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January 25, 2012

Apple published its results yesterday, and it has seen its revenues grow at 73 percent and its earnings more than doubled. Soon after Apple CEO Steve Jobs died, its fourth quarter results that so disappointed investors in October were inlikely.

Apple is now a $400 billion company, and is about to replace Exxon-Mobil as the most valuable company in the world. Yesterday's results also revealed another important item-- the shellacking that a team of independent analysts suffered in October at the hands of Wall Street analysts with some of the worst track records in the business.

And even if the most bullish wireless industry analysts were surprised by the strength of Apple's first quarter 2012 results, at least this time they were closer in their earnings and sales estimates.

Nevertheless, Apple is now an American icon, and it has millions of fans all over the globe. And these are not just stock investors, but real customers that use the iPod Touch, the iPhone, the iPad tablet, the iBook and Mac computers. And they love their sleek and user-friendly Apple devices.

After the close of the markets yesterday, and as soon as the numbers started trickling in, Apple shares soared to a record of $457.20 a share in after-market trading, as the company blew way past the most optimistic sales expectations and profit results for its first quarter.

Apple posted record quarterly revenue of $46.33 billion and quarterly net profits of $13.06 billion, or $13.87 per share. The numbers, which compare to year-ago revenue of $26.74 billion and net quarterly profit of $6 billion, were driven largely by strong iPhone and iPad sales.

Apple sold no less than 37.04 million iPhones in the quarter, representing a 128 percent unit growth over the year-ago quarter. Apple's new CEO Tim Cook said that the company placed a bold bet when it figured expectations for first quarter iPhone sales and still managed to come up short on inventory, with a backlog of orders for the device still pending.

"I think if you'd have known what we were thinking when we came up with those numbers, you'd have been suprised as well," Cook said during an earnings conference broadcast on the company's website.

Total iPads sold reached 15.43 million during the quarter, a 111 percent unit increase over the year-ago quarter. Peter Oppenheimer, Apple's chief financial officer, said that the tablet market will continue to grow, representing a "huge opportunity" for Apple.

"2011 was supposed to be the year of the tablet, and I think most people will agree it was the year of the iPad," Oppenheimer said.

Across the board, Apple's gross margin was 44.7 percent compared to 38.5 percent in the year-ago quarter, while international sales accounted for about 58 percent of the quarter’s revenue.

Cook said that Japan and the United States were especially strong markets for the quarter, but added that given the late introduction of the iPhone 4S in China and the corresponding sales of that device, the company expects to be China to be a strong market going forward.

"China is an extremely important market for us," Cook said, "and we continue to look at how to grow it further." It also said that there are other rapidly growing countries as well such as Brazil, India, and to a lesser extent, Russia.

Apple's average cash flow also increased by $17 billion for the quarter, which places the company's total cash position at a staggering $97.5 billion. Neither Cook nor Oppenheimer would say what the company plans to do with all that cash, beyond saying that Apple is "actively discussing" various uses for its cash, suggesting that there could potentially be one or two acquisitions in the works.

In other mobile news

After many months that company shareholders wanted to kick out the two co-CEOs at Research In Motion (RIM), Jim Balsillie and Mike Lazaridis have finally agreed to step down from the company, but many wireless industry analysts are still wondering if that will even make a small dent in the company's day-to-day operations, given the dismal short-term outlook the company faces.

As things stand now, Lazaridis still hangs on, at least for now, as vice-chairmain and gets control of a new Innovation Committee within the company, while Balsillie has to accept a lower board position. This time, the new and *single* CEO is former COO Thorsten Heins, as he takes over the helm of the struggling company.

RIM sales are now down significantly, and shareholders are calling for many changes, but while the company has a new leader, the thoughts inside it look very similar to those it just replaced, and anyone expecting a change of direction will be sadly disappointed, some say.

That may be simply because Heins was chosen by those he succeeded, but speaking to reporters late yesterday, Heins repeatedly emphasised the decisions made by those he was replacing, to the point where one might wonder why they were being replaced in the first place.

Some say it was just a minor cosmetic modification to the company's board and not much change will be made in the day-to-day management of the company, since Balsillie and Lazaridis will still probably call all the shots, just like before.

Heins called his predecessors "visionaries" who "pioneered the smartphone industry" and "took a bold step" in buying QNX Software last year which (it turns out) was "the right path to go down". There were "bumps on the road", but "we are strong today because of what we've been though".

Plans for the future are limited to "continuing to develop customer-focused products" and "make sure employees have the tools available to help them succeed," he told reporters.

However, there was much more along those lines, like some innuendo comments delivered in scripted monotone. When asked directly what he was going to do to turn the company around, Heins claimed that the company didn't need *any* turning around, only greater "market communications" and even that was just for the U.S.

The only point on which Heins was adamant, and showed any trace of emotion, was scotching any talk of divesting itself of certain parts of the business and/or breaking up RIM into two or more entities. He was "prepared to entertain" licensing BlackBerry 10, but given that it's not even out yet it's difficult to imagine who would be interested in taking a licence.

