Ask Siri to name the most successful company in the world and it might respond: Apple. In terms of profit, revenue, market capitalization, and consumer cachet, it certainly ranks right up there. The iPhone, in its ninth year and seventh generation, has been the company’s golden goose, generating two thirds of the company’s revenue. Other familiar Apple products -- MacBook computers and iPad tablets – each account for about 10% of sales. Services such as iTunes, the App store, and Apple Music add another tenth or so. Mostly a consumer-oriented company, Apple has inked alliances with IBM and Cisco Systems to deepen its penetration of the enterprise market. About 60% of revenue comes from overseas.
Apple’s mobile products, the iPhone and iPad, account for about three-quarters of its revenue. The iPad line has been expanded to include the iPad Pro, which features a bigger screen and a more powerful processes; it’s aimed at the business market. The computer line includes the iMac desktop line and the MacBook laptop line.
Apple’s product run on two operating systems. The mobile products are on iOS, now in its 10th generation, and the computers run on OS X. The company generally updates its operating systems once a year.
The company also makes the Apple Watch, which is part of its Other Products segment (4% of sales). Other products are Beats headphones, which the company acquired in 2014, the Apple Pay payment system, Apple Music, Apple TV, and iCloud.
The App store is where applications from Apple and third parties are accessed. Over eight years, more than 140 billion apps have been downloaded.
The company makes some of its products at facilities in Ireland and the US, but most manufacturing is handled by third party contractors such as Foxconn, also known as Hon Hai Precision Industry, operating in Asia.
The Americas market, which includes the US, accounts for 40% of the company’s sales. About a quarter of sales come from China while European customers generate 22% of revenue.
Sales and Marketing
Apple sells through its own 420 or so retail stores and website and through other retailers. About 22% of revenue comes through its stores. The iPhones are also sold through carriers such as Verizon, AT&T, Sprint, and T-Mobile.
Over the past decade Apple has been on a remarkable run of increasing revenue and profit. In 2015 (ended September), revenue increased 28% to $233.7 billion while profit jumped about 35% to $53.4 billion, compared to 2014. Its profit margin was about 23% in 2015.
iPhone sales increased 52% in 2015 (adding $53 billion to the top line) with the introduction of the larger iPhone 6 and iPhone 6 Plus. Sales for the iPad dropped 23% in 2015 from 2015. China led geographic markets with an 84% increase in 2015, doubling the year’s increased sales in the Americas. The strength of the US dollar in relation to other currencies tugged at revenue.
Apple’s net income jumped 35% to $53.4 billion from to $39.5 billion in 2014 on the higher sales. The company reported higher selling, general, and administrative expense, and higher spending on marketing and advertising.
Cash generated by operations rose to $81 billion in 2015 from $60 billion in 2014.
Following its customary practice, Apple introduced the latest model iPhones toward the end of its fourth quarter, priming them to benefit from holiday sales in what is the first quarter of its fiscal year. The iPhone 7 and iPhone 7 Plus debuted to positive comments from reviewers as they went on sale. Whether they’ll maintain blockbuster sales as previous models have done remained to be seen.
The company reported lower phone sales in the second and third quarter of 2015 (ended September), the first such quarters in the iPhone’s history. Other companies, notably Samsung, have caught up (and in some features, surpassed) Apple’s technologies and design. Apple has disappointed some analysts by failing to deliver a new breakthrough product. The Apple Watch has produced block buster sales, though Apple has said it sales are in line with its expectations. Nor have services like Apple Pay or Apple Music provided noticeable boosts to revenue.
While China provided a big injection of revenue in 2015, Apple faces increasing competition there and elsewhere. The company has spent time wooing officials in India in hopes that it can break into that market. In 2016, Apple opened an office in Hyderabad that will focus on development of Maps for Apple products.
In some ways Apple’s strengths can be seen as weaknesses. The tight interlocking of software and hardware helps its devices work, but it frustrates users who would like to have access to more third party products including hardware. The company’s history of innovation has led analysts and customers to expect big products from Apple on a regular basis. They’re disappointed when it fails to deliver.
Apple became ensnarled in debates over national security and privacy in 2016 when it refused to help the FBI get access to information on a terrorist’s iPhone. The issue was resolved when authorities got the information without Apple’s help. In another regulatory battle, the European Union officials ruled that Apple owed some $14 billion in back taxes to Ireland. Apple said it would fight the ruling, but the issue is indicative of Europe’s stronger stance against American technology companies.