Apple earnings, 2Q12: 5 enterprise takeaways

Apple earnings, 2Q12: 5 enterprise takeaways

Summary: Apple CEO Tim Cook and CFO Peter Oppenheimer discussed the company's record second-quarter earnings yesterday. Here are five enterprise takeaways.

SHARE:
TOPICS: Apple, Banking, Browser
46

For those of you under a rock or merely without Internet connectivity yesterday evening, Apple announced another record-breaking quarter -- its second-best ever -- and some $11.6 billion in profit, with millions of iPhones and iPads sold.

That's a great story if you're an investor, and if you happen to own a bunch of AAPL stock, well, treat yourself to a swimming pool full of caviar or a ride in a white Jaguar full of prostitutes. (Please don't. It's unbecoming.)

But if you're a tech buyer for your company, you probably have a few questions about where the industry is headed. Chief executive Tim Cook and chief financial officer Peter Oppenheimer offered a few words about how the company is treating the enterprise and what could be in store around the next corner.

Five things you need to know:

1.) The iPad is a vertical play. One line repeated over and over on the call was how broadly appealing the iPad is. The device posted a 151 percent increase in sales, year over year, and that's because it keeps popping up in places entirely new to Apple -- which translates to new customers. The U.S. Air Force Air Mobility Command unit uses them, for example. Cook: "The iPad has taken off not only in consumer in a way but in education, enterprise -- it's sort of everywhere you look now. And the applications are very easy to make very meaningful for everyone. As the ecosystem gets better and better and we continue to double down and make great products, I think the limit here is nowhere in sight."

2.) Education is everything. The most prominent vertical for the iPad is education, and it came up early and often on the call. There are more than two iPads for every Mac in the K-12 segment, Apple said, and San Diego's school district just placed two double-digit orders for them -- even as school districts across the nation face budget shortfalls. It certainly helps that the company reduced the entry price of the device to $399, an important step to win price-sensitive education buyers. Cook: "It's a profound product. The breadth of it is incredible. The appeal of it is universal."

3.) The next enterprise step: dig in. One caller asked how the company was working with enterprise customers in particular, and Cook shed a little light on its strategy with this group. "Initially our focus was working with the Fortune 500 and Global 500 to get the iPad certified for their particular enterprise," he said -- leading to 94 percent of the Fortune 500 and 75 percent of the Global 500 testing or deploying them. "These numbers are off the charts for a product that's only 24 months old," he added. Now the company is focusing on penetration within these accounts, he said. "It's absolutely the most broad-based product I have ever seen in my whole career in terms of adoption rate into the enterprise," Cook said, and Apple is definitely investing more resources and testing and sales people for this group, including working with carrier partners to deliver product-plus-service bundles.

4.) Tablet-PC cannibalization: it exists, but it's not a problem. "Convergence" was a key concern of callers asking questions of the executives, but they said Apple sees the tablet market as a growth, not zero-sum, game. Cook, memorably, compared the convergence of a refrigerator and a toaster: "Anything can be forced to converge, but the problem is that products are about tradeoffs. You begin to make tradeoffs to the point where what you have left at the end of the day doesn't please anyone." Sluggish PC/Mac sales are more indicative of an industry slowdown than cannibalization, he said. For now, people still need both.

5.) China matters. There's no way Apple would have posted record numbers without a huge lift from China, where it opened up sales of the iPhone 4S and the iPad after years of pent-up demand. Even Macs saw strong sales. "We had the mother of all Januarys with getting the vast majority out of the iPhone 4S backlog and China's launch as well," Cook said. "It was an incredible, incredible quarter for us." Addressing the big picture, Cook said, "China has an enormous number of people moving into higher income groups -- 'middle class,' if you will. This is creating a demand for goods, not just Apple's but other companies' goods as well, I think there's a tremendous opportunity for companies that understand China. We're trying to understand it as best we can." The share of international sales in Apple's overall portfolio is growing, and the company is slowly turning the pressure valve. "It is mind-boggling that we could do this well," Cook said.

While the executives did mention the upcoming Mountain Lion operating system and its iOS development program, the spotlight was on the iPad -- both for its potential enterprise applications as well as its role in carrying the company beyond its successes with the iPhone.

Photo illustration by me and based on this, in case you're wondering.

Topics: Apple, Banking, Browser

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

46 comments
Log in or register to join the discussion
  • AAPL shareholder here.

    Since I don't care much for caviar, my swimming pool will be filled with Johnnie Walker Blue Label. :))
    Userama
    • LOL!

      :)
      William Farrel
      • Really people?

        I know that I very rarely agree with what William Farrel says when it comes to iOS/Android but flagging this post and sending it into the negative is just childish.
        non-biased
  • Market waiting for Windows 8?