Overall, the Canadian company has beheaded its board to show shareholders that it can change, only it hasn't changed and is still betting everything on BlackBerry 10, the new platform based on QNX, which will arrive on the PlayBook supposedly sometime in February.

So, the face at the top might be different, but the company remains unchanged as far as most of the people Wireless Industry News has contacted yesterday and today. It will be interesting to see if and when any positive changes will be made at RIM and if they can rapidly turn around the beleaguered company from Waterloo, Ontario.

Time is running out fast for RIM and the company's shareholders are very impatient and demand changes now, not next year. And that, we can certainly understand. So the question is, will Heins understand it?

In other mobile news

The bad news never seem to be ending for Clearwire. The struggling mobile operator said earlier today that it has stepped up its efforts to get more wholesale customers as it braces for the loss of its largest customer, Sprint Wireless, which is phasing out devices that use Clearwire's WiMAX outdated system in favor of Sprint's shiny new LTE network.

Now Clearwire has hired a research firm to reduce the "time to market, effort and cost" of using its WiMAX network for companies that want to resell the service under their own brand, commonly called in the wireless industry "mobile virtual network operators" or MVNO for short.

The research firm is Simplexity, and it claims that this will make it easier for companies to resell Clearwire's service by handling logistics such as sales and order acquisition, activation and provisioning, distribution and logistics, billing and mobile subscriber lifecycle management, customer care and management analytics.

"Simplexity's ability to offer MVNE (mobile virtual network enabler) services adds a new level of choice and flexibility to the equation, and will make it even easier for potential wholesale partners seeking a simple back office solution to support their 4G product offerings," said Don Stroberg, president of Clearwire's wholesale business, in a statement.

Simplexity is now Clearwire's preferred provider of services for its wholesale customers, though companies still have the option of going directly through Clearwire. The service provider handles websites that sell wireless products for a number of top brands, including RadioShack, Target and Motorola.

It also owns and operates Wirefly.com, which claims to be the Internet's largest authorized retailer for wireless phones and service plans.

Overall, Clearwire has a limited number of wholesale clients, but depends on those customers for the bulk of its revenue because of its comparatively weak direct-to-consumer business. Yes, some have already said in the past that this could be a weak business model, and time will tell.

Its wholesale subscribers outnumbered its own retail customers by eight to one at the end of the third quarter-- 8.22 million wholesale subscribers to 1.32 million retail subscribers, and wholesale revenue accounted for more than one-third of its sales.

In comparison, Sprint smartphone users account for the majority of Clearwire's wholesale subscribers. Interesting market segmentation if there is any.

And recent developments have put Clearwire's wholesale subscriber base under a lot of pressure, as reflected in the price of Clearwire's stock.

Time Warner Cable and Comcast said in December that they would eventually stop offering Clearwire's WiMAX service because they had signed an exclusive contract for access to Verizon Wireless' LTE network as part of their multi-billion-dollar AWS wireless spectrum sale to the mobile operator.

For its part, Sprint also plans to stop selling phones that run on Clearwire's network by the end of this year but isn't completely ending its relationship with the WiMAX provider. Sprint will eventually lease extra LTE capacity from Clearwire, which plans to overlay its WiMAX network with TD-LTE in some high-traffic areas, even though some wireless industry observers say that may not be a good idea.

United Online said in November it would start using Clearwire's network to offer mobile broadband service under its NetZero brand. The product was slated to hit the market early this year but has not yet been launched as of yet. We are still awaiting news from United Online on that.

In other mobile news

According to new numbers published by research firm Ovum, Android is poised as the OS of choice for many developers, but still, almost all mobile app developers will support iOS as well as Android, nevertheless. sGoogle's Android platform will become the preeminent platform for developers over the next twelve months. Ovum's call comes as Android continues to bring in more market share as more and more companies use the platform to crank out a whole slew of new mobile devices.

While iOS has seen its market share growth slow a bit in the recent years, it has always been seen as a more lucrative location for app developers to make money. As a result, most apps came to iOS first, and the other platforms second, Android being no exception to this.

But this could all change in the coming months, Ovum said. Android's prevalence is getting harder and harder to ignore, and app developers have incorporated new business models such as advertising and in-app purchases to spruce up revenue.

Ovum also said that there is growing developer interest in Windows Phone and BlackBerry OS. The results come as both Microsoft and Research in Motion attempt to lure developers over to their respective camps, for what it's worth that is.

"The growing momentum behind Windows Phone indicates that Microsoft has managed to convince developers that its platform is worthy of investment. Its main challenge right now is to persuade consumers," said Ovum analyst Adam Leach.

The Ovum research also reveals that app developers are abandoning mobile-centric app development tools such as Java, Flash and WAP, and moving to HTML 5, a Web-based standard that can run across multiple devices and platforms.

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Source: Apple Corp.

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