One billion smartphones shipped in 2014.
Now, a billion of anything is a lot, but a billion devices that retail for as much as $800 each is a staggering level of trade.
This week, we got to see how profitable that trade could be.
Apple (NASDAQ: AAPL), the global second-place shipper of smartphones behind Samsung, announced how many iPhones it had sold in the fourth quarter.
No big surprise here — it was a lot.
The surprise was how much the company beat estimates.
Breaking its all-time record, Apple sold 74.5 million iPhones, contributing to $18 billion in net profit for the quarter.
This amounted to EPS of $3.06, which beat estimates by a whopping $0.46 per share.
With all that profit, Apple has upped its investor returns.
In Apple’s earnings call, Chief Financial Officer Luca Maestri said, “We spent over $8 billion on our capital return program, bringing total returns to investors to almost $103 billion, over $57 billion of which occurred in just the last 12 months.”
Further, the company’s Board of Directors declared a $0.47 cash dividend, payable to shareholders on record at the close of the business day on February 9th.
Apple’s quarter shook out in the following way: iPhone sales were at a record high, as were sales of Mac computers, but iPad sales sank.
Sales of Apple’s market-dominating iPad tablet continued to decline in the fourth quarter. Sales of 21.4 million units for the holiday season represented an 18% decline over the previous year, but this is still nothing to be alarmed about.
Tech companies still haven’t figured out the refresh cycle for tablets yet. Carrier-subsidized smartphones, meanwhile, have a two-year shelf life. When a subscriber’s wireless contract ends, they have the opportunity to buy a new smartphone at a discount, and that has consistently whipped smartphone sales into a predictable cycle.
Apple has pushed this predictability to great ends, and we’re seeing it now. After all, the iPhone accounted for 56% of Apple’s revenue in the fourth quarter, and it’s climbing.
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In the last two generations of iPhone, Apple hasn’t been the uncompromising design leader it is famous for being. Rather, it has responded to consumer demands based upon broader market trends.
Instead of offering just a single design as it had since the iPhone’s inception, the company began to offer the cheaper, plastic-shelled iPhone 5C in 2013, and in 2014, it released an iPhone with a bigger screen: the iPhone 6 Plus.
It’s similar to the way the company grew the iPod product line back in the early 2000s. For the first three years, there was one primary iPod design with different storage configurations. Then in the fourth year, the iPod mini debuted; in the fifth it was the iPod shuffle. Then in the sixth year, the iPod nano, and in the seventh, the iPod touch.
It was at this point that Apple had a full iPod product line, with a version of each iPod for sale simultaneously.
Currently in its seventh year, the iPhone lineup has four models simultaneously available though Apple: the 5C, 5S, 6, and 6 Plus. These each offer slightly different specs and reach different levels of consumer spending.
Apple’s limited but flexible product line allows the company to be responsive to trends without taking significant risks that might result in a flopped product or a dip in market share.
The important takeaway from this whole thing is that we live in an era of mobile device ubiquity. Every year, an even greater number of tasks are being handled by our smartphones.
They are not going away, and as much as people love to say Apple is somehow doomed, 34,000 iPhones being sold a day tell us it’s as much of a sure thing as you can get in the tech world.
Good Investing,
Tim Conneally
For the last seven years, Tim Conneally has covered the world of mobile and wireless technology, enterprise software, network hardware, and next generation consumer technology. Tim has previously written for long-running software news outlet Betanews and for financial media powerhouse Forbes.
