As the company that invented smartphones spirals downward, the company that reinvented them is soaring.
Apple Inc. has cemented its position as the tech industry's most profitable juggernaut with a record-smashing quarter that saw the company double its profits and sell more iPads, iPhones and Mac computers than ever before.
The Cupertino, Calif.-based company flew past all profit expectations as it reported net income of $13.1-billion (U.S) on revenue of $46.3-billion in its first quarter ended Dec. 31.
The blowout results are yet another painful reminder to rival Research in Motion Ltd. investors about just how much the Waterloo, Ont. company lags behind its main competitor in the high-end smartphone market.
Sales of the wildly popular iPhone accounted for more than half of the company's overall revenue. Apple sold 37-million iPhones in the three-month period, compared with RIM's entire BlackBerry customer base of about 75-million built up over the past decade. Apple's revenue increase of nearly $20-billion in the latest quarter versus a year earlier is higher than the expected total revenue for RIM's current fiscal year.
"Apple's results emphasize how much revenue RIM has been missing out on" by stubbornly sticking with a keyboard-based smartphone that was its key to success before Apple introduced the iPhone, said Neil Mawston, an analyst with U.K.-based technology consulting firm Strategy Analytics.
"They've missed out on billions of dollars of growth, every quarter" that are now going to Apple and market leader Samsung, he added.
Apple's most recent quarter was among the most profitable in U.S. corporate history. In after-hours trading, investors pushed the company's stock price up about 8 per cent, once again putting Apple in a dead-heat with Exxon-Mobile for the title of world's most valuable corporation. It is now also sitting on almost $100-billion in cash and securities.
The blockbuster results followed a management shakeup at RIM this week that put a new CEO in charge, while co-CEOs Jim Balsillie and Mike Lazaridis relinquished the top spot. RIM's already battered share price tumbled anew this week on the news, as investors worry that RIM lacks a clear plan and product lineup to win back market share.
"We are right in the thick of the rotation from feature phones to smart phones, and Apple is the clear beneficiary of that, while RIM is being left farther behind," said Colin Gillis, an analyst with BGC Partners in New York.
Among a slew of impressive numbers, Apple's iPad and iPhone sales stood out. The company's phone sales and its 15.4-million tablets sold during the quarter are numbers more than double the figures from the same time last year. The record iPad sales also came during a period when competitors such as Amazon launched several low-priced tablets that some believed could break Apple's dominance.
"We're going to continue to innovate like crazy in this area," Apple CEO Tim Cook said of the tablet market. "We think we can continue to compete with anyone who might be making tablets right now or will be in the future."
Still, Apple's stock only traded up 8 per cent in after-hours trading in reaction to arguably one of the most incredible quarters in U.S. corporate history Tuesday, suggesting some trepidation by investors that the company can keep growing at such a torrid pace. The company's earnings and revenues rose by 116 per cent and 73 per cent, respectively, over the same period a year earlier – and were several strides ahead of the $38.8-billion revenue and $10.07 per share net income analysts had forecast, on average.
The year-over-year increase in the company's revenues was bigger than the annual revenues reported by three-quarters of the companies on the Fortune 500 last year and about four times as much as the total revenues reported by RIM in its most recent quarter.
"Apple has done an amazing job of out-running peoples' expectations, but ... this will not happen forever," said Roger Kay, a technology analyst with Endpoint Technologies in Wayland, Mass. "It may happen for several more quarters, but mathematically it has to end. There is a point where Apple is weighed down by the law of large numbers. They can't become all of China."
As Apple and competitors such as Samsung continue to battle for the lead in the smartphone space, "the next couple of quarters will be tough for RIM," said Mr. Mawston, as the company won't be out with its new operating system until later this year.
"RIM has been heading in a downward direction in terms of growth for three years and we see that continuing in the next few quarters," Mr. Mawston said. "Demand has polarized strongly around Samsung and Apple."