International Sales

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    Posted: 01 December 2010 11:55 AM

    Every analyst keeps focusing on the US consumer market for Apple. They count store traffic and they keep comparing iPhone sales to the Android system

    What everyone is forgetting is that in 3rd quarter 52% of sales were international and that jumped 10% in 4th quarter to 57%.  The iPhone 4 and iPad are still rolling out internationally.  So Apple is truly selling everyone that they make.  I think we will see 17 million iPhones and 6 million iPads.

    I agree with DT that this quarter will be a monster and the biggest reason is the international market.

         
  • Posted: 02 December 2010 12:21 AM #1

    We’ve discussed this before. One of the challenges of following Apple from a US vantage point is more fully appreciating the growth in Apple’s international sales and opportunities available overseas. More than 50% of Apple’s revenue is now sourced from outside the US and trends vary by marketplace.

    Perhaps Apple’s best opportunities for the next few year are outside the US as well. Apple appears to be among the few get that actually understands how to sell products profitably in China.

         
  • Posted: 02 December 2010 12:23 AM #2

    adamthompson3232 - 01 December 2010 04:15 PM

    . But, so far they’ve been able to consistently crush guidance as neither of these issues have arisen. And they will do so again this Q with over $26B in revenue and over $6.00 EPS.

    I’m currently just over $26.5 billion in revenue and at $6.00 eps. I expect to revise a bit upward between now and the end of the quarter.

         
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    Posted: 02 December 2010 09:03 AM #3

    WOW DT, You are really starting to make me feel good about this QTR. I see you are moving/revising towards my bold Mac number (4.5). The heck with the ipads if we can sell 4.5 mil Macs. What would be truly astounding is that if Apple does sell +4.3 mil Macs, it would show that ipads are not hurting Mac sales. I have been a little down on Apple for not running Mac ads, but it seems that in the last couple of weeks the Air has been getting a lot of “air” time.  tongue laugh

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  • Posted: 02 December 2010 10:58 AM #4

    mbeauch - 02 December 2010 01:03 PM

    WOW DT, You are really starting to make me feel good about this QTR. I see you are moving/revising towards my bold Mac number (4.5). The heck with the ipads if we can sell 4.5 mil Macs. What would be truly astounding is that if Apple does sell +4.3 mil Macs, it would show that ipads are not hurting Mac sales. I have been a little down on Apple for not running Mac ads, but it seems that in the last couple of weeks the Air has been getting a lot of “air” time.  tongue laugh

    Mac unit sales growth may represent 50% or more of domestic industry unit sales growth this quarter. Apple’s unit sales are rising and the company is ahead of the consumer trend. Of course, the halo effect from the iPad and the iPhone will bolster sales. I won’t be increasing my Mac estimate over the balance of the quarter but I expect unit sales growth similar to the pace of growth realized in FY2010. The new MacBook Air is a net plus for unit sales growth.

         
  • Posted: 02 December 2010 02:51 PM #5

    DawnTreader - 02 December 2010 04:21 AM

    We’ve discussed this before. One of the challenges of following Apple from a US vantage point is more fully appreciating the growth in Apple’s international sales and opportunities available overseas. More than 50% of Apple’s revenue is now sourced from outside the US and trends vary by marketplace.

    Perhaps Apple’s best opportunities for the next few year are outside the US as well. Apple appears to be among the few get that actually understands how to sell products profitably in China.


    While some of this discussion is clearly focused on the immediate term, this is a longterm trend, which, by all appearances, Apple is poised to exploit. Living and working in Asia, there are two secular trends that substantially affect Apple’s international growth in this region.

    First, is the expansion of the middle classes (I realise that in the US we relegate the ‘middle class’ to a single entity, but there is considerable substructure here, particularly in low and middle income countries), which is in a period of rapid expansion among these countries now enjoying greater than, or equal to 6% growth in GDP per annum. This process is projected to continue for many years (some have argued decades). Thus, the potential consumer base for Apple’s (and anyone else’s) products will expand.

    Second, the ‘digitalisation’ of largely untapped markets, particularly in Southern Asia, that are also the same sectors entering the middle classes. In many countries, there remains substantial asymmetry between those with disposable income and those with internet access. As this imbalance is adjusted through ground and space-based extension of internet access to smaller cities and villages, more potential consumers will be exposed to purchase options of which, today, they are largely unaware. In countries like Bangladesh (where there is a surprising and increasing amount of wealth), and to a lesser extent India, Apple remains a largely unknown entity amongst all but the wealthiest and most travelled sectors.

    These two phenomena, while not easy to anticipate on a quarterly basis, will likely have substantial impact on Apple’s international sales growth for a considerable period.

