The Apple paradox

Lots to mull over in Apple's results - not least rebuilding my model to reflect the changes in reporting, which is always a joy.

However, these charts illustrate what I think is the paradox in the Apple story: it is so strong that people wonder how much more growth there can be. 

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Apple has just 10% of handset volumes, but due to the premium price it is able to extract for the iPhone, it probably had around a third of ALL revenue in the handset business in Q4, and a much higher share of profits.

Is that good or bad? How much more of the industry's revenue can it take? How many more people are left who can buy a $650 phone (or even a $400 one) every 24 months? Is growth almost over? This in turn leads inexorably to the much argued-over 'cheap phone' issue, and how margin-dilutive such a phone might be.

As an investor, therefore, are you buying a company with high growth and continued high profits, slowing growth and the same high profits, or the same growth and (due to cheaper products) lower profit? It really isn't clear. More cynically, this is a catch 22: high numbers mean saturation (bad), and low numbers mean slowing growth (bad). 

Finally, Apple has got to the point where all news is bad news. I saw this following Vodafone a decade ago, which had a very similar period in which every random or irrelevant story had a bearish interpretation thrust upon it regardless of reality. I remember the FT putting on the front page a passing observation by the CEO of the time that 3G data rates 'might be variable depending on where you were' as 'More Bad News for Vodafone'. We're seeing much the same now for Apple, with the CEO saying, in effect, 'you're being silly' to the USA's most prestigious business newspaper.