Apple’s earnings announcement was yesterday. For the quarter ending March 30, 2013, Apple posted revenue of $43.6 billion and net profit of $9.5 billion ($10.09 a share). Apple’s announcement was more or less what I’d have expected. Strong sales with clear pressure on margins. Lower growth. And a strong dividend plan. I think these four (strong sales, slowing growth, lower margins, good dividends) are a blueprint of the future for Apple. Let me elaborate on each.
In terms of sales, there is no doubt that Apple has a strong brand and its iPhone and iPad lines will continue to sell well. At the same time, one has to acknowledge that the kind of growth Apple saw for the past decade is really hard to sustain for very long for any company. So, we should expect that growth will slow down unless Apple is able to come up with a completely new product line (which it has done consistently in the past but it’s getting harder now). The pressure on margins is also here to stay. Android smartphones are a genuine threat and will place pressure on Apple’s pricing. Further, Apple will have to seek growth by partnering with all the carriers around the world that do not currently support iPhones on their network. Apple cannot expect the carriers to subsidize the phone for consumers as U.S carriers have done for Apple. Further, Price sensitivity is higher in these markets. And Samsung & HTC will be major competitors in these new markets. So Apple will face pricing pressure as it seeks to expand. So I think lower margins are here to stay. So the question is if growth stalls and margins decrease, how does Apple deliver value to shareholders. That’s where the dividends come in and I think they are here to stay.
Overall, I think Apple has been getting the wrong kind of attention lately. Apple has solid sales and is highly profitable and Wall Street should stop looking for growth & margins of 2010′s Apple in the Apple of 2013. The market has changed as has the company. Apple is highly profitable and dividends are a great way to return money to shareholders. Overall, I’d be happy to see Apple continuing to innovate and producing good products at lower margins even if that means Apple can now be seen as a mature company. Also, I think Apple is currently underpriced by at least 10-20% relative to other players in the market. So the market has over-reacted to recent news.
NPR’s On Point with Tom Ashbrook discusses the future of TV with guests Whitson Gordon (Lifehacker), Bob Bowman (CEO, MLB Advanced Media) and Kartik Hosanagar (Wharton):
Check out today’s On Point with Tom Ashbrook on NPR. We will be discussing recent developments in the Internet video streaming world and looking at the impact of Netflix, Hulu and others on consumers and incumbent players like Comcast and Time Warner. The show will be broadcast at 11 am Eastern and is accessible live at http://www.wbur.org/listen/live . The link to identify the timing of the show at your local NPR station is http://www.wbur.org/syndication?program=On-Point
I am surprised by how many entrepreneurs I run into who are still working on social startups (or more recently, social analytics startups). I am honestly surprised by how few of them are working on healthcare tech startups. Let’s review some facts about the space (at least within the US context):
1. HITECH act: $36B set aside for hospitals & providers that make use of Electronic Health Records (EHR) technology between 2011 & 2015. Hospitals will receive money & be required to spend it on EHR by 2015.
2. Pay for performance (P4P) payment model: Reimbursements to providers is shifting to a P4P model. You now need software to store relevant data & analytics to mine the data to figure out how to drive a lift in outcomes (e.g., alerts & automatic emails to patients when they have not received a flu shot or alerts to the doc when a patient needs to be pushed towards a weight management program).
3. A key step in bridging the gap between supply of doctors and demand for doctors is to make doctors more productive. One needs better tools to help them (e.g. think of a tool like IBM’s Watson helping docs as a decision support engine).
Folks, start looking into healthcare.
Enabletech students and alumni will remember mini-projects and classroom discussions on Livelovely, a website to find apartments for rent in a visual, easy-to-use manner. Today, Lovely launched its mobile app on iOS. The app is already among the top 25 free Lifestyle apps (and the top real estate app!) on Apple. It is THE BEST way to search for apartments in the U.S. I am proud to have been an active adviser and the first investor in Lovely. It’s been great watching the transition from Easternshorehousing.com to Homeboodle.com to Lovely.
In the Spring Enabling Technologies course, we will talk about some of the entrepreneurial challenges associated with starting and building Lovely. In the Spring MBA course IT & Business Transformation, we will discuss some of the challenges associated with monetizing data companies like Lovely and Milo. In the meantime, download and enjoy the Lovely app here.