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  • Posted: 02 December 2010 06:32 PM #6

    DawnTreader - 02 December 2010 02:58 PM
    mbeauch - 02 December 2010 01:03 PM

    WOW DT, You are really starting to make me feel good about this QTR. I see you are moving/revising towards my bold Mac number (4.5). The heck with the ipads if we can sell 4.5 mil Macs. What would be truly astounding is that if Apple does sell +4.3 mil Macs, it would show that ipads are not hurting Mac sales. I have been a little down on Apple for not running Mac ads, but it seems that in the last couple of weeks the Air has been getting a lot of “air” time.  tongue laugh

    Mac unit sales growth may represent 50% or more of domestic industry unit sales growth this quarter. Apple’s unit sales are rising and the company is ahead of the consumer trend. Of course, the halo effect from the iPad and the iPhone will bolster sales. I won’t be increasing my Mac estimate over the balance of the quarter but I expect unit sales growth similar to the pace of growth realized in FY2010. The new MacBook Air is a net plus for unit sales growth.

    Lets hope the Mac mix skews toward the new Airs as their margins are pretty sweet.

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    Posted: 03 December 2010 01:04 AM #7

    wab95 - 02 December 2010 06:51 PM

    In countries like Bangladesh (where there is a surprising and increasing amount of wealth), and to a lesser extent India, Apple remains a largely unknown entity amongst all but the wealthiest and most travelled sectors.

    I am curious about this.

    Generally, I strongly believe in expansion of Apple internationally and growing markets “from the top”. However, with South Asia in particular, there has been such a large amount of “cheap innovation” (not really innovation, but copying 80% of the features but offering at 20% of the price) that even I am skeptical. In other words, I suspect that those markets will grow “from the bottom” with e.g. Indian smartphones/tables based on Android that provide affordable mass computing. Kind of like a Tata Nano of the smartphone world. I just don’t see a large percentage being able to afford the iPhone or iPad.

    Am I mistaken?

         
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    Posted: 03 December 2010 01:40 AM #8

    An iPhone is a status symbol, especially in less then affluent countries.  Even here in the US I see many minorities (especially asian and young kids) who I know don’t make lots of money own an iPhone.

    South East Asia has millions of potential users in that category. The problem is that many of those countries don’t have ATT stores and Walmarts at every corner.  The internet infrastructure is not in place and internet cafes are still the way for most to connect to the world

    We see huge jumps in demand in more affluent countries like Japan, Taiwan, parts of Chine (hong kong), South Korea, , Indonesia, Philippines and parts of India.  Over time we will see that spread to places like Vietnam, Malaysia, and other countries.

    In the mean time we have explosive growth in Russia, most of the former Eastern Block, Western Europe, and Australia.

    African Continent and South America will be last, but only about 5 years away.

         
  • Posted: 03 December 2010 02:06 AM #9

    omacvi - 03 December 2010 05:40 AM

    An iPhone is a status symbol, especially in less then affluent countries.  Even here in the US I see many minorities (especially asian and young kids) who I know don’t make lots of money own an iPhone.

    South East Asia has millions of potential users in that category. The problem is that many of those countries don’t have ATT stores and Walmarts at every corner.  The internet infrastructure is not in place and internet cafes are still the way for most to connect to the world

    We see huge jumps in demand in more affluent countries like Japan, Taiwan, parts of Chine (hong kong), South Korea, , Indonesia, Philippines and parts of India.  Over time we will see that spread to places like Vietnam, Malaysia, and other countries.

    Are you offering to pay me to do some channel checks in Thailand Sponge?  LOL

         
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    Posted: 03 December 2010 02:13 AM #10

    Mercel - 03 December 2010 06:06 AM
    omacvi - 03 December 2010 05:40 AM

    An iPhone is a status symbol, especially in less then affluent countries.  Even here in the US I see many minorities (especially asian and young kids) who I know don’t make lots of money own an iPhone.

    South East Asia has millions of potential users in that category. The problem is that many of those countries don’t have ATT stores and Walmarts at every corner.  The internet infrastructure is not in place and internet cafes are still the way for most to connect to the world

    We see huge jumps in demand in more affluent countries like Japan, Taiwan, parts of Chine (hong kong), South Korea, , Indonesia, Philippines and parts of India.  Over time we will see that spread to places like Vietnam, Malaysia, and other countries.

    Are you offering to pay me to do some channel checks in Thailand Sponge?  LOL

    Why do I get the feeling you will be the first guy to disappear with some chick in Vegas.  Unlike Thailand where the mighty dollar gets you lots of booty, in Vegas you will impress the young ladies with quotes like ” I follow Sponge Bob’s stock picks and now I am rich with Apple

         
  • Posted: 03 December 2010 02:34 AM #11

    omacvi - 03 December 2010 06:13 AM

    Why do I get the feeling you will be the first guy to disappear with some chick in Vegas.  Unlike Thailand where the mighty dollar gets you lots of booty, in Vegas you will impress the young ladies with quotes like ” I follow Sponge Bob’s stock picks and now I am rich with Apple

    Yes.  I will wear the Sponge Bob costume to win the affection of all the ladies there.  I’m sure that’s how you won your model wife.  So, what the hell?  Maybe I’ll give it a go…

         
  • Posted: 03 December 2010 06:20 AM #12

    Roman - 03 December 2010 05:04 AM
    wab95 - 02 December 2010 06:51 PM

    In countries like Bangladesh (where there is a surprising and increasing amount of wealth), and to a lesser extent India, Apple remains a largely unknown entity amongst all but the wealthiest and most travelled sectors.

    I am curious about this.

    Generally, I strongly believe in expansion of Apple internationally and growing markets “from the top”. However, with South Asia in particular, there has been such a large amount of “cheap innovation” (not really innovation, but copying 80% of the features but offering at 20% of the price) that even I am skeptical. In other words, I suspect that those markets will grow “from the bottom” with e.g. Indian smartphones/tables based on Android that provide affordable mass computing. Kind of like a Tata Nano of the smartphone world. I just don’t see a large percentage being able to afford the iPhone or iPad.

    Am I mistaken?


    No, you are not, at least not entirely, but that’s not the whole equation.

    As omacvi has pointed out, Apple products (and other name brands) are status symbols in these locales already. The wealthy are acquiring them. As I mentioned in the original post, there is considerable substructure amongst the burgeoning middle classes. Among these are those with education and exposure. This is a rapidly expanding segment. Among these too are those who are acquiring wealth, but with less education and exposure. These are not the same.

    Thus, amongst the former, you will see higher demand and uptake of genuine product. These are potential Apple clients. Even if they are not the whole of the middle classes, just based on the shear population size of the countries, you are still looking at a large number of people. Amongst the latter, you will see largely the growth from the bottom to which you refer.

    Over time, some of the less educated monied classes will migrate to the educated and they too will want genuine product. Witness the expansion in demand for luxury items from other manufacturers (BMWs and Mercedes in these markets - recent but growing).

    Without a nuanced analysis, businesses stand to lose substantial global market growth in some of these Southern Asian countries.

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  • Posted: 03 December 2010 10:20 AM #13

    Regarding Southern Asian markets, I should add, there is one more important element.

    Intellectual property. The US government, and to a lesser extent, the EU and others, have made inroads into IP protection, including trademarks etc. The governments of these countries have been responsive, and one can see real progress on the ground, which is not to say that things are great, merely improved.

    Again, it would be wrong to regard these markets as a monolith. There is a sector, a growing one, that appreciates the importance of intellectual property and the value of real international partnerships, legitimate franchises etc. These tend to be better educated entrepreneurs (and not necessarily educated in the West) with an eye on global trends, and a desire to be part of a larger market.

    There is another, still larger, sector that does not, nor does it necessarily perceive the need to be anything other than a local concern. Indeed, some among them seem to feel, and have voiced, that it is justifiable to take advantage of lack of copyright enforcement, as this simply ‘exploits the international exploiters’. Most of this sector, however, are simply opportunistic ‘mom and pop’ or other consortia operations.

    The former obtain licenses, pay taxes and operate legitimate businesses, the latter largely do not. These are two very different economies in operation, and remain a challenge for their governments.

    What I find encouraging is that a substantial fraction, I would like to think the majority but that may be too optimistic, of the current growth in Southern Asia is driven by this former sector. Whatever the fraction, it is clearly growing and aggressively seeking partnerships.

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    Posted: 03 December 2010 02:47 PM #14

    wab95 -

    Thank your for the insightful contributions. I’m encouraged by your view of IP becoming more important/accepted though I think it’s far from becoming prevalent.

    For Apple, I don’t see this as a problem since they’re not setting up (their own) manufacturing or operations in Asia. Instead, they outsource this portion. Obviously, they already have a solid deal with Foxconn and I don’t think that will need modification any time soon. Smartphone IP is easy to rip off in terms of UI (which Palm, Google and others have done off of iPhone) but for a closed system like the iPhone, the software is what drives the device and is hard to reverse-engineer. The hardware is easy to reverse-engineer but is meaningless. Finally, smartphones obviously have huge network externalizes through the app stores.

    So it really comes down to the size of the segments and their purchasing power (as well as competitors, naturally). If your argument about the growing middle class is true, Apple will do very well.

         
  • Posted: 03 December 2010 03:00 PM #15

    dotdash - 02 December 2010 10:32 PM

    Lets hope the Mac mix skews toward the new Airs as their margins are pretty sweet.

    Not to worry.  The Air is flying off the shelves.