Apple – The Numbers Part II

postcard--giant apple 2
Here are some of the reasons why Apple is under pressure. It used to be that every time Apple released a product there was a Usain Bolt advance between 1st and 2nd. You couldn’t name who was in 2nd place. They were irrelevant. If they mentioned anyone it was the spectacular Nascar crash of RIM and Nokia. Now with the release of the iPhone 5 the difference between 1st place and 2nd place is pretty blurry and when you leave a decision in the hands of the judge everything is arguable.

Apple’s cash cow, the iPhone 5, is severely under assault.
iPhone 5 = 65% of Apple’s overall profit. Gross margins: 55%

These hot numbers are under attack. Such fat margins are not sustainable. It attracts competition. And now the competition is not inferior to Apple anymore. You can have a debate that the Samsung Galaxy S3 is equal or superior. Microsoft has some credible phones and early reviews of RIM’s Blackberry 10 claims that it will be the best smartphone to hit the market. Carriers like Verizon are less likely to fork over $400 for every sale of iPhone sold.

New products like the iPad mini are more costly to produce and are not as profitable. The release of the iPad mini represents a defensive move by Apple. They used to be the leading proactive company and now they are becoming more and more reactive to the competition.

The bottom line: It’s getting harder and harder for Apple to justify that you pay over $500 for a phone. Competition will bring price down to grab market share.

Photo Credits: Ferrum College/News

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