Published: 26 January, 2010
Apple set a glittery scene for tomorrow's supposed 'iSlate' launch, reporting its most profitable quarter ever, as it reaped the rewards of breaking the iPhone's exclusives. With AT&T the only major exclusive carrier left for the device, there is rising expectation that it will lose that position tomorrow, with the release of an iPhone variant for Verizon Wireless.
As well as the expected tablet - expected to be a 10-inch, content-driven device combining features of an e-reader, video player and smartbook - Apple may announce a new iPhone. Not a complete fourth generation refresh, likely to debut in April or the traditional Apple launch date of June, but a variation for Verizon's CDMA network, which could also carry the tablet.
If the 'iSlate' is to feature embedded wireless, like the Amazon Kindle, it would need to come in CDMA and GSM versions to support a Verizon deal as well as international sales (Kindle switched from CDMA-based Sprint to GSM-based AT&T when it went international). Or the Apple product could feature a multimode processor like Qualcomm's Gobi, which was reportedly evaluated by Amazon but considered too expensive (with a rumored price tag over $1,000, the same might not apply to iSlate).
The loss of the exclusive would hit AT&T hard. Despite the iPhone's drain on its margins and on the performance of its painfully stretched 3G network, the Apple device has been responsible for nearly all its customer adds during the course of the deal. Recently, the cellco announced partnerships with a range of new platforms - including Nokia Ovi, Brew, Palm and Android - in apparent anticipation of the loss of its golden goose.
Apple COO Tim Cook evaded the question of the AT&T exclusive on the analyst call following the results announcement, just issuing the predictable statements about what a great partner AT&T had been. "It's important to remember they had more mobile broadband usage than any other carrier in the world," he said. "As you know, AT&T has acknowledged they have some issues in some cities, and they have detailed plans to address these. We've reviewed these plans, and have confidence they'll make significant progress."
In its first quarter, ended December 31, Apple sold more than 8.7m iPhones, doubling the year-ago total. This vindicated the policy, introduced in stages over the past 18 months, of ending exclusives where they existed, and entering new markets on a non-exclusive basis. Despite the fame of Apple's model of negotiating long and vendor-friendly operator deals, in fact the iPhone has launched with more than one carrier in most countries. Now those that did have one carrier, such as France and the UK, have gone multi-carrier, and the change of heart has been fully justified - making it even more likely that Apple will make the same move in the US soon. Broader distribution has increased sales and market share, while the profit dent incurred by higher competition between iPhone carriers has mainly been taken by the cellco rather than Apple. Overall, the vendor's net profit rose by 50% to $3.38bn, its highest ever, on revenues of up 31% to $15.68bn.
The iPhone, which for its first two years at least was over dependent on the US, is now becoming truly global, available in 86 countries, and 58% of Apple's Q1 revenues (across all products) came from outside its homeland. Although some markets remain tough for the handset - either because of high consumer standards, as in Japan, or price sensitivity, as in prepaid territories like India - Apple is clearly serious about its global presence now, and added 17 new operators during the quarter. And it reported that China Unicom has activated more than 200,000 iPhones since launching the device in October, despite competition from a flourishing grey market.
Predictably, Apple executives remained tightlipped about the Wednesday product launch. "I wouldn't want to take away the joy of surprise when you see what we have in store for you on Wednesday," Cook said.
Other key metrics included a growth in gross margin, up three percentage points to 40.9%, and Apple generated $5.8bn in cash during the quarter.
Meanwhile, a commentator in BusinessWeek expects Apple to go on an acquisition spree soon, in the wake of its recent purchase of mobile ads firm Quattro Wireless. The company has bought only 11 small firms since Steve Jobs returned as CEO in 1997 but last year it hired a Goldman Sachs investment banker, Adrian Perica, to help the company make new deals. And three of the 11 acquisitions have been in the past five months.