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Why the App Store continues to grow business for Apple

Why the favorable commodity market helped Apple's gross margins (Part 3 of 5)

(Continued from Part 2)

Apple’s App Store driving iTunes business

In the previous part of the series, we discussed the strong growth that Apple’s (AAPL) Mac business has achieved. Another Apple business that’s showing strong growth is its iTunes software and services business. Under the iTunes business, Apple earns revenues from iTunes Store and App Store. The App Store allows users to download free and paid applications (or apps) and purchase the in-app content. The iTunes Store is the place where users can purchase and download music, movies, and TV shows. During the conference call to announce fiscal 3Q14 earnings, Apple mentioned that iTunes billings grew by 25% year-over-year (or YoY) and credited the growth to the App Store.

Apple generates more revenues from the App Store than Google

Apple’s management mentioned that the cumulative app downloads from App Store has reached about 75 billion. The developers have earned $20 billion from the sales of their apps from App Store.

During the conference call to announce the March, 2014, ending quarter earnings, Apple specifically hailed Microsoft’s (MSFT) decision of launching the Office app on iPad. Apple agreed that it is helping in terms of its App Store revenue growth. Apple also mentioned that during the quarter, the App Store generated 85% more revenues than Google (GOOGL) Play despite a huge difference of market share between Android and iOS based devices.

Android dominates the smartphone operating system market

The difference in market shares can be judged from the fact that according to a report from International Data Corporation (or IDC) and as the previous chart shows, Android dominates the global smartphone operating system market with a share of 81%, while Apple’s iOS is second at a 15% share. Windows Phone and BlackBerry (BBRY) are struggling in this market with a share of less than 3% share each. Apple’s continued growth from the App Store would help exchange-traded funds (or ETFs) like the iShares Dow Jones U.S. Technology ETF (IYW) and the Technology Select Sector SPDR ETF (or XLK) , which have high exposure to Apple.

Continue to Part 4

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