iPhone 'halo' launches Apple into stratosphere

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This was published 12 years ago

iPhone 'halo' launches Apple into stratosphere

By Asher Moses
Updated

The iPhone has created a ''halo'' around the Mac and iPad that has made Apple the most valuable company in the world and sent its revenues skyrocketing, says Apple's CEO Tim Cook, who believes there are ''jaw-dropping'' opportunities ahead.

Just in the last few years as developing countries like China, Brazil and Russia have switched on to the iPhone, Apple's revenues have grown by tens of billions of dollars and Cook believes ''we're only on the surface''.

Cook, who spoke at the Goldman Sachs Technology Conference, is fast proving that he can fill the late Apple co-founder Steve Jobs' shoes, with the company doubling its quarterly earnings last month with net profit reaching a record $US13.06 billion, and sales up 73 per cent year on year.

Apple is also once again the world's most valuable company, with its share price this week breaching the $US500 a share mark for the first time. It is worth more than Google and Microsoft combined and has $US98 billion in cash, which Cook said management was considering what to do with.

Smartphone growth 'jaw-dropping'

In the last quarter, Apple sold 37 million iPhones, 17 million more than it has ever sold before.

But Cook said that meant 24 per cent of smartphones sold were iPhones and three out of four people were buying something else. He said the handset market was projected to grow from 1.5 billion to two billion units, which Cook saw as a ''jaw-dropping industry with enormous opportunity''.

"The iPhone is creating a halo for the Macintosh. iPhone has also created a halo for iPad," he said.

''You can definitely see the synergistic effects of these products, not only in developed markets but also in emerging markets where Apple wasn't resonant for most of its life.''

Cook said the iPhone introduced Apple to millions of people who had ''never met Apple before''. He said ''the biggest opportunity is in emerging markets''.

In China, where the iPhone only recently launched, the Macintosh grew more than 100 per cent year on year, compared to a market growth rate of just 10 per cent. Apple's revenue in China has grown from ''a few hundred million in revenue to last year with $13 billion''.

In 2007, before the launch of the iPhone, Apple's revenue combine from greater China, other parts of Asia, India, Latin America, Eastern Europe, Middle East and Africa was $US1.4 billion. Revenue last year for that same group of countries was $US22 billion.

In the smartphone market, which is expected to reach 1 billion units in 2015, a quarter of that number is expected to come from China and Brazil.

''We're only on the surface ... We focused mainly in China. Last year we began to focus increasingly more in Brazil and Russia,'' said Cook.

Just like the iPhone is doing now, the iPod has long provided a halo for the Mac. Cook said that since the iPod's launch ''for 23 straight quarters - six years - we've outgrown the market on the Mac''.

But Cook said that unlike the iPod, the iPhone was driving sales of Macs in emerging markets in addition to developed countries.

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Tablets to overtake PCs

Apple has sold 55 million iPads since the product's debut and there are now 170,000 iPad-optimised apps. Cook described the trajectory of the tablet as "off the charts" and said "I strongly believe that the tablet market will surpass the units sales of the PC market".

"The reason that it is so large in my view is that the iPad has stood on the shoulders of everything that came before it," said Cook.

"The iTunes Store was already in play, the App Store was already in play. People were trained on iPhone. They already knew about multitouch. Lots of things that became intuitive when you used a tablet, came from before. I gave one to my mother and she knew how to use it from watching the commercial."

Analyst firm Telsyte reported yesterday that it believed 1.4 million tablets were sold in Australia last year, with the figures expected to grow to two million this year and 5 million by 2016. Telsyte said that by 2016 around half of the Australian population would be "using "a tablet.

"Tablets are a significant post-PC computing device which will cannibalise significant portions of the CE industry and computers," said Telsyte analyst Foad Fadaghi.

Cook criticised the iPad's competitors, saying everyone in the PC and phone industry launched a tablet last year but they aimed at iPad 1 and by the time they came out with something "we were on iPad 2".

"We wound up with 170,000 apps and I'm not sure there is 100 yet on the other platform," he said.

Apple is widely expected to release the iPad 3 next month, with the latest rumours suggesting a March 7 date.

Apple seeking something "larger" for TV arsenal

Asked about the Apple TV set-top box and movie streaming player, Cook said Apple sold three million of them in the last year but Apple still called it a "hobby" because it didn't have the mass market appeal and sales potential of the Mac, iPad, iPod or iPhone.

But Cook said Apple had been looking for "something that was larger" to make the Apple TV a "serious category", which has been interpreted as referring to a TV. Jobs told his biographer before he died that he had "cracked" the problem of making a user-friendly, mass market television.

Cook said Apple didn't do hobbies as a general rule and only focused on a few things but with Apple TV "despite the barriers in that market, for those of us who use it, we've always thought there was something there".

"If we kept following our intuition and kept pulling the string, we might find something that was larger. For those people that have it right now, the customer satisfaction is off the chart. We need something that could go more main-market for it to be a serious category."

Factories to face higher scrutiny

Apple this week announced it would be placing its contract manufacturers under "unprecedented" scrutiny by the Fair Labour Association, following sustained bad press around working conditions at Foxconn, maker of the iPhone.

At the conference today Cook, who said he used to work at a paper mill in Alabama and an aluminium plant in Virginia, stressed that "we care about every worker" whether they're in Europe, Asia or the United States.

Cook said top executives at Apple visit factories on a regular basis and suppliers must live up to Apple's standards if they want to continue doing business with the company. He said the company had almost weeded out underage labour from its suppliers and was constantly improving conditions.

"No one in our industry is doing more to improve working conditions than Apple," said Cook.

"We are constantly auditing facilities going deep into the supply chain, looking for problems, finding problems and fixing problems. We report everything because we believe transparency is so very important in this area."

Apple is publishing monthly updates on conditions in its factories on its website and Cook said the January audit of over half a million workers in its supply chain found 84 per cent compliance with Apple's guidelines.

"We focus on the details. If there is a fire extinguisher missing from a cafeteria, that facility doesn't pass inspection until that fire extinguisher is in place," he said.

This reporter is on Twitter: @ashermoses

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