    I believe the reason why the iPad did not do as well as many expected, is that most people are waiting to see what Windows 8 PCs will have to offer in the area of touch computing. If MS and its partners can produce high quality tablet, hybrid, and large touch screen user experiences at reasonable prices, then the Windows consumer market will explode. I believe it is crucial that MS et al get tablets, hybrids right; but if they can also have desktop and all-in-ones demonstrated in stores, that show great productivity and consumption experiences, then Windows will storm back into the consumer market, and send ripples through the enterprise. In fact I think large screen touch PCs displayed in stores will be a bigger attention grabber for Windows 8, than tablets / hybrids.

    I think MS et al should also try to push Windows 8 tablets / hybrids in vertical markets, and broadly in the enterprise, as a new class of document / information consumption devices that are used in tandem with desktop PCs.
    P. Douglas
    • I think it's more about the supply chain.

      It was very clear during the call that Apple is constrained by how many iPads it can produce, and that there was more demand than it could meet. "We're making them as fast as we can," they said a couple of times. I think the quarterly sales figures demonstrate that there's little hesitation about the device relative to others, only that customers can't get their hands on it as readily.

      That's not to discount Microsoft Windows 8, of course. For some enterprises, particularly those single-vendor shops with PC-only software, this is a big deal. But for those enterprises whose employees largely play in the cloud, I don't think it's a matter of device or OS preference so much as budget. If an enterprise really needs a tablet now, it seems they're willing to bring Apple into the fold, rather than wait.
      andrew.nusca
      • Security & Administration

        Device costs are but a small consideration for most enterprise IT directors. Security, encryption, and remote management are key factors. Also, vertical marketplaces for corporate apps is very very important. Apple needs to get those ducks in a row before they can be taken seriously in the enterprise.
        clcrockett
      • Apparently enterprise knows better

        It seems that enterprises already chose Apple products, especially the iOS platform.

        With iOS, Apple has demonstrated that users are better to make choice based on the overall experience, not single variable such as "it must run windows" (or, it must not run windows, as sometimes is the case).
        danbi
    • The onlt problem with that strategy is price

      To get a Window 8 tablet to work in Enterprise settings, it has to be the more expensive x86/64 tablets. Microsoft gave out some at their Build conference, and those cost roughly $1,200 each. If you van buy an iPad for $499, or pay more than twice as much, to get the same functionality out of a Window 8 tablet, you'd have to be a fool to buy a Window 8 tablet
      Jumpin Jack Flash
      • Your logic is not sound

        [i]To get a Window 8 tablet to work in Enterprise settings, it has to be the more expensive x86/64 tablets.[/i]

        Only if you admit that tablets that aren't able to join domains, like Windows RT tablets and iPads, won't work in Enterprise settings.

        [i]If you van buy an iPad for $499, or pay more than twice as much, to get the same functionality out of a Window 8 tablet[/i]

        But you just admitted that iPads can't work in Enterprise settings because they can't join domains. So you aren't getting the same functionality, you are getting far more functionality in a Windows 8 tablet.

        You just said the equivalent of "why would anyone pay $50,000 for a truck when they can pay $1,000 for a scooter and get the same functionality".

        Don't get me wrong, I don't think Windows 8 x86/64 tablets are going to sell in numbers that will come close to the iPad because most people who want tablets don't need the power of an x86/64 tablet. Likewise, Mac Pros don't sell in numbers that come close to iMacs because most people simply don't need the power. Doesn't mean the Mac Pro is overpriced, or bad, just that most people don't need $50,000 trucks.

        Microsoft's tablet success / failure will hinge on sales of Windows RT tablets, not Windows 8 x86/64 slates.
        toddbottom3
      • iOS and Windows domains

        "But you just admitted that iPads can't work in Enterprise settings because they can't join domains. So you aren't getting the same functionality, you are getting far more functionality in a Windows 8 tablet."

        This is making the presumption that domain inclusion is necessary. It may be in some contexts, but notice that there wasn't much trouble getting Blackberries into the enterprise -- and iPhones and Android phones are getting in there too.

        It might be nice, but it's not strictly necessary.

        "Microsoft's tablet success / failure will hinge on sales of Windows RT tablets, not Windows 8 x86/64 slates."

        WinRT will not have the ability to join domains either.
        jimfrost
      • Speaking of not being sound logically

        "Only if you admit that tablets that aren't able to join domains, like Windows RT tablets and iPads, won't work in Enterprise settings."
        Yet the web is literally littered with methods of configuring iPads to join Domains... Just Google "iOs and joining a Domain" and you get 8.2 million hits. I would say try that with Bing, but you'd probably come up empty.:(

        "But you just admitted that iPads can't work in Enterprise settings because they can't join domains. So you aren't getting the same functionality, you are getting far more functionality in a Windows 8 tablet."
        Read above, it seems you can join a domain with an iOS device...

