Apple is ‘Healthier’ Than Ever

Apple came out with their December 2014 quarterly earnings this week, and the numbers are impressive.  They sold 74 million phones over the holidays – or 34,000 phones every hour, 24 hours a day and generated $18 billion in profit for the three months.  This is a record for Apple (as well as every other company on the planet) with a revenue figure of $74.6 billion that is staggering against the backdrop of death cries for Apple from a year ago.  They are not just surviving, they are healthy and thriving.

For comparison, Google and Microsoft generated a combined $43 billion of revenue last quarter.  Apple beat that with its iPhone sales alone, with iOS accounting for nearly 80% of all mobile e-commerce sales during the holiday season.  With increased revenue per phone on the iPhone 6 Plus, Apple’s gross margin is nearly back to 40%, dropping ever more cash to the bottom line.

It is exciting to see Apple survive the transition from Steve Jobs to Tim Cook, who has assembled an impressive team to re-mold Apple after the death of its co-founder and spiritual guide.  With the advent of Apple Watch and an array of health apps this year, a lot of investor expectations will ride on these products to diversify their revenue base away from the iPhone.  While it is not critical to Apple’s continued success, with plenty of available market share in phones and computers, it would help drive more investors to the stock.

In a period of epic storms and calamitous drops in commodity prices, it is one piece of goods news that is quite welcome.

 

David Matias

Managing Principal

Vodia Capital, LLC