App Store customers spent more than $10.0 billion in 2013. The
company recently announced that December spending alone accounted
for $1.0 billion. Customers downloaded almost 3 billion apps
making it the most successful month in the company's history.
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The strong growth in overall sales reflects Apple's success in
building an iOS-based ecosystem that continues to attract app
developers. Since the launch of App Store in 2008, Apple has paid
almost $15.0 billion to developers, after deducting its 30%
share. Apple is estimated to earn $3.0 billion in revenues from
App Store in 2013.
The phenomenal success of App Store solidifies Apple's position
Android platform. Similar to Apple's iOS ecosystem, the Android
platform has also started attracting developers primarily due to
the increasing sales of Android-based smartphones and higher
number of apps download from Google Play store.
However, it has been noted that iOS users tend to spend more
compared to Android users, making Apple's platform much more
attractive to developers. According to IBM, iOS users spent
$115.42 per order, compared to $83.56 per order by Android users
during fourth-quarter 2013.
The higher spending is primarily driven by Apple's affluent
customer base and partnerships with leading carriers. Moreover,
customer engaging apps, such as the Candy Crush Saga, drove the
We believe increasing iTunes sales (fastest growing segment in
the fourth quarter) will boost Apple's top line in the long run.
The company's recent partnership with
China Mobile (
, revamped product line-up and strategic acquisitions will
improve its competitive position against the likes of Samsung and
, going forward.
Nevertheless, falling gross margins and lack of innovation are
expected to remain the primary headwinds in the near term.
Currently, Apple has a Zacks Rank #2 (Buy).