Hey, IBM, Apple's Double Digit Growth Engine Is on Your Heels
With the introduction of the iPad, Apple (AAPL) has created a new multi-billion dollar product line that by itself could easily add over 15 percent year-over-year growth to the financial explosion the company has seen over the last few years. If the iPad specifically -- and tablets in general -- don't turn out to be a fad, Apple's revenue could outstrip that of IBM within a few years.
First, look at Apple's product history. Not everything the company has done turned into a hit. The Newton died off years ago (though clearly CEO Steve Jobs found a way to resurrect it -- and its ad campaign -- with the iPad). Apple TV has been a "hobby" project, though one with potential to expand into full home and office automation.
However, when Apple's been spot on the market, the results, even if slow at first, have gone nowhere but up. The Mac? A sales winner for decades. The iPod? Sales dying off now, as the iPhone has cannibalized the customer base, but it took off like a rocket and sold millions of units a quarter. You can say the same for iTunes and the app store -- services that resell content and applications of others, but which are still Apple-branded ventures.
Now review the iPad's numbers. The iPad has taken off faster than any other product before, though the iPhone 4 seems to promise even more robust sales, given 600,000 unit purchases on the first day (and that with AT&T's systems croaking). In 28 days, Apple sold 1 million iPads. Less than a month later, another million -- long before the iPad was fully available in other countries. The iPad already sells faster than Mac desktops and laptops put together. After two months. Given Apple's product history, it's reasonable to expect that the rate will continue and grow.
A million units a month is 3 million a quarter, and that will be a bare minimum. The product sells for anywhere from $499 to $829. Figuring that the lower priced models have an edge for consumers, conservatively assume an average price of $600. Further assume that Apple loses 15 percent of the price to retailers, and that 40 percent of the units move through third parties. That leads to the following per quarter:
1.8 million units at $600 per unit net revenue, for a total of $1.08 billion 1.2 million units at $510 per unit net revenue, for a total of $612 millionThe total quarterly net revenue, then, is currently $1.692 billion, for an annual run rate of $6.77 billion. That's assuming no sales growth, which is nuts. Even at that flat rate, the iPad alone represents nearly 15.8 percent annual net revenue growth over last year's $42.9 billion. Assume a still conservative one-third increase in sales, and 20 percent overall annual revenue growth attributable to just the iPad is easy.
The implications are stunning. Companies of this size generally grow in moderation because creating additional revenue in large enough quantities is so difficult. If Apple adds another 20 percent to whatever else it does -- and the potential of the iPhone 4 is eye-opening -- it could conceivably grow 40 percent to 50 percent year-over-year. Even at 20 percent growth, the company would double every 3.5 years. In other words, not only will the company's hypergrowth leave Microsoft (MSFT) and Google (GOOG) far behind, but within two years, Apple's sales will likely blow past IBM's.
Related:
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