret and you’d bet the last to know about it.

    Secondly moron man weapon are used to kill, destroy, remove life, and certainly, most certainly not used to continue growth, although there are times when something like an Apocalyptic fire like the one heading your way can allow for new growth (as opposed to continued growth).

    It’s a nice gesture to support your war mongering terrorist nation You’ve learned the propaganda well and certainly deserve a salute worthy of your approach.

      1. Ya yea but what does Sam Frizell sound like? You know associating secret weapon with growth. Sounds real modern day war mongering terroristic American to me.

        Dang did I say Apocalyptic fire. Too religious huh? How about scientific global burning. Is that better?

        I’d only sound humorous to those who have an ear for it…or eyes for those capable of reading silently.

  6. Disappointed about what? The 5th largest profit ever in corporate history. These anal-ists need to be fired or they should retire because none of them have any common sense and they don’t understand business anymore. Throw in the towel people because you raise stocks like Google on missed bottom lines, but you pound Apple’s stock into the ground when Apple makes the 5th largest profit of all time!
    Anal-ists are IDIOTS!!! Plain and simple. They have lost it completely! PERIOD!

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