Apple cyclicality

Apple's results yesterday were actually pretty boring. But one of the more interesting things is the way that the iPad is now starting to become just as cyclical as the iPhone.  

You can see this at a high level in this chart, which shows unit sales for Apple products since the iPhone launched back in 2007.  

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There are a bunch of dynamics here.

  • The iPod, obviously, spikes each Christmas as a gift, though that is declining as a percentage of sales as the overall business declines. 
  • The iPhone has spiked, to an increasing extent, with new product launches
  • The iPad has been driven both by new product launches and by buying seasons
  • Apple changed the iPad product cycle in 2012, from launching in the Spring to launching in the December quarter
  • And, just to complicate things, Apple has shifted from launching new products in China in the March quarter (i.e. after the USA and in the New Year season) to launching them in the December quarter with everything else.

This product cycle impact is clear in the two charts below, which break out iPhone and iPad sales by the primary product that was on sale (older models continue on sale but we don't have a breakdown). 

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The iPhone dynamic is pretty obvious, but the iPad cycle is more complex, because sales are being driven by both the calendar season and the age of the product.

For the first two cycles Apple launched the new iPad in the June quarter and sales then rose in the September quarter (back to school?) and again in the Christmas quarter (presents) before falling in March (old product, new one coming). But then in 2012, iPad Mini rumours led to sales falling in September and then Apple launched the Mini and a 4th gen model in the December quarter. So sales shot up in the December quarter, held up well in March (newer product plus Chinese new year) and then slipped this quarter as it's now a nine month old product.

I should point out, incidentally, that competition is a relevant but not sufficient factor to explain these swings. Certainly, Android tablets are having a minimal impact in the West. The iPhone picture is more complex, but the chart below makes it pretty clear that substitution from iPhone to Android cannot be the main factor. 

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All of this is a long-winded way of saying that sales patterns for the iPad have yet to settle down. It looks like September quarter iPad sales will be down again, but really, who knows? The one thing that's certain is that there'll be another big spike in December. And that historic comparisons just don't work. 

The broader issue for investors is that the annual cycle means you can't really tell how Apple is doing from the mid-cycle sales numbers. So much of the revenue and the momentum is determined by the December quarter that you really have to wait. 

There is, of course, a significant set of financial implications for Apple from such volatility in production and sales, but that's another topic. 

UPDATE Google released tablet numbers for the first time yesterday: see a discussion here.