        "You just said the equivalent of "why would anyone pay $50,000 for a truck when they can pay $1,000 for a scooter and get the same functionality"."

        No what I'm saying is that to use the Microsoft solution, it will simply cost you more. Paying almost 2.5 times more, for a 5% increase in functionality, is a fools errand.

        "Don't get me wrong, I don't think Windows 8 x86/64 tablets are going to sell in numbers that will come close to the iPad because most people who want tablets don't need the power of an x86/64 tablet. Likewise, Mac Pros don't sell in numbers that come close to iMacs because most people simply don't need the power. Doesn't mean the Mac Pro is overpriced, or bad, just that most people don't need $50,000 trucks."

        Why are you suddenly changing your tune? before you were complainin that Macs were overpriced junk.
        Jumpin Jack Flash
      • jimfrost: I know, I was pointing out the flaw in Jack's logic

        [i]This is making the presumption that domain inclusion is necessary[/i]

        I'm not presuming any such thing. Jack stated:
        [i]To get a Window 8 tablet [b]to work in Enterprise settings[/b], it has to be the more expensive x86/64 tablets.[/i]

        Since the big deal that is currently being made about how only x86/64 tablets will be able to join domains, I was challenging Jack on his statement that the only way to make an enterprise tablet work is to have it join the domain. You and I clearly agree that he is wrong when he states that.

        I don't even need to answer his reply since anyone who believes that iPads can join domains is clearly not worth responding to. iPads can interact with AD secured resources but then again, so can Windows RT so either way, his argument that you need expensive x86/64 Windows 8 tablets is laughably false.
        toddbottom3
      • @Jumpin Jack Flash. Speaking of missing your own logic

        toddbottom was only pointing out that while you asserted that WRT would not work in enterprise settings, iPads had similar restrictions, so if iPads can work, so can WRT devices.
        Patanjali
    • iPad numbers

      "I believe the reason why the iPad did not do as well as many expected, is that most people are waiting to see what Windows 8 PCs will have to offer in the area of touch computing."

      Maybe, but consider: Apple hit a backlog for iPad3 orders a week before it even started shipping. The backlog put into Apple's Q3 a large number of orders that, had inventory been available, would have been posted as 2Q revenue/shipments.

      Would that be enough orders to make up the ~1M or so difference between expected and actual sales? Very hard to say until we see the 3Q numbers, but I think it's safe to say that they would have been a lot closer, and it's likely -- given that they're still showing backlog more than a month after shipping -- that they would have beaten the estimates.

      We'll see, but think the real problem there isn't demand but limited production capacity. I kind of wonder if that might be the thing that ultimately limits the iPad's penetration; maybe Apple simply won't be able to build them fast enough to satisfy the whole market.
      jimfrost
    • Waiting for Win8

      We're an enterprise that's waiting for Windows 8. We have some iPads here, but managing them is a nightmare. Of course, there are currently no Windows tablets that come anywhere near matching the iPad for price, ease of use, and functionality.

      So, we wait. Our hope is that new Windows 8 devices will merge the advantages of the iPad with those of a PC.
      ParrotHead_FL
      • What nightmares do you have?

        ParrotHead_FL, what specific issues do you think managing the iPad presents to the enterprise?
        greggwon@...
      • the Worldwide Waiting for Windows

        Wait as much as you like, but remember two things:

        1. Life is short.

        2. While your enterprise waits, others won't.
        danbi
    • Manufacturing matters

      Apple has become by far the largest personal computer company (desktops, laptops, tablets and smartphones). There is not one single vendor, that sells such quantities.

      When you produce such huge quantities, to the point to exhaust all available supply channels, you can have significant economies of scale. Combine that with the purposely limited number of variations.

      What this means for Windows based products is, that they are not going to be competitive with Apple products, price wise. After much hype over the years, consumers understood that what matters is the product. Not a single "good" piece of it, be it software or hardware, but the product as a whole. To achieve the same quality as Apple products, Windows products will need to cost significantly more. This is because Microsoft does not make any computers -- they are at the mercy and abilities of a number of way smaller than Apple vendors.
      danbi
    • That's the delusion

      For many here the delusion is that Win 8 is already a hit and everyone is just waiting for it before they buy anything. I am by no means saying Win 8 won't do well but it is far far away from being a foregone conclusion that it will be a big hit or even a fairly successful product at all. I would suspect that there are some that didn't buy iPad as they were waiting on Win 8 but would be shocks if the equaled even .1% of the overall market.
      non-biased
  • Have iOS products become the de facto mobile enterprise market products?

    With so many iPhones being sold to enterprise markets and the undeniable enterprise market acceptance of the iPad (not to mention Apple's MBP and MBA laptops), do these developments represent a "nightmare scenario" for Microsoft?
    kenosha77a