Apple has an "i" for revolutionary technology. Since release, the company's iPhone -- which accounts for the largest portion of its sales -- has spurred a revolution in cell phones and mobile computing. Apple also continues to innovate its core Mac desktop and laptop computers, all of which feature its OS X operating system, including the iMac all-in-one desktop for the consumer and education markets, the MacBook Air ultra-portable laptop, and the high-end Mac Pro and MacBook Pro for consumers and professionals. The company's popular iPad tablet computer has become another game-changer in the consumer market. It generates nearly two-thirds of sales outside the US.
Most of Apple’s revenue is phoned in from its line of iPhones. They accounted for about $102 billion in sales for 2014 (ended September), 56% of the total revenue. Sales of the company’s iPad and iPad Mini, which fill a market niche between notebook computers, e-book readers, and smartphones, were just more than $30 billion in 2014, a 5% decline from 2013. The company’s laptop and desktop computers posted a 12% sales increase to about $24 billion in 2014, 13% of revenue. Revenue from iTunes, the App Store, and software grew 13% year-to-year, coming in at $18 billion. Sales of the iPod tailed off in 2014, down 48%, to just $2.3 billion.
One of the factors that makes Apple products so popular with some and less so with others is that its hardware and software products are tightly woven together for a seamless experience. In 2014, the company added greater cohesion, enabling users to go from device to device with little interruption. Users, however, are restricted in the number of non-Apple devices they can use with iPads or iPhones.
Apple gets about 36% of sales from domestic customers. Its international markets are Europe (22% of sales), China (16%) Japan (8%), and the Asia/Pacific region (6%).
Sales and Marketing
Apple sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. In addition, it sells a variety of third-party iPhone, iPad, Mac, and iPod compatible products, including application software, and various accessories, through its online and retail stores. Customers downloaded more than 85 billion items from Apple’s app store in 2014. The company operated about 260 retail stores in the US and 254 international retail stores. About 22% of sales come through the doors of its stores.
Additionally, Apple enhances reseller sales by positioning Apple fixtures, merchandising materials, and other resources within selected third-party reseller locations. Through its Apple Premium Reseller Program, certain third-party resellers focus on the Apple platform by providing integration and support services, and product expertise.
Apple posted increases of almost 7% in revenue and profit in 2014. Its overall sales reached almost $183 billion and profit came in at almost $40 billion.
Double-digit growth continues to be the norm for most of Apple's product lines. Sales of the iPhone and related products were up by 12% for the year, which was off from the 71% increase the previous year. Sales for the iPad slowed in 2014, off 5% from 2013. Sales of the iPod line continued to fall, dropping 48% in 2014 after a 25% decline in 2013.
Apple spiced up its product mix at the end of its year with the release of iPhones with larger screens than previous versions. The iPhone 6 screen is 4.7 inches and iPhone 6 Plus screen is 5.5 inches. The larger screen versions stack up more closely with bigger-screen phones offered by competitors such as Samsung Electronics. With the new phones came Apple Pay, which enables users to zap payment information wirelessly at cash registers. The new iPhones also have most powerful processors, sharper cameras, and longer-lasting batteries. The new phones turbocharged the company's earnings in its 2015 first quarter. Revenue leaped to $74.6 billion from $57.6 billion in the same quarter of 2014. Profit soared to $18 billion in the 2015 quarter from $13.1 billion. Apple sold 74.5 million iPhones during the 2015 quarter.
Other product releases in 2014 included the iPad Air, the fifth generation iPad and iPad mini with Retina display; iOS 8, the operating system for its mobile devices; an updated Mac mini; and OS X Yosemite, an updated operating system for its computers. In 2015 it released the Apple Watch, a smart device to bring Apple’s design and technology prowess to the wrist.
To shore up its presence in corporations, Apple formed a partnership with IBM in early 2014 to develop industry-specific applications for Apple’s mobile devices. The first apps, released in the fall of 2104, were for airlines, financial services, and sales assistance.
Always a secretive company about its product designs, Apple has brought some chip design expertise in-house to reduce its dependence on outside semiconductor suppliers. The company still relies on silicon foundries (contract semiconductor manufacturers) for the physical fabrication of its chips, but the moves mean fewer outsiders will be involved in future designs of the iPad, the iPhone, and other mobile devices. Apple outsources production of hardware products to a few partners, primarily Hon Hai Precision Industry and Quanta Computer.
In September 2014, Apple and Samsung Electronics agreed to scale down their patent infringement litigation by dropping claims outside the US. In the ongoing suit, Apple accused Samsung of using iPhone patents in the design of Samsung’s cell phones. After Apple initial won a $1 billion verdict, the suit has lingered with appeals.
Mergers and Acquisitions
Apple is "on the prowl" for acquisitions in the words of CEO Tim Cook, having made some two dozen mostly small purchases since late 2012 as it develops new products and improves existing ones. In 2014 it paid $3 billion for the Beats companies, which includes streaming music service Beats Music and the headphones and speakers company, Beats Electronics. With the acquisition of Beats Music, Apple will have its own streaming music service to position itself against other players such as Amazon, Pandora, and Spotify. Also that year it bought start-up LuxVue Technology, which makes power-efficient displays for small consumer